Global Investing newsletter

Tables Plus Biotech Battle

Sun, 2018/02/18 - 6:19pm | Your editor


My Sunday job is to post our tables at and I just did despite tomorrow being a holiday: President's Day in the US; New Year in China, Hong Kong, Taiwan and many other Asian centers; and Families Day in Canada.


I got my Barron's issue yesterday at my home address and was pleased to see that Mary Childs, a new by-line, has written about how male-dominated and macho Wall Street remains in the era of “me-too”. Women at funds and brokerages are under-hired, underpaid, and under-promoted according to statistics and anecdotal evidence.


My Barron's issue came with a glossy 34 page catalogue from UK haberdashers Charles Tyrwitt showing menswear only. It had an advertising insert about options trading which featured only male experts. It ran its list of local stock advisors around the country and ads about promotions from brokerages with only a handful of women's names.


Ms Child's headline read: “A Failure to Supervise?” specifically about the misdeeds of Steve Cohen who is being sued by a lady whose career was blocked by the hadge fund manager under supervision for insider trading and other bad behavior, and therefore should be required, we both think, to end discrimination in promotion and pay.


But Barron's itself, despite naming a woman as editor-in-chief this year, is still acting as if the stock market is only for guys. Who is supervising its ad salespeople—or are they all salesmen?


More for paid subscribers follows, over disputes on the stock we tipped Friday in an article by Canada-based Martin Ferera about a local biotech firm Vancouver. The article was published with a critique by Patti the Biotech Maven, but she has more to say. I bought the stock and I do not regret this. But I think readers should hear more from Patti and, probably in a rebuttal, more also from Martin.

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Cassandra Is Silent

Fri, 2018/02/16 - 2:40pm | Your editor

Another day of seemingly irrepressible stock gains despite the risks of a holiday weekend, with US markets to close Monday for President's Day. It doesn't pay to predict trouble. But please do note that the almighty dollar is down again against foreign currencies.

In early trading US Treasuries again fell in price over housing starts rising, a possible herald of inflation. Lower T-Bill prices mean interest rates (which move inverse to the price) rose again. But now the bond market has moved the other way, and the yield spike dropped.

Today, the lockstep move of bond and stock price broke down and stock prices rose solo. So maybe the stock selloff earlier this month is over.


Or not. I don't want to suffer the curse of Cassandra whose warnings were always correct, but were never believed. Gold is again on the up because it moves inversely to the US$ in which it is priced. My paid subscribers were told when I bought more gold

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Zurbaran and Short Sellers

Thu, 2018/02/15 - 2:19pm | Your editor


Francisco Zurbaran grew up in Seville, the city which administered Spanish colonies in the 17th century and the main port shipping goods and treasure to and fro. The son of a draper, he became a painter with a naturalistic style, heavy shadows and chiaroscuro, and usually a Catholic religious subject. He nonetheless managed to beat Marc Chagall in depicting Jacob and his dozen sons, in paint rather than stained glass.

Yesterday we went to the Frick Gallery here to see the Jewish family portraits, which are huge and brilliant and rarely seen. Jacob and his eldest 11 sons normally hang in Auckland Castle in the north of England, and Benjamin, bought by a rival of the Durham Bishop when it was auctioned, in a different castle.
   A mystery is why after the Inquisition and during the peak of the counter-reformation the paintings were commissioned at all. One theory is that the Spaniards believed that their subjects in America were descended from the 10 lost tribes of Israel, and wanted to ease their way to converting them to Catholicism with the paintings, to be hung in a church. In the end the paintings stayed in Europe. One of the brothers, Zebulon, wears a pair of striped short trousers which recall costumes of Latin American Indians. As a draper's son, Zurbaran was a brilliant painter of clothing and cloth.

Because the Auckland castle is being restored, its pictures were allowed to be moved to be shown here and the Frick persuaded the owner of Benjamin to let her picture join the Durham ones. It is a wonderful show.


Yesterday funds had to file their last 13-F report on major holdings changes to the SEC. The main impact of the news is on one of our favorite long-time holdings. But there is gold in other reports as well. The Greenwich, CT-based Bridgewater Capital hedge fund sold short euros 14 bn in stocks in the Dec. quarter, expected a share crash. At least one of our stocks was affected as it was third on the sell list.
Details below for paid subscribers.

If I am right and Bridgewater now has to buy back the stocks it shorted, our share will rise. My information came from a report in the Frankfurter Allgemeine Zeitung which today covered only the major German stock shorts.


With the dollar expected to sink in part because the US Administration likes that, and with higher interest rates and inflation threatening, I think shorting euro stocks is madness. Currency factors will boost their share prices and dividends when converted into US$s. The only thing to watch out for is companies which do too much selling in the USA.


In the most recent quarter, the eurozone economy grew 0.6% in the quarter, and 2.7% from the prior Q4, ahead of the US 2.3% for the year but behind the 2.5% in Q4. This is not a clarion call for shorting Europe.


Today we have report a quarterly report out of Canada and news from Germany, Britain, Panama, Spain, Mexico, India, Ireland, Israel, Finland, Hong Kong, South Africa, Brazil, Colombia, and Japan.


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The Valentine Day Problem

Wed, 2018/02/14 - 1:40pm | Your editor


Inflation is baaack but not necessarily where we want it, like in Japan. The US consumer price index overshot forecasts and hit a new 12 month high after rising a half percent in January, much higher than the Bloomberg forecasts of 0.3%. The core rate, which leaves out food and energy price moves, hit 0.3% vs forecasts of 0.2% The year-over-year price increase came to 2.1% confirming the level for December.

Immediately bond yields rose with the 2-year US Treasury note hitting 2.15%, but likely to rise further because bond buyers want to make more than the rate of inflation on their holdings. The higher yield pushed down the price of bonds because that's how bonds work. The 10-yr note gained 4 basis points to 2.87% and the 30-yr 2 bp to 3.13%. And the US dollar rose because more foreigners are expected to buy bonds.

The combination of a a profligate Administration building up debt which will cost more and the rising dollar spells trouble for stocks. Costlier borrowing makes it harder for companies and consumers to spend money. Exports go down if the dollar rises against foreign currency. So stocks fell.


A media darling has to work hard to retain his supporters, why fatcats dealing with the Israeli Premier apparently bribed him with millions of shekels to help improve his coverage on TV, in the press, and the free papers.

The local cops called for an indictment which would probably end Bibi Netanyahu's tenure and political carreer. He is likely to face charges of corruption.

Surprisingly a small bribe came also from James Packer of Australia, whom I had no idea was Jewish or active in Israel.

The Israeli shekel is naturally down today impacted by both the prospect of higher interest rates here and the prospect of political uncertainty there. This will take down the ADR prices of any Israeli stock although stock traders are slower than currency traders.I will tell you all when to buy.


We have three reporting companies today and more, so here is news from Canada, Ireland, Israel, Britain, Brazil, and more.

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A Day Early

Tue, 2018/02/13 - 1:45pm | Your editor

The bloom is off the rose even before Valentine's Day when I predicted there would be a drop in stock prices. Bears have come out of hibernation a day early.

Today the experts indicate that despite eight quarters in a row of economic growth, Japanese inflation is still well below the target of 2%--and only at 1% under the most generous estimate. In early April, Haruhiko Kuroda's first term as central bank Governor at the Bank of Japan, will come to an end, after all his unorthdox moves to boost assets and push up yields failed to trigger higher prices or even the expectation of higher prices.

According to Russell Jones at LlewelynConsulting in London, Mr Kuroda had better be kept in office despite Japan's slowness to adopt inflation, because there are now “belated hints of success in meeting the inflation target”--despite recent BoJ “stealth tapering” of the purchase of government paper and exchange-traded funds. One trick would be to reduce the target to 1% instead of 2% and claim victory—blaming the gap on labor shortages. But there is also a risk that central bank actions will rebound with security sales in the private market and cause (for Japan) “positive inflation surprises”, meaning higher interst rates.

Without this reaction, which Mr Jones carefully hedges, the BoJ will have to again resort to “helicopter money” (mis-attributed to former US Fed head Ben Bernanke) to try returning to normal monetary policy.

The US currently looks more normal than Japan because our CB has committed to raising interest rates this year, what is terrifying the US bond and stock markets. Higher interest rates would be needed if the spare labor capacity of the US dries up and wage inflation risks arrive.Higher interest rates make older bonds cost less, and nip economic growth because companies and people have to better control their spending if they cannot borrow cheaply.

Fiscal policy in the US is now recklessly expansionist in a growth period when it is not normal to run deficits. So it is up to the Fed to take away the punch-bowl just when the party was really warming up. This is a quote from Democrat William McChesney Martin jr., who ran the Fed after being named as governor by Harry Truman.

'Truman expected Martin would let the White House run things. For 20 years he did the opposite under Presidents Eisenhower, Kennedy, Johnson, and Nixon. While Pres. Trump has little patience for precedents he is unlikely to try to bully the Fed.

UK inflation meanwhile is the highest in 6 years and boosted both the pound and the London FTSE index.

(The Japan material is from in London, run by the former deputy chief economist of the OECD whom I know from Paris.)


Fidelity brokerage has blocked its clients from opening new purchases of reverse volatitily exchange-traded funds and notes and slapped a high margin on the whole volatility ETF and ETN group. You still can sell them. Because Fido is a private company it did not inform the market of its moves which took place on Feb. 6, but only confirmed it to Bloomberg last Friday. Another volatility vehicle, the LJM Preservation & Growth Fund, est. in 2006 with $800 mn under management, cashed out all its open positions. But the fund itself did not liquidate and asked its clients to be “patient.” Managers Anish Parvataneni and Anthony Caine claim LJM investz in “long and short options on the S&P 500 index that seek to profit, primarily, from the volatility premium' fell 82% in 2018 before it went into all-cash on Feb. 9.


More for paid subscribers from Israel (again because 3 companies there made news), Jordan, Russia, Ireland, Canada, Switzerland, Norway, Mexico, South Africa, Spain, Italy, Hong Kong, the Netherlands, Australia, Argentina, Chile and Finland.

We also explain why large well-known liquid American Depositary Receipt stocks do less well than smaller cap shares when markets are in the bear mood.

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Mon, 2018/02/12 - 3:22pm | Your editor

Fiscal year caught me today. Here is a correction for paid subscribers. Read more »

Taking Stock After the Debacle

Mon, 2018/02/12 - 2:24pm | Your editor


Gen. Joe Shaefer wrote today on today that “true passive investing cannot result from an index fund whose components are changed regularly.” Joe, who runs Stanford Wealth Management and writes a news letter, explains:

“The committees that decide what stocks constitute their index change their minds regularly. This is not buy-and-hold investing. It is buy and let someone else determine what you will own.”

He then wonders if buyers of supposedly passive funds know what they are getting into.  Of course both Joe and your editor are stock pickers whose customers are active investors so we are singing from our own hymnal.


Volatility, which has triggered the recent market sell-off, is not the same thing as risk, although if you listen to enough pundits you might think they mean the same thing. When VIX goes into orbit, in theory the smart money sells out. It didn't happen last week because the reversed volatility ETNs, like XIV, were sold off massive by “weak hands”, Wall Street lingo for retail investors. Right now according to Morgan Stanley quant Christopher Metli, equity market inflows and a really cheap price for VIX gamma (forward traded-volatility) means that they are good value compared to current VIX—if those ignoring gamma, according to ProTrading Research are right.


The SPDR S&P 500 ETF suffered $23.6 bn in outflows last week, an 11-year record in amount and a 10-yr record in percentages. This was about 8% of the fund's total assets at the start of the week and means that position unwinding can lead to further selling this week from risk parity funds and commodity traders, to say nothing of exiles from bitcoin.


However according to M&G's Eric Lonergan, the recent volatility spike was not triggered by news and therefore is less serious than the China devaluation rise in the summer of 2015 and the 208 financial crisis. However he warns that investors are all moving in lockstep which means asset prices move more than the fundamentals account for and it may take longer to clear the panic. Also using volatility as a proxy for risk, he writes, is a “recipe for pseudo-science and over-confidence” in tech and statistics.

And of course volatility is not the same thing as risk, because the only risk investors care about is loss of their capital. Volatility may raise it.  Note that because retail US customers often could not get hold of their brokers last week they may still have trades they want to make from the panic, which may show up as soon as Weds.


My mother-in-law died in a car crash on Valentine's Day, so it's a holiday we don't celebrate. This week it will also be a make-or-break day for the US stock markets which will get new data on US consumer price inflation. It was the trigger for Wall Street crumbling so far this month. Two of our companies are reporting, not enough to turn Wednesday into a terrible Thursday coming a day earlier. We also will see a couple of our favorites go ex-dividend.


*Today I got another mysterious stock tip form Russia from a different writer, Marthena Maus, for a stock called PBYA, Probability Media Corp., which trades OTC. If you get this stuff from Putinland, remember: “there is no such thing as a free lunch.” You do not get stock tips by email from legitimate analysts with whom you have no relationship. There is a footnote in Ms Maus's plug saying it had been paid for by notes granted to Pickwisk Capital Partners LLC of White Plains NY, a licensed broker-dealer. Where is the SEC in this imbroglio?


Today we have news from Switzerland on Israel, Canada, Switzerland, Japan, Ireland, Britain, Netherlands Antilles, Colombia, South Korea, Argentina, Mexico, India, Finland, Russia, China, Australia, Germany, and Brazil. Israel is first for stock market reasons, not Zionism.

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Tables Posted

Sun, 2018/02/11 - 1:57pm | Your editor

Before letting you check on my tables, I wanted you to also be able to check on my prescience. So before you visit read my blog of January 5, 2019 which was sent from London a whole 5 weeks before the stock sell-off began. I reproduce it complete with editing goofs.

Fri, 2018/01/05 - 10:13am | Your editor


A new high of the Dow-Jones inevitably makes pundits ponder what will pull the stock market back down. It only took 23 trading days for the DJIA to go from 20,000 to 25,000, the fastest rise in the index's history. Overnight the MSCI Asia Pacific Index advance a half a percent and the Japanese index gained nearly 1%.

The bulls are running and everyone is trying to guess which matador will first slay the creatures. It will not be in Catalonia (near where Catalan-laden Pamplona is located in Navarre). The sell-off will not be triggers in an increasingly marginal market like London or Frankfurt or even Tokyo.It must be on Wall Street. But the euphoria translates well according to S&P indexes: Brazil up 4.51%; Japan up 2.1%; Germany up 1.9%; Hungary up 1.1%; China and Britain both up 0.9%; Argentina up 0.5%; Hong Kong up 0.4%. The Swiss index and the London Stock Exchange both hit new records.

What will make the Dow and its fellow indexes fall?

It will not be yesterday's horrible snow dump in the US financial capital (which I missed by being in London) because the index rose despite the blizzard.

It's not going to be nuclear war because North and South Korea have arranged to begin talks and Seoul has postponed its 3-country military exercises until after it hosts the winter Olypics.

It's not going to be because of inflation because, despite the glorious US hiring binge, wages have remained tame. Now the Dec. report shows that US job growth slowed down because of lower retail employment in the runup to Christmas than had been anticipated. Department stores and some speciality retailers are vulnerable to internet competition, and that holds inflation at bay.

It will not be the speculative excess any fool can see in the bitcoin market frenzy.

It may result from the rise of the euro against the greenback but David Goldman who addressed that risk in says he is not sure. If Goldman is not sure about something it really is a hard call.

And it will not be the revelation that computer hardware (and not merely software!) is seriously flawed and vulnerable to hacking to steal data and passwords. This for the first time hurts Mac users as much as Windowers, and appears to be very broad.

Nor will it be the problems of regulating banks in Europe or negotiating a post-Brexit trade deal for Britain or even whether on not Prince Mohammed bin Salman's reforms are implemented. Since Putin is a shoo-in it markets will not suffer over his re-election, and because Italy is marginal it will not suffer over elections there. Spain has important political choices to make but they will not rock the boat for shares.

The German political impasse and the problem of what to do about Catalans will not derail the Dow because they failed to cut its rise. China, however populous and aggressive, is still far away. Japan ditto.

Realistically, as the accomodative Fed becomes tougher, there is no way that money won't flow out of stocks into bonds. Tax cuts, already in the price-earnings ratios,will not work their magic again.

My own guess is that the chaotic White House and the prospect of the Republicans losing their Congressional majorities will take down the US stock market and eventually those of tits trackers. Steve Bannon is prepared to play Samson to kill the Philistines if his revelations to Michael Wolff mean anything. As there is always an edge for being early, we are going to start exiting our high-flyers before the trend becomes totally clear, meaning soon.

But, beware,I am unsure how deep the drop will be and how long it will go on for. There are more warnings for paid subscribers below.

[The reason I recalled how well I had called the pending stockdrop is that my blog of Jan. 5 was sent out last week by Investor's Digest of Canada which featured it in its third issue of 2018, dated Feb. 9. So it was not clear from the reprint how well I predicted the drop in stocks]. More for paid subscribers follows:

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Another Day in the Market

Fri, 2018/02/09 - 2:43pm | Your editor

Now it's officically a correction if the Dow Jones remains down until the market closes. It may not. There now is an abundance of theories about why the fall occurred. My Swiss National Bank thesis has not been picked up by other analysts but many are blaming higher bond rates for having triggered the stock market fall. While the fall in bond prices as yield go up (because they move inversely to each other), the coordination of stock falls to bond market ones was slow getting going. It was more the likelihood of further rate hikes rather than their actual rises that started to stock selloff.

The impact on stock prices of the collapse in reverse-volatility plays (derivatives long on low volatility like XIV, the reverse of the VIX) is a technical factor being blamed for the continued share price weakness. It is probably being overstated. Whenever there is a crash in the stock market, pundits like to blame a technical factor. Among the culprits past are portfolio insurance; over-leveraged mortgage market losses; options strategies (put-buys or call-sells); and Wall Street bankruptcies ( in 2008-9's correction: IndyMacCIT; WaMu, Lehman Brothers, AIA, Merrill Lynch, etc.)

Blaming it on a technical factor absolves the market from having to blame itself for plummeting stocks. “It wasn't me”.

Or to blame the economic outlook for the bear market, which means it is a real danger.

Or for the US to blame the White House or Congress, for example for the looming rise in US government deficits and their pro-cyclical tax “reform”. Or the inexperienced new Fed Chair.

My own secret theory is that everyone knew it couldn't continue so they were trigger happy after the DJIA and the S&P 500 ran up the longer series of gains last year since the 1950s, which even I can barely remember. (Yesterday I was carded when buying hard cider, for the first time in about 40 years so I must be well-preserved, to use the French back-handed compliment.)

It is another day overladen with results, so enough chatter. We have results from Panama, Mauritius, Canada, and Japan, plus more news from other places. And a new stock pick in China which reported yesterday (our writer was waiting to be sure.)

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A Worm in the Apple

Thu, 2018/02/08 - 3:08pm | Your editor

There's a worm in the apple.

In case worrying about the stock market is not enough to keep you anxious, here is what the Swiss are frightened of today: a major leak of the source codes for the Apple internet operating system used for iPhone and iPads. The NZZ today quoted an insider as calling it “the biggest hack in history” affecting more than a billion devices.

Which doesn't mean Wall Street or indeed Zurich's Bahnhofstrasse are calm, cool, and collected today. As noted already, the Swiss Central Bank selling of its US stock portfolio used to invest funds it gathered to keep the Swiss franc cheap, was a trigger for the US stock market drop last week. The Swiss Central Bank, according to today's Wall Street Journal, last year made $55 billion from its global portfolio holdings—more money than Apple did.

Today the CBOE stock dropped another 15%, taking it down 25% since last week when the VIX soared and the XIV sank. It is a Chicago-based options market which trades volatility but also lots of other things.

Mexico raised interest rates because of inflation fear to a 9 year high which hurt Mexican shares.

European stock indexes fell to a 5-month low.

This is another terrible Thursday so we have corporate results to report, from Canada, Mexico, and Israel, plus news from around the globe. Here goes.

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