The attack bears surrounding Ben Bernanke are not serious currency forecasters. They are a bunch of tea-party Fed-haters, Republicans hoping that gridlock will sustain the Great Contraction long enough to defeat Obama in 2012, Chinese trying to deflect criticism of their weak renminbi by yelling about US policy, and Germans trying to deflect criticism of their smug unhelpfulness to fellow-Europeans over the risks of the common currency.
However, since I went long the Greenback on Nov. 4, the dollar has risen, fed by continued euro bailouts and the Chinese need to tackle inflation. This has hurt the euro and commodity currencies like the C$ and the A$ and boosted the US$.
According to Bloomberg, “strategist forecasts for the dollar to weaken have all but ceased.” The service today says that its most recent survey of 38 analysts show they expect the dollar to strenghten to euros 1.36 by the next year, from 1.3673 now.
Bloomberg cited analysts with “a good record” at Wells Fargo as being more bullish on the US currency, expected it to be worth 1.38 euros by year end.
China is seriously worried about the price of food leading to social unrest. Beijing’s food focus led China Daily News to write today: “Road tolls for vehicles carrying fresh produce will be scrapped from December 1, and local authorities will have to ensure energy and transport prices for fertilizer producers are reduced.” CDN is the main state media mouthpiece. More for paid subscribers on how to play China veggies and dollar strength and news from Canada, Israel, Thailand, Germany, and Brazil follows:
*Our play on dollar recovery is Powershares DB US Dollar Index Trust Bull, UUP for short.
*Our China veggies stock Le Gaga will report its Q2 earnings at 8 am on Nov. 29. Your GAGA editor will cover it, gaga because of the time of day.
*Compugen of Israel studies proteins in the lab to find new interesting molecules for treating diseases. It recently licensed Prof. Stephen Miller of Northwestern U to extensively validate a drug find, CGEN 15001 against multiple sclerosis, one of nine new molecules in the B7/CD28 family which regulate the immune response found by CGEN scientists. Now the other 8 are also being turned over to him. They all involve inhibition of reactive T lympacytes.
This reflects CGEN’s new strategy of taking its finds closer to market before licensing them to drug majors. It is a high risk way to move from in silico drug discovery to get closer to the market.
*Fellow Israeli Kosher food distributor G. Willi International reported Q3 sales up 16% to NIS 79.7 mn ($21.7 mn). While not strictly comparable, WILC net profit came in at NIS 7.8 mn or $2.1mn, 15 cents/sh, up 7.4%. The non-comparability was because of an acqusition in 2009 Q3. Selling expenses nipped the profits too.
*Another Israeli, Elbit Imaging, will spin off its Elbit Medical in Tel Aviv via a shell company. That means US EMITF shareholders will probably not be allowed to participate because the new stock will not be registered with the SEC. (See below.)
*One of the first Israeli stocks I tipped was ECI Telecom which is now being shopped by its latest owner to Dmitri Medvedev, the Russian president. I hung up on ECIL ages ago.
*Another takeover bid will help our portfolio, according to Business Week. It reports that One Equity Partners LLC, a JP Morgan entity owning half the shares, is shopping Sued Chemie, our recently acquired German “green” chemicals producer, only a quarter of whose shares trade publicly. The purchase had to be made in Germany and as you can read below caused some subscribers to cancel. SUC.GY had euros 1.2 bn of sales. Early next year Morgan will decide between listing its stake or selling. If it sells, the buyer under German law must make an offer for the whole company, meaning us. SUC:Deutschland
*Brazil’s Cosan is buying Brazilian listed shares, not those of our offshore entity, listed as CZZ.
*Saneamento Basico de Sao Paulo will borrow Reais 600 mn ($350 mn or so) for 18 months on the local market.SBS
Lots of changes in our funds portfolio.
*Our Canadian switch is to take place Dec. 11 when BAM.M:CA Brookfield Asset Management preferred M stock goes ex-dividend. At Martin Ferera’s advice, we will then buy the higher-yielding Brookfield Infrastructure Fund, which will go into the funds portfolio, BRPFF. It has the advantage of being quoted in the USA as well as in Canada. Brookfield is the Bronfman family investment vehicle which they have graciously allowed the rest of the world to invest in alongside the Mishpochah. Family investors’ needs set investments in the US, Australia, Europe, China, plus Canada.
*I have more confidence in Canadian family-controlled companies than ones from further afield: the Bombardiers, the Morgans (of Third Canadian) and the increasingly respectable Bronfmans, even if they did get their start running liquor across the border during Prohibition. I also believe in Power Corp, PWCDF, another Canada family enterprise.
*Big Rock and Cineplex Galaxy are both converting from tax-exempt Investment Trusts into standard corporations by year end when the tax advantage ends. There will be new ticker symbols from the current BR_UN:CA and CGX_UN:CA.
*The dividend on MFD, Macquarie FirstTrust Global, has gone up by 50%. MFD had been reclassified as a World Equity Fund rather than an Income Fund in Barron’s. Unless they change it back.
*Deutsche-Bank-managed Dreman RREEF World Real Estate is merging. Our closed-end fund, DRP, will be merged into another Dreman open-end fund with a similar investment strategiy. That means it will be dropped from out portfolio as we do not cover open-end funds. This will happen in Q1 2011.
*Finally a piece of rotten news, S&T System Integration and Technology, the Austrian speculative IT company operating all over Eastern Europe, which was due to be re-financed by an Austrian group after reporting a money losing Q3, saw the refinancing cancelled. It is now in the process of restructuring. We are selling after a decade in the share, marginally ahead. The idea of outsourcing to Bulgaria enchanted me, perhaps excessively. It fell by half last week. Gevalt. Its ADR barely trades (STSQY) and I am selling in Vienna, SNT-World. Fidelity just sent me stale quotes and no news and on Sunday it stopped providing a quote. (On Friday it did still.) So much for a faithful broker….
*A dialogue with Paul Renaud of Phuket (Thailand) follows. His comments are bold/italics, and mine normal:
I do occasionally recommend direct purchases in foreign markets on the pages of Global Investing, and then I get criticized by the readership for making things complicated for them. Some people cancel their subscriptions because an occasional foreign-only idea cannot be bought easily. That happened last summer when I recommended Sued Chemie of Munich.
Understood. It’s like eating…you can go to McDonalds and eat in 10 minutes, or you can spend lots of time preparing a nutritious meal. The difference is in quality of food and your health! I understand the Amercians (generalizing) have little patience in such things.
My readers are not all as sophisticated or rich as the ones who subscribed to thaistocks.com, and many are only dipping their toes into international waters. My job is to encourage them, not scare them off.
True enough, capice.
Global-Investing.com currently recommends stocks trading only in major foreign markets, all much more accessible from the USA than Thailand. I do not think that is the result of US imperialism or taxation or regulation. And naturally that makes it easier for you to outperform in your niche. Bangkok is not as accessible as, say, Switzerland or Canada. That’s a fact.
But if you own foreign securities and bank accounts, you become a “Person of Interest”, and so profiled by the IRS. The effect is alike regardless where you invest outside the US! That is what I am talking about! Most US people don’t want that hassle, so opt out. As IE just did. (IE is a reader who subscribered to both of our publications. I have no idea if Paul is right about IRS targets, but I do get audited every year myself.)
If you are a US resident tax-payer you have a responsibility to report on your foreign capital gains and dividend income. That caused my problems with boom.com, and that is what IE was referring to in his note to you. It is easier if you go through a USA brokerage that works out your basis, capital gains, and dividends in US dollars.
Exactly, and the effect is that most Amercians stay home and use only US institutions! Hurray for them. That is the whole point Vivian, the laws discourage direct foreign ownership of shares, and so [are] imperialistic in effect. Not you, US laws!
Also you are wrong that foreign directly listed companies pay higher dividends than the corresponding ADRs. Shareholders are treated alike if we are talking about open foreign markets without exchange controls.
I was not talking about ADR’s, my dear. I was talking about US security laws, which allow for different classes of US listed shares. This is an abusive practice not allowed in Thailand! There have been many abuses in your land so its no longer the great standard.
As for the price of trading ADRs, it depends on the liquidity and the market. Obviously, the MAI shares (Thai secondary market) are more expensive to deal with from the USA than from Bangkok. Again, you should enjoy your ability to offer something most people cannot compete with. To blame the US because the MAI firms are too small to undertake the listing process seems to be putting things in the wrong order. It is interesting that Singaporean and Chinese smaller companies are tapping into the ADR market, and I expect that Thai firms will be coming too.
ADRs are very expensive to undertake. It’s a rich man’s club reserved for the biggest non-US companies, often overvalued. Hence, these often do not represent a good take on foreign markets. In Thailand well over 2/3 of our GDP is made up of smaller companies, the real Thailand, not ADR’s.
A regulatory problem arises when there are in-kind distributions not registered in the USA. Then the banks sell the rights and you may wind up behind the locals. I wrote ofter and early against the SEC barring rights distributions to Americans because they are not registered since I started Global Investing. I have fought hard against ADR fees imposed by the depositaries. The fact that I took a lead in these matters is known in this country, to the SEC, the IRS, the DTC, to my competitors in the newsletter business, to brokers, to my readers. Just as you criticized Swiss practices which harm shareholders, I have criticized those of the USA.
Good for you and your followers, because there are many abusive tactics….just another reason why one should try to own shares here directly, even if it means tabulating the capital gains. No big deal if you don’t trade all the time. Realize too,[US} buying and selling commissions are near 10 times as high than using a local broker. Surely this savings then pays for a bookkeeping fee at home.
Your editor retains her Thai stocks picked by Paul, at least for now. IE made about 20% net when he sold out. I would not because I used US brokers.