The virus-laden e-mail opens “Hi” which is not what the supposed sender normally would write. I got it and so did one of our contributors in Latin America. I didn't open the attachment because I have an instinct for these things; he opened his. If you get a “Hi” email, don't open the attachment!

This is an example of using precedents to understand the world. I use rules-based thinking when opening e-mail. I also use it in pricing close-end funds or holding companies, or in predicting the price of oil, or in evaluating biotech stocks. In pricing stocks owning other stocks, with a few exceptions (like Berkshire Hathaway, now a brand name to conjure with in real estate and men's sports shirts as well as stocks), the vast majority are discounted, often ridiculously discounted.

That is why closed-end funds or holding companies are such a tempting part of the stock market.

It is not because the discounts are expected to disappear. They don't. It is because you get $1 of assets working for you (and producing dividends for you) for around 93 cents. The average US discount over time is 7% although in a market sell-off it is often much higher. It is often higher but less well tracked for foreign CEFs.

The only thing unusual about the failed Dutch IPO yesterday for Bill Ackman's Pershing Square Holdings is that the underwriters didn't even support the stock on its Day 1 of trading, presumably because they don't like Ackman, and possibly also because he upped the number of shares to be issued after the prospectus came out.

Cartels tend to break is another rule. With crude oil prices in a rout there are two ways that Opec can react. Traditionally, the lynchpin producer, Saudi Arabia, cuts its home-grown output enough to boost the price.

This time the Saudis instead say they will just learn to live with crude oil priced at $80 per barrel. There are a bunch of reasons for the new tactic. Saudi Arabia has managed to persuade Kuwait to join the acceptance of $80/barrel.

I think the Gulf royals are simply fed up with some of the fellow-cartel members, like leftist Venezuela. And they don't want to cut output only to allow Shi'ite Iran to fill the crude gap while also developing a nuclear threat to the region.

Then too, OPEC's share of the oil market is down in any case. The largest producer of hydrocarbons now is not Saudi Arabia, but the USA. Outsider non-cartel producers are the likeliest to gain from a production cut hitting only the Middle East, as they (and us) can fill the gap.

Saudi Arabia by tradition keeps its contact lines open both to the US major oil producers and to Washington Arabists in the Dept of State. The decision to let prices drop has been approved. Cutting back Gulf output would not stop the swing to US production, growing as much for geopolitical reasons as for cutting costs.

In fact, the US is better able to live with cheap oil than many OPEC countries and outsiders, above all Putin's Russia, which both Saudi and Yankee oil men want to hurt.

Newer oil sources are also coming on: from Mexico and Brazil offshore, and eventually from the Athabasca oil sands where a rump Republican congress might vote as soon as December to allow the construction of a Keystone XL pipeline to link the Canadian fields to the US Gulf ports. Our expert, Martin Ferera, thinks even if a joint bill is passed, Pres. Obama will either veto it or procrastinate. But at some point the pipeline will begin piping.

Moreover for the Opec countries, cutting off the markets where the Persian Gulf states have a geographic edge (in Asia) would have long-term repercussions when oil prices rise. US light crude is already being shipped to South Korea under a loophole in the US rules against exporting crude.

Meanwhile, Saudi Arabia's antiquated monarchs face new financial demands, ranging from far more people at home to support for loyal Sunni Muslims around the region. To sacrifice these goals to keep the cartel together is harder than it used to be.

What comes next? Iraq so far appears to be on board for the lower price regime, but as a Shia Arab ally of Iran, it may switch to flat-out production whenever there is a gap in the civil war. The same may apply to Iran if it is prepared to dismantle its nuclear program to gain traction in the oil business. Non-OPEC Russia, and cartel members Venezuela and Ecuador will produce flat-out to the extent that their creaky infrastructure allow. And the new producers (the USA, Canada, Brazil, Mexico, Argentina) will go ahead whatever the price of crude is right now.

Energy-saving zeal will not end even if crude prices fall. We still have global warming to deal with and dirty fuel is on the outs.

In my opinion, the OPEC cartel is finished. Peak oil has been reached and the world will benefit from lower prices in future decades. If only for this reason I am relatively optimistic about a pickup in global growth.

A final rule is "sticks and stones will break my bones, but words will never harm me." Today's blog is late because I had to deal with an electrician doing an estimate. I have a life and a wonky chandelier in my dining room. More  follows from Panama, Korea, Israel, Japan, Brazil, Switzerland, Germany, Australia, Portugal, Brazil, and Canada.

*Embattled Pimco, a sub of Allianz, launched an “Unconstrained Bond Fund” for Canadians. AZSEY.

*Both Vale and Cosan rose 2.5%+ in Brazil trading despite the latest polls showing that the two presidential candidates, Aécio Neves and Dilma Rousseff, are neck and neck. VALE, CZZ.

Ding Dong

*Also from the bitter election campaign, Dow-Jones reports that Brazil's communications minister Paulo Bernardo charged that the euros 897 mn loan by Portugal Telecom SGPS to a Luxembourg sub of defunct Banco Espirito Santo, Rioforte, was “an illegal fund transfer.” He said that Brasilia is not using its legal clout to pursue the miscreants who did the deal because it was between two foreign private sector companies.The inference is that if Rousseff is re-elected there will be charges filed for violating exchange controls. Presumably Oi's ex-CEO Zainal Mohammed Bava has left Brazil by now.

*Vodafone has bought at auction two 15-yr spectrum licenses in Greece for euros 124.5 mn to bring more 4G to the Hellenes. VOD is British; we own its Yankee bonds 92857WAB6. Deutsche Bank today started covering VOD common shares with a “buy” rating. This is 95% of the 20-day average current market price of the share up north, C$17.1362.

Biotech and Beastliness

*Yesterday I bought more Benitec Biopharma from Australia, BTEBY, at $2.78/share. The share price of the gene silencing biotech research firm may be being manipulated and has lost half its value since the IPO despite good news. It would help matters if the underwriters of its IPO would send shareholders from its previous incarnation (as an unsponsored ADR) the issue package. Insiders who have received shares and options are holding on to them. I found this stock through Dr KSS who writes for www.stockgumshoe.com to which I subscribe.

Dr KSS has written a beastly letter to me today via stockgumshoe:

“If I subscribe to your ossified overpriced dunderheaded newsletter, will you let me come and attack and belittle you as you have done me? NOT cool! Your have made a complete idiot of yourself and enemy of me. Nicely played. You trying to undermine me to my editor will never be forgiven. No one respects you. You are cheap and out of date. If you badmouth me again, expect serious consequences legally.”

This was after I carefully refrained from publishing or spreading around the damaging information about the good doctor which Benitech's CEO Peter French sent me, either in this newsletter or when asked by other subscribers to the newsletter to which Dr KSS contributes. I sent Dr French's letter to the editor of stockgumshoe.com, Mr Travis Johnson, but to no one else because I have no way of confirming if what Dr. French wrote to me is true.

I bought more BTEBY mainly because it won a positive pre-clinical proof of concept when dCellVax (a potential breast cancer drug being developed by a sub of Biomatric Scientific BMSN). The sub licensed BTEBY's gene silencing DNA-directed RNA interference (ddRNAi) technology. BMSN is not the only prestigious licensee of the ddRNAi in therapeutic uses. Others include Millipore, Applied Biosystems, Sigma Aldrich, Merck, and Pfizer, plus dozens of small cap licensees, and universities and medical schools in the US, Australia, and Britain. They are studying ddRNAi in HIV, hepatitis B and C, non-small cell lung cancer, certain muscular dystrophy dieseases, retinitis pigmentosa and macular degeneration, and Huntington's (Woody Guthrie's disease.) BTEBY holds the patents. This is what the sticks and stones quote above is all about.

*Israeli Compugen reported that it had achieved a 2^nd clinical milestone under their antibody-based cancer immunotherapy deal with BayerAG. It relates to a checkpoint protein candidate which hit its first milestone in July. They signed a license agreement in August 2013 whereby Bayer agreed to fund the p;re-clinical research program for two immune checkpoint regulators CGEN had discovered. If it moves to the clinic, Bayer will control the trials and commercialization. CGEN got upfront payments of $10 mn and is up to collect $30 mn more in pre-clinical milestones. If the drug advances the miletones can top $500 mn. Cancer immunotherapy may provide long-lasting results, and stop recurrence or resistance. Conventional cancer therapies, surgery, chemotherapy, and radiation (AKA slash, poison, burn) directly target cancer cells but they can become resistant. CGEN is up modestly on the news. Israel will be closed for holidays tomorrow and Thursday so we may be able to buy more without the full impact of today's news hitting.

*Teva was upgraded from hold to buy by Standpoint Research. TEVA is researching central nervous system diseases like Huntington's., Alzheimer's, and multiple sclerosis, plus maybe whatever mental illness ails Dr. KSS.

*Novartis faces delays in building its $150 mn manufacturing plant in St. Petersburg, Russia, according to Pharmaletter in turn cited by FiercePharma.com. The plant was supposed to open this year but has been delayed either because of techical issues or because of sanctions over Ukraine imposed by the European Union, but not by Switzerland, where NVS is HQ'd. CEO Joe Jiminez wants to build out NVS drug business in Russia and emerging markets. FiercePharma.com was told by the NVS US spokesman that the plant would open in 2015 and he denied that politics had caused the delay.

Oy Canada

*Veresen is redeeming all its 5.75% convertible unsecured subordinated debentures series C due at the end of July 2017. It will issue them with either cash or stock in the Canada version of FCGYF at a price of C$16.2794 per share. If they take stock they will get C$61.4273 shares of VSN plus C$12.76 cash for the accrued and unpaid interest minus any taxes applicable per $1000 face value of the cv bonds. Fractions will get cash. The TSX will delist the bonds.

This notice was sent to our Canada reporter Martin Ferera by Veresen with a warning that US investors were not supposed to be told the news. The share fell 2.6% on the news. FCGYF recently bought half the Ruby pipeline in from US owners for US$1.425 bn. Maybe they will stop this nonsense about what they tell US shareholders soon.

*Paddy Power plc fell over 3% in trading today to $69.25 on low volume.

Trading alerts:

*I also finally got Lord High Executed on my purchase of ShinMaywa Industries, Japan:7224, Chris Loew's latest Japanese small cap idea.

Fund Notes:

*I used money from my leveraged volatility fund, Proshares Ultra Vix Short-Term Futures ETF, UVXY, to fund the BTEBY buy. It goes up when markets go down.

*Reuters updated its report on Raven Rus, a UK REIT invested in warehouses and logistics facilities in Mother Russia. RUS:AIM is still tradable with E-trade but not under fair conditions. Its H1 revenues fell 2% to $132.3 mn and its net incoem collapsed 17% to $45.3 mn, still a very profitable business. The gross margin is 68%; the operating margin 76%. The shares trade at the usual discount from NAV, which according to Reuters comes to 76 pence/sh vs a stock price today of 65.38 pence. US investors cannot use fractions of UK pence in their trading, another penalty imposed by dear old Credit Suisse on shares they deign to trade for E-trade accounts. The number of shares we own is weird because we got a buyback of part of our holding for 2013 earlier this year, which makes it even harder to figure out where we stand. But they are at a ~16% discount from the most recent NAV.

This year I think there will be no dividend. Apart from properties in 3 major Russian cities, RUS owns Roslogistics, which provides services like customs brokerage and transport in Russia.

*Africa Opportunity Fund fell a half percent in London trading to 98 US cents. Its fund manager is a Ghanaian based in South Africa, Francis Daniels, but it may be suffering from fear of Ebola. To the best of my knowledge, from quarterly reports, its investments in West Africa are in Standard Chartered Bank Ghana and Anglogold Ashanti, and with Ebola now a potential plague in other regions of the world like Texas and Madrid I think that the Africa risk will be properly addressed by global medical, business, and international organization bodies, as should have been done in the first place. AROFF.

*Ascendas India Trust fell 3.9% today to $0.571 bid 0.615 ask. ACNDF is a Singaporean unit trust invested in India office and commercial real estate.

*Also down in Singapore is Global Logistic Property GBTZF which invests in China, Brazil, and Japan.

*Fibra Uno rose 2.8% in London trading this morning. FBASF, half sold, is Mexico's oldest REIT. It is holding a NYC FUNO day Oct. 28. I will attend only late to get out my newsletter.

*Korea Fund won a 16.7% increased investment by UK fund of funds City of London. Its manager, Barry Olliff, has upped the stake it holds in KF to 26.7% of the shares out. Separately, Kim Yung Un, the North Korean dictator, has reappeared in public with a cane.