Spiking The Punch Bowl And Volcker

The Fed spiked the punchbowl instead of removing it and Wall Street roared ahead. It did this by not specifying more clearly when interest rates will start to rise. instead of promising to keep rates at zero "for a considerable time", the US central bank said it "can be patient in beginning to normalize the stance of monetary policy."

It also ordered delayed imposition of the Volcker Rule which is intended to separate the insured role of banks as deposit-takers from the public with their often high-risk underwriting and hedging activities. The rule is named after Paul Volcker who wiped out US inflation with awful high interest rates during the 1970s before the New Deal separation of commecial banking and investment operations was undermined by free-market enthusiasts.

Defending the sales of Swatches and chocolates, the Swiss central bank imposed a 0.25% CHARGE on bank deposits.

Germany's BASF extracted itself from a complex deal with Gazprom whereby it was supposed to replace Wintershall in a new exploration program in Siberia. Even in Germany, Russia plays are being reexamined for fear of becoming a target as Putin wraps himself in the flag and accuses foreigners of bringing the country into what he insists is not a crisis. We sold BASFY not over this new development but simply because I worried that it could not get its petrochemical feedstock at competitive prices against US shale oil.

*To start with everything went up but 3 shares went ballistic. Our CUBA (formally Herzfeld Caribbean Basin), a closed-end fund, is up about a third after the end of the Cuban embargo and the resumption of diplomatic relations by Washington. The fund aslso announced a 0.635 cent special dividend of which only 0.039 cents is short term. The managers picked up 15.41% new shares in the recent rights offering. The margin cost of shorting CUBA was raised by 100% by my e-trade broker. It has taken long enough.

*Also up sharply is Ecopetrol after the government-controlled board announced that it was hiring a head-hunting firm (unnamed) to seek a new CEO. Presumably this will lessen the likelihood of a crony being named by the Bogota govt. Looking for experienced Latin American oil executives who need a new job, the head-hunter might search across the border in Venezuela. EC rose 8.4%

*Finally the stock I refused to sell despite its becoming untradable in my e-trade account rose 22%,China Chaintek, CTEK on the AIM.

*Now for the bad news. Barrick Gold's US$ bond fell back below par after it suspended production at the Lumwana gold mine in Zambia, whose parliament had just voted a new royalty regime which would tax production more highly. Our bond is cusip 068494RAF9.

Drug Dealing

*Reckitt Benckiser was hit with the third largest fines in a French crackdown on price-fixing in the household goods and heathcare business, and will have to pay euros 121 mn. The top fines went to l'Oreal and Unilever. The scheme operated through a lunch club which in Paris must have been fun. The total fines come to euros 951 mn, not as much fun.

The London Times's Tempus wrote that the Indivior spinoff by RBGLY should be sold. This, writes Martin Ferrera who tipped the stock but never joined the bibulous luncheons, will represent a buy opportunity for those wanting to play the new version of RBGLY's pharma arm, specializing in anti-addiction sublingual substitution meds. A rival drug to treat addicts offers them a chance to squirt the naxalone into their noses; that sounds suspect to me, like snorting coke.

*Making the best of a mixed outlook, Sir Andrew Witty yesterday told GlaxoSmithKline shareholders that despite the sinking sales of Advair, which fell off the proverbial patent cliff, they can expect a good outlook for 2015, specifically a steady dividend of 80 UK pence/share. We only own GSK for the yield. Shareholders approved the asset exchange with Novartis which will fill GSK coffers with about GBP 4 bn, for a special dividend as well as the fixed one. Sir Andrew also said 2015 revenues in 2015 will be boosted by GBP 1.3 bn.

*Speaking about NVS, it won EU aprpoval of its new long-acting basal insulin for treating diabetes, Tresiba.

*Teva got FDA approval for the kiddy version of its nasal squirt against allergies, GNASL, a potential blockbuster.

Infrastructure Is In

*While the hot news in Ireland is in the sky, there is also some interest on the ground. Our CRH,bought as play on infrastructure, is up over 5% over the last two days.

*Abengoa landed a 950 megaWatt Chilean contract for a site near the desert in Atacama Province. There it will build a combined solar-thermal power plant for the country. The main photovoltaic energy production line will link to a thermal storage plant, which will allow it to provide juice to customers of the Chilean govt 247. Storage for when the sun doesn't shine is a limitation on solar power and the Spanish co may have a solution. The demonstration plant may ultimately result in as many as ten further contracts in Chile. ABGB is building them, but will not share in ownership once they start to run.

Rumors Ringing on Telcos

*Germany's Manager Magazin writes that the on-again off-again talks between Nokia with Alcatel Lucent are on again. The two companies are both in infrastructure for mobile phone systems but not as much in landlines, which is ALU's forte (or faiblesse). NOK is about 3x as big as ALU, which is successor to the old Bell Labs of the old ATT.

*The latest hot gossip in Rome is that rather than allowing itself to be gobbled up by 3 rivals interested in its Brazil holdings, Telecom Italia wants to use its 67% Brazilian sub TIM to snatch the smallest of the trio aiming to buy it out. They are Telefonica (of Spain via Vivo), America Movil (of Mexico via Claro), and Oi (OIBR of Brazil). Bloomberg reports that Brazilian regulators prefer a buyout of the home company to a complicated asset shareout, and Oi stock is up 11%. However, back in sleepy Portugal, nobody seems to have noticed yet although Portugal Telecom (PTC in Lisbon, PT in NYC) and Oi have complex cross-shareholdings. To quote Janet Yellen, I too “can be patient.”

*I am not sure if the price rise in oil is more than a blip but the market certainly believes that it will be helpful to our latest purchase of BP plc here in its homeland. The share rose a further 1.8% today after rising 8.4% yesterday. It will close out the last full week of 2014 still below our acquisition price. I always buy too soon.

Selling Too Soon

*I also sell too soon sometimes. Catlin Group is under offer at GBP2.7 bn by an American reinsurance rival, XL Group.

*But not with Tesco, TSCDY, or BG Group, BRGYY, or Posco, PSCDY. Nor for Xerox which I kept for years.