Republican Hope

There will be no Brexit deal after Boris Johnson got nowhere with its latest proposal to the European Union. The next question is whether Boris will try to exit the EU without asking for an extension, in defiance of Parliament.

It seems that the moment trading become free for many US investors, they used the opportunity to sell their stocks. Is this a late-cycle inflection point or merely dumb money leaving the market? Watch this space.

The US Congressional Budget Office, a strictly non-partisan body, expects that based on current trends, the US government's total deficit will rise to equal 95% of GDP by 2029. Economic growth will be stifled and turn negative. Of course, 2029 is far off. But right now things are already pretty bad in the CBO's view. Our national budget deficit at $984 bn is at a 7-yr high, and equal to 4.7% of GDP.

Once the Republicans in Congress beat back ambitious spending plans coming from across the aisle because they favored fiscal restraint and budget balance. Those days are gone but they may return. I was impressed yesterday by the line-up against the impulsive Presidential decision to throw under the bus our country's Kurdish allies in the fight against ISIS in Syria. His position was partially reversed when mainstream strongly pro-Administration Republicans Mitch McConnell, Lindsey Graham, Marco Rubio, and former UN Ambassador Nikki Haley, all loudly and publicly criticized the President. Trump then promised to ruin the Turkish economy if the country attacked our former Kurdish allies.

Another likely trigger for Republicans moving away from Pres. Trump is trade-talks. If there is even a hint that rather than providing better protection to foreign investors in China over their intellectual property, Beijing is going to provide dirt on ex-Veep Joe Biden to get a trade deal, the GOP leaders would have to dissociate themselves from him. In my opinion, the Chinese are too savvy to play this card at all, and the likeliest outcome will be new tit-for-tat tariffs and US measures to cut investment in China. But farm-state Republicans may still have to declare independence!

Can a rift between the Hill and the Administration happen in budgets and government spending? One trigger may be the need to combat some of the wilder future spending and tax plans by the left-wing of the Democratic party, They variously call for single-payer health care, free daycare and preschool, free college, disability funding, more Social Security benefits, affordable housing, more infrastructure spending. Note that the leftish Democrats also propose new taxes on big-ticket financial transactions, passive income, payrolls, estates, capital gains, dividends, private equity fund managers, and lots of other fatcats.

If the GOP decides to tackle tax and spend and impulsive and amateur Trumpian foreign policy moves, it will have to look independently at what comes out of the White House. As the impeachment investigation will roll-on, his party in Congress will stop toadying to Trump.

I saw this happen on the spot when I worked on Capitol Hill for the Republicans on the Senate Foreign Relations Committee during the Nixon debacle.

Tech

*Chinese artificial intelligence, facial recognition, camera, and surveillance firms have been targeted by the US Commerce Department for targetting Xinjiang Muslims. Their names were published by the Financial Times: Dahua, Hikvision, SenseTime, Megvil, and Yitu. SenseTime recently listed in Hong Kong and says it pulled out of Xinjiang to save its reputation. Melvil filed for an IPO there and says it will not let its tech be used for “infringement of human rights.”

*Nokia of Finland is up 1.7% in a down market, for two reasons, first its new next-gen chip family called Quillion, which has been optimized for low-latency time-critical applications for 5G transport and later for networks to introduce even higher levels like 10G, a first. DNB set a price target of euros 6 for NOK, which is a third over its current level.

Secondly, there are reports that the US wants to help rivals in 5G provide finance to buyers compared to the sweetheart terms China is offering with Huawei. NOK would be able to grow much faster if it could offer cheap finance, along with Swedish Ericsson.

*British Vodafone is closing 15% of its retail outlets in Europe and upgrading another 40% with new-look kiosks to increase its on-line digital sales by the end of 2021, according to CEO Nick Read. It has 7,700 stores in European centers outside Britain.

*Tencent is joining Chinese State Broadcaster CCTV in boycotting National Basketball Assn. distribution after the Houston Rockets manager Daryl Morey issued a tweet supporting the Hong Kong democracy protests. Tencent will not show Rockets matches and ban news about the team. It is now the pre-season but if the ban holds, it will cost the NBA as much as $1.5 bn from TCEHY plus as much as $2.5 bn from advertisers, over the next 5 years. I'm glad we sold this Hong Kong stock.

*South African Naspers, a 31% owner of TCEHY, saw its share nipped 0.23% over the NBA matter.

*Veoneer was again rated overweight by Barclays, but the stock fell 5% today regardless. The Swedish firm makes electronic auto-safety systems and is under threat because automakers are doing poorly.

*Japanese Fukui Computer Holdings (Tokyo: 9790) rose 1.82% today to near a year's high at ¥2570 but its US stock is still shown by my new brokerage at $1.60, which is where it started the year. I assume this is because TD Ameritrade has no market maker for FKCIF but it may be that the intermediary is making money from not posting updated prices. Not covered by any US analysts, the Japanese say it has a flawless balance sheet, a proven track record—and pays a divvie according to Australia website Simply Wall Street Pty. I am trying to arrange to get their stock tables for filling gaps in our coverage caused by US brokers in return for an ad.

Utes

*Deutsche Bank chopped E.On SE to hold at $9.85. EONGY was upgraded by the Royal Bank of Canada to outperform from neutral. One of my ex-colleagues Richard Suttmeier considers the utility sector to be seriously overpriced.

Extraction

*BP was upgraded to buy with a target price of £7 by Barclays analysts.

*Morgan Stanley lowered its target price on “overweight” rated Schlumberger Ltd to $50 from $51. The Dutch Antillean stock is now $31 so SLB has a huge potential gain if MS is correct. It lost 2.5% today on the oil price drop.

*BofA-Merrill Lynch reaffirmed its buy on copper miner Antofagasta of Chile, copper miner. The stock keeps falling all the same despite the likely demand will rise regardless of the success or failure of carbon capping. Copper prices rose 0.6% today.

*Delek Group of Israel finally crept up today by 3.2% after a sell-off, presumably because it was overdone. Note that Tel Aviv is closed till Thursday so the market maker could not arbitrage.

Pharmaceuticals

*Roche was the second-worst offender in raising US drug prices according to the non-profit Institute for Clinical and Economic Review (ICER) because of 23.6% increases in the price of Rituxin. This cost the US cost of drugs by $806 mn, second only to Humira from AbbVie which upped the price of Humira by nearly 16%, which boosted US drug spending even more, to $1.9 bn. ICER wrote that there was no clinical evidence to justify the price hikes. RHHBY fell more than its US competitors on the ICER report. For the record, Switzerland is not a safe haven stock market. Source: Seekingalpha.com/

*Overnight Teva crashed 2.6% to $6.86, well below my average-down price. Israeli markets are shut today and tomorrow for Yom Kippur. Then Wall Street took it still lower, to $6.64. It will report on Q3 Nov. 7.

*GlaxoSmithKline will work over the next 5 years to develop cancer cell therapies using Lyell Immumopharma's pipeline which includes an engineered T-cell target against the NY-ESO 1 antigen which is expressed in many cancers, now called GSK3377794. Its main work is in t-cell differentiation and a San Francisco business under Pres. Elizabeth Homans and CEO Rick Klausner. GSK's pipeline includes a Lyell cell therapy using autologous T-cells, now in phase II trials in synovial sarcoma given EU Prime designation and US Breakthrough Therapy designation.

Separately, GSK recalled Zantac over concerns the heartburn OTC med may be contaminated with a carcinogen, at the order of the Medicines and Healthcare Regulators in Britain.

*Bavarian Nordic of Denmark will test in humans a new vaccine against equine encephalitis virus, to be financed by the US Defense Department under a contract with the US Army Command of New Jersey. BVNRY is building out its smallpox franchise into other mosquito-borne diseases. My question is why is it being selected. We no longer own the stock.

Banks and Brokers

*Banco Santander fell 2.52% in Madrid today on fears of a cash drought in the European Union, the result of a stress test by the European Central Bank which doesn't have the funding sources to hand that our Federal Reserve does. It is lobbying for more repo power, but meanwhile, it says that half of the banks in European including the most global one would be hit more severely as the lack of stable funding sources. All this on top of the bank's exposure to Latin America and the USA and trade issues. In US trading SAN was down only 0.9%.

*UK bank Clydesdale & Yorkshire, CBBYF, rose nearly 2%

*British discretionary fund manager and broker Reyker Securities filed for bankruptcy after its regulator, the Financial Conduct Authority. banned it from stockbroking activities.

*The likelihood of no deal and therefore no Hallowe'en exit for Britain has boosted sterling today.

*The Hong Kong Stock Exchangerwithdrew its offer to buy the London Stock Exchange.

Funds

*Barrons' news daily featured an add from Standard Life-Aberdeen closed-end funds. SLFPY has lost several mandates for managing money for UK insurance rivals after the merger and is trying to boost its US CEFs.

*Ascendas India Trust (ACNDF), a REIT run out of Singapore, rose despite the Indian holiday today by 6.66% to US$1.12. It is a favorite of non-resident Indians in the USA.