Money and Museums

Sun, 2015/04/19 - 5:38am | Your editor

Since it's way too difficult to access US stock prices from Paris, I offer readers impressions from the first half of our long weekend here. We arrived on the Eurostar from London to discover the Gare du Nord full of fierce CRS special police who had hung yellow tape to stop passengers from connecting to the Metro and RER city system. We had to shlep our cases to the last metro entry on the boulevard and line up at the single functioning window (with one working clerk and two who sat beside her not doing anything) to buy our tickets along everyone else. Making it worse is that my carefully hoarded stock of tickets from our last visit to Paris did not work, nor did my US credit card. We were already out of euros from our last trip. So I hit an ATM for euros 500.

A CRS man I asked told me that the station would be closed till 6 pm, nearly 4 more hours, because of “a suspect parcel”. The next morning there was no word in the papers about any security issue in Paris; they caught 5 kids planning a bomb attack in Canberra. Read more »

A Paris

Fri, 2015/04/17 - 2:02am | Your editor

As I am off to Paris today, this blog is being filed early and fast. We went to a marvelous play last night by the Theatre sans Frontieres in Southwark (London). The play was Federico Garcia Lorca's Amor en el Jardin performed in Spanish with supertitles for those who needed them. In many ways London is now a European center. As for Paris, on verra.

The use of a fiddle to stop shareholders from blocking further state intervention at Renault is not exactly a sign of good business practice in France. The Loi Florange, which rewards longer-term shareowners with greater voting power, was used (or abused) to keep out capitalistic impulses at the state-controlled French car-maker.

More from Israel, China, The Netherlands, Panama, France, Mexico, and Finland. Two companies reported overnight.

Read more »

London Letter

Thu, 2015/04/16 - 3:35am | Your editor

Our arrival day was glorious, full sun, warm, lots of greenery in glory and flowers budding like mad. On the Thames, there was lots of birdlike bobbing and dipping to impress their fellow drakes and above all the lady ducks. So naturally we conked out to catch up on our sleep.Today we are rested and the outside world is greyer and colder.

Just when spring has apparently sprung the price of oil is firming greatly, with the crude future price up 5.25% yesterday to $56.25/barrel. This boosted Wall Street and hurt the US dollar. Today in European trading Brent crude is up another 3% to over $63. The rally will almost certainly reverse.

The headlines again predict that Greece is on the skids, mainly because Wolfgang Schaeuble is blocking a deal at the level of the European Union ministers. You may be as puzzled as the rest of us about who Mr.Schaeuble might be, but Standard & Poor's has decided that his "nein" puts paid to any further payment of its debt by Athens in May. Greek 3-yr debt now commands an interest rate of 24.6%. At least it is not 25%. Read more »

Haste makes Waste

Tue, 2015/04/14 - 1:43pm | Your editor


Thanks to readers for correcting my blog sent out early this afternoon in a rush because I am flying to Europe tonight. Especially first responder Patti the Biotech Maven. Read more »

Jack and Guenter

Tue, 2015/04/14 - 12:02pm | Your editor

Our old friend and tennis partner Jack Suhl, who retired to the Algarve, was a friend and a bit of an alibi for Guenter Grass, a better known novelist than Jack's wife, Leonore Suhl, an American who also wrote in German. Jack fled Germany in 1937 for the US because he was Jewish by heritage if not belief. He attended George Washington High School in “The 4th Reich” (Washington Heights, at the northern end of Manhattan) but could not afford college. He was not drafted because of some physical impediment.

After he became a wealthy businessman, Jack financed the education of both of his younger brothers, a professor and an engineer respectively. He then sold his packaging business and moved to Portugal where he got his German nationality restored.

It was only after his friend Jack died in 2007 that Grass revealed that he had been a member of the Waffen SS. Jack's ashes were placed in the crypt of the NYC Episcopalian Cathedral of St. John the Divine where Leonore (a non-Jew who emigrated to the US only after World War II) can lie beside him eventually.

Grass now joins Jack in whatever heaven agnostics go to, where they can discuss their newly divergent past.


The Hang Seng index is up by 10% today, as Chinese investors buy through the link between Shanghai and Hong Kong. Shanghai was up about 2.2% today. The big play is on Hong Kong.

But Chinese stock punters are buying only a limited number of stocks, usually ones they are already familiar with at home. They are eager to front-run the country's institutional investors by moving into Hong Kong while playing on their hope that China will add new stimulus measures to get the local economy to grow more.

Recent indicators are that Chinese growth is lagging. The latest figures on Chinese bank loans and money supply seem to herald slower growth. Its exports fell 15% last month and its import 12.7%, both harbingers of trouble.

But can the Beijing bureaucrats really get the Chinese aircraft carrier economy to change direction all on their own using monetary spigots? Will they be able to boost the GNP without a renewed bubble building? Will they be able to control the monetary spigot to get money to flow into productive investment rather than sink into regional money pits?

Does quantitative easing work in a command economy? Can a central bank make conservative Chinese spend?

I do not have the answer. I am not even sure that China has the answer.

The impact of Chinese stock buying goes well beyond China. It explains the boosted ruble in an economy many Chinese merchants and traders are familiar with. It helps explain why the Kospi, the South Korean stock index, is rising.

It may even explain some of the rise of our own US dollar despite the greenback being overvalued by most measures (including potential corporate profits.) The reason: big Chinese individual investors (not the little folk heading for Hong Kong) are buying boltholes in the US for their student children and themselves if they get into trouble with the modestly reformist regime over corruption and ill-got wealth.


Today is my last NYC filing for the next few weeks so it is fully of lots of things to watch. And news from many places like Hong Kong, India, China, South Korea, Finland, France, Luxembourg, Britain, Canada, Israel, Ireland, Colombia, Spain, Brazil, Norway.

Read more »

Out of Bounds: Gold and GE

Mon, 2015/04/13 - 12:53pm | Your editor

Adrian Ash, Head of Research at our advertiser, BullionVault, writes from London:

“China's super soar-away stock markets have ignored today's terrible export data, and jumped another 2.5% Who cares if China's exports last month missed analyst forecasts by 95%? Equities today hit yet more fresh 7-year highs.

“Maybe China's army of investors know something. Or maybe they're just adding credit to their cash-paid positions now that Beijing says they can open and trade 20 brokerage accounts if they wish, instead of just one. History says such frenzies tend to end badly, most of all when everyone agrees the bubble has got further to inflate.

“Western savers are taking a shine to the current record highs in Western stock markets too. German financial paper [Frankfurter Algemeiner Zeitung] notes today that mutual funds today hold twice as much money in equities as in 2008.

“Gold bullion, in contrast, has slipped from favour with China's households as the stock market boom shot higher. Offshore traders today eased back from the Shanghai gold market's international contract, too. And Western investors and hedge funds are staying very modest with bets on gold. Indeed, last week was the first time since late January that speculators cut their bearish bets against gold and grew their bullish bets using US futures and options contracts.

“Gold is a long way from over-heated. Global stock markets have never been higher.”


There are lessons for investors from the counter-cyclical changes at General Electric, one of my favorite long-term US stock holdings. I disagree with today's Barrons' multiple articles saying GE is betting on oil and gas recovery as part of its forecast double digit returns in EPS. The barrage quotes lots of analysts but mostly was put together by staff writer Avi Salzman, a relative junior on the weekly's masthead.

Only veteran Vito Racanelli broke ranks, citing Fort Pitt Capital's Kim Forrest who called the GE divestiture plans a “bright light”.

As a GE shareholder I am pondering the lesson of its exit from RE and finance (via the 15% spinoff of its credit card ops to Synchrony to eventually get this off the balance sheet and end GE being cursed with the designation of being a bank-like entity requiring more capital.

GE will focus on of all things high-value global industrial goods. This is contrarian and counter-cyclical thinking at its best.

The valuations of its property and financial divestitures is high because of US low interest rates. Cheap mortgages support property prices. Cheap money helps creditors pay.

But long-term, GE's planners are saying, this is unsustainable. They want to get back to GE's original business of making things. This does NOT mean appliances and light bulbs (both divested). GE will produce more fuel-efficient jet engines, cheaper medical devices for emerging markets and US cost-saver insurance programs, power generation turbines, new industrial materials (alloys, ceramics, composites).

Yes, GE will also provide better technology for the oilpatch which in 2013 accounted for ~17% of sales. GE has already warned its shareholders that sales and earnings from its oil and gas businesses will fall this year and next. But GE's high payout promises took lower oil and gas price into account.

Its focused strategy assumes that low interest rates are fleeting and also that cheap energy is too.

For a long-term investor the other sector to leave is consumer discretionary and the retailing ops that feed it. Cheap money and a lower price when you fill you gas tank have sent spending up. But without eventual higher employment levels and higher wage levels, both still to come, consumer discretion will mean the discrete consumer will do less buying. So GE aims in a few years to get 75% of its earnings from the industrial sector, and to continue to boost its operations outside the USA. I am sticking around for the $90 bn to be returned to shareholders. GE is down today as America reacted to the negative press.

More for paid subscribers follows from outside the precious metals and US markets to which I am supposed to confine myself.. like Britain, Ireland, Canada, Hong Kong, The Netherlands, India, and Israel.

Read more »

Updated Tables

Sun, 2015/04/12 - 11:41am | Your editor

Today was a special Sunday because it marked the first full day after Passover. At the Sabbath services this week-end we stopped praying for rain and started praying for dew, silly in the USA outside California, but reasonable in the land of Israel when the Sabbath prayers were written.

Because Passover is over, we are having pasta rather than Chinese food for lunch. Normal noodles are not allowed on the holiday, being leavened, and I miss them more than our weekly Chinese feast.

This morning, as is normal for Sunday, I updated our tables on The closed position table is visible to all. But only paid subscribers can see our current advice. To more easily view the spreadsheets, click on the "printer friendly" button above the tables.

An apology. As I misread my fly dates this week I said there would be no blog on the 16th. In fact we are flying overnight the 14th to London and so there will be no blog the 15th. We will be in Paris next weekend, and Vienna for a college reunion the following weekend, after which we will spend a couple of days in Bratislava, the capital of Slovakia, which is just down the road and easy to get to Vienna airport from. We have been several times to Prague, but never to Bratislava, formerly Pressburg. There will be no table updates until the first weekend I will be in NYC, May 10.

More for paid subscribers follows: Read more »

Cuba and Canada In Focus

Fri, 2015/04/10 - 1:58pm | Your editor

Your editor again was quoted at length about her views of Canadian stocks Pure Technologies and Veresen in Canada's leading stock market magazine, Investor's Digest. It was voted the world's best investment advisory 5 times, which is gratifying to anyone quoted in it. My notes were bullish but included negatives. I am not a booster bull. Only paid subscribers to my newsletter of the Canadian version of Barron's can find out more.

The two stocks are not usually covered by analysts in Canada, to say nothing of the USA. They are mid-caps covered by a mere handful of stock analysts. Canadian share coverage is dominated by oil and gold mining industries, where neither operates. They are not contrarian plays on the future recovery of the oil price.

They are not likely to attract Canadians pension plan money because they are too small, so analysts advising these institutions are not studying them. They are not run by TV star fund managers or gold bugs. Read more »

Perverse Incentives

Thu, 2015/04/09 - 2:31pm | Your editor

JP Morgan Chase is using a new algorithmic software program which signals employees who might be “going rogue”. It collects data on whether or not they attend compliance classes or if they have a prior history of having violated trading rules. Then it predicts which bank employees might behave badly again.

A danger at huge banks comes because the top brass cannot check on what the rank and file are up to. Back in the old days bankers were supposed to know their customers, and of course it was inconceivable that they then didn't know their staff members. It is an argument for breaking up large global banks with insufficient personnel control.

The theme of today's newsletter is perverse incentives. Having this software is an example.

I made an error in my article two days ago about the Wisdom Tree one-stop exchange traded funds investing outside the US dollar using currency hedges. The yen-hedged fund investing in Japanese equities is a new one, Wisdom Tree Japan Hedged Dividend Growth Fund, ticker symbol JHDG. Its priority is yields, not capital gains.


More for paid subscribers follows from Britain, Israel, China, The Netherlands, Singapore, Hong Kong, India, Myanmar, Ireland, Canada, and Brazil.

Read more »

Gold Robbers

Wed, 2015/04/08 - 1:08pm | Your editor

Gold is not yet dross for the criminals among us.

Over the 4-day British Easter weekend, about 300 north London jewelry storage safes at Hatton Gardens Safe Deposit Ltd. were broken into and robbed. The theft was only discovered at 8 am yesterday when the diamond district returned to work. Because the thieves used the back door while the security guard only checked the front one, they escaped with huge piles of jewelry and precious metals.

A British cousin's daughter was briefly married and then divorced from Adam, a third generation Hatton Gardens silver vault dealer. While Adam was our relative we got a discount. He also took silverware to sell on consignment. It is a profitable business.

Meanwhile in Sinaloa (Mexico) armed robbers heisted 900 kilograms of gold concentrate worth $8.5 mn from the El Gallo refinery belonging to Canada's McEwan Mining Inc.

Now the robbers have to try to fence their loot and the victims to collect from their insurance companies. Many London consignment customers were not covered by the dealers' insurance. Mr. McEwan told the Toronto Globe & Mail that his insurance will not cover his firm's full loss.

Now that oil and gas companies have been revalued by the move by Shell on BG, perhaps gold and gold mines are next in line for a boost. We used to own BG and also another takeover target, TNT of Australia.

One reason for a gold rally came from bond shop Kamakura's analysts today. They predict that the 3-mo US T-bill rate will rise to an average of 2.67% in 10 years, from 0.02% now, based on risk neutral scenarios using historic data. The range is between 21.096% and minus 1.97%, so not a sure thing.

More importantly, the T-bill rate a year from now is likely to be 0.579%, just over the forward rate now of 0.577%.


We are now exchanging newsletters with Investors Intelligence (which also goes by the name Stockcube plc or Chartcraft), a venerable west London-based chartist shop est. 1947.


More news today including an annual report from Canada, India, Brazil, China, Japan, Israel, Ireland, Panama, Brazil, Australia, South Africa, Jersey, the Cayman Islands, and Britain. I saw a robin red breast on my way home from the supermarket yesterday so I think spring has sprung. But half my friends and family have sinus trouble and bronchitis so the sequels of winter continue to harm us.

Read more »