Peasouper and Russian Patriotism

Wed, 2016/12/28 - 9:54am | Your editor

In recent years there were several things Russians could patriotically identify with: the vestments, incense, and rituals of the Russian Orthodox Church dating from its historic origin in Kievan Rus; the country's great literary tradition; the ballet; the triumphant sports teams; and the great voices of the former Red Army Chorus, far more popular than the Army ever was. One by one these bases have gone wrong. Kiev and Ukraine want to be independent. Russian literature has come to a seeming dead end. The ballet is underfunded and the Olympic victories turn out to have been faked by systematic official institutionalized drug doping. A 2nd Russian anti-doping official Anna Antseliovich admitted the cheating to the New York Times.

And the successor to the Red Army Chorus traveling to a Syrian holiday gig crashed into the Black Sea not far from Kiev.

Early in his grab for power, Vladimir V. Putin was suspected of letting the security services create fake terrorist attacks in the Russian heartland, blamed on Caucasian Muslims. These unified his political support and following. Now what looks like a terrorist move on the successor to the Red Army Chorus is being presented as purely an accidental airplane wing failure. I'm sceptical.

One reason for my going all 1960s is today's almost impenetrable London fog. It is not quite the same peasouper as a half century ago, as the mist is white rather than yellow or grey with pollution from coal burning. But it still feels like a John Le Carré novel where it is impossible to tell good guys from bad or truth from manipulation. Fifty years on, post-fact fog is back.


More for paid subscribers from Britain, Mexico, Finland, Hong Kong, The Netherland, Germany, India, Canada, a half dozen oil producing countries, Sweden, Switzerland, The Dutch Antilles, Panama, Australia, Colombia and a few other places.

Read more »

Boxing Day

Tue, 2016/12/27 - 6:17am | Your editor

Our Canada contributor Martin Ferera wrote last night from Britain where he too is catching up with family:

“As most of your readership are probably eating latkes or turkey, economists/forecasters should probably be eating humble pie or at least nothing more than cold turkey. How many of them will in all honesty look back over the year 2016 and admit their errors?


“As Roger Bootle put it in the Telegraph today: 'In truth, at the end of this year, economics and economists have much to be embarrassed about. Coming so soon after the largely unforeseen financial crisis of 2007-9, 2016 should surely be remembered as the year when economic forecasting finally lost any claim to being regarded as a scientific pursuit.'”


Doom-laden economic prophecies about the result of Brexit and Trump's triumph have yet to come true or even close—although to be frank we are not yet home clear.


This year in Britain we are near to having 12 days of Christmas. Like many other countries, the UK is adding Monday as a holiday to make up for Christmas falling on Sunday, already a day off. The trouble is that Britain traditionally celebrate the day after Christmas as Boxing Day, another holiday when it is said apocryphally that the Christmas presents are put back into their boxes for the following year or for re-gifting. So Britain will also have a holiday today. Then, in preparation for the New Year holiday next Sunday, markets will only be open for a half day on Friday. That leaves a week of only 2 ½ days and a 4 day weekend followed by a 3-day one which will also be 4-days long in Scotland.


I have written about the amazing sight of swans on the Thames outside our windows, but haven't yet reached my target of 7 swans a'swimming. And worse yet, a report from Greece says that they found a swan infected with Bird Flu, so maybe I never will.


Next Monday, France will raise its financial transaction (or Tobin) tax to 3% from 2% before, which apparently can be done without any input from the National Assembly or Senate. The tax is a main reason why UK bankers needing to become accredited within the European Union after Britain leaves will not take the easy and pleasant option of moving across the Channel to Paris.


More for paid subscribers follows from the UK, Israel, Grecce, Egypt, Russia, Uzbekistan, Azerbaijan, Finland, Germany, Italy, Sweden, Canada, Norway, Spain, The Netherlands, Hong Kong, India, Turkey, Japan, Argentina,The Bahamas, and the USA. And we have a new stock pick which you cannot buy until tomorrow as it is British!

Read more »

Bless the Peacemakers

Fri, 2016/12/23 - 9:33am | Your editor

Sat. night is both Christmas Eve and the first candle-lighting of Chanukah. The main theme of Christmas is “peace on earth, goodwill toward men.” The message of Chanukah is that victory comes “not by might, not by power, but by the spirit”.

These idealistic notions are being countered by rhetoric from the leaders of two countries where Christmas and Chanukah are being observed, the 2017 leadership of Russia and America. Vladimir Putin famously has two close Jewish friends from his youth in St. Petersburg (then Leningrad) who share in the spoils of Kremlin corruption. Donald Trump has a Jewish daughter and son-in-law. Both men are nominally Christian.

The bombast and bombs are being rolled out by both leaders to cover up actual or potential failures of economic policy and populist electoral promises . In Russia, since Putin returned to the Presidency, the national growth rate has shrunk to 1%. To make up for this, the Russian populace is treated to false victories (as in Syria, which will not put bread in Russian mouths) or false enmities (a plot by the western powers to nab Ukraine and punish the righteous Russians for taking it back by imposing sanctions and a recession.)

With a modern army unaffordable, Putin's Russia is boosting its nuclear weaponry, which costs less.

Trump so far has not failed to fulfill his promises to his electorate because he is still not inaugurated. But the jobs in coal mining and heavy industry, the gains from ousting Mexican illegals, and the growth from blocking Chinese trade and currency cheating will never come to fruition.

Defense spending is more easy to organize fron Washington than coal mining jobs. Trump also wants to instigate trouble with Beijing by naming China-hawk Peter Navarro as trade policy chief, another Putinish tactic for finding a foreign scapegoat for domestic policy failure.

More nucldear bombs also help show that he did not gain the US mandate because of Russian hacking of Democratic Party websites. The Manchurian candidate too wants to build weapons for domestic political reaons.

So a Twitter post from the president-elect suggests an end to decades of bipartisan efforts to limit nuclear weapons. Mr Trump is also combining bombs with bombast in a symbolic move to satisfy his voters. The risk is that one of these leaders pushes the nuclear button. Nuclear war in 2017 is the nightmare outcome

. I pray that both men are smart enough to stop short of unleashing a hydrogen bomb. And everyone observing the winter Judeo-Christian holidays should add a prayer for the same outcome: peace.

Nuclear disarmament is the first step, just as it was under Kennedy. Alas, there are no votes in being a peacemaker although there may be a blessing or two.

As you gather around the Chanukiah or the Christman tree, remember to bless the peacemakers.

More for paid subscribers follows from Israel, Mexico, India, Finland, Germany, Switzerland, the Dutch Antilles, the Cayman Islands, Australia, Canada, Japan, and the usual suspects in Britain.

Read more »

Season on Non-Santa Suits, re-sent

Thu, 2016/12/22 - 9:43am | Your editor

Mozilla decided to upgrade my computer in what it thought, being in the USA, was the middle of the night. It also sent me a haiku. However, this screwed up the sending of today's emailed blog, which is now being re-sent with a very important royal correction.

Druids of the 21st century gathered at Stonehenge yesterday, with their watches or smartphones, to fete the first day of winter with total accuracy unavailable to their celtic forebears. Meanwhile Her Majesty the Queen, 90, will not take the train to Norfolk for Christmas, as is a tradition for the royals here, because both she and Prince Philip, 95, have bad colds. Instead of going to Sandringham in the country they wre initially going to have their their Christmas at Buckingham Palace where the central heating is better.

After the ISIS attack on the Berlin Christmas Market, the royals will also be beefing up their security in London, because of course it would only take one terrorist suicide bomber to wipe out the whole lot of them. Then the royal couple changed their plans on Friday afternoon and embarked on a helicopter journey to Norfolk. This was reported wrongly in our earlier blog which didn't go out correctly. It is very important to properly report on the Queen as my eldest granddaughter is keen on the monarch's movements.

Unlike Mexico City, London does not have a fireworks market, nor any tradition of blowing things up at Christmastide. They get in out of their systems at Guy Fawkes Night which celebrates the defeat of the Gunpowder Plot to blow up the Houses of Parliament and depose the Her Majesty's Protestant ancestors.

Meanwhile in the former Raj, the dirt is flying around the government, no longer confined to the Tata conglomerate. Congress Party head Rahul Gandhi (of that ilk) accused Prime Minister Narendra Modi of accepting 400 mn rupees (~$6 million) from the Sahara conglomerate when he was chief minister of Gujarat and demanded an independent inquiry. Modi’s BJP immediately dismissed the allegation as a sign of opposition desperation.

Meanwhiel the idiotic withdrawal of currency notes by the Modi govt to try to crack down on “black money” has poisoned the air enough so that the key laws to create a national goods and services tax to replace a hodge-podge of wasteful state levies has become derailed by politics. It is now unlikely that the GST law will be passed by the April 2017 deadline. This reduces further the hopes of good growth for India next year.

More for paid subscribers today from among other places, Britain, Finland, Switzerland, Brazil, Australia, Greece, Africa, Canada, Ireland, Northern Ireland, South Korea, and India.

Read more »

Curing Disease

Wed, 2016/12/21 - 7:43am | Your editor

Africa Today

Tue, 2016/12/20 - 7:44am | Your editor

The 'word of the year', according to today's Financial Times, is ETF, exchange-traded fund, according to a note on the op-ed page. Since the first US ETFs came out in the 1980s, this belated recognition is an indicator of how different British investing is from American, or perhaps of how different posh British investing is from the US popular retail variety.

Last night we attended a performance in Swiss Cottage of Wild Honey, a long-lost Chekhov play, as translated and edited by Michael Frayn. I suspected that Frayn had simply written it himself but there turns out to be a provenance for the play so I gave that ideal up. However, its thesis that Russians drink too much was tragically confirmed by the most recent incident when 49 Irkutsk residents died from drinking bath oil. It has been a tough 24 hours.

Besides the conviction (if not sentencing) of IMF head Christine Lagarde for negligence by a French court, we have had another terrorist truck murderer in Berlin, where at least 9 people were killed and dozens wounded by a deliberate drive into a Christmas fair. Suspicions are that this was the work of Isis. A Swiss shot up people attending a mosque. And the Russian ambassador to Turkey was assassinated at an art exhibit in Ankara. In Chekhov's day or Florence Nightingale's any one of these incidents would have been a casus belli. We are planning to visit the museum dedicated to the famous nurse along with an expert on Galipoli early in the New Year unless war breaks out.

More for paid subscribers follows mostly from Britain, Finland, Brazil, Israel, India, Sweden, Canada, Abu Dhabi, Egypt, Guinea, Senegal, Nigeria, Angola, Democratic Republic of Congo, Sierra Leone, Mauritania, the Channel Islands, and Nevada. As you can see, this issue is about Africa.

Read more »

White and Black Swans

Mon, 2016/12/19 - 7:32am | Your editor

An extraordinary sight in the middle of last night from the window of Mudchute Manor: three white swans sailed into the slip from the Thames. The night before a single swan and three cignets swam under our window. This you never get to see on the East River in Manhattan. I was disappointed that there was no black swan among them, and that there weren't seven swans a'swimming, I kick myself for not handaving woken my sleeping husband to see them.

I am not sure what is under the tidal water in the slip, which normally attracts lots of ducks, that leads birds to come in close to shore and within reach of the many brazen foxes who now live in London but it must be a dietary supplement.

Among the black swans possibly in play are: an electoral college vote less affirmative of Trump today after the Russian polling interference was made known and new considerations about Brexit with Scotland again wanting independence and a challenge from within the cabinet to continuing the move out of the EU. At this hour I cannot tell if either swan can swim.

More today for paid subscribers starting with (surprise, surprise) more news from Britain, Israel, Abu Dhabi, Mexico, the Middle East, Nato, India, Australia, Denmark, and a few other places. The main focus is on ethics and reputation.

Read more »

Back In Iceland Again

Fri, 2016/12/16 - 11:39am | Your editor


After a half century of not flying to Europe via Reykjavik we went to Iceland again yesterday to avoid painful holiday season prices on flights to London, mainly because BA would not accept our miles in payment. In the runup to Yule in the Old Norse-speaking island of Iceland, the days have barely any daylight and people revert to their ancient Viking supestitions. Gryla, a witch or ogressnwho eats children and her evil Yule cat Jilakotturinn settle down in the towns and villages along with her 13 mischief-making sons with names like Kertasnikir (Candle Nicker) or Askasleikir (Bowl Licker), Prousleikir (Spoon Licker) or Bjugnakraekir (Sausage Thief). The cat bites anyone not wearning at least on new garment on Christmas Day.

It is all much more fun that benevolent Santa Claus although the mischievous lads also leave presents for children who have been well-behaved. Iceland has one of the most flexible economies I can think of. After fishing became over-competitive the country switched to high-yield banking. After that went bust (taking out government ministers who had been behind the push), it started refocusing on population health databases (easy in a small well-tracked population) and winter tourism. Hundreds of Britons among those who did not lose their money in the Icelandic banking disaster of 2007 are now willingly flying to Iceland to visit hot springs and glaciers and volcanos, and to view the local wildlife, very long-haired horses the size of ponies and reindeer, a word from Old Norse which we all can understand.


Mexico's Banxico (central bank) raised interest rates by 50 basis points to 5.75% which shows the risks of a strong dollar to emerging markets. Bank regulators in the US raised the amount of capital required for too-big-to-fail banks while the European Union cut the capital it requires for its banking sector, in the hope of boosting animal spirits and loans. US small caps are showing great expansion even before the new Administration feeds the frenzy while unemployment continues to fall. There is a disconnect between our country and the rest of the world—not just China but also Japan, where stocks are soaring as the yet loses traction

More for paid subscribers today with a double-sized close-of-week report from London with news from India, Africa, Mexico, Brazil, Colombia, Hong Kong, and Argentina among developing countries, and Israel, Spain, Australia, Canada, Hong Kong, Britain, Japan, Switzerland, Finland, Sweden, Iceland, and Ireland. For a change we start with fund news.



*Valeant, the Canadian drugmaker in trouble with regulators and stock pickers for its private pharma fulfillment firm, now sold, and its price hikes, lost 3 top execs with effect early in 2017. They are jumping ship the moment their multimillion dollar retention bonuses run out Dec. 31. It does tell you something about the former management which lured in all those institutions, as well as what the future holds for our big player in VRX, Pershing Square Holdings, PSHQF, a UK closed-end fund run by Bill Ackman. He is also in deep do over other picks. The 3 departing managers collected $6.8 mn in retention bonuses before they hit Go. We bought PSHQF (PSH in London) to learn from Ackman about 2 years ago. 


*To buy we sold Africa Opportunity Fund or AOF, listed in London, at a loss. However an insider last week bought 434,000 pounds sterling worht of AOF stock at about 41 US cents/sh.


*FibraUno, the Mexican REIT which trades in the US as FBASF, put out a report to show that its risks from the Bank of Mexico rate rise is minimal. Its debt is 83% for over 6 years and no repayment is due on this until 2014. It has unused revolving credit facilities totalling NMP 7.1 bn and US $ 410 mnb. FBASF debt leverage against capital is only 34%.Its debt is 76% at fixed rate and 93% secured against assets. Its debt is 51% in pesos which are costing more in interest and 49% in US$s which at the moment are cheaper. These revelations are a reaction to the REIT shares falling 2.7% in the wake of the Banxico doubling its interest rate rise against that of our Fed.


*Saba Capital, an insider, reported to the SEC that it had bought another $1.28 mn worth of shares of Advent Claymore Global Convertible, a closed-end fund. AGC is in our model portfolios because at a time of rising interest rates, convertible shares and bonds make investment sense. However Saba is buying to try to get at the cash in a battle with the existing management group. Saba is officially offshore from the Cayman Islands but is really Canadian. 

Read more »

Nattering Nabobs of Negativism

Wed, 2016/12/14 - 12:51pm | Your editor

After my nostalgia trip to the 1960s over the Manchurian candidate in Trump Tower, I was reminded of a bit of wit during the Nixon Administration. Before he resigned over corruption charges, Vice-President Spiro Agnew was the house wordsmith. He coined the phrase “nattering nabobs of negativism”.

The planned US cabinet could meet that definition, but here is another: “the tweeting Trumpian total tear-down tycoon team”. The nominations in the energy, environmental, healthcare, education, and trade posts all publicly hate the part of governmnet they are supposed to head.

More for paid subscribers follows in this last US-based blog for 2016. I fly away tonight to Brexit-land. We have news from Britain, Australia, Israel, Denmark, Finland, and Ireland.

Read more »

Foggy Bottom and TIFs

Tue, 2016/12/13 - 2:21pm | Your editor

When we lived in Washington, your editor was the senior economic advisor to the Minority (Republican) leader of the Senate Foreign Relations Committee, my only foray into the striped pants world, at a time when Richard Nixon was the president and took major steps to change US relations with the rest of the world, starting with China. My boss, Sen. Clifford P. Case, a liberal Republican, despised the POTUS but supported many of these moves as well as the messy extraction of our troops from Vietnam and environs.

There's a reason why the center of US diplomacy is called “Foggy Bottom”, the nickname for the Dept of State. Diplomacy is not a matter of one winner offseting a loser. It is more a matter of hidden influences balancing out to craft national policy and avoid bad outcomes like war, boycotts, and bans, or relationships breaking down. Tearing up treaties, threatening to exit alliances, is not diplomatic, and is dangerous.

Business negotiations are a lot less fraught than diplomatic ones because the companies have an easy way to figure out their interest, aka the bottom line. There is no clear bottom line in statesmanship and in fact taking a long view often imposes costs. Think of the Marshall Plan. Consider Michael Gorbachev's thesis that the western countries gloated about their victory and failed to do enough to help the former Soviet Union get back on its feet. Ponder how the great powers in 1914 stumbled into a dreadful war which wiped out most of their leaders.

To look at hidden influences to come, consider the future president's view of daily briefings from the intelligence service: “You know, I'm like a smart person. I don't have to be told the same thing in the same workds every single day for the next eight years. Could be 8 years. I don't need that. But I do say 'if something should change, let us know.'”

Mr Trump comes to the White House with less familiarity with government operations than any president since Herbert Hoover, and he is naming a cabinet full of similar folks. About the only single thing that unites these nominees is that they are often opponents of the way things were done until now by the agencies they will command.

In diplomacy, there is a particularly hole which worries me greatly. The future head of the DoS, Rex Tillerson is a known buddy of Vladimir Putin who the CIA says worked to influence the outcome of the November election in favor of Trump. This is a credible suspicion given the hacking of the Democratic National Committee and Hillary Clinton's emails by persons unknown who had the time and electronic means to do this.

An ex-KGB officer running the Kremlin is a credible suspect. Russia provides financial support to the extreme rightist Marine LePen in France and is said to be helping the Alternatif fuer Deutschland extremists opposition ot the re-election of Chancellor Angela Merkel in Germany. Both countries have imposed economic sanctions against Russia for the invasion of Ukraine and seizure of Yalta as did the US.

Sen. Harry Reid, the Minority (Democrat) leader, called in late October, well before the election, that “explosive information” linking Mr Trump with the Russian government should be made public. Exactly what Reid was privy to I do not know, but his position gave him access to some of the briefings Mr Trump says he doesn't need.

At the peak of the Cold War in 1962 a movie called “The Manchurian Candidate” told how a brainwashed scion of a US political family ran for the presidency on behalf of the Communists running China and the Soviet Union. It was Vanity Fair, not exactly a major media group, which called Donald Trump the Manchurian Candidate before the election. Naming Tillerson to head the State Department and refusing to read CIA daily briefings makes me fear they were right.


The inventor of TIFs traded index funds—but not of exchange-traded versions of index funds—Jack Bogle of Vanguard, wrote a scathing condemnation of ETFs in today's Financial Times. Bogle cites among other defects of the ETF variant the hefty daily trading volume which he likens to speculation. He notes that investors in Vanguard TIFs with the identical mandate to ETFs wind up with more money and fewer losses. Even the basis charges are higher for ETFs than Vanguard funds of the same catergory. He also reveals that the big users of ETFs are not retail investors but institutions, and that rather than following the overall market, ETFs are increasingly focused on strategic beta (2x the level at TIFs) or speculative strategies (6x TIFs) which account for 31% and 25% of the total assets of ETFs, well over half.


More for paid subscribers follows from China, Britain, Finland, Denmark, Israel, Canada, Brazil, Colombia, the Dutch Antilles, Panama,and India today.


*My note about fat fingers having caused the huge drop in the Chinese currency overnight Dec. 6-7 was finally posted on the site which published a note claiming that China was defying future president Trump by devaluing the renminbi. This is the kind of information which amateur diplomats might act on, leading to major upheaval in the world. Read more »