Vice-Chairman Daniel Fuss CFA at Loomis Sayles held a press luncheon I attended with other hacks yesterday. LS has over $230 mn under management, $90 mn in US and foreign mutual funds, and the rest in institutional accounts for insurers and pension plans, endowments and managed money for fatcats. Dan Fuss is the oldest and wisest bond manager left. Moreover he is more fun to listen to than Ben Bernanke.

Fuss forecasts and commentary on Federal Reserve policy leaves others in the dust. These days, in addition to its official US central bank goals of keeping the banking system working, fighting inflation, and boosting growth and employment, in his view, has had another unofficial goal added to them: a geopolitical goal coordinated with Foggy Bottom, our State Department (just down the street from the Fed.) That goal is to provide dollar liquidity to the global system. But it is unofficial.

Mr Fuss warns that if we quote him on this he may not be invited to have lunch at the Fed for another 3 months, which apparently happened the last time he made this comment—dining at the Fed.

The goal that dares not speak its name is hidden with our central bank using the excuse that the labor market has not yet recovered. This gives the CB a legitimate excuse for delaying interest rate rises really for another goal: being a responsible manager of the world's currency needs. As long as our CB doesn't face higher inflation it can avoid again throwing East Asian and emerging markets under a bus by raising dollar interest rates.

For a fixed income investor like Mr. Fuss this requires some strategy adjustments. The old game of acquiring lots of US Treasury odd lots, consolidating them, and selling them for a gain is tougher because there are more buyers of mini-lots. Today investment advisors (“formerly known as brokers”) buy laddered bond holding for their clients. That has boosted the spread on US bond trading on a quarter to a half billion dollar bond trades (Loomis' levels) to as much as 7 basis points from normal levels of 1 or 2 bps.

The market is illiquid and Loomis has to buy bigger lots to avoid the pinch.

Another tactic being adopted may be of interest outside the world of investment management: buying more equities. This is Loomis Europe strategy underits leader and dealer in global fixed-income, David Rolley. He remarks that Europe is a technical market, which means “you cannot make any money buying” in it. He finds “pockets” where Loomis can invest, like Turkish bonds (because of political risk over the President trying to rein in the CB head.) But Europe “is not a value proposition.”

As a result, the Loomis bond portfolios are currently ~20% invested in equities. Unlike ETFs which are forced to buy bonds in the present climate, Loomis has the option of using yield proxies, like stocks.

So equities it is for global investing, and Loomis' global equity leader, Eileen Riley, selected three stocks for the lunch guests: one of the is a pick of ours too.

There will be no blog tomorrow because it is unchristian to trade stocks on the day you remember your God being tortured to death. Have a Happy Easter or a Pious Passover or a nice long break from stock markets.

Drug News

*Ms Riley's European pick is a Danish firm with “a diabetes franchise”, Novo Nordisk (NVO), which has a high return on investment and is engaged in world class R&D. That's NVO, one of my top picks for 2015. She picked two other shares, one US Autozone, and an Indian car-maker we never owned. NVO's resubmission to the FDA of Tresiba may boost its insulin offerings at the expense of Sanofi, (SNY).

*Novartis (NVS) licensed PeptiDream's peptide discovery platform from the Japanese firm exercising an option from their strategic alliance of 3 years ago. The deal will generate milestones as NVS examines trillions of non-standard peptides the 9-year-old Tokyo listed company (TSE Mothers:4587; ADR PPTDF) has collected data on. The size of the potential payments was not revealed.

*A month after taking over NVS's vaccine lines, GlaxoSmithKline (GSK) managed to do a deal over meningitis jabs with Britain's National Health Service. It will be paid £20 per dose for Bexsero injection for babies, a deal which had eluded the Swiss firm. The cost of the drug is £16/dose according to fiercepharma.com. Meningitis can cause death and brain damage. This year 800,000 babies will be inoculated.

*Teva (TEVA) and Xenon Pharma enrolled the first patient in their joint Phase 2b trial of topical TV-45070 to treat sharp pain from herpes zoster (shingles) neuralgia, in two doses. It can last 3 months after the initial rash disappears, and there is now no treatment which works for half the patients. If you ever had chicken pox as a child, get a shingles shot. Apart from testing TV-45070, under their license of 2012, Israel's Teva is also doing a phase 2b trial for osteoarthritis of the knee.

Deals

*Phoenix rising? Delek Group (DGRLY) may be finally landing a buyer of its Phoenix Insurance arm in Israel along with its sub, broker/fund manager Excellence. Last year's attempted sale to Ivanka Trump and her real estate mogul husband Jared Kushner was vetoed by the Israeli insurance regulator. Now the regulator is rumored to be examining a sale of up to 52% of the financial group to Hong Kong's Fosun, a serial acquirer of non-China assets. Fosun bought Portugal's Tranquilidade insurer out of the Banco Espirito Santo bankruptcy, and also a slice of France's Club Med.China is a new player in Tel Aviv.

Another rumor has it that DGRLY or its US non-consolidated sub Delek US, want to buy out Alon USA for NIS 3.7 bn (about $930 mn.) This is unlikely as Delek just exited its ex-Mapco convenience store-gas station and refinery businesses by selling a majority of Delek US. We got into this Israeli company because your editor owned US Mapco before Delek snatched it, a decade ago. Alon the parent is Israeli too.

*Veolia (VEOEY) copied Teva by bidding to buy back its existing high priced debt with a new issue. The difference is that VEOEY is less highly rated and owes euros rather than mostly US$s. It bought back euros 515 mn in bonds due 2019-2022 with a nominal 13 year replacement note paying only 1.59%. The underwriter group was led by Natixis. Both are French.

*We celebrate liberation this weekend at the Passover seder, not Yom Kippur penitence. Thanks to promises to liberalize the economy by Dilma Rousseff, Brazil soared yesterday and with it, beaten down Portugal Telecom, owner of a quarter of native son OIBR, rose 9.4% according to Bank of NY Mellon, and 8.3% according to my broker. Again from E-trade, PTCGY rose another 8.7-9.7% today.

Be wary of market-maker spreads on this neo-pink-sheet share based on PTC: Lisbon. It is still in the dumps but less so that earlier this week. I am not proud of this pick but it is less awful than it was.

*While Brazil generally was goosed up by Dilma Roussef's promise to stop interfering so much in the economy yesterday, the outlier which failed to rise was Vale (VALE). Worries about iron ore prices took it down despite the samba of optimism.

*Naspers of South Africa hit a new all-time high of £154 pence in London. Not however in US$s.

*Cameco (CCJ) was upped to outperform today by analysts at Bank of Montreal. CCJ mines uranium. It is up ~3%.

*Reckitt Benckiser was upped to outperform from neutral by Sanford Bernstein.

Fund Notes

*Someone else is thinking like me. New Ireland Fund has boosted its position in CRH plc (CRH) to $10.74 mn, making it the second largest holding for IRL. The largest, now marginally less large, is Ryanair, at $14.65 mn if you add together the Dublin and ADR holdings. CRH was upgraded to neutral from underperform by analysts at BNP Paribas aujourd'hui. IRL itself is up marginally perhaps because the market doesn't like its concentration on airline stocks now being lightened. Lafarge of France, one of the firms whose assets CRH will buy if the merger with Swiss Holcimis revived by new terms, was also upgraded by a different French brokerage, Natixis, to buy from hold, presumably because it will extract better terms from the Swiss than expected.

*Our Swedish holding company, Investor, was tipped in seekingalpha.com by Holmes Osborne as “a darling of value investors” IVSBF, a Wallenberg family controlled outfit, owns shares of every major SEK client and SEK itself. Osborne quoted Third Avenue Value Fund about hints of a new Investor strategy reoganization coming, buying more privately held companies to monetize its stakes. The fund cited Molnyke as an example of a company where Investor can unlock value by taking control.

*My note on speculative REIT Kennedy Wilson Europe Real Estate plc, (KWERF), was reprinted as today's daily alert by www.dickdavis.com.

*Franklin Templeton bond managers, including closed-end Templeton Emerging Income Fund (TEI, sold) are negotiating a debt restructuring with Ukraine over sovereign debt issued on international markets, having become one of the largest creditors of Ukraine. These talks are dependent on cooperation from its major creditor, Russia. The situation is unprecedented for Paris Club debt negotiations.