Trading alerts

Fri, 2018/01/05 - 10:51am | Your editor

Trading alerts are only for paid subscribers. Join them to gain from our ideas by signing up at www.global-investing.com/. Today I did my first trade for 2018, a buy.

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What Will Hurt Markets This Year?

Fri, 2018/01/05 - 9:13am | 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 locatedin 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 Asiatimes.com 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.

Because of the double dose of blogs in Thursday, you will not be given much news today. We have tidbits from Belgium, The Netherlands, Switzerland, Spain, Bermuda, Ireland, Britain, Germany, Israel, Japan, Canada, Colombia, Brazil, and Mexico. Read more »

Thursday Bonus

Thu, 2018/01/04 - 7:02am | Your editor

Today the children went back to school here in London on a rainy Thursday and we are suddenly back into traffic by cars, bicycles, and scooters—with both mothers and children zipping along. The children all seem to have helmets to protect them, but not the mothers.

Britain in 2017 met its target of generating more electricity from renewables and nuclear energy than from oil, gas and coal. Nuclear power stations provided 21% of UK electricity needs, and low-carbon renewables 29%, as Britain “de-carbonized” its power for the first year. Its ultimate target is for three-quarters of its electricity to be green or nuclear, so it still has some way to go.

Half of Norwegian cars now either are electric or hybrid. It offers free charging and zero tolls, which helped the launch, but may be less generous in future.

Because I have wiggled out of the planned Friday lunch I am writing a normal second Thursday blog with updates and tomorrow will file in the morning, as is appropriate, rather than tonight. So here is a bonus issue. We start with banking news. And a bid for one of our companies!

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Lords a-Leaping

Wed, 2018/01/03 - 3:08pm | Your editor

News in 2018 is proving predictably scandalous. The Brazilian Minister for Industry, Marcos Perreira, resigned today. As a result, the bolsa in São Paulo rose 3.4% (the Brazil S&P index). Whether he was implicated in the Lava Jato (car wash) scandal or did something else naughty, I know not. But it is not illegal to engage in sexual harrassment in Brazil so that was not it.

 

Brazil also plans to investigate Apple updates because they took too long on older iPhones, a key accessory when you are sunbathing on Ipanema Beach. If your iPhone is out of date you may miss a key link-up with a bikini-clad beauty. Perhaps that did ex-Minister Marcos Perreira in.

The British equivalent of the SEC, their Financial Services Authority, is investigating the results reported over the last two years by Carillion plc, a company which provides track and train mechanical and construction support to British railroads. It reported serious losses, but only last month. Meanwhile the new railway station at London Bridge opened on time and on budget. We had lunch there today. Last week when we went to the theater they were still working at night to get the work done.

 

The British papers are full of stories about enlightened mothers of infants referring to their sprogs as them (although there is only one) to avoid pushing a sexual identity on the baby while its diaper is being changed. Having been raised partly in German I can assure the British mothers that there is a better way to avoid sex-casting their babies. Just use the German, es, or it. When I was a kid I would get furious that my mother would say es regnet (it is raining) and es weint (the child, me, is crying.) The neuter goes on well into your teen-age years if you are female. You are a Maedchen, a Maedl, or some other neutral noun until you become a Frau by getting married. So the British moms should start calling their babies it.

Jewish girls don't get away with anywhere as much. As a tiny child I was taught to say a prayer upon awakening to bow down symbolically to thank God for restoring my soul to me. The trouble is that the Hebrew present tense uses a different first person verb form for a girl bowing down (modah ani) than for a boy bowing down (modeh ani.) I would guess Arabic does too, but I don't know for sure.

 

Pimco has doubled the number of “smart beta” exchange-traded funds it offers on Charles Schwab’s ETF OneSource list, with new three smart beta share products. ETF OneSource list is a commission-free ETF platform which offers 254 products from 16 different fund shops, including Pimco, Deutsche Asset Management, and Invesco’s Powershares, with over $100 bn in assets. Retail investors with Schwab brokerage or retirement accounts can buy ETFs completely commission-free. I have such an account.

Schwab has today added 12 new ETFs to the platform, from 7 providers, 3 of them from Pimco which created them along with Research Affiliates (RAFI) last Sept. The $109.3 mn Pimco RAFI Dynamic Multi-Factor Emerging Markets Equity ETF, the $24.7 mn Pimco RAFI Dynamic Multi-Factor International Equity ETF, and the $17.7 mn Pimco RAFI Dynamic Multi-Factor US Equity ETF are now on the Schwab platform. Earlier Pimco offered bond funds to Schwab customers: the Pimco 0-5 year High Yield Corporate Bond Index ETF, the Pimco Investment Grade Corporate Bond Index ETF, and the Pimco 25+ Year Zero Coupon US Treasury Index ETF. That makes it the biggest player on the Charles Schwab ETF OneSource list.

While I tend to be ngative about the ETF phenomenon, because most ETFs are index-huggers and underperform, that is certainly not the case with Pimco and RAFI. Smart Beta stock picking requires that the analyst ponder other factors apart from whether a stock is in the index. And the result is that these funds can outperform. Because of this move we have a strong buy stock pick for our paid subscribers today. We also have news from Canada, Britain, Germany, Israel, Belgium, Ireland, Bermuda, Colombia,Finland, The Dutch Antilles, and Brazil.

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Ladies Dancing

Tue, 2018/01/02 - 2:46pm | Your editor

Today the Frankfurt airport went down because of IT computer woes. Five flights out were cancelled and another five heading there from other airports never took off. Apparently it was impossible to get the flight indicators to show that planes had begun boarding. You wonder why human beings don't simply pick up a microphone to tell people to board.

 

The US purchasing managers' index reported today for December hit 55.1, the fastest rise since 2015. The risk of over-heating is up although the people supposed to demand higher wages don't yet seem to be aware of their power.

 

*It is not only Apple which slows down its older phones. Samsung does the same according to our guy in Canada, Martin Ferera.

 

Again because of family business I will be out on Wednesday morning so I am writing up the news on Tuesday evening instead. We have a lot about finance from the USA, Germany, Scotland, China, the EU, and Spain, Chile and Canada. On industry we report developments in Brazil, Colombia, the Dutch Antilles, and Britain, while our Internet and IT coverage hits Hong Kong, South Africa, Israel, and Canada. Drug stocks from Britain, Switzerland, Israel, and Ireland make news too.

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Maids a-Milking

Mon, 2018/01/01 - 5:25pm | Your editor

2018 is now in full swing so we are back to reporting on news, however meager. It's back to work in London. The good news of 2018 so far is that Kim Yong-un seems to have softened his aggressive line under pressure from Beijing and the USA. In his New Year's Day address, Kim said that while he has a "nuclear button" on his desk, also offered an olive branch to South Korea, saying he was "open to dialogue" with Seoul.

"When it comes to North-South relations, we should lower the military tensions on the Korean Peninsula to create a peaceful environment," he stated. "Both the North and the South should make efforts." If this works out the worst current threat of nuclear war has been reduced by the Hermit Kingdom. Officially, Pyongyang says its move is related to the Olympics in South Korea Feb. 5-29. It that was enough to stop battles between Athens and Sparta it should work for North and South Korea. I hope both heads of state with funny hair (the other one is Trump) realize that a retaliatory escalation of military provocation can to result in a nuclear war neither country wants. Now that North Korea has mastered ICBM weapons and targeting systems and perhaps has tested nuclear bomds, it may feel it is strong enough to negotiate a freeze on more nuclear and missile tests, if it is allowed to keep what it already has.

Asia Times warns that the highest risks will hit after the Olympics as both the US and North Korea may be tempted to try to find an advantage by engaging in an operation which cannot be directly traced to them.

 

A reader out west, DN admits “I worked for Apple once upon a time.” He adds: “I think Apple's slowing down the old iPhones was a good thing to have done. It lengthens battery life and cuts power spikes that might damage hardware. The problem is that they did not tell customers about it, or offer them the option of slowing down or not. That would have required offering an app with a power use control. Not a technical difficulty, but perhaps a marketing one. As so often the problem is the cover up. The market's reaction occurred regardless of what I think” were good intentions. I had no idea this reader was an ex-Apple employee.

 

We have news from Brazil, Canada, Cuba, Demcratic Republic of Congo, Chile, Argentina, Russia, Britain, Denmark, Israel, and Canada. Because I am heading for distant Wimbledon on Tuesday to meet relatives for lunch I wrote this blog New Year's Day.

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Auld Lang Syne

Sun, 2017/12/31 - 11:33am | Your editor

Dear readers,

Before we head off to celebrate the New Year in Greenwich, I posted my close-of-year tables on the website www.global-investing.com where you may view our closed-positions and, if you are a subscriber, our current ones as well. It has been a good year for stocks and also for our stocks, the first time since 2008 that our companies were sufficiently appealing to lead to mergers and acquisitions, the easiest way to make money with a portfolio.

It will not be so easy in 2018 of course, but I think some US stalward oldies like GE or Microsoft may be on the comeback trail. Other markets also have such venerable out-of-favor shares and we own a few of those.

We went last night to the brand new Bridge Theatre (by London Bridge) with my brother- and sister-in-law to see The Young Marx, a comedy about not Groucho but Karl. It was fun seeing that the great bearded one was actually a bit of a hippy and only saved from various dreadful consequences of his actions by Engels and his wife Jenny von Westfalen who the play claimed was a relative of the Duke of Argyle, which I expect the British got right given their passion for lords and ladies. Read more »

Five Gold Rings

Fri, 2017/12/29 - 8:54am | Your editor

Wall Street has got it wrong about Apple's stock drop. It is not because demand for its newest model has been weak that AAPL shares have dropped lately. It is more a matter of the smartphone maker having cheated its customers by throttling their downloads if they had older batteries, inciting them to replace their iPhones.

Now Apple has apologized and admitted that it had let its customers down. It will now sell new batteries for older iPhones at $29 each vs an earlier disuasive price of $79. For some reason information on this scandal is more available on this side of the pond than in the US.

Comments tech newsletter writer Shelly Palmer, “Apple thinks they can buy your love for $29.”

The other hot news in London on the last trading day in 2017 is that the Forties oil and gas pipeline from the Scottish North Sea is now partly back in service. That means the current temporary glut in oil stocks in Europe and the US will not boost prices for much longer. In anticipation of more volatile pricing, China now intends to have a market of its own to trade oil futures, although it is mostly a consumer rather than—like the existing pricing services in Oklahoma and Scotland—a producer. Mexico also wants to allow visible price data for its market to be gathered. It is like its northern neighbor, a producer as well as a consumer.

The oil cartel, under the Seven Sisters decades ago, and under OPEC more recently, controlled markets by controlling supply. A key factor was having the best price data at any minute of the day, while other players had to settle for delayed prices, then often made available by the specialized press. One of the fact sheets was called Platt's Oilgram, my first jounalism employer. It still exists but is on-line with a new owner.

Today's pink paper (Financial Times) notes that the largest passive fund managers in the USA, Blackrock, State Street, and Vanguard, are installing shareholder “stewards” to better deploy their control of proxy voting in major companies. In the US, about a third of shares are now owned by passive exchange-traded funds, which the paper expects will rise to half by 2021 on current trends. In Britain passive funds own a quarter of all shares traded in London.

By voting for management, as they do well over 91% of the time, passive investing funds allow excess reward to the top brass, short-termism in strategy, undersized dividends, and self-perpetuating company management. So the new activist officers can make a differencd. However the reporters conclude that sheer numbers favor the current regime continuing, with no oversight. If a fund employing thousands to track an index puts 20 or 30 people in its “stewardship office” they won't make a different, the FT concludes.

 

More for paid subscribers follows from India, Britain, Canada, Israel, Japan, Spain, Hong Kong, Bermuda, Australia, and New Zealand. Happy New Year.

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Four Calling Birds

Thu, 2017/12/28 - 9:33am | Your editor

The Christmas New Year holiday link is very strong and today my internet went down and it is more than 5 hours into the market day as I write today’s blog. A Microsoft windows update overnight took down my fiberoptic link and I am starting all over again with today’s screed.

Meanwhile the one I wrote on is going round and round with an ill-timed Windows 10 update.

In addition to the gap in performance by exchange-traded funds vs their indexes for fixed income, small caps, and emerging markets--all of which are relatively specialized--a new outlier was discovered by analysts at a UK brokerage which offers stock selection to its clientele. As my source is a family member I am not giving the broker’s name but--yes--it is backing its own book by reporting that 21% of UK stock index tracking funds fail to match their indexes. They either do better or worse, but they do not match.

Since the London Stock Market is the closest large proxy outside the US for passive funds, this gap is surprising. And it also is backing my book, since I feel stock picking still has a role in global investing if not in the USA.

More for paid subscribers follows from Canada, Israel, the UK, Spain, Hong Kong, South Africa, Japan, Brazil, Argentina, Colombia, Israel, and Chile.

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Island Idyll for Three French Hens

Wed, 2017/12/27 - 10:54am | Your editor

Rain and sleet pelt the world outside. Even the ducks on the Thames have sought shelter and there is no sign of our local fox, called Blondie (because his or her pelt is lighter than the normal rust color of fox fur.) But at least the snow is not sticking and will not hit the 5 ft level reported in Erie, PA. The British dote on the winter misery of Americans.

Christmas, which in Britain fills two days with feasting, feeding, and drinking, has wound down to a close even in London. There is a Financial Times again. It is time to plot to escape to warmer climes and the back of the paper has an ad to tempt anyone contemplating an icey, slippery step outside the door with dread. Consider “The Ultimate Christmas Present”, called Bloody Bay, a 13-acre spread on Union Island, in the Caribbean mini-country of St. Vincent and the Grenadines.

It is for sale in lots or as a whole. Offers will be accepted from 400 bitcoin and up. If you are tempted you can register at www.bloodybaybeach.com/

The number of those who could afford this Caribbean haven in its entirety has been reduced by the Saudi regime's incarceration at the Ritz-Carlton Hotel of many of its oligarchs. To get sprung, they have to give up 70% of their ill-got gains. According to the FT a former government finance official has returned home after paying in $7 bn to his jailers. This will not be available to buy Bloody Bay, unles Crown Prince Mohammed bin Salman, who start the graftere purge, is himself tempted.

However, Bloomberg reports today that the world's wealthiest people gained $1 trillion this year as stock markets rose sharply, more than 4x as much as they gained in 2016. This is from the 23% rise in the Bloomberg Billionaires Index, which ranks the 500 richest people (including Michael Bloomberg himself.) The top slot went to Jeff Bezos fo Amazon.com, who gained $34.2 bn and is now the world's richest person with $999.6 bn—down from a round $100 bn at the end of Nov.

 

A correction from reader Steve C to my note on FAANGs yesterday, who pointed out that the N stands not for Netscape (a defunct internet outfit) but for Netflix. Apologies for my error—I go back a few years.

However the scandale over Apple's deliberately throttling down its older models to get customers to replace their iPhones which I also wrote about yesterday, seems to have hit home and AAPL stock is suffering, having lost 2.5% in US trading yesterday. Amazingly a US reader wrote to learn the details from me stuck in faraway Britain, perhaps as she was too busy cooking a feast to read the papers or view TV. To use “the word of the year” I would advise her to “wake!”

 

More for paid subscribers from Britain, Argentina, Israel, Hong Kong, Sweden, South Africa, China, Chile, Japan, Mexico, and a few other places today. We also have a new stock pick, our last for 2017.


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