Today we present a major report about how to invest in global bonds and alternative sectors like global infrastructure and real estate. My interest was piqued because Mohammed El-Arian, the former CEO of Pimco and the former investment chief of the Harvard Endowment is joining specialist alternative investment shop Investcorp's advisory board. Investcorp helps global fat cats and their fund managers, mostly from the Middle East, invest worldwide. El-Arian, an American, will help CEO Mohammed Alardhi, who is from Oman, find alternative investments suitable for the wealth funds, sheikhs and royals of the region as well as other high-net worth individuals.

We can do it too, without the same level of fees and, so far, no man named Mohammed in my team.

But before discussing this technical report, here is news about my favorite central bank, that of Switzerland, which is quoted on the Zurich exchange. Every now and then a newsletter writes up the bank and tells its benighted readers to invest in it. But this is not a good tactic, because the Swiss version of the Fed invests to protect the interests of Switzerland, not its own shareholders. In the June quarter, the Eidgenossische Fed lost 6.7 million francs, about $5.4 million US, because it buys dollars to support Swiss exports of cheese, watches, pharmaceuticals, and other goods. Buying dollars helps keep the franc from rising and hurting business outside the country.

It then rather mindlessly invests these dollars in a home-grown index of US securities, mostly stocks. As we have pointed out already based on reports on institutional shareholders, the Swiss CB just tries to buy the entire US market, rather than selecting individual shares by any criterion used by analysts. And they often wind up owning non-US stocks (notably Israeli ones, but also ones from Euroland) because they are quoted on the NYSE. So the desired impact on the franc is being undermined by the CB.

In Q2 despite the official level of Wall Street having risen across the board, the Swiss managed to lose money because they bought the market rather than trying to buy winners, like the US tech stocks.

They also lost because they loaded up on Israel's leading blue chip.

So, nein, non, no, you don't want to be a shareholder in the Swissie CB. More about what this means for our own portfolio follows for paid subscribers along with news from Israel to Germany to Pakistan, Hong Kong to Mexico, Spain to Italy, and a couple of reports and one trading alert.

The Swiss also can keep their franc cheap by buying gold, one of the key alternative investments we advise owning. It rises when the dollar falls, as it did during the June quarter. But apparently the guys in Berne failed to buy enough gold so far this year. If they gear up to do so the price of the yellow metal should rise in dollars. So this is a pitch for owning alternative investment SPDR Gold, GLD, an ETF.

And of course the Swiss wound up owning too much Teva, which may be a heavenly revenge against the Swiss institutions, banks and insurance companies, which denied access to the accounts of Holocaust heirs or survivors for decades after World War II. More drug news below.

Another alternative investment we pitch is global bonds, covered by several closed-end funds whose different strategies we spell out in our tables. The biggest and best bond fund once again is Pimco's Income Fund, PONDX, which saw a $50 billion inflow in H1 and, according to Morningstar, closed June with $1.6 trillion under management, near the $1.9 trillion peak of AUM under former manager Bill Gross, who walked out. The fund is now run by Dan Ivascyn, one of those who opposed Gross. And of course we own its manager via Allianz SE, the German insurance company which controls Pimco.

We do not own PONDX itself because its investments are focused on the USA and our brief is to invest globally. We do own a small closed-end fund from the Pimco stable with a global mandate. But having bought AZSEY when Gross walked out, I feel vindicated for that pick. Unlike stocks where you can match an index (unless you are a brainless Swiss), bond investing success depends on differentiating between the huge number of issues which are often under- or over-priced.

Macquarie First Trust Global Infrastructure and Utility Fund, MFD, is my long-term pick for investing in infrustructure outside the USA. You want to hold individual highways or power companies, port operators and pipelines, aircraft leasors or LNG terminals, but few of them are listed on stock exchanges. Companies which benefit from infrastructure spending can be found but their shares and results are roiled by local conditions as can be seen by the way our Cemex or CRH have performed. We also own a Canada pipeline firm which is being acquired (and therefore up-valued), Veresen, FCGYF, to be merged with Pembina Pipeline.

Last month I noted that MFD had risen sharply with no news—but now I found it. The managers of this CEF have reported to the SEC on their new policy of voting proxies on behalf of their shareholders, not the management of the companies they invest in. They countered management in their proxy votes globally, in listed firms, against the management in Mexico (Infraestructura Energetica Nova); Spain (Transmission Alianza de Energia); Hong Kong (Hopewell Highway Infrastructure and China Merchants Port Hldg.) Germany (Innogy SE); and Italy (Terma, ENAV, and Snam).

What got MFD to vote its proxies against management were common practices, ranging from putting the CEO on the board (which is bad for shareholders but perfectly legal) to limiting the offering of new shares to locals rather than the existing shareholder base (ditto.)

But it also blocked a board naming a supposed shareholder rep to itself. It halted the creation of an internal auditor rather than an independent one It opposed moving a former ordinary board member to a German supervisory board. It opposed removing term limits for board members and alternative board members being appointed in reserve.

It opposed various payment systems to complex for words for compensating board members or protecting them from shareholder lawsuits. It tended to vote against removing pre-emptive rights when new shares are issued and against restricted shares or the integration of formerly restricted shares to the common.

What all these measures have in common is taking money or control away from MFD and giving it to management. It is interesting that Macquarie is taking the lead here, because the Australian parent company, the Macquarie Bank (MQG in Sydney) was the creator of the first money market fund Down Under. It is also manager of a house fund investing in infrastructure and other funds for Ozzies and Asians. It has set up a US Delaware corporation to handle MFD and one other US fund it manages, MIC, Macquarie Infrastructure Corp which bought Constellation Energy outright and AWAS Aviation Capital some years ago.

The Macquarie link is an important reason why our fund is keen on looking after its shareholders to avoid conflict of interest. Another reason is that back in the 1960s, its then parent, Hill Samuel, still subject to UK exchange controls, allowed its Oz arm to set up solo. MFD rose some more today after the SEC published its report on its proxy votes.

This curious history explains why our MFD is taking the lead in defending its shareholders. I like Crocodile Dundee!

Financials

Banco Popular management confirmed that Santander is selling 51% of Popular's portfolio of repossessed property assets and non-performing loans to Blackstone, the US fund manager. Spanish SAN bought Popular for 1 euro on June 7 and is still awaiting European regulatory approval for the deal, so it declined to comment on the report.

Last week in the conference call, CEO Jose Antonio Alvarez stated that “the real estate market is in good shape right now in Spain and we have alternatives. SAN ADRs go ex-div today. Its Mexican sub expects profits this year to rise 17-20% over last, twice as fast as earlier estimates, reports Eduardo Garcia.

Spanish newsletters say competing funds Lone Star and Apollo had failed to get in offers for the real estate portfolio worth about 30 billion euros ($35.2 billion). However Lone Star appears to be the winner in taking over Novo Banco across the border in Portugal. It is the state-sector bank created to replace the Banco Espirito Santo which looted our Portugal Telecom and other holdings 3 years ago.

Insurer AIA of Hong Kong reported H1 business levels rose 41% y/y to $1.billion on which operating profits rose 16% to $2l.26 bn. AAIGF earned most of this in Hong Kong and China but also operates in Singapore, Thailand, Malaysia, and South Korea. It was spun off by US AIG which fell into a black hole during the global financial crisis. Asia is short of life insurance as its population becomes wealthier and AIG had old roots in China it is building on now.

Bank of Nova Scotia is offering auto-callable step-up notes linked to the Russell 2000 index and the Eurostoxx 50 under its mounting institutional index trackers offering leveraged ways to cover or gain index risk. This is not for individual investors in the US but BNS may do ok with the range.

Industrials

Tata Motors reported on its 2016-7 FY Q4 today and it is not pretty, a 17% decline in profit as its commercial vehicle sales took a hit from the government's crackdown on cash and stricter emission rules. And this time Jaguar Land Rover could not fill the gap as its contribution fell to 43.36 billion rupees ($669 million) during the Q4, from 52.11 billion rupees a year earlier. However TTM did beat the 26.95 billion rupees consensus estimate in a Thomson Reuters survey.

Consolidated revenue declined 3% to 787.47 bn rupees and Jag contributed 80.4% of the total.

Full year net income came in at Rs 62.2 trillion rupees, vs 96.9 trillion in the prior FY and 129 trillion in 2014-5. EBITDA margins fell to 12.2% from 14.6%. The Jag gap couldn't be filled by boosted revenues and earnings from India for vehicle loans and spare parts sales or Korean operations.

I am glad we sold our TTM holdings, notably because hopes for greater car sales in the US and Britain are likely to be dashed. For the moment we will put the money into Morgan Stanley India Fund, IIF, which focuses on small caps.

Vale rose ~3% pre-market after China reported that its construction activity index rose to 62.5 in July, the highest level since early in 2013. Vale's iron ore is used to reinforce cement in housing and infrastructure construction.

Cosan CZZ also rose in Brazilian trading, in sympathy. Britain wants to do more business with Brazil after it leaves the EU, it says.

Health Stocks

With GlaxoSmithKline withdrawing its Tanzeum from cheap diabetes meds, according to the conference call with the new CEO, Emma Walmsley, other cheap insulin producers may follow suit. The likely beneficiaries include Danish diabetes specialist Novo Nordisk.. Its weekly semaglutide, Victoza, is due to come out in a new oral daily version which also cuts the risk of heart attacks and strokes.

NVO also gained because US pharmacy benefits manager Express Scripts issued its new exclusion list for drugs for 2018. There is no new exclusion for diabetes drugs, good for NVO which is tops in insulin worldwide, according to a Deutsche Bank analyst. "This should alleviate some market fears," Deutsche said. Novo Nordisk closed 1.2% higher in Copenhagen today after rising nicely last week.

South Korean Celltrion and its partner Teva announced U.S. FDA acceptance of Biologics License Application for proposed biosimilar to Herceptin (trastuzumab), CT-P6 and CT-P10. have been accepted for filing by FDA for standard review. Herceptin is a a recombinant DNA-derived humanized monoclonal antibody made by the US sub of Roche, RHHBY, Genentech, for treating HER-2 negative breast cancer. TEVA fell because it is now a common short.

Israeli fund group Menora Mivtachin has taken a 5.4% stake in Mazor Robotics which rose on the news in Tel Aviv. It makes neurosurgery systems.

Technology

Naspers fell 4.6% today in London reflecting South African selling. However Tencent increased by 2.6% in Hong Kong increasing the spread between the parent and its 30% holding in TCTZF. This came after the Wall Street Journal reported today that the real rival to Apple iPhone apps in China is WeChat from Tencent.

The big news it that Apple withdrew from selling in the greater China market virtual private network software enabling people to penetrate the Great Internet Wall. The apps have been called “illegal content” by Beijing which likes to censor the Web (as does Russia as well). China also forced Apple to maintain a data center within China which it will license. The makers of Express, Vyper, and Golden Frog VPNs which had backed Apple when the FBI wanted to break into the phone of the San Bernardino terrorist protested at Apple caving in to China on censorship.

I sold Renishaw at $54.81 this morning, ahead of my target price, a first buy with Schwab well handled. RNSHF was tipped by Martin Ferrera who thinks other engineering shares are a better value and said to sell.