I am suffering from a nightmare after three surprise wild moves by in Washington last week, culminating in an attack on freedom of religion in the First Amendment to our constitution and the ancient right of habeas corpus applied against Muslims from seven selected countries with visas to enter the USA. It has been turned back by a NY judge but there seems to be no recognition year by the White House recognizing the astonishing mistake the executive order reprsents.
If nothing else, it now gives Islamist radicals a grievance against the USA which they lacked before. It will encourage terrorism which usually came from Muslims who were not from the banned countries in the first place.
The attack on religious freedom is of a piece with the stance on the press by Executive Counselor Steven Bannon who called The New York Times part of the “political opposition” for questioning some of Mr Trump's obsessions over how the election and the inauguration went. I also am worried about the Trump tweet that he will impose a 20% tax on Mexican imports to the USA to pay for the wall. My issue yesterday closed before we know of these rumblings from the new administration, which is driven by PR rather than by any government experience.
I am particularly worried about how the Trumpians are ignoring the lessons of from the past, starting with the 1930s but extending into later years.
With the Trump Mexico tax, we risk unrolling the whole global free trade consensus which fostered global markets and economic integration after World War II. Will it be back to Smoot-Hawley and the foreign reprisals which extended the Great Depression?
By attacking and blocking the American press our country risks slipping into government by Twitter without critical commentary. That leads to dictatorship, of the left or the right, as was also seen in the 1930s and to the McCarthyist Big Lies of the 1950s. We can live through 1984 all over again, complete with torture of dissidents.
Removing the safety nets of welfare, public education, public housing, and medical insurance from the poor will fill out country with poor, sick, homeless, addicted, and illiterate neo-Okies. There will be many more illegitimate babies because of restrictions on abortion and they will compose a criminal underclass such as terrorized our cities in the 1970s.
Deporting “wetbacks” and blocking legal fund transfers to Mexico will create illegal fund transfers, money laundering, and criminality among those denied a normal life here. We have seen this before.
Immigration rules targeting Muslims will trigger more not less Islamist terrorism. I am reminded of nothing so much as the Kafka-esque measures which made it so hard for my parents and one set of grandparents to emigrate here from Germany. (My other grandparents died in a concentration camp because they couldn't get an “affidavit of support”.)
Denying the risks of climate change will bring back the Silent Spring Rachel Carson wrote about.
More bad science on the causes of autism can lead to uncontrollable outbreaks of childhood diseases like measles, mumps, and whooping cough.
Rebuilding highways and airports, like making the Italian trains run on time, will not resolve real economic problems, to the extent that Washington even knows about them. But government spending does risk triggering inflation.
Fighting Mexico will lead to a new Pancho Villa. It will be Andres Manuel Lopez Obrador.
If relations with China deteriorate further, its military and nuclear capacity will be used against us. We may have to remove another Gen. Douglas MacArthur threatening nuclear war. Wrapping itself in an appealing ideology China can gain great influence among those who want clean air and global trade. Buddying up to Putin will not help any more than the Hitler-Stalin pact helped Europe in the 1930s.
Of course this is a nightmare scenario and none of these events necessarily will happen. It is likely that the 20% border tax on Mexican exports will be blocked by wiser heads (like companies whose supply chains run across the Rio Grande). Our future Secretary of State, once he had been briefed, will point out that the President's tax idea is a violation not only of NAFTA but also of the World Trade Organization and other existing treaties. Somebody (perhaps his sister, the judge, or his wife the former immigrant) will point out how pernicious the ban on entry to the US of people from some countries and of some religious faith who have visas--and jobs, homes, children, and taxes to pay in the USA.
The attacks on the press, Muslims, and the support of torture are sufficient unAmerican that even a Republican Congress will push back against these proposals.
But I am still scared.
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Affected companies were up, down, and sideways at the end of last week. It is not because I brilliantly predicted how markets would react to the Trump measures that I am posting this as my first weekly talkmarkets blog--becauses the POTUS is totally unpredictable and has a small attention span (as well as small hands.) I am posting this widely because my paid subscribers reacted with more enthusisam to my Friday blog than ones earlier in the week.
More follows from Mexico, Canada, Panama, Switzerland,Brazil, Britain, Denmark, India, Ireland, Israel, and Finland. Talkmarkets readers should be careful buying small cap foreign stocks on which we report here, because we already own them. These pink sheet American Depositary Receipts are often traded at huge spreads. The best way to buy is using a limit good-till-cancel order somewhere between the bid/asl, or where possible only trading while the foreign market is open.
*Many buys over the past few days have not been executed because of my panic late Thursday (after my issue went out) over the measures being threatened in Washington. But I did buy back Barrick Gold common at $17.77on Jan. 25. ABX is a way to cover systemic risks from stocks and bonds, be it inflation or incoherence, by using gold. Its global business, and low costs of production and all-in-costs make this Canadian gold major a safer bet than smaller, seemingly cheaper miners.
*I also bought more Greencore Group, GNCGF, at $2.83 today. The Irish food processor (whose primary listing is in London) was hit by Tesco buying a wholesaler and concern about Irish ability to continue retail spending as Britain starts competing with Ireland as an on-shore tax haven. Neither of these worries is correct about Greencore but the UK stock market is aiming at moveable targets. Worries about US consumption of ready meals under its takeover of Peacock Foods here are probably wrong because in the small cap universe, mergers are very carefully planned. It may also be down because of below-consensus results at its oldest US outlet for ready meals, Starbucks (BUX).
*More about trades not completed in funds.
IT
*Renishaw, the UK laser metrology firm reported operating profits up by a third from its core business yesterday. Its ADR remains flat with a huge bid-ask spread despite its gaining coverage froma first US brokerage, Morgan Stanley. Watch this one, RNSHF, and buy if it loses altitude, writes Martin Ferera.
*Infosys is gaining despite border blockages because competition from other Indian IT firms is being talked down today by Dow-Jones, Wipro in particular. Indian analysts also think INFY will be the last man standing if Trump hits US visas for Indians. INFY is up ~1.5%+ in part also because many Asian markets are closed for Chinese New Year and Japan is falling.
*Less brilliantly, SAP is also up today.
*Nokia is both up and down after it announced an investment in WorkFusion, a startup supplier of intelligent automation, machine learning and digitization. NOK is Finnish. It also launched a digital assistant for telephones, called Mika, a rival to the ones offered with computers. Mika stands for multi-purpose intuitive knowledge assistant and I hope it is not as annoying as others. NOK also aims to create Predictive Repair which uses the same platform as Mika, to warn of hardware failures 14 days before they happen. Nokia owns over 90,000 patents in cellular telephony. Credit Suisse yesterday argued that it is not a Johnny-come-lately in cloud IT, as I wrote. I withdraw my comment.
*Israeli Mazor Robotics is up sharply today (while the TASE is shut), recovering from earlier worries over its dependence on robots which help perform US back surgery for future sales.
Drugs and Health
*Roche won US FDA priority review for its sub Genentech's Actemra (tocilizumab), a biologic to treat giant cell arteritis, a rare disease, a form of auto-immune disease vasculitis. This follows last year's breakthrough designation. It is the first new treatment for GCA in 50 years and a biologic, which is significant. GCA which affects older women can lead to blindness or stroke and is currently treated with high dose steroids which have bad side effects. Actemra will be administered with steroids in decreasing strength. RHHBY is Swiss.
*I also bought more Novo Nordisk at $34.7999 on the assumption that it may gain from problems of other insulin makers, notably Johnson & Johnson as reported yesterday. I keep getting notifications from securities lawyers about an alleged failure to properly forecast losses which I think are unlikely to play out in class-action suits. NVO is Danish.
*Teva is also up 2.6% today despite Tel Aviv being closed, just over my most recent buy level (but of course well up from my original buy price.)
*Benitec Biopharma of Oz is $1.79 bid $1.84 ask. I want to be a market-maker with spreads like that.
Finance
*Banco Latino-Americano de Comercio (Blaex)of Panama is fluctuating in the Trump Mexico wake off marginally one minute, up marginally the next.
*More serious is the 0.5% fall in Bank of Nova Scotia, despite its being the least exposed to US business among the Big Five Canadian banks. It yields 3.8% and pays today. It also launched its “Digital Factory” in Toronto which will house engineers and specialists to help its Canadian corporate customers get what they want from Scotiabank via artificial intelligence and digital banking and borrowing. Companies will be invited to test what the lab comes up with before it goes live The selloff may be because BNS plans to open similar facilities in Pacific Alliance countries Mexico, Peru, Chile, and Colombia—potential victims of Trumpian protectionism.
*Banco Santander is assumed to be likely to gain from Washington's negative attitude to Latin America, which will stimulate colonial memories about Spain. It is up today despite SAN going ex-div yesterday. It was one of the shares tipped by Dow Jones yesterday in an article about the recovery of European bank shares.
*Despite a paean to its Chairman by a magazine, Sampo Oij traded both up and down today. It yields 5.4%. SAXPY. Its key bank holding, Nordea of Sweden, reported a 30% rise in 2016 profits there was a sharp jump in prices for ABB, one of its holdings.
*Barclays preferred D non-cumulative US$ preferred shares are up today.
*Also up are Royal Bank of Scotland NC US$ preferred F and L shares in our portfolio.
*Virgin Money is trading up from yesterday at $3.77 bid, $4.10 ask (prices from before the London closing.) I want to be a market-maker.
*Standard Life is trading up sharply at $17.96 bid $18.30 ask. SLFPY and VRGDF may be gaining from Theresa May meeting the President today or from the fact that they were tipped here yesterday.
*A sub of Alibaba today announced buying for $800 mn Moneygram, a major US supplier of cross-border transfers for people without bank accounts (or legal domicile.) It may be brilliant or bad timing given the Wall and the ban on emigration. I'm not sure. BABA is a share we have resisted owning.
South of the Border
*Presidents Trump and Peña Nieto chatted on the phone today although their tete-a-tete was canceled. They know each other because Trump visited his Mexican counterpart during his campaign.
*Mexichem rose beyond my buy price to $4.83 yesterday. MXCHF.
*Also swinging up and down is Vale, the Brazilian iron ore miner, subject of a favorable Fitch report on its finances yesterday.
*Cemex is up either because it will build El Muro or because of its Cementos de Chihuahua potential profits reported yesterday by Eduardo Garcia from Mexico.
Funds
*Herzfeld Caribbean, despite political uncertainty, was acquired for $6.80 and is up despite its heavy investment in Mexico and (among other overlaps) in Cemex of Mexico (CX) and Banco Latino (cf above). It trades on the pink sheets where spreads are high.
*I was executed today on my $14.74 (US) purchase of more Canadian General, CGRIF, a closed-end fund. Fear that Trumpish nastiness to even our nice neighbors hurt Canadian stocks and the loony.
*Mexico Equity & Income Fund got away rising over 2%.
*Fibra Uno, FBASF, the Mexican REIT, is up an improbable 7.04% today and at $1.42 bid, $1.59 ask. The group invests mostly in offices and retail sites in Mexican cities which get global tenants, and borrows heavily in US$s. Its US shares have now recoupled all their losses after Trump won the White House. FBASF is run by the El-Mann real estate clan (Mexican Trumps?) who also offer portfolio management to other property investors and off-market acquisitions. They also develop new properties.
