Factoids. By the waters of Babylon, there we sat down and we invented tacking geometry over time, about 1600 years before it was supposedly discovered. The Babyonians were watching Jupiter in the skies, AKA the god Murdoch, no relative of Rupert who just reappointed his son James back into managing a chunk of the empire after letting him go during the UK hacking crisis.

King Tut's wet nurse's mummy has been found. She also was his sister. Nobody besides his sister was good enough to be pharaoh's wet nurse (or wife.) You can go to the Velasquez exhibit to see what that leads to.

Now for the real news:

The latest acronym for emerging market investors is MICKs, which stands for Mexico, India, China, and (South) Korea. It replaces BRICS because of the rotten outlook for Russia and Brazil. Take any such mnemonic with a tablespoon of salt. But note that we are presently over-invested in 3 of the quarter, but not China.

Japan surprised the world by imposing negative interest rates to try to end the decades-long deflation in its economy, after a 5:4 vote at the Bank of Japan. It also will lower rates further to trigger inflation and growth if needed. This came after pre-move central bank denials even at Davos, which is usual.

Bond yields in Japan crashed after the CB headed by Harukiro Kuroda decided to charge banks for placing money with the Bank of Japan. Annual yields on 20-yr bonds fell to 0.82% and 10-yr ones to 0.11%, levels not seen since the start of this millennium. Bank stocks fell but the Tokyo market overall decided that this was a good thing for stocks, and they rose there. Euro markets and Britain also rose.

For some reason this triggered an attack on central banks by Marc Faber, who earlier was dropped by the Barron's Roundtable. Rupert Murdoch is also behind Fox TV refusing to do a deal with The Donald over who would moderate yesterday's debate.

The Chicago purchasing managers index for Jan. came in at 55.6, showing a strong economy. Whether this applies for the whole USA will be known next week.

More for paid subscribers follows from Bermuda, Brazil, Britain, Colombia, Denmark, Ireland, Japan, Panama, South Korea, and The Netherlands, including two annual reports.

*Harry Geisel writes about Bermuda reinsurer Validus Group (VR) which reported after the market close Thurs. “VR did not make as much money in 2015 as in 2014 in the type of earnings/sh favored by analysts, 'net operating income available to Validus.' For 2015 it was $4.74, down 6.6% from the $5.08 of 2014.

But this was a lot better than most competitors.

“Moreover the key combined ratio was 79.7% in 2015 and up from 73.6% the year before. This marks how much its investments and premiums produced, and higher is better. It again beat most rivals.

“CEO Ed Noonan, a 'glass-is-half-empty' pessimist, called VR results 'strong despite competitive pressures.'

“VR also treats us shareholders well. They pay a 3% dividend and bought back 6 mn shares in 2015 at a mere nickel on average over book value, $42.33. This adds up to an astonishing total buyback since the program began of 160.5 mn shares. Gloomy Noonan is disciplined so when he can't find a reinsurance deal with good return he simply buys back more shares.

“A contrast to the wind-down of Pacific Re, another reinsurer based in the US into which Paulson & Co invested. I love Noonan's comment on Pacific Re's demise: 'Having a business with no premium coming into it isn't a business.'” [Vivian adds: John Paulson is having to put up his personal assets as collateral to keep his $18 bn hedge fund afloat.]

*MICK stock Posco (PKX), the Korean steel-maker, reported a net 2015 loss of Korean Won 96 bn (only $80 mn but it does sound terrible). This compares to a gain of KRW 557 bn in 2014. The loss was KRW 1596.sh or $1.41, much of it the result of charges taken for asset impairments, plus currency effects, and underperforming subs. Total sales for 2015 fell 11% to KRW 58.2 trillion in value, but actually rose marginally in metric tonnage.

Thanks to control of SG&A, which rose only 1.3% over the year, PKX cut its cost of sales 11% in the course of the year and it was kept flat as a percentage of revenues. Operating margins fell to 4.1%, down 80 basis points. Cash and inventories to hand barely budged in Q4 from Q3.

The big kimchi news is that PKX upped its sales target for the current year 26% from boosting its high-performance “WP” (World Premium) steels, descussed below. PKX expects to achieve consolidated levels of revenues of 58.8 trillion won from 72.5 mn tonnes of sales, half from finished products and half from crude steel. It also will further cut fixed costs by 1.4 trillion won.

The main way to achieve this boost is from its WP specialty steel technology, which lured us into PKX in the first place. While full WP steel details are not forthcoming from closed-mouthed Koreans, one WP steel now in production is “twinning inducted plasticity steel” or TWIP. At the recent Detroit motor show, PKX had a separate booth highlighting TIPS, the first time a steel-maker participated in the motor gathering. Its stand featured a model car made from Posco steel that was 26.4% lighter than a normal steel car body, but also safer and stronger thanks to TWIP. Other WP steels are in development for theconstruction industry.

*Another MICK stock, Shinhan Group of Korea, is up marginally on the Japanese negative yield news. SHG can boost its appeal to Japanese investors unless the Bank of Korea copies the BoJ.

*Vivian thinks Fiat Chrysler is a likely TWIP buyer. CEO Sergio Marchionne was attacked in Bloomberg today for no longer wanting to make FCAU saloon or sedan cars—and not lining up a partner to cover this part of the dealer lot. The theory is that you cannot just sell SUVs, trucks, sports cars, and mini-Fiats where the demand is greatest. FCAU is Dutch. Car writer Ed Niedermeyer thinks Marchionne is ignoring the future of self-drive or car buffs who want automakers to offer a full line. I think the main risk is that oil prices go back up. FCAU is down again by 1.5% on the Bloomberg criticism. 

IT

*For the moment our small cap stocks are up more sharply than the Topix index which only gained 2.95%, both in yen. However, because of the weekend, the spreads are wide. DeNA, DNACF, or 2432:Tokyo did best, up 6.23%. It the best performer in my portfolio besides Xerox, which is splitting. We do not own any Japanese bank shares. Don't do anything; just stand there.

*Naturally with India having survived the BRICS cull, Infosys is up again.

*So too after the Financial Times boost are Naspers and Tencent, NPSNY and TCTZF, which plan to get together to sell we-chat in Africa. Naspers is South African, the S from BRICS added later; Tencent is Hong Kong Chinese.

*But Dutch Gemalto is down. GTOMY makes security systems for smartphones which probably do not sell well in Africa yet.

Divvies

*Greencore, which we reported on yesterday, is up nearly 4% in UK trading. It makes and sells ready-meals and is expanding in the USA where store-made carry-out food is subject to taxes and often tastes disgusting. GNC in London (I couldn't buy the ADR when I wrote it up from London. My US brokerage demanded proof I couldn't provide that I was not an “insider”. The ADR, GNCGY, is up 10%+.)

*Renishaw plc, another non-FTSE UK share, will pay GBX12.5/sh in dividend April 7 to shareholders of record Mar. 3. It is different from Berkshire-Hathaway in having a payout, but both are cult shares. RSW's dividend of GBX12.5.sh was the same as in the prior year H1 but down from the H2 level of 32 pence.

*Banco Latino de Comercio (BLX) will pay a Q4 dividend of 3.85 cents Feb 23. Panama uses the US$ as its currency.

*Vale told Brazilian regulators it seeks board approval to omit dividends this year because of iron ore and commodity “price uncertainty.” If the situation improves and it manages to achieve cash flow in 2016 it may resume payouts after all. The news boosted VALE shares as it had been expected for a long time. Vale rose 5.3% so far today despite its bonds being cut to the lowest investment grade level by Standard & Poors today. There is a generalized up move by Latin American shares.

More Latins/Caribbeans

*Cosan is up 3.3%. It refines sugar and makes ethanol, which it then sells worldwide (except to the USA where Iowa protectionism applies.)

*Ecopetrol is up 3.25%, a Colombian explorer and producer of oil. The price of oil is over $34/bbl today.

*Schlumberger shares are rising despite news that corporate insiders were selling. The sellers work in accounting and legal teams, not involved directly in the oilfields, and they are probably just hedging their bets. SLB is incorporated in the Dutch Antilles so it counts as Latin-Caribbean.

Drugs

*Phase III “SWITCH” clinical trials for Novo Nordisk's Tresiba insulin degludec showed that it reduced hypoglycemic events by 30% vs insulin glargine. Tresiba also reduced night-time hypoglemia episodes by 42% vs insulin glargine. However, the benefit from use of Tresiba for maintenance periods did not match the hypoglycemia results during full treatment and was not statistically significant. NVO is the Danish insulin specialist whose Tresiba won US FDA approval last Sept.

*Most drug shares are up except for bad boy Alkermes, now being penalized for tax inversion and a failed phase III. ALKS is Irish.

Funds

*The Daily Buy-Sell Adviser Hotline from Investor's Digest of Canada calls for gold to rise to $2500/pz and advises buying, in an article by Nick Barisheff, CEO of Markham Ont. Bullion Mgm Group.His main reason is that gold is the most un-correlated asset class to stocks and bonds. He says that you should have 10% of your money in bullion and now is a good moment to buy. We own GLD, the SPDR Gold ETF. We also run an ad on our website at www.global-investing.com from a related entity, www.bullionvault.com, also sponsored by the mining firms of the World Gold Council. Bullion Vault is a way for Americans to own physical gold cheaply and legally.

*Pershing Square Capital Mgm, presented its poor 2015 results for Pershing Square Holdings, PSH, the UK listed fund in which it concluded that its outperformance in rising markets more than offsets its underperformance in falling ones. This is an example of statistical jiggery-pokery as there aren't enough data points to draw any conclusions. Last year gross returns from Allergan, Mondelez, and Zoetis came to 8.7% while losses, notably from Valeant, Herbalife, Canadian Pacific, Activis, and Platform Specialty Products (and others) came to 28%. Herbalife and Activis are Ackman shorts which he may be right about eventually, but what bugs me is his failure to exit Canadian Pacific given the drop in its volume business of hauling crude oil, grain, and metals and minerals. Last year PSH lost 5.6% on shorts and 9.3% on longs when you include options.

I also learned that our fund has $5.22 bn under management of the total $14.27 bn core fund AUM; the others are L.P.s and an offshore fund for fatcats, not small investors. PSH also has $1 bn in 5.5% 7-yr bonds issued last summer with no NAV covenants, now rated BBB with negative outlook by S&P which only represents about 7% of assets, barely any leverage at all. But there won't be more under this performance record.

The other think I learned is that PSH is now trading at a lower discount from NAV than in the past, at 4%. The gap was much higher when the fund was first launched (before it was seasoned and US investors like us could buy.)

Some of the lessons we Mr. Ackman drew from 2015 were repeated but I will spare you the details. The managers declare that there are “new opportunities” because of “recent market conditions”. So “high quality businesses with catalysts to increase value are at or nearing attractive valuations.” Bill Ackman says “we wait for the weighing machine”, a Graham-Dodd concept alleging that intrinsic values win in the end. There will be at least one new investment in the next few months, he added.

The big kahuna in the portfolio is VRX which PSH says is trading at ~7x 2016 eps of $14. It expects EPS to exceed $20 by 2020.

PSC​M​ hired lots of legal and communications staff last year, 6 out of 8 new executives. 

​PCH​ stock rose 1.75% by the London close, to $17.40. Its NAV yesterday hit $18.62.