A New Fund

Sun, 2017/09/03 - 4:56pm | Your editor


 I had hoped to wait until Tuesday to write up my latest fund pick, but my paid subscribers are clamoring for more information Sunday. So here goes. I have picked a very free-ranging fund with experienced managers and a good track record for higher yields--which even in this case do involve higher risk than more sedate funds with narrower mandates. Read more »

September Is On

Sun, 2017/09/03 - 11:51am | Your editor

The tables have just been posted at www.global-investing.com

We are showing the closing prices on stocks as of August 31 rather than the following day but because of data issues I could not do the same for exchange-traded and closed-end funds, and in fact there are many gaps because of the long weekend.

We have a new buy recommendation for paid subscribers for next Tuesday posted today. Join them to follow our current picks and make money.

I can confirm that Tom Herzfeld is in the process of creating a new Cuba Fund but have no idea how it will be structured. Tom, a Florida-based expert on closed-end funds already tried once before to do this, but was frustrated by the embargo. I have no recommendation at this time because all I know is that he told the SEC of his plans--not the rest of the world.

I'm off to a Chinese lunch as is my usual practice on Sunday. And tomorrow I will lie in. I actually went into labor on Labor Day nearly a half century ago. The obstetrician was on the golf course because he figured the baby would take longer, but I knew any child of mine would like a pun. The toubib came back from Normandy to try to collect his fee but our baby was born near Paris before he made it to the clinic.

The Jewish holidays this year will result in only one day when I will not be filing, because Yom Kippur falls on a Saturday. It cannot all on a Friday or Sunday so the rabbis cheat and make it fall on the Jewish Sabbath if there is a treat of that.

An important coincidence in 2017 is that the lunar New Year will be shared this time around by Jews and Muslims. That doesn't happen often. The Islamic year is shorter than the solar year because unlike the ancient Hebrews, the Prophet Mohammed did not accept the Babylonian invention of leap months to make up the difference. In the Arab heartland, the fact that in many years the pilgrimage takes place during the hottest month in Arabia makes Islam a tough religion to follow.

Also the sighting of the New Moon is not adjustable in Islam, as it is in Judaism to avoid having to prepare or recover from a fast on a Sabbath.

I think along with defining Jihad better, and stressing that murder is murder, the ulemas should correct the Muslim calendar, as indeed the Christian world did in the 18th century with, except for a few Russian Old Believers, worked out fine.

They should do this in Whitby in eastern England.

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The Stada Saga

Fri, 2017/09/01 - 1:57pm | Your editor

After a series of perilous mailings and conversations I have persuaded brokers Charles Schwab to keep an eye on developments at Stada Artzneimittel, STADF, which we tendered to private equity group Bain Capital of the US and Cinven, a UK hedge fund.

They only collected 63.5% of the shares and under Germany;s Beherrschungsvertrag law, in order to take control of the company board they need 75% of the shares out; and to delist it even more. The takeover bid at euros 5.3 bn barely scraped through last month after a June bid fell short. After that the former board were all replaced.

It is always fun when an obscure hard-to-follow stock I found for my readers is subject to a bid. This year it has happened several times, twice in Canada, once in Britain, and once in Hessen, the German province from which my parents escaped to the USA from the Nazis.

Taking advantage of this close win, US hedge fund Elliott Partners, run by Paul Singer, is attempting to force the two victors to pay a premium to collect another 11.5% of the STADF shares it holds for ransom. Its deadline is today. If Singer, a well-known Manhattan supporter of right-wing Koch Republicans and hard-line Israeli politicians (which he offsets by also supporting gay and lesbian rights) gets a premium price for his Stada shares during the next calendar year to August 22, we also will be get the additional amount for the shares we already cashed out. Singer is also opposed to passive index-tracking investment for “devouring capitalism” which is something I agree with.

Stada, a large maker of copy-cat drugs for Germany and the world, first came to my attention some years ago because I thought it might become a target for Teva, the Israeli firm. Listed in Frankfurt, its shareholders were mostly medical and pharmaceutical professionals who doled out its products in Germany.

The German public tends to be distrustful of stock markets in part because they are run by large banks as the brokerages which used to operate in Frankfurt before Hitler's rise were often Jewish-owned (two by uncles of my father) and no real replacements exist except a bit in Bavaria. So apart from those with a professional knowledge of a sector, like drugs, individual investors are rare in most of Germany, and very mistrustful of funds and foreigners.

Still, the Stada saga is extraordinary. The current board are all resigning; the prior board was denied “quittance” (legal immunity) by the ones resigning, Stada is about to name a new CEO, generics pharma industry veteran Claudio Albrecht, according to Bloomberg, who will be the 4th CEO of Stada in 2017. The first to go was Hartmut Retzlaff, who had long headed the company whose HQ was near Frankfurt, officially for health reasons. He also was known to be opposed to a sale of Stada.

His successor Mattias Wiedenfels then fired advisors and cut the powers of Retzlaff's son ostensibly to save money in Stada purchases raw pharma materials and made drugs.

But another reason for the CEO switch was because an investor, Active Ownership Capital, sought to sell Stada to Bain and Cinven. New CEO Wiedenfels, who is about 40, discovered that his phone was being tapped, there was a hidden microphone in his car, and he was sent photographs of himself in public or private situations to threaten him against the talks with the US and UK funds. This was reported by Manager Magazin in March, according to FiercePharma.com, a daily blog on the industry.

At this time other potential buyers of Stada came forward: the usual Chinese buyers looking for foreign boltholes to buy; Mylan Pharma, which was trying to protect its own operations from hostile takeover bids, and a Boston private equity fund, Advent International, specialist in healthcare investing. Advent offered $3.7 bn for the company and was told to do better. CEO Wiedenfels crafted a plan to cut costs and increase sales and earnings with a cashflow target by 2019 of euros 570-590 mn and a sales target fo euros 2.65-2.7 bn.

A first offer came from Cinven and Bain at euros 5.32 bn, then about $5.63 bn, much higher than Advent's offer and a 49% premium over the trading price. It finally came out in June. The pair needed 67.5% of the shares to be tendered and only 65.62% of the holders agreed to sell at euros 66/sh. Reaching smaller German holders of Stada in their drugstores and medical offices was difficult, but the process was made more complex by the German rumor mill which focused on the alleged share ownership by Harvard professor Andrei Shleifer.

Shleifer, both Russian-born and Jewish, was a protege of Harvard Pres. Larry Summers. Shliefer was convicted of having defrauded the US government during this period because of conflict of interest during his term as the chief US advisor to Russian privatization programs during the 1990s. His fine was $26.4 mn which Harvard paid during the Summers presidency in 2004, while Prof. Shleifer himself only paid back $2 mn in damages. (Summers wound up fired as Harvard president in part because of paying the fine.) A specialist in behavioral finance, Shleifer salvaged his Harvard career and his wife, Nancy Zimmerman, source of the conflict of interest, now runs Bracebridge Capital. It reportedly supported the bidders from Bain and Cinven both times.

German shareholders were told that Bracebridge was involved in Stada's buy of the US generics business of Mova Labs (of New Jersey) in 2001, Mova's sale to private firm Dava Pharma in 2006, and later Dava's sale to Endo International plc, each time at a higher price- which left the German Stada owners furious. I have no confirmation of any Bracebridge played in these events but a private equity fund typically will buy private unlisted companies such as Dava was.

Now active in investing for the endowments of US universities including Princeton and Yale (but not Harvard), no link can be found between Stada and Bracebridge. But during the first unsuccessful round by Bain and Cinven, the pair agreed to “provide financial and strategic support for possible acquisitions” by Stada and they are in the same business of buying companies, taking them private, and selling them later at a profit.

The second takeover vote was favorable to the bidders because non-German owners of the shares (including me and my readers) tendered while Germans held back. Throughout the bid period the chairman of the Stada supervisory board which refused the “quittance” was Carl Ferdinand Oetker, a member of the Dr Oetker baking powder family which had supported the Nazis, but who himself had begun his career at BHF, a former Jewish investment in Frankfurt, founded by the legendary Carl Furstenburg. He has resigned along with the rest of the board. More (and more sedate) pharma news below for paid subscribers.


There will be no blog Monday as it is a US public holiday. I will be preparing my close-of-month stock tables today with yesterday's prices.


Louis Navellier, a newsletter writer and fund manager, was charged by our SEC with fraud for false track records overstating investment gains by managed funds at the Reno firm. Your editor just wrote a comment on stockgumshoe.com about a Navallier recommendation in the lithium frenzy, pushing one of our foreign companies discussed below; and more news about Mexican companies dealing with the Houston hurricane. I do not manage any money except my own, because I want to benefit from the First Amendment protection of press freedom.


More for paid subscribers follows from other countries but more from Germany: a relic from the Portuguese past in Brazil; Danish drug-makers and others; Latin lithium miners; Hong Kong Internet powerhouses; and a few notes about Houston and Mexico.

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Brokerage Problems Again

Thu, 2017/08/31 - 1:52pm | Your editor

My first horror tale has hit with the Schwabians who are now my main brokerage. I received from San Francisco an envelope marked “Personal and Confidential”. It contained a letter saying that there was something I needed to know followed by a colon and a blank line and nothing more. Then Schwab thanked me for being their customer and gave a number for more information.

I naturally called the number on the letter to find out what that was all about and after being on hold for 45 minutes got a human. He named a Canadian stock I and my readers had tendered which was being taken over. Asked what about this new, he said he would look into it and call me back. I explained that he needed to call my home rather than my office and thanked him.

Nobody called after that until my bedtime. Naturally nobody called before I went to work (from the west coast). So I called again. The message was trivial. The tender offer had been extended until Sept. 6. As I had already accepted and opted for cash or stock in the acquiring firm there was absolutely no reason to write.


If the company felt the need to do so, the news was not that private or confidential and required no action of my part. All these people keep saying “great” and promising to “reach out to you” which sets my teeth on edge.


But just to be safe I called Schwab again this morning and they looked into it and just called back. After all that effort it turned out that the stock in question was a totally different one, from Germany, and there really was an important change. However I had already learned about it by reading the FAZ.com website today and then checking in with Reuters.


Today PM Theresa May told journalists she had no plans to resign, and would fight the next parliamentary election on behalf of her Tory Party. This is what the French call “un pari stupide”. Today also the Sinn Fein of UK-run Northern Ireland, the local arm of the same movement in Ireland itself, said Ireland should block talks about future ties between the two bits of the Emerald Isle between Britain and the European Union. They cited not only the open border between Ulster and Ireland but also the need for continued jurisdiction of the European Court of Justice on the human rights clauses of the treaty.

After she lost her Parliamentary majority in the June election, Mrs May was able to stay at 10 Downing Street only thanks to the support of the Protestant Democratic Unionist Party's seven Members of Parliament in Westminster.


Next Tuesday will see the start of 2-day settlement for US stock trading, faster than the current 3-day way. And there is other news as well of even greater importance to global investing adherents, ranging from how to blackmail an acquiring company to how to pay for foreign inputs quickly and securely with the blockchain. Paid subscribers should read on.


More today from Canada, Chile, Spain, Israel, Germany, Switzerland, Sweden, Finland, Argentina, Australia, Britain, Brazil, Greece, the Dutch Antilles, and India plus a company quarterly and another company's annual report.

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Creating Indexes

Wed, 2017/08/30 - 12:19pm | Your editor

Melania Trump's Slovenian grandfather was a genetic scientist. One of Donald Trump's uncles was a nuclear physicist. Maybe some scientific insights into how global warming causes 500-year storms of horrendous proportions may penetrate the ill-educated brain of our president who never seriously studied science.

Your editor tends to favor active stock-picking over buying an exchange traded fund to passively track an index. My main reason is that my newsletter is about active investing. And because our small-cap and under-the-radar finds can outperform cookie-cutter ETFs.

This week's Economist challenges how indexes are now created in the wake of the Dow-Jones Industry Average, which went live in 1896. Dow famously is weighted by share prices in dollars rather than by market capitalization, which was the only way it could produce a number quickly in the era of ticker-tape machines. But index distortion has not ended just because the number-crunching now is easier. Read more »

Another Scary Day

Tue, 2017/08/29 - 1:43pm | Your editor

Asian markets are being roiled by fear of North Korean aggression after it sent a guided missile straight over Japan. Meanwhile, AsiaTimes, a website, today published an article by Bill Gertz in which he argues that “the two recent collisions between US Navy warships and commercial ships have raised the specter that China was behind the 'accidents', using electronic means to disrupt or fool radar or navigation systmes into creating deliberate collisions.” He cites unnamed military experts and adds “there are signs the People's Liberation Army is preparing to use exotic electronic attacks in a further conflict.” Gertz is an author (of a half dozen books, the most recent of which is The China Threat) and national security columnist for the conservative Washington Times.


Right now stock markets are digesting the Houston hurricane and there are moves that one might not have anticipated. The latest horror from the post-hurricane deluge is that two reservoirs19 miles from downtown burst its banks and the levee south of the city has been breached by floodwaters. Six nore Houston suburbs are now in the flood zone and their residents are being told to evacuate their homes.

Of course the insurance, energy, and aviation industries are taking a hit. But so is Mexico. Its peso is down more than 1% against the US dollar, the biggest drop in several months, a reaction to lower crude oil prices, according to Eduardo Garcia, writing from Mexico City. Of course new Trump threats to make Mexico pay for El Muro (despite his having told his Mexican counterpart that he would settle for a fake payment) hardly helps.

The other threatened Nafta country, Canada, a major energy producer, is also suffering stock market drops—except for gold miners.

One exception to the Asian selloff is Thailand whose SET rocketed up nearly 2% today with the 2nd highest volume ever recorded, writes Paul Renaud from Phuket. The Thai baht also rose. He attributes the move to the long-term destabilization of Thai politics by populists having ended “with Ms Yungluck fleeting the country as did her brother Thaksin Shinawatra.” He adds: “political factions will be tamer and more humble now”, predicting a “more stable era and a more confident stock market.”

Eduardo edits sentidocomun.com.mx and Paul edits thaistocks.com. We exchange news and ideas with them both.


More today from around the globe including two corporate results and news from Brazil, Colombia, Canada, Mexico,India, South Africa, Kenya, Israel, Australia, Spain, Finalnd, Hong Kong, Britain, Ireland, and Switzerland.

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Hurricanes and Other Risks

Mon, 2017/08/28 - 12:49pm | Your editor

My Paris-based Chinese-American friend who mastered Schwitzerditsch to gain a third language after she married Uli has died. I said Kaddish for her, although she was (of all things) a Lutheran, over the weekend. The passage read from the Torah included the famous words “justice, justice, shall ye pursue” which certainly described Sylvia, who was a volunteer for everything from visiting Jewish old-age homes to chat in her rudimentary Yiddish to organizing French-resident Americans to petition their native land, most recently against Trump's conflicts of interest.

She will be missed.


You may wonder why the closing of docks, refineries, and pipelines in Harvey-hit Houston has led to lower crude prices. But if Texas is not buying crude, there is less demand, even if there is a shortage at the pumps. The price will rise again after Houston dries out. The dollar is also down because Houston is an export port for gasoline and other refinery products.

Meanwhile the haven commodity today is gold, helped also by a trend among central bankers last week to talk less about hiking rates. Higher interest rates hurt gold demand because the yellow metals doesn't produce earnings, and therefore holders are losing more.


My Sunday blog did not go out correctly so I included the major note for paid subscribers again today. We have news from Israel, Denmark, Switzerland, Ireland, Brazil, India, Hong Kong, Canada, and Australia today.

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Sunday Tables Posted

Sun, 2017/08/27 - 12:16pm | Your editor

I just posted the updated tables at www.global-investing.com as I usually do on Sunday. For a change we are having Thai food rather than Chinese this week. Please visit the website to see what you are permitted to view: the closed-positions for all; and the current tables of stocks and bonds, and closed-end and exchange traded funds for paid subscribers only.

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Perils of Passive

Fri, 2017/08/25 - 1:42pm | Your editor

Mexico's current account deficit super-shrank to $321 mn in Q2 compared to $8.398 bn in Q1, the Mexican central bank said today. The deficit in the April-June period represented 0.1% of gross domestic product. You could say that is the real Trump bump. Meanwhile north of the Rio Grande, summer labor shortages are hurting not just the tourist industry, but also other service sector employers dependent on foreign labor during our vacation time. I note that two of my grandchildren are back in school now. Back in the dark ages when I was a teenager I worked as a summer replacement in NYC learning how to run a switchboard, write to customers, work an adding machine, and other useful skills for later life.

John Llewellyn from London commented today on the spread of exchange-traded funds and the passive investing they are used for. ETFs now account for $4 trillion in global investments, of which $3 trillion is in the US, triple their 2010 level and double their 2013 level. As much as 40% of US domiciled equity funds are now passively managed. Around 30% of equity trading in the US is by ETFs. Vanguard alone owns at least 5% of all the S&P 500 companies. Obiously, ETFs are a cheaper way to buy stocks.

So far, ETFs only account for about 10% of overall US market capitalization, and barely more than 1% of the more complex US bond market. Although debt-security and “smart” ETFs account for very little of the current market, they are the fastest growing parts of it.

He warns that while they offer attractions to investors, “their spread may bring an enhanced risk of market dislocation and turbulence when the current bull market finally ends.

He adds: “Critics worry that they undermine the price discovery process; encourage momentum investing; undercut the role of fundamental research; raise counterparty risk; foster liquidity mismatch between underlying securities and the fund [which own them]; increase volatility; and promote bubbles.”

He concludes: “ETFs remain largely untested in a crisis, and may exaggerate asset price declines in times of market stress.” John is the former deputy chief economist of the Organisation for Economic Co-operation and Development whom I know from Paris, who now runs Llewellyn Consulting, whose new email address is llewllynconsulting.onmicrosoft.com/


More today from Israel, India, Ireland (a trifecta), Mexico, Britain, Canada, Chile, Germany, Denmark, South Africa, Brazil, Colombia, Bermuda, the Dutch Antilles, Japan, including companies reporting, the last pile-up before the next quarter results come out—I hope.

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Oh Canada!

Thu, 2017/08/24 - 1:09pm | Your editor

Your editor has just accepted another gig, this time unpaid volunteer work. I will become the new editor of the Sutton Area Community's SAC News Bulletin, which will also result in my getting a seat on the SAC board. My payback will be indirect, through the valuation of the neighborhood where I have lived and worked for over 25 years, and where we own an apartment and my office.

I have already written here about the threat to our quiet area from overweening high-rise apartment apartment buildings being sold to exotic oligarchs to launder what are often ill-got gains. The nearest one (whose foundations are being laid now) is a block and a half from this office which we own along with our apartment. The locals are fighting the latest builders, an outfit called Lend-Lease which bought out the site from the bankrupt Bauhouse Group, and so far the city has not issued permits for more than the foundation. Parties of Chinese periodically arrive by bus with paperwork showing the plans for a 99 story monster. We locals are against it because it will cause problems for our views, parking, sewage, and quality of life.

A countervailing factor is the development just across part of the East River from here of Roosevelt Island (formerly Welfare Island where among those hospitalized was Ezra Pound). The first homes built on the island combined Mitchell-Lama subsidized rental residences for the poor with what were then cheap coops just a short distance from East Midtown by the gondola (mislabeled as a tram—it is more like an aerial ski-lift). More recently the F train was also diverted to Roosevelt Island.

There a monument to FDR's Four Freedoms was finally built a few years ago. However the Queensborough-Koch Bridge does not give pedestrians or cyclists access to the island, so far at least.

Now the island will become a graduate tech campus for a jv between Cornell and Haifa's Technion Institute of Technology which will be working on block-chain systems. Both sons of my Israeli first cousin Esti are Technion graduates.

A new way to reach Roosevelt Island will go live next week, a ferry. It will take people to either Astoria in Queens or E. 34th St. in Manhattan in 20 minutes. Apart from the UN, which is a key element in our neighborhood. Cornell also has a club near here (where the Technion deal was partly negotiated) and its “Downstate” Medical School. I imagine most of the faculty will aim for East Midtown rather than the outer boroughs which should help our real estate valuations if the monster tower is stopped.

There is not much I can do about the Trump Tower which also dwarfs our residential area, because it was put up on business streets, 5th and Madison Avenues between 57th and 56th Street. Its location means that the President, First Lady, and I voted for different presidential candidates last Nov. at the same polling place, the school on 56th St.,


Eduardo Garcia writes that Mexico is about to allow a second stock market to open after more than 100 years of only allowing a single “Bolsa de Valores”. It will be for smaller-cap or higher-risk firms.


Execs from some top European companies operating joint ventures in China are joining forces to try to block political pressure being exerted by their state sector partners to give Beijing and their required Communist Party unions more say over business and investment decisions. They also fear that technology they bring to jv's is being used to compete with their European wholly-owned operations.


More for paid subscribers starting with a take-out on Canada, and news from Brazil, Israel, India, Hong Kong, South Africa, Chile, Switzerland, Germany, Japan, and China. We have a buy and a sell today.

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