The global stock selloff is intensifying without input from China, closed for the week for New Year's.

Concern over the failure of OPEC to reach a deal to boost oil prices is the ostensible trigger for another round of selling which has hit not only oil-related shares, but also ones from sectors offering alternative energy: nuclear, solar, and battery systems. The rot is spreading to other commodity shares.

Meanwhile, concern over bank exposure to emerging markets, its pricey credit default swaps, and the dropping German “bund” yield have pushed down Deutsche Bank (DB) shares by 4.35%. Europe-traded stocks fell to levels last seen in 2014, after a sixth day of decline. We update our sovereign wealth note.

Worry has also boosted the price of gold which now has risen 11% YTD.

Yet China is not ​free from all blame. Sunday it updated information of outflows from its reserves in Jan. which shrank less than forecast to $3.23 trillion, still a 3-yr low.

US yield stocks like Williams Companies (WMB) and Targa Resources (NGLS) are plummeting. Despite relatively upbeat US economic indicators, Wall Street is being hit by hurricane winds from Europe about a recession in US markets, taking down the “FANG” tech favorites of last year and other stocks which gained in 2015.

Car Jacking

*”When the facts change I change my mind. What do you do?” is (possibly wrongly) attributed to John Maynard Keynes. But it explains what we are doing by selling Fiat Chrysler (FCAU), formerly one of my picks for 2016. The reasons are multiple. I still like its management but there are tech problems which go beyond what a brilliant accountant and deal-maker can do.

First, my assumption that the Italy-based company would gain European market share at the expense of Volkswagen diesels spewing out nitrogen oxide was wrong. Fiat cars like the Punto and the Bravo also failed emissions tests in real driving, and also were fiddled with during staged tests. (Astonishingly, this was legal under EU rules.) Other European car-makers did even worse, but I am not interested in a race to the bottom.

Secondly there are problems with Fiat's most popular US models using the company 3.6 liter V-6 engine. Customers think the automatic transmission is in “park” but it slips out and causes accidents. The affected vehicles include the Jeep Grand Cherokee, a best-seller, Chrysler 300, and Dodge Charger.

Other recalls includes slipping from jacks when drivers change tires on the Charger. The body beneath the doors is bent and becomes unstable. So it falls off the jacks. Fiat has to offer some 500,000 owners wheel chocks and automatic transmission fixes for their 2011 to 2016 Charger models.

Meanwhile US dealers are banned from selling these models until repairs have been made and approved on all affected cars, including the recalls and unsold cars on the lots. Naturally FCAU has to pay its dealers for delays in selling.

Yet another issue is whether FCAU can shut down Detroit plants making slow-selling vehicles. Under its deal with the United Auto Workers, FCAU became a bellwether for making a deal with the union but now it wants to centralize and cut production of unpopular models.

The fact that viewers of the Superbowl were hit with lots of ads for Fiat Chrysler cars, notably the Jeep which turns 75 this year is irrelevant. So is my interest in the Fiat 500 mini car as a way to get around NYC with flair.

It would have been nice had we sold FCAU before its stock fell 40%, admittedly partly offset by the $4.60 per share we booked when Ferrari (RACE) was spun off earlier this year (we got 1/10 RACE share per FCAU share owned and sold them at a slight loss.) In the recent market rout I do not want to stick with Fiat Chrysler. While obviously Italian-American, it is incorporated in the Netherlands for tax reasons, which also may come under attack as European Union countries go after fiscal fiddles. Try for $6+/sh.

*Do not add to Tata Motors (TTM). Buy back Autoliv (ALV). We sold the Swedish airbag maker years ago. Now with its leading Japanese and German competition in full recall mode (with recorded deaths, which so far Fiat-Chrysler has been spared), ALV is a good idea. Of course with the recent sell-off it is back to Sept. lows in US trading on the big board. It is not cheap, selling at 22x earnings. It pays 2.22% in dividends but these tend to be raised as the company boosts its income, which has not happened for the years 2013-5, largely because profit growth has lagged.(ALV pays out about half its net earnings in dividends now, so most of its spare cash is going to the usual share buybacks rather than boosting the payout.) I bought at $96.37.

Chemistry

*Our Mexican multinational corporation is becoming more multinational. Eduardo Garcia wrote that Mexichem (MXCHF), the maker of plastic tubes, has named a non-American Indian to head its Fluent sales group, Paresh Chari. The fluoride and PVC tubes account for 54% of MXCHF sales and the Latin America and European units will report to Chari who will be directly under the general manager, Antonio Carrillo. Chari was acquired in 2014 when Mexichem bought Dura-Line in the USA which he helped build up. Chari studied at an Indian IIT and then got an MBA at Michigan before joining Kellogg Brown & Root. Eduardo edits www.sentidocomun.co.mx with which we trade news and ideas.

*Of course car batteries are a key potential market for SoQuiMich (SQM), the Chilean miner in the Salar de Atacama Desert of potash (used for fertilizer); other potassium and iodine compounds, used for chemistry; and lithium, mainly used for car batteries.

The risk with SQM as always is political. We sold out of the company when its former management did under the table deals with companies controled by the family of Augusto Pinochet, the former dictator, to keep control away from other investors, including US retail investors and institutions. In the subsequent house-cleaning this abuse has been ended. But now there are worries that the Comte management also fiddle the books over royalties owing to the Santiago government. We went into the share to try to beat the eventual return of the institutions and in the current market the stock is holding up well for a Latin American raw material firm. SQM is off 3.4%.

*Australia's Orocobre (OROCF) was up 3.4% in Canadian trading. The company mines potash and lithium in Argentina and has been invested in by Japan's Toyota (TM). It trades as ORL in Toronto, which is how we will be covering it from now on as ORO Down Under is too hard to track. OROCF which we originally bought has ended its pink sheet ADR.

*The selloff has also hit Canada's Agrium (AGU). AGU is expected to have $2.8 bn of sales (US) and net of $1.38/sh. It is off 2.5%. Fertilizer is needed to grow food which is bought even if business elsewhere is sluggish.

Nordic Sovereigns

*Norway will have to take about NOK 57 bn out of its sovereign wealth fund this year vs a government plan to only cash in NOK 5 bn, if oil prices resume their fall under $30/bbl. This was calculated by Nordea Bank, a holding of our Finnish financial group Sampo Oy.

As we reported last week using Canadian sources, the link between oil price drops and sovereign wealth funds, mostly from the Middle East, is a compelling explanation for the current global stock selloff.

Norway will probably spare its homeland firms, like Marine Harvest Group (MHG), grower of salmon in fish farms, and its energy sector, Harry Geisel points out. But other Scandinavian stocks are at risk, particularly if they do not split the jobs of CEO and Chairman as the $810 bn sovereign wealth fund demands.

At risk also are US banks and companies like Microsoft, Morgan Stanley, JP Morgan-Chase, Wells Fargo, Exxon Mobil, Citibank, BofA Merrill Lynch and GE with which the Norwegians have already battled in proxy fights.

Norway owns an average of 1.3% of every listed company in the world and is a top 10 shareholder in those 5 large US banks. The wealth fund CEO Yngve Slinstad is taking public stance in favor of a dual structure in companies, and it can use its clout to force proxy votes—or simply exit. Note that Deutsche Bank, off 8.5% yesterday, already has split the two jobs. SAXPF has also.

IT

*Its shareholder Chris Lau writing in www.Seekingalpha.com writes that Nokia (NOK) has been penalized over concerns that China's key telecom sector is cutting backs capex, plus fears of issues as it integrates with acquired Alcatel-Lucent (ALU) to make a push into the USA where it is relatively weak. As we reported, investors were disappointed at the patent fees Nokia negotiated with Samsung. He calls NOK “fairly-valued” after its 17% drop last week, mainly because of arbitrage over ALU. NOK reports this week. It fell another 2% in London trading. Our cost basis is just over $3/sh of the Finnish firm, still a near double.

*Infosys (INFY), which also was acquired cheaply, is off but its NJ rival Cognizant Technology Solutions produced exceptional results in Q4. We write about CTSH from time to time as I own it.

War Games

*BAE (BAESY) is a likely winner from increased US spending on futuristic self-propelled guns like the Paladin, wrote Alan Tovey in The Telegraph (of Britain). He cited Defense Secy Ash Carter's plans to “do more with less” in the US$600 bn military budget. Its Strategic Capabilities Office (SCO) aims to use existing military hardware in new and cheaper ways, with fewer troops.

He cited railguns which do not fire using explosive or propellants, like the Paladin, are a key way to fire fast missiles from ships using electromagnetic force. It can fire at hyper-velocity (4500 miles per hour).

Developed with BAESY its current use is to send off naval missiles from a fixed place on a ship to take down enemy missiles. Railguns with huge range and great destructive force can be from non-naval positions and as defensive weapons too.

BAE is also in the running to develop a new British submarine to replace the Vanguard, which holds nuclear weapons. The price tag is £31 bn. Another project is a new combat ship for the UK. Meanwhile BAE is looking for a new CEO to replace Ian King, and for security reasons he has to be a Briton. BAE, which reports Feb. 18 on 2015 results, gets about 45% of its operating profit from Britain which increasingly is buying US military hardware (because it is cheaper, being produced in bigger quantities.)

We picked BAE after I decided to buy a war stock, and among ADRs the UK firm won the most medals.

Drugs

*Another UK newspaper wrote an initiative by the G7 countries (including the US) to force drug companies refusing to work on new antibiotics to pay their rivals a fee. The Sunday Times wrote that some $35 bn will be in a “play or pay” program to develop antibiotic-resistant infections and can come into force after the summit in May. Companies which are not researching antibiotics will have to pay, and Martin Ferara writes that GlaxoSmithKline (GSK) will be one of the companies getting the money. He notes that GSK is one of the 85 drug firms addressing the “superbug” problem, germs which existing antibiotics cannot stop. By 2050 unless something is done, resistant infections will kill 10 mn people/year. Natch GSK fell 3% yesterday in London trading.

*Novartis (NVS) has run into heavy flak over its ads promoting heart failure drugs, which play on fear of drowning. The Swiss firm is trying to deflect US patients away from generics. NVS.

*Analyst Sanjeev Kumar of Frost & Sullivan thinks the 2015 deal between Teva (TEVA) and Takeda of Japan will set the pace for other smaller generics linkups with Japanese firms. He was talking to Bloomberg. Indian generics firms may be simply taken over.

*Also reporting tomorrow before the opening is Compugen (CGEN) of Israel, expected to have revenues of $3.3 mn on which it will lose 11 cents/sh. CGEN was off 3.4% although nobody expects it to make money yet. The sell-off may be because Illumina, a US company I own, is getting into the business of linking gene data with electronic medical records for biobanks to find better medications. Biotech database systems are hot where the Israeli firm is a small if experienced player. With its increased US presence it is also a takeover target, in my opinion.

*Obviously the reason Reckitt Benckiser (RBGLY) is a strong buy is that its OTC lines include condoms, very much needed now because it turns out that Zika virus can be sexually transmitted, as well as probably causing birth defects if pregnant women catch it. Two reasons for RBGLY.

Bank-Insurance

*Two of our stocks are getting together. Allianz Global Investors, the non-Pimco asset mangement arm of the German Allianz (AZSEY) insurance firm, is taking over the fixed income arm of Old Mutual for an undisclosed sum. The ODMTY bond group, called Rogge, had euros 34 bn under management. This will offset $100 bn in outflows from Pimco after Bill Gross walked out 2 years ago. Old Mutual is a South African banking and insurance giant which is buying asset managers in Britain to diversify into wealth management, but not everything it picks up fits. Rogge was also bid for by Aberdeen Asset Management, according to the Financial Times which broke the story. The Rogge team will continue to use its name and other fixed-income offerings may be added to its current roster. With rates in Europe low there is need for fixed-income asset management.

Analyst Amin Rajan of consultancy Create Research says that Rogge can create new funds which will save costs at both firms, according to the FT. Martin Ferera comments: As price is undisclosed, I assume Allianz made an offer they couldn't refuse.

*The exception to the selloff in insurance is Validus (VR) of Bermuda, VR, a re-insurer, up 1.3%. I suspect it doesn't do Taiwan P&C reinsurance.

Funds

*GlobalX Poland ETF (EPL) was sold because of the right-wing governments crackdown on press freedom and the independence of the judiciary violated EU rules. In reponse, my website was subject to distributed denial of service attacks coming from Polonian addresses. Now another reason for exiting Poland has come up. The government plans to end the “privileged” access of EU companies to Poland under a new tax regime. Any Polish offensive can be easily blocked. Kosciusko would be proud of me.

Snows of Yesteryear

*Amec Foster Wheeler was downrated by Nomura to neutral with a target price cut from GBX 660 to GBX 360. That is not a misprint. We told you first. AMEC here; AMFW in London.