News in 2018 is proving predictably scandalous. The Brazilian Minister for Industry, Marcos Perreira, resigned on Wednesday. As a result, the bolsa in São Paulo rose 3.4% (the Brazil S&P index). Whether he was implicated in the Lava Jato (car wash) scandal or did something else naughty, I know not. But it is not illegal to engage in sexual harrassment in Brazil so that was not it.

Brazil also plans to investigate Apple updates because they took too long on older iPhones, a key accessory when you are sunbathing on Ipanema Beach. If your iPhone is out of date you may miss a key link-up with a bikini-clad beauty. Perhaps that did ex-Minister Marcos Perreira in.

The British equivalent of the SEC, their Financial Services Authority, is investigating the results reported over the last two years by Carillion plc, a company which provides track and train mechanical and construction support to British railroads. It reported serious losses, but only last month. Meanwhile the new railway station at London Bridge opened on time and on budget. We had lunch there on Wednesday. Last week when we went to the theater they were still working at night to get the work done.

The British papers are full of stories about enlightened mothers of infants referring to their sprogs as them (although there is only one) to avoid pushing a sexual identity on the baby while its diaper is being changed. Having been raised partly in German I can assure the British mothers that there is a better way to avoid sex-casting their babies. Just use the German, es, or it. When I was a kid I would get furious that my mother would say es regnet (it is raining) and es weint (the child, me, is crying.) The neuter goes on well into your teen-age years if you are female. You are a Maedchen, a Maedl, or some other neutral noun until you become a Frauby getting married. So the British moms should start calling their babies it.

Jewish girls don't get away with anywhere as much. As a tiny child I was taught to say a prayer upon awakening to bow down symbolically to thank God for restoring my soul to me. The trouble is that the Hebrew present tense uses a different first person verb form for a girl bowing down (modah ani) than for a boy bowing down (modeh ani.) I would guess Arabic does too, but I don't know for sure.

Pimco has doubled the number of “smart beta” exchange-traded funds it offers on Charles Schwab’s ETF OneSource list, with new three smart beta share products. ETF OneSource list is a commission-free ETF platform which offers 254 products from 16 different fund shops, including Pimco, Deutsche Asset Management, and Invesco’s Powershares, with over $100 bn in assets. Retail investors with Schwab brokerage or retirement accounts can buy ETFs completely commission-free. I have such an account.

Schwab has added 12 new ETFs to the platform, from 7 providers, 3 of them from Pimco which created them along with Research Affiliates (RAFI) last Sept. The $109.3 mn Pimco RAFI Dynamic Multi-Factor Emerging Markets Equity ETF, the $24.7 mn Pimco RAFI Dynamic Multi-Factor International Equity ETF, and the $17.7 mn Pimco RAFI Dynamic Multi-Factor US Equity ETF are now on the Schwab platform. Earlier Pimco offered bond funds to Schwab customers: the Pimco 0-5 year High Yield Corporate Bond Index ETF, the Pimco Investment Grade Corporate Bond Index ETF, and the Pimco 25+ Year Zero Coupon US Treasury Index ETF. That makes it the biggest player on the Charles Schwab ETF OneSource list.

While I tend to be ngative about the ETF phenomenon, because most ETFs are index-huggers and underperform, that is certainly not the case with Pimco and RAFI. Smart Beta stock picking requires that the analyst ponder other factors apart from whether a stock is in the index. And the result is that these funds can outperform. 

The German Mood

*The main reason that Pimco's ETF coup matters is that we recommend its parent, Allianz SE, the German insurance giant, now astrong buy. It owns the Pimco group apart from the stock held by its fund managers as part of their pay. AZSEY is winning impact on the US retail market through its deal with Charles Schwab now having been extended into smart beta equity. ETFs from fixed-income, where Pimco always was considered to be in the lead, are less significant to its business. Picking bonds cannot be done with an index because there are too many different bonds from the same issuer with different risks and rewards, terms and covenants. The same is also true of smart beta equity selection.

We bought into Pimco when Bill Gross, its former bond star walked out, and are happy to see that the firm has recovered its mojo despite this. Now it is moving into a new speciality which can pay off big as discount brokers like Charles Schwab figure out how to lure in more customers,.

*While on the subject of Germany, note that the Frankfurter Allgemeine Zeitung says that it is Germans who have been taking the lead in buying gold, given that the coalition talks over a new government had been going nowhere. Angela Merkel cannot mix chalk and cheese into a coherent position on the economy, the environment, and emigration, the three be E's of German politics now. For the 8^thday in a row the price of gold has risen.

However, earlier this week, the Chancellor is trying a Hail Mary Pass (despite being a Protestant pastor's daughter) and the Germans stopped buying the yellow metal whose price duly dropped for its nearly 4 ½ month high.

Energy

*Schlumberger Ltd has gained 2.52%. SLB is Dutch Antillean.

*BP plc has sold a 26.5% stake in offshore Perdido regional platform to Arclight Capital Partners, the Boston (Mass.) based private equity group specializing in midstream capital deals. Crude is back up and despite its non-cash charge of $1.5 bn for lost deductions under the US tax reform, BP is a sound company with a nifty dividend of 5.77%. While I have no idea where or what the offshore Perdido (lost) platform may be, the news of the deal boosted BP plc's share price to a new 52-week high.

Pharma and Health

*Our drug startup Galapagos is in the news because of seemingly good results form its Flamingo trial of a cystic fibrosis C1 corrector which seems to help sufferers from the genetic disease. However information is still scant and the Crédit Suisse drug assessment specialist Vivek Divan M.D. says he wants more details on the results before upgrading GLPG from its current hold rating. We used to have a link to the Belgian company but our guy retired, so we rely on the analysts.

*Israeli surgical assistance company Mazor Robotics soared 9.22% on Wednesday on no news I can find. Its Renaissance systems are being sold under a deal with Medtronics of the USA, and it was investigated last year by the Israeli version of the SEC for alleged insider trading. Either one of these may have triggered the rise. MZOR is now over $55 again.

*Leerink resumed coverage of Teva with a low grade for the Israeli firm: underperform with a target price of $15, meaning it is overpriced now. The Israeli firm, under new-broom management, faces considerable risks because of desperate need to pay down its debt pile. Right now CEO Kåre Schultz is sticking with most of his cost-cutting plans despite protests from the Jerusalem government. But if they do a deal, giving TEVA a continued tax break, and the right to fire people, while also helping it find new drugs by tapping into Israel's considerable research ex;pertise, the company can be righted in the next 3 years.

Does Benjamin Netanyahu want to save Israel's marquee pharma firm more than he wants to get support from the Histadrut unions (which almost always back the Labor party rather than Likud)? I hope so. I still own a considerable amount of Teva mostly in my IRA because there is no reason to sell retirement stock at a loss when there is a hope of recovery. Teva is $19.17 now so the Leerink price sounds too bearish.

*Irish Shire Pharma got Canadian approval for its Xiidra drug for dry eye. ValuEngine upped its rating to buy from neutral, pefrhaps as a result. ValuEngine also upgraded GlaxoSmithKline to buy from hold. While both are primariily listed in London, SHPG is Irish incorporated as a US tax exile, while GSK is also big in the USA but is really British. Both will have to overcome the downward move in the US dollar year to date which reduces the sales and earnings of drug companies when translated into euros (Ireland) or sterling (Britain).

Mining

*My note earlier this week on mining being a good way to benefit from the electric vehicle push without taking substantial risks with the actual production of cars and trucks may have triggered more buying of MMC Norilsk Nickel, NILSY, the Russian metal producer. Its stock is up 3.5% on Wednesday. It periodically goes into orbit depending on the politics and prices of—not Moscow--but New Caledonia, the leading rival nickel producing country

Internets

*Tencent was accused by the CEO of Geely, Li Shufu, of monitoring the public on behalf of Beijing using its WeChat app. TCEHY denies this. I suspect Li knows whereof he speaks, like Steve Bannon. 

*Golden Oldie Nokia is on a rise, maybe because NOK of Finland doesn't monitor its cellphone system users, except to collect royalties from its licensees.