Global Investing newsletter

Don't Disconnect for a Minute!

Mon, 2017/12/11 - 5:16pm | Your editor

 

Oy vey. How tough it can be to prepare ahead. We properly headed back to New York from Boston to catch the 5 p.m. Flight to La Guardia after getting an email confirmation of our tix at the hotel. Big mistake. American Airlines delayed our takeoff by a mere 5 hours. When we finally hit the Big Apple the wait for taxis was around the airport twice. Luckily we did not try to return by bus via the Port Authority Terminal on 42nd St. which was hit by a terrorist in the wee hours today.

Then after a quick short sleep I hit the office. Big mistake II. Microsoft had updated my laptop during the weekend and taken out my ability to log on with my password. I called and spoke to a nice man in the Philippines called Harvey who after many tries to overcome the blockage asked if he could wipe out my laptop and install a new system of windows 10. Since my laptop holds work in progress and I couldn't save this stuff I refused.

In the end I used a 1990s trick to get back into the laptop, linking it to my pre-Windows 10 desktop with a wire. Although my laptop was not left on, and not with me, it had been “updated” to block non-Microsoft access over the weekend. I am going to copy all my stuff onto the desktop and remove microsoft 10 entirely before night falls. Here it is 3:15, a mere 7 hours later and I am writing my blog.

In the interval during which I was incommunicado, Bitcoin rose from $15,460 to $18,700, which works out to about 21%.

 

Apart from scepticism about cybercash, my conclusion is that however benevolent the Bill & Melinda Gates Foundation may appear to be, Macrohard is still a monopolist at heart and its purpose with updates to is disable computers which do not use Windows, Siri, and all the trimmings.

And by analogy, if you are Chinese you should not trust wechatto hide from Beijing and local Communists your snide remarks about the Chairman or your boss or the garbage collector.

 

Also, you do not want to expect Apple to honestly run your cellphone. You do not want to believe in Amazon's benevolence. Do not assume that google is your friend and that facebook is benign.

 

As bittycoin reaches the size of a Dutch tulip bulb the odds increase that this will all end in tears. However, confining the troubles to come to cybercurrencies and internet stocks will not be easy, particularly if the Trump Administration opts to boost taxes in Blue States like New York or Massachusetts, California or Connecticut. Such surgery tends to spill over into other areas—even with Republican Senators and Congresspeople making laws.

 

In fact the vagaries of the tax reform bill are hard to pin down, but will have far more impact on 2018 US stock market performance than anything else I can think of.

 

Luckily we have good news to keep spirits bright. The best way to exit good performing stocks is if they are taken over, and 2017 has just seen another move on one of our small caps by a buyer.

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Before I Fly Off

Fri, 2017/12/08 - 10:51am | Your editor

Before we fly off to Boston here is a brief blog. It is still way to early to figure out who got caught by the bankruptcy of the Steinhoff International Holdings group of South Africa, heavily invested in British and European retailing.

 

But it doesn't take a rocket scientist to see the impact of wildly divergent prices of Bitcoins which gained and lost as much as 20% of their value in different marketplaces yesterday, to undermine any claims of usefulness for the crypto-currency. Currency is a store of value, and cannot price erratically. It is a unit of exchange and there has to be some consistency in how many loaves of bread or shares of Apple you get for every bitcoin. And if you borrow or lend against this “money” you have to have some idea what the future valuation will be.

Bitcoin is becoming an argument for fiat currencies by its valuation excesses and interruptions. Up 20% in a single day (with fluctuations) is not how a currency behaves.

Which is not to say that some currencies in use now are not over-valued or under-valued. Bank of New York thinks the currencies likeliest to rise next year are from Central Europe, like Czech Republic, and Asia, like India.

 

More fore paid subscribers follows from Australia, Bermuda, Belgium, Brazil, Britain, Colombia, Finland, Hong Kong, India, Israel, Japan, Spain, and Switzerland.

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Fund vs Fund

Thu, 2017/12/07 - 2:20pm | Your editor

 

Today the Slovenian exchange called Nice Hash was hit by a hacker. Slovenia is a newish Balkan country which runs the northwestern-most part of former Yugoslavia. This new country produced the beautiful Melania Trump although when she was born it did not yet exist. It also produced the now Italian mother-in-law of one of my nephews. In that part of the world, borders suffer from variable geography.

Nice Hash was a bitcoin exchange whose main clientele was from across the border in Italy, which has a frequently deserved reputation for having lots criminal mafias. From Italy or somewhere else, hackers stole 4,700 bitcoins. At present quoted prices for the crypto-currency that amounts to $70.5 million. It is only one of several thousand unregulated bitcoin exchanges.

 

TEI vs EMTL Read more »

Political Risk is Back

Wed, 2017/12/06 - 3:31pm | Your editor

 

Today's blog is late because of a water outage in my building.

The stock markets of the world today are being roiled by diplomacy, starting with Pres. Trump's move of the US Embassy in Israel to Jerusalem. But other diplomatic White House plans are also putting stock markets at risk, notably Mexico's, with the renegotiation of the terms of the North American Free Trade Act, or Nafta. Political risk is back.

Bank of America Merrill Lynch analyst Carlos Capistan says Mexico is seeing “a clear downturn” in consumption “with retail and auto sales contracting” year/year by 0.33% and 10.2% repectively. The cause is high inflation and tight monetary policy to control it. At over 6%, inflation is pushing real wages down, leaving households poorer and with less spending power. Meanwhile tight money is slowing credit growth.

However, Capistan says that offsetting the household spending drop is a good external environment. Historically, that would mean sales to the USA eventually boosting a Mexican recovery. Until now, the US has accounted for 80% of Mexican exports. But with Nafta changes potentially blocking Mexican exports, it is different this time.

But Eduardo Garcia of www.sentidocommun.co.mx writes today about a new factor not typically taken into account in Mexican forecasts: the rest of the world where Mexico can find new agricultural and industrial markets if Trump force abandonment of the Nafta treaty. Eduardo quoted a study by the Inter-American Development Bank (IADB) which listed 130 products, accounting now for 59% of Mexican exports, whose pricing is highly competitive, and can tempt new buyers.

Selling more widely can help Mexico overcome the damage President Trump has heralded to Mexican sales to the USA. Products which used to go north can be sold to Norway, Canada, New Zealand, Japan, and Australia and the proceeds can boost Mexican consumption as well as that of destination countries.

The study was done by IQOM Commercial Intelligence which employed analysts led by Herminio Blanco, the Mexican Secy of Commerce and Industrial Development (1994-2000), who negotiated the terms of Nafta for over 20 years; Jaime Zabludovsky, a deputaly Nafta negotiator; and Sergio Gomez Lora, who was chief Mexican global trade negotiator for 9 years and who now heads IQCM. They examined trade data over the last 25 years and the impact of GATT and preferential access to 46 destinations under its terms over the last 23 years.

Manufactured products where Mexico has an edge in price range from autos and auto parts to telephone equipment, hearing aids to computer hardware, microphones to domestic appliances, air conditioners and compressors to medical and mineral equipment.

Among the best future target markets are Pacific Alliance Pact countries (a treaty already renounced by the US Administration) like Chile, Colombia, and Peru, Spanish-speakers where Mexico has an edge. It also of course can sell to the rest of the Pacific Rim which is hungry for farm products like meat and corn (maize) for feed.

The think-tank advised that the Mexican government encourage exports by opening new distribution channels and cheaper transport of merchandise. Other Mexican winners in a non-Nafta world would include tourism, retirement, and dental and medical tourism.

 

*Pres. Trump signed a document recognizing Jerusalem as Israel's capital. Yerushalayim shel zahav, Jerusalem of gold, is a major pilgrimage site for all 3 monotheistic religions and the Old City fell into Israeli hands only 50 years ago after 6-day war. Its status and that of other territories captured then is supposed to be part of a peace treaty which nobody has managed to reach since then.

 

*Dozens of Republicans on Capitol Hill have come out against compulsory first-in-first-out calculations of capital gains taxes for individual investors, a matter I pinpointed in my Monday blog this week. The amount to be earned is not worth the aggravation it will cause among voters, $2.4-2.7 bn over the next 10 years. There are also good chances of removal of the proposal to disallow state and local income taxes—a deduction ever since Federal Income taxes were invented, in the early 1900s.

 

More on Mexico today along with 3 updated analyst reports and news from Britain, Belgium, Canada, China, Finland, Germany, Israel, Mexico, The Netherlands Antilles, Nigeria, Spain, Switzerland, and a few other places.

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Breakdown Brexit Risks

Tue, 2017/12/05 - 2:12pm | Your editor

Brazilian pension reform is back on track so the country's bolsa is bullish, up 0.82% in reais, or 22.4% for the year and another 0.51% for the currency's rise against the dollar. São Paulo is now ahead of Chile, Colombia, and poor Mexico. But what markets like best are repentent sinners so the top major market in Latin America is Argentina, up 51% (net of currency losses). I used local market data.

 

The embarrassing split between Britain and Northern Ireland over the European Union's terms for moving on to trade talks has led analysts to consider the impact of a walkout without a deal at all. This at one point PM Theresa May threatened her EU counterparts with. Breakdown risks are high.

Crédit Suisse looked at the sectors which will suffer the most from a no-deal outcome. Tariffs on food from the EU will hurt British farming because agricultural exports would have to pay them under World Trade Organisation rules. And farmers will lose the subsidies they are now getting under the Common Agricultural Policy which account for 50% or more of their income. And Britons who eat food will have to pay 8% more for their groceries, boosting inflation by a similar amount.

The UK financial services industry would suffer from a brusque Brexit and lose jobs, while the Exchequeur would lose about 11% to 15% of its total tax receipts which come form the financial services sector.

The auto industry (as also in Nafta countries) is highly integrated across borders and would face a £4.5 bn in costs which would translate into a 15% rise in car prices, and a 20% drop in car sales. Again inflation would increase.

Landing rights could ground airplanes between the UK and the EU and disrupt supply chains in the whole European region.

Leaving Euratom without a deal would keep Britain from getting nuclear isotopes (for medical care), nuclear fuel, and components for its reactors. It would also have less money for nuclear physics research.

With the European Medical Authority moved to Amsterdam, Britain faces customs delays for its pharmaceuticals and customs delays. In theory pharmaceuticals trade duty free but border controls and customs checks will slow the movement of drugs and hurt patients on both sides of the border.

More from Israel, Ireland, Canada, Sweden, Germany, India, Chile, Spain, Brazil, Mexico, and China.

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Commie and Capitalist Stocks

Mon, 2017/12/04 - 3:22pm | Your editor

 

The BBC reported today that more than half the voters polled in Britain want another ballot on whether or not to go for Brexit. The poll was taken before the failure of PM Theresa May to get a deal during her Brussels visit today, despite offering to pay £50 bn to cover liabilities to the European Union after Britain leaves. The talks have stumbled over the special needs of Northern Ireland which has a now un-guarded border with Eire, a member of the EU.

What makes this serious is that the current May government lacks a majority in Parliament without the votes of the Northern Irish Democratic Union Party. British shares and sterling fell in the wake of the latest mess over Brexit. Irish Taoseach (Prime Minister) Leo Varadkhar, who is half Indian and gay, expressed surprise that an exit deal reached by Britain and the EU failed to get Mrs May on board. He thinks the only region which wants a voice is Northern Ireland. But if Belfast gets its own rep over Brexit, Wales, Scotland, and England also want to have their say. The Scottish Nationalists who already want to remain if England leaves were the first to put forward a demand for parallelism, by leader Nicola Sturgeon.

Meanwhile the horror show in Yemen continues with the current strongman apparently killed by a bomb in his family compound by pro-Iranian Houthis. Wily Ali Abdullah Saleh, a former strongman ousted in 2011, made a deal with Iran to resume running the country which is being bombed by Saudi Arabia to its north trying to oust the Houthis alligned with Iran. Last week he threatened to switch sides and make peace with Riyadh. The country has cruise missiles but no way to fight cholera and famine.

 

Analyst Paulo Santos today wrote the definitive piece (in English, not Portuguese) on why Bitcoin will crash, published in seekingalpha.com/ article 4129397-bitcoin-series-7-endgame?unprof today. As I have no real knowledge of crypto-currencies I am leaving it to him to tell you why you don't want to buy into the bubble.

 

Bloomberg worries that the US asset management business is turning into a duopoly by BlackRock and Vanguard. The pair manage wealth greater than the US GNP. With the number of Exchange-traded funds now greater than that of US stocks, the power of the combined managers may hurt basic market efficiency. That is the view of the founder of Vanguard, Jack Bogle, interviewed by the website and magazine.

 

Tech is dreck again today as well. I have an alternative to bitcoin, ETFs, and marijuana stocks. Consider Commie companies. Paid subscribers should read on.

Today we have a new stock pick and a strong recommendation from on an old stock plus news from Switzerland, Sweden, Australia, Argentina, Israel, Ireland, India, China, Russia, Kazakhstan, Canada, Brazil, Mexico, Britain, Finland, Denmark, Sweden, Norway, and South Korea.

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Sunday Tables Posted and Mazel Tov

Sun, 2017/12/03 - 3:39pm | Your editor

Today's www.global-investing.com tables have just been posted on the website, where pre-subscribers may look at how we have done with closed positions over the past few years. Only current subscribers are shown the current stock, bond, and funds we recommend. Join them to make returns like we have chalked up in the past.

The tables were posted late because this morning we went to a triple wedding at Temple Emmanuel, a Reform Synagogue on Fifth Avenue. The weddings were of 3 Israeli couples: Elizabetha Komkov and Valentine Boldovsky; Alona Livneh and Ori Berwald Shaer; and Gal Gerberovich and Alon Sela. Mazel Tov to the happy couples.

The setting was the magnificent main temple designed by Guastavino with fabulous acoustics. There was string music and a magnificent cantor chanting the 7 benedictions for a Jewish wedding. 

The newly wed couples were blessed by Cohanim (members of the priestly tribe) both male and female. A dozen rabbis, both male and female, did the sermonizing and solemnization of the weddings. And everyone said the prayer of thanks (shehekeyanu) for having reached this happy occasions. Read more »

December Day

Fri, 2017/12/01 - 5:12pm | Your editor

The US stock market is quivering on the start of the final month of the year, because of worries about the administration's tax plan now derailed again in the Senate, plus fear that the Administration's Russian overture will turn out to have been ordered by the President himself coming from investigation by his interim adviser Michael Flynn. Secretary of State Rex Tillerson is rumored to be on the ropes.

The US dollar and stock shuddered after the Markit manufacturing purchasing managers index missed the upbeat forecasts, coming in at a respectable 53.9 but nowehre near the forecast of 54.5. Anything over 50 shows expansion.

Egypt has reacted to the latest Trumpian barrage against Muslims by signing up to allow Russian bases on the Mediterranean, something not imaginable since the days of Gamal Nasser.

Russia has also announced that it will not receive John Huntsman, the new US envoy to the country. And it defended Kim Jong Un of North Korea at the UN against what its Foreign Minister Sergei Lavrov called “a bloodthirsty tirade” by the President. However Russia will receive British Foreign Secretary Boris Johnson in the hope that he will indiscreetly reveal something he shouldn't.

It doesn't help that the internal contradictions over the Tory coalition in Britain Irish border policy puts the UK at risk of losing its majority which depends on the Northern Irish Democratic Unionist Party votes. That brings on the specter of Jeremy Corbyn's lefty Labour Party taking over.

On this unhappy day the haven of choice for Wall Street is Canada, bitcoins, and some commodities.

 

There are several elements of the new tax code which do not look like surviving an informed vote, assuming Congress gets this. One hidden charge to boost tax receipts came to my attention because it affects investors. If after the tax bill is passed you want to reduce your positions in a stock where you have large profits, the new law will require that you use first-in-first out shares to trade, or FIFO. That means your long-term winning trades will be more heavily taxed than if you can use last-in-first-out, or LIFO, as at present. You do have to balance short term trades (positive or negative) in a separate part of your IRS forms, but until now it has been your choice which lots are sold.

I am going to be reworking my tax planning this month to cover the new bill risks, on the off-chance that Congress will not remove this penalty clause. The only alternative at present is to leave the big winners in place until you die, and your heirs can liquidate them based on the valuation on the date of your death rather than when you bought the stock 50 years earlier.

 

More from China, Mexico, Finland, Britain, Denmark, Argentina, and South Africa about internet stocks, and more on other sectors follows. I lost my work when the exderminator came to clear out the roaches and started afresh afterwards.

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China Trade

Thu, 2017/11/30 - 2:36pm | Your editor

I am as keen as the next investor to benefit from the increase in Chinese consumption and its economic growth. Chinese people want appliances, cars, trips, and experiences, and the government is aiming to let them have it all. This is not a bubble like bitcoin or tulip mania. They also may want more freedom and news, but that is not an easy investment pick.

China represents about 16% of global gross national production but its booming stock markets only account for about 3% of the investments available globally. If you then strip out state-controlled entities with dodgy accounts and hidden debt, there are even fewer Chinese investment options to consider.

That helps explain why the few private sector companies participating in the growth move are trading at ridiculously high multiples, mainly because of lemming-like Chinese neophyte investors buying whatever their friends are touting today. And passive funds are buying more of what went up.

A small number of high-growth companies have become the bulls in the China shop with eye-watering multiples. We are not expecting to exit them altogether now but we are cutting our risks with these high-flyers and have doing that for months. But I am not selling out because I want to be present in as Chinese people move to a middle-class way of life.

The selloff in China-linked Internet leaders continued today in Hong Kong and Shanghai markets after its impact on US tech stocks took a few billions away from our FAANG owners. That the FAANGs are up here today changes nothing in Hong Kong or China.

Your editor opted to exit her main Chinese fund holding, the SPDR S&P China ETF, GXC, overnight. It is a rather mindless index tracker fund trying to replicate the S&P China BMI Index. It is grossly overweight the local hotties: 13.6% (its largest stake) in Tencent Holdings; 11.7% in Alibaba; 3.7% in Baidu; and 1.7% in JD.com. I sold GXC at $107 and change per ETF.

My reason was that I figured the US selloff would be copied in Asian markets today, which was the case. The flops there were led by Tencent Holdings in Hong Kong while other more sedate markets like Japan were among the tops. My other reasons will be shared with my paid subscribers in their section of this blog.

My end-of-year decisions now will focus on how to put this money to work.

I am looking at stocks we already own to add to, in South Africa, Israel, Spain, India, Mexico, Finland, Brazil, Argentina, Chile, and Canada. More for paid subscribers follows.

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Tech Selloff and Alternatives

Wed, 2017/11/29 - 3:31pm | Your editor

 

Here's what a great stock market figure, no lefty, thinks about the tax bill now before Congress:

“The tax proposals in Washington are a 'moral abomination' because they favor corporations at the expense of workers, Vanguard Group founder John Bogle said.
“Think about this: Corporate profits after taxes last year were the highest they’ve ever been in the history of GDP going back to 1929,” said Bogle at an event Tuesday sponsored by the Council on Foreign Relations in New York. “And we are thinking of giving relief to the corporations at the highest levels ever. Individual wages are at the lowest level in about 15 years as a percent of GDP,” he added.
“So we are helping people who are doing very well and doing nothing for the people doing very badly,” said Bogle. “One of the flaws is that corporations are putting their shareholders ahead of the people that built the corporation, the people who put their heart and soul” into the companies.

 

Another grievance, this time from my alternate role as housewife. The new Amazon-controlled Whole Foods market in my neighborhood no longer takes back empty bottles for cash, so they will clutter up the landfills run by my city. The change also affects on of our stock picks, at least longer-term. But it also undermines the green credentials of the supermarket.

The tech selloff which began in China and Hong Kong has now hit the US. There are alternatives.

More for paid subscribers including three company reports, from Australia, South Africa, and Israel, mostly good, and a stock sale in Canada. Plus lots of news from Hong Kong, Sweden, Norway, Austria, Switzerland, Mexico, Brazil, Mozambique, various Caribbean islands, Britain, Japan, Chile, and Argentina and a half dozen other places.

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