Inoculation Politics

I find the dispute over whether or not children should be vaccinated against measles terrifying. There are parents who still believe that vaccines are poisonous or unnatural, while others fear that jabs will give their children autism, based on 1996 charges from a British doctor, Andrew Wakefield who has now been discredited there.

To get his charges published by The Lancet, Dr. Wakefield made up a “deceptive” and “improper” epidemiological study of 12 children who were said to have developed bowel and mental problems after their vaccination. He invented a disease called autistic enterocolitis which he said resulted from use of a triple jab (MMR, a combo of measles, mumps, and rubella or German measles).

This finding led to Dr. Wakefield being struck from the General Medical Council in Britain for “serious professional misconduct” and as a result he could no longer practice medicine. Later research by other British medical journals concluded that the Wakefield Lancet article was “fraudulent.”

Since then in various countries, studies of the results of vaccination concluded that while there are risks, the benefits greatly outweigh them. And risks can be reduced by more careful design and reporting on MMR vaccination. But they found no linkage whatsoever between the jab and the child developing autism or colitis. (Crohn's disease wasanother supposed result of vaccination ex-Dr. Wakefield had cited.)

Lawsuits by the parents of autistic children in Britain and the US failed to show any causal link with MMR shots.

Despite this, after 1996, vaccination rates fell in Britain and Ireland because of what doctors call “the most damaging medical hoax of the last hundred years.” There were increased incidence of measles and mumps resulting in some permanent injuries and deaths. German measles which harms their unborn babies is particularly dangerous for pregnant women who have not been vaccinated earlier and resulted in abortions. (Queen Juliana of the Netherlands in 1947 refused to terminate a pregnancy when infected with rubella in the hope of having a son. She bore a mildly retarded partly-blind 4^th daughter, Marijke Christina.)

Measles, which can lead to meningitis, brain damage, deafness, and death is the most potentially deadly of the childhood diseases.

Now an outbreak of measles centered on Disneyworld in California and now spreading in this country raises uncomfortable ethical issues about parenting and social responsibility. In many areas, local rules require that kindergarten and school children be vaccinated, to protect other children. The success of vaccination program depends on most children being innoculated to protect those who cannot be given MMR. Infants less than a year old do not get vaccinated (because they still have some immunity from their mothers which means it will not “take”.) Children and adults with immune deficiency should not be vaccinated. And a certain tiny number of vaccinations for childhood diseases fail to work also putting children at risk. MMR cannot be given to pregnant women because of the rubella risk.

Sen. Rand Paul MD called for “most vaccinations to be voluntary”, essentially opposing any local governments enforcing rules requiring that children attending schools or nurseries have had their shots.

He made a weird comment: “children do not belong to the government; they belong to their parents.” Actually in my opinion, children do not belong to their parents either, especially if some silly fear of “profound mental disorders” resulting from measles shots (another remark by Dr Paul harkening back to Wakefield). Nor do parents who have a total hatred for government at every level (as some of his followers do) have the right to endanger their own children or those of others over “an issue of freedom” (another remark of Dr. Paul's.) Like Bashar Assad, Rand Paul is an ophthomologist.

This unscientific approach to inoculations is ultimately dependent on a conspiracy theory, that governments are faking data on vaccinations—as they allegedly are also doing about climate change. And in teaching evolution in schools. The difference is that measles kills children now. Climate change takes longer. And being misinformed about the age of the earth may not hurt most children when they are grown up, even assuming that they never learn better.

More from Canada, Colombia, Spain, Ireland, Finland, Israel, Britain, Portugal, Mexico, Brazil and Hong Kong including two quarterly reports. With my internet access still wobbly I am not going to do a new stock pick today either.

*BP (BP) surprised on the upside thanks to a profit of $470 mn from Rosneft, a Russian operation, in which it owns just under 20%. Rosneft apparently changed its forex accounting system which produced a gain for BP whereas analysts had predicted it would lose $750 mn from the Rosneft account.

Rosneft did not include the forex impact on its profits in working out what it owes BP; the number may be changed. CFO Brian Gilvary said the Rosneft dividend in 2015 will fall to about half the net $693 mn received in 2014 overall. Rosneft accounts for about a third of BP oil production, ~1 million barrels of oil equivalent/d. It also accounted for 9% of total profits in 2014.

The $1.22 bn reversal helped BP produce an underlying net profit based on underlying replacement costs of $2.2 bn compared to forecasts by the analysts of only $1.5 bn. It overcame the 42% drop in oil profits from the lower price of oil, called up stream profits. Also helping was the “upstream” profit from refining and trading oil which came in at $1.21 bn, vs a mere $70 mn a year earlier. This sounds like a one-off.

The rest of the story was not as pretty. BP will adjust its staffing and investment this year as oil prices drop. It took a $3.6 bn impairment charge for its North Sea and Angola assets (also extracted from the underlying replacement costs net profit.) The shares rose over 2% in UK trading as analysts sharpened their pencils to try to figure out what the results imply. Most analysts reacted positively to the BP report, according to Reuters.

CEO Bob Dudley last year started on a $1 bn plan to “reset BP” of which $433 mn has been spent on layoffs and shutins. If oil prices remain at about $55 (a guess; it has risen 11% in the last 2 days!!) then BP will have to further cut budgets and write down more assets this year. It also will slash its investment budget this year, Mr. Dudley sai, to $20 bn, off 13% from last year, and also lower by ~20% from the earlier capex plan.

BP kept its 10 cents/quarter dividend

*Banco Santander (SAN) reported whopping consolidated Q4 group profits up 69% from prior year mainly because it slashed provisions for bad loans as economic conditions improved. The profit total hit euros 1.455 bn, ~$1.7 bn, thanks to euros 2.45 bn from reversed provisions for bad loans. In Q4 alone that was 12% of loan loss provisions being taken back into results. These occurred despite higher lending during the quarter and the year.

SAN also managed with new borrowing to take its tier 1 capital to 9.7% of its assets at year end, vs 8.3% at the end of Q3. This is a measure of bank solidity.

Yet despite this, SAN failed to match the Reuters analyst consensus. Also its Q4 2013 results, were restated to exclude deposit guarantees. The main drag was from exchange rate changes and a euros 250 mn restructuring charge taken in the quarter under the new chairman.

For the full year SAN profit rose 39% to euros 5.82 bn boosted by net interest margins, but nipped by higher operating expenses. Spain was a winner account for a quarter of the full year profits, up 141% from the prior year. In Q4, thanks to the deprovisioning, Spain accounted for net profits of euros 299 mn.

Britain, where new Chairman Ana Botin cut her teeth, was more important, producing a full year profit of euros 1.58 bn, up 37% y/o/y. In Q4, Britain chipped in euros 391 mn of profits to the parent. Ms Botin told the conference call that she did not expect to spin off part of the British bank during calendar 2015 but that it was still on the cards. British customers were said to have become loyal after switching to SAN thanks to good service being given them.

Latin America was off marginally for the year, with profits of euros 3.18 bn, and in-line profits of euros 853 mn in Q4. The biggest Latin operation, in Brazil, saw gross income drop 3% nipped by much higher costs. But in smaller markets like Mexcio (up 6%); Chile (up 13%) and Argentina (up 34%) gross income rose. In Los Estados Unidos, SAN booked gross income up 16% to eruos 5.643 bn (in constant euros)

Looking forward, SAN plans to use its capital more efficiently and increase linkages of customers and transactions between its units. It planst o boost customer satisfaction in other networks using the lessons of the UK arm. It expects to grow its loan portfolio by 5% from 2014 levels by 2017 while bringing its capitalization ratio up from 9.7% now to 10-11%. The big goal is to up return on equity by 11% in by 2017 and earnings per share by 24%, a very demanding target.

*The fallout from the government attempt to break up the consortia developing Israeli offshore gasfields continues. Its immediate effect is to delay the launch of work to develop the offshore Leviathan field, while antitrust conditions are imposed on the developers, led by Delek Group and US Noble Energy (NE).

Cyprus extended to end-April its tender to import gas from Leviathan so the Israelis can figure out whether or not Aphrodite, offshore Cyprus, may be owned by the same companies .This throws into disarray the eventual plan plan to link up the Cypriot field, via future reversed Israeli pipelines, to the trans-Sinai pipline, also reversed. The ultimate aim is to feed from Cyprus now and from Leviathan later Nile Delta liquefaction plants to supply Spain and Italy.

In pursuit of a compromise with the Israeli Antitrust Authority, the Minister of Energy now says that there is no hope of global oil companies working with the Israeli firm and its Texas partner, citing the exit of Woodside Pete of Australia. He left out Noble Energy which is Woodside's partner in African offshore. The real issue is the close Israeli parliamentary election which is being fought over the high cost of living in the Jewish State. The current Netanyahu govt. is fighting hard to stop the swing leftward and will not lift a finger to help Delek—or, despite the US Dept of State, Noble.

*China plans to boost its steel output despite declining home demand to build up exports and stimulate its economy. This is good news for Vale (VALE) which is up 4% today.

*Also up again is Ecopetrol (EC) on its new status as a Latin American index share, among the Top 10 listed by Fitch, replacing OIBR.

*Also gaining is Oi's target Portugal Telecom. I learned from a Portuguese contact that the local Tivoli hotels in the Algarve have been bought by a Thai company. These are among the goodies supposedly owned by Rio Forte, the Luxembourg holding company of the Espirito Santo family which owes PT nearly $1 bn for a placement made last April. A Thai company is mysterious enough, and the extent of the Tivoli purchases is also unclear.

*Bank of Nova Scotia (BNS) and its Canada rivals are all up on the rising oil price, but BNS is up the most, 4.4%.

*CRH (CRH) was upgraded by Sociėtė Gėnėrale to a buy from a hold. There are negatives. Lex in today's Financial Times worries about the shift in the Irish firm's business mix after it takes over assets from merging Lafarge and Holcim (divesting to satisfy competition watchdogs.) Current sales are 56-7% from the US; 31-8% from Western Europe including the UK; and 5% from emerging markets. After the takeovers, assuming CRH doesn't change the mix (it will of course), the new breakdown will be 38-46% from the US; 36-44% from Western Europe including the UK; and 10% from emerging markets. (The figures in the article and the table do not line up, why I have used ranges.) Moreover Lex says that one of the losing bidders for Lafarge-Holcim assets, KKR, may provide finance in return for a share of British assets. I only wish the FT would get its tables and verbiage to match.

*Janus boosted its stake in Indivior over 4% as reported to the London Stock Exchange. Janus which just landed Bill Gross has had heavy inflows of funds to manage and INVVY is one placement for it.

*An outfit called Super Stock Screener put a storng sell on Alkermes and the stock fell today. ALKS is Irish and developing a long-term schizophrenia jab which avoids the weight gain from current Abilify drugs.

*Readers need to tell their brokers to convert their Amec pink sheet shares based on the London listing to now-NYSE-listed AMFW stock to show the Foster-Wheeler takeover. They should not charge you for this. It is up 7% today, again on the increased visibility.

*Your editor finally sold her remaining Anton Oilservices (ATONY​) shares at $41.36/per because of a higher oil price yesterday.

*Oops. I used the wrong cost basis and the wrong ticker symbol for the shares of Sampo Oyj of Finland sold yesterday. SAXPF is the pink sheet traded stock whereas the ADR, illiquid, is SAXBF. I own the both but sold the pinksheet stock at $49.42. Thanks to Harry Geisel who first recommended this share ages ago for setting me straight.

Fund notes

*While on the subject of worries about Nordic dislocation, our sale of SAXPF was a reaction to the Danish branch of its Nordea bank sub paying mortgage debtors money from the new CB negative interest account rather than collecting interest. I considered the impact on Investor A/B, the Swedish holding company run by the Wallenbergs, but decided that unlike financial stocks (like their major holding, Skandinavske Eniskilde Bank, IVSBF can shift holdings to match the breakup of currency link between Euro-user Finland, and the krone/kroners of Sweden, Denmark, and Norway.

*Mexican REIT Fibra Uno raised NMP 10 bn in bonds in Mexico, NMP 7.5 bn in fixed interest at 6.99% for 10.5 years, and NMP 2.5 bn at a 0.39% spread of the TME interest rate. The bond was very much demanded so FBASF could have doubled the issue. This is the first time it borrowed at under 7% in Mexico. The stock is up over 2%.

*Aberdeen Asia Pacific Income Fund, FAX, reported that it closed out 2014 with 43.1% exposure to US dollar-denominated bonds, and only 39.5% exposure to A$ ones, a serious shift. The A$ is drifting down because of lower rates imposed by the CB. The US debt was issued by Asian countries.

*Stablemate Aberdeen Global Income Fund, FCO, also was more dollar-denominated, with 22.8% of its bond portfolio in the Greenback. But it managed to boost its currency exposure by forward and futures trading to 35.9% of its portfolio. This too is a shift if less dramatic. Both funds rose smartly on the change.

*We were not alone in underperforming US stocks in 2014. Closed-end Fund Advisors reported today that unmanaged international equity portfolios lost 4.32% (MSCI World excl. US) or 3.3% (Dow Jones World Stocks.)