Angela Blinked
What I know about Colombia which I have never visited, despite reporter Frida Ghitis's urgings. Old Cartagena is apparently terrific. I've never been there. Frida was born in Cali.
Colombia is full of leftist and rightist guerillas and people get assassinated. Its main export products include bulletproof T-shirts for wearing on the golf course, although I think they might handicap your swing. It has a cluster of people genetically-predisposed to premature Alzheimer's disease now being tested to try to find a cure.
And according to an ad in The Financial Times, Colombia has the 5th best investor protection system in the world, according to Doing Business 2011 by the World Bank.
Commented Premo Sewnunan from South Africa on another matter: “Food for thought. Statistics are just numbers looking for a fight.”
Martin Ferara, who grew up in Zimbabwe, notes news stories that the European Central bank stopped providing liquidity to Greek banks as about 1bn euros was withdrawn. “The far left, which wants to tear up the austerity agreement whilst keeping the euro is likely to be the biggest party. Greeks are literally stashing euro notes under their mattresses. If Greece pulls out given its very weak institutions, it will became a failed state, unable to borrow for years and unable to spend as tax revenues plunge. The Greeks are headed for chaos.”
Precisely why it will not happen.
Michael Kurtz writes from Nomura Hong Kong: “The frail Greek butterfly flaps its wings and a global hurricane is soon whirling that blows $3.3 trillion off global equity market capitalization. Astonishing impact for a country whose economy barely matches a second-tier US city's in size and whose political classes almost all still profess a preference to remain in the euro area (albeit under watered-down austerity terms.)”
My view: Angela Merkel blinked at fear of the consequences of a Grexit, the cool term for Greece exiting the euro, which would not be cool. So suddenly a bit of stimulus for the Hellenes is acceptable to Berlin. Having to deal with Paris made it easier. Worrying about Italy and Spain ditto. To say nothing of North-Rhine-Westphalia. Poor Angela has ceded to the growth boosters.
We will know how the Greeks react by June 17. Until that time you don't gain much by thinking about polls or credit markets. But about stocks I have a few ideas.
More from Ireland, Canada, Denmark, Finland, Britain, Brazil, Greece, India, Singapore, and Israel. Only for paid subscribers of course. Become a world expert by joining up. Your portfolio will gain and you will become a more interesting person able to talk about bookies and gas drillers, shipbuilders and generic drug firms, interdealer brokers and movie chains, SME payements systems and jabs against prostate cancer.
Tobin Tax and Grexit
US industrial production roared ahead in April, at 1.1%, more than double what economists were expecting, the Fed announced today. And US housing starts also came in over estimates, up 2.6% in April, according to the Dept. of Commerce. The price of oil hit a new half-year low of $93/bbl. So we are back into risk-on mode.
Wall Street is buying BRICS shares today. Europe continues to sag on worries over Greek elections and austerity. I do not think there will be a Grexit but not everyone agrees with me, as paid subscribers can read below.
Message to TF reprinted for general conssumption:
With some foreign invested funds (Closed End Funds or Exchange Traded Funds) you would not be able to get back foreign taxes paid with an Individual Retirement Account (because you do not pay US taxes with an IRA).
To get back the foreign tax paid you need to owe US taxes that you can offset against what was withheld.
So it is not a tax-efficient way to invest outside the USA. except for capital gains.
However we do have some high yield foreign bank preferred shares denominated in US$s which do not have withholding applied. These are excellent for an IRA or tax-sheltered account. I am not an accountant, but if there is foreign withholding at source at some stage in the dividend process you do not want the position in an IRA.
More for paid subscribers from our companies in Britain, Ireland, Canada (oy vey), Brazil, India, and Israel.
Ben Graham and Precious Metals
James Mortier of Grantham Mayo Van Otterloo writes, not about JP Morgan Chase, but about the 2009 global financial crisis “as is so often the case, Ben Graham got there ahead of us”:
Graham wrote in The Intelligent Investor: " Mathematics is ordinarily considered as producing precise and dependable results; but in the stock market, the more elaborate and abstruse the mathematics the more uncertain and speculative the conclusions we draw therefrom...
"Whenever calculus is brought in or higher algebra, take it as a warning signal that the operator was trying to substitute theory for experience and usually also to give speculation the deceptive guise of investment.”
Platinum demand rose in every sector except investment in 2011. Supplies are high thanks to recycling which overcame mining declines. While palladium markets were in oversupply last year Russian state stocks are running out and de-stocking can only be done once.
As commodity markets sink into the sunset over concerns over slowdown in China and austerity in Europe, it is comforting to learn that at least one category will not see price drops. Platinum and palladium prices are near their bottom and likely to rally over the next half year according to a refiner active in the platinum group precious metals markets. Palladium, mainly used for catalytic converters to clean car and truck vehicle emissions, will see much higher prices because Russian stockpiles are running out. Palladium prices are likely to rise by 35% for palladium regardless of the drop in oil or gold prices.
Platinum may remain in oversupply as its uses are more linked to the overall economy, for glass and chemical industries, things like LCD panels in consumer electronics.. While platinum may still seem to be in oversupply, our source expects new demand from Chinese jewelry buyers. Meanwhile South African production problems will persist. So the company predicts a 20% price hike for platinum. To play these themes, paid subscribers should read on.
Beyond the Bottom Line
The best performers in our portfolio were not the usual suspects. Today The Financial Times published its weekly Top 20 list which included two of our stocks, and its Bottom 20 list which included none of our stocks (but did include your editor's personal USA holding in JP Morgan Chase.) Being too small for the FT Global 500 on which this listing is based, Chesapeake Energy was not among the losers.
To learn more, paid subscribers should read on. They will also gain from news about our companies from Canada, Spain, Finland, Norway, Bermuda, Israel, Cyprus, and Ireland. The reports which came in after the market closed on Friday tell us not to just look at the bottom line. It's often more complicated than that.
Tables Updated
I just updated our tables after my Mother's Day dim-sum with Gewurtztraminer feast. This was my husband's doing as my children simply donate to good causes to honor their mother.
Please note that I invest in the same market as everyone else, and am in a state of shock over poor governance at two of my Big Board USA stakes, JP Morgan Chase and Chesapeake Energy. The moral of the tale: you can lose money in the supposedly over-regulated class-action-lawyer-harried US market with co-opted boards. There is no need to hop abroad to lose money. I mention this because most Americans figure that there is more danger in foreign small stocks than with US big Kahunas. It ain't necessarily so. Stupidity, carelessness, conflicts of interest, excessive risk plays, and hubris can be found all over the world. Read more »
More Greco-American and Other News
More news follows for paid subscribers from Sweden, Belgium, Greece, The Netherlands, Britain, Colombia, Brazil, and Canada. These items are more marginal than those posted this morning. Because the office was closed yesterday for personal reasons, there is a lot to report today.
Jamie's Hubris
I knew that Greek banks were in trouble and Spanish banks high risk. But I thought JP Morgan Chase (whose shares I own, headed by Greek-American 3rd generation banker and HBS grad) was safe. After all, its Jamie Dimon was taking the lead in attacking the Volcker reform. Now Mr. Dimon's hubris has been exposed by a $2 bn loss (which may go higher) at its London credit default swap trading desk which was hedging or market making to such an extent that its chief was called “the London whale” by the market. Since the new law is not yet on the books (thanks in part to bank lobbying) no law was violated. But too big to fail certainly applies.
More from the riskier corners of the world follows, mostly updates from our dodgy foreign companies. We report on Spain, China, India, Canada, Bermuda, Britain, and other high risk areas. All doing better than Park Avenue.
The Yellow Brick Road
After I wrote about Bryan yesterday, two readers forwarded notes about the Wizard of Oz based on research done by Jeffrey Saut of brokers Raymond James. Thanks to Maurice and Jim we now know that the popular movie was really about monetary policy in the late 19th century. Saul wrote:
“L. Frank Baum's book was penned in 1900 following unrest in the agriculture arena due to the debate between gold, silver, and the dollar standard. [It] is supposedly an allegory, making the events easier to understand. Dorothy represents traditional American values. The Scarecrow portrays the American farmer. The Tin Man represents the workders and the Cowardly Lion depicts William Jenning Bryan, the official standard bearer for the 'silver movement' as well as the unsuccessful Democratic candidate of 1896. In the original story, Dorothy's slippers were made of silver, not ruby; silver was the Populist's solution to the nation's economic woes. Meanwhile, the Yellow Brick Road was the gold standard, and Toto (Dorothy's faithful dog) represented Prohibitionists, an important part of the silverite coalition. The Wicked Witch of the West symbolizes Pres. William McKinley,. And the Wizard is Mark Hanna, chairman of the Republican Party [who] made promises he could not keep. Obviously, 'Oz' is an abbreviation for 'ounce'.”
Perhaps some Homeric scribe will sum up the present Euro-zone crisis with another best-seller children's story. I had no idea that the movie I enjoyed as a child had any deeper message.
Other readers took me to task for favoring a two party system à l'americaine, arguing that the only way to get out of the Washington impasse is to get a 3rd party going.
News today as three of our companies reported on the most recent quarterly earnings. There will be no blog tomorrow, Thursday, because I am having a medical procedure. Sorry about the font changing. No idea why this is happening. We have news today from China, Israel, Finland, Japan, Ireland, Britain, the Antipodes, Spain, The Netherlands, Belgium, and Canada. Plus another bit of German Jewish boasting, a Yecke kvell.
The Greek Bryans
Imagine a late 19th century US state voted against both major parties and chose to follow a third party opposed to the robber barons who were then running the USA. Its party platform was to monetize silver to increase the money supply beyond the official gold standard to stimulate growth. The state's dissident voters were following William Jennings Bryan's rallying cry: “you cannot crucify mankind on a cross of gold.”
As the USA had barely recovered from the discord left by the Civil War, Washington was in a quandary.
That roughly spells out the current impasse between Greece and the European Community after Hellenic elections produced a hung parliament with no respectable party or coalition able to form a majority. Chaos (Greek word, that) faces both Athens and Brussels. Under parliamentary rules there will be another election if no party can form a government, but there are no guarantees that rebellious anti-austerity Greeks will change their votes.
What we are seeing is the split between economic policy framed at the top in response to political pressures from the official pundits and the dominant economy of the European continent, Germany, and people asked to tighten their belts beyond all reasonable limits.
I do not know how it will play out. Syriza, the hard-left anti-austerity grouping of parties now trying to form a government, is opposed to the New Democracy group which negotiated a deal with Brussels, but capable of splitting into factions.
How lucky we are that Bryan and USA rebels remained in the two party complex. But Greeks, despite having invented democracy, have a messier method.
Parliamentary systems allow freedom for cross-party deals, one reason for hope. An example is the agreement between Benjamin (Netanyahu) and Saul (Mofaz) to create a grand coalition in Israel avoiding the general election the former planned earlier. Now Likud will run the Israeli show at least until Q3 2013. I am not sure that the extreme left or right in Greece are as wily or willing.
More for paid subscribers follows from Spain, Mexico, Canada, India, The Netherlands, China, India, Italy, Israel, and Ireland (a politics trifecta!)
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