The dollar fell Thursday because of talks initiated between Britain and Germany to set the terms for British exit from the European Union. The hope of a reasonable outcome boosted both sterling and euro, which are priced against the dollar. Also hurting the Greenback was a nearly 50-year low in applications for unemployment benefits, at 203,000 last week, a level last seen in December, 1969. This means that there is a real threat of inflation which will undermine so-far benign Federal Reserve moves raising interest rates.

The dollar also weakened against the Yen after the Justice Dept. charged North Korean hackers over last year's WannaCry ransomware attack, the theft of $80 million from the Bangladesh Central Bank in 2016, and the cyber attack on Sony Corp in 2014. The hacker, Park Jin Hyok, has close ties to the Kim Jung-Un.

Moreover the rumors about instability in the Trump Administration, along with worries about impeachment, had a negative impact on the US dollar, while Chinese plans to retaliate for any tariff hikes by our country will also cause inflation as Americans will have to pay more for Chinese goods they crave. Sept. 6 is the day $200 million of new tariffs on Chinese goods are supposed to be imposed by President Trump—if he dares.

Stronger currencies chopped the prices of most foreign stocks on Sept. 6, a side effect of the move out of emerging markets currencies which is continuing, and out of the dollar, which is strengthening.

In case you were unaware, the former KGB was behind the attempted poisoning of a former spy and his daughter in Salisbury, England, probably at the orders of the former KGB operative, Vladimir Putin.

If I am forced to predict what comes next, I think the Administration will blink. And I also think the selloff of emerging market shares and currencies will reverse, particularly for the South African Rand which is suffering from slower growth rather than a real crisis. I also think Canada, backed by many American workers and members of congress, will not give way on its serious objections to the NAFTA terms: protection for Canadian cultural businesses against being swamped by US exports, and anti-dumping panels. And, no, Mexico will not build that wall.

More about what this means follows, with news mostly about Argentina. But we also have news from Australia, Bahrain, Belgium,.Brazil, Britain, Canada, Colombia, Denmark, Germany, India, Israel, Jordan, Kazakhstan, Kuwait, Lebanon, Mexico, Oman, Qatar, the Palestinian territories, South Africa, and the United Arab Emirates.

Don't Cry For Me, Argentina

The imposition of Argentina export taxes on our Orocobre caused overnight panic in OROCF's homeland, Australia, where investors are not good at globalism. The stock fell 17% Down Under to the equivalent of $2.5496 (at the US opening) and where I averaged down. This is an opportunity to load up on lithium for electric cars at a price not seen for over 3 years. The tariffs are temporary, along with very high interest rates. The IMF aims to stabilize Pres. Mauricio Macri's currency and budget. Meanwhile OROCF has a deep-pocketed backer, a subsidiary of Japanese car-maker Toyota. The Australian (newspaper) calls the stock a screaming buy today which may influence the primary market overnight. This is a 7.8% tax which is “temporary” according to Buenos Aires. It applies to all exports in theory until the end of 2019, however unlikely. If there is no recovery by then the export tax will be scrapped but it won't say this because Argentina wants to export now. The levy could cut OROCF profits by as much as 50% but that is only if you omit the lower Argentina production now compared pre-crisis.

My willingness to deal with Argentine risks does not extend to yield funds. So I used a magnifying glass to examine the holdings of beaten-down closed-end Templeton Emerging Markets Income Fund, TEI, which has as its lead portfolio manager the notorious Michael Hasenstab Ph.D, the man who loaded up Templeton funds with the 100-year Argentina debt issue early this year. The most recent TEI report has just hit, dated June 30, and I think Hasenstab (who in a touch of irony is Australian and has greatly shorted the A$) has been ring-fenced by our fund. While the full details of currency and interest swaps and forward currency contracts are not easy to find, total local currency exposure to Argentina was cited already then as having hurt TEI performance in H1 and hopefully cut. The heaviest Latin America exposure in our fund was not the Argentine peso, but the Mexican one, accounting for 14.7% of currency risk. Argentina was down the list at 4.9%, in 4^th place.

Obviously I would prefer that this was not the case, but note that the main cause of this exposure was from derivatives. Actual Argentina bonds accounted for only 3.7% of exposure at H1's end. At some point even the Hasenstab team would have cut back on derivatives.

The Argentina bonds owned did not include the 100-year issue. Instead it was 3 Bonos del Tesoro (Treasury bonds): $11.1 million in the 15.5% of Oct. 2026; $6.2 million in the 18.2% of Oct. 2021; and $2.99 million in the 16% of Oct. 2023. An additional $6.5 million was held in short term stripped Letras del Banco Central of Argentina maturing between July 18 and Nov. 11 of this year.

The key question is whether the Board of Directors of our fund, who are less than independent since most of them sit on the boards of dozens of Templeton CEFs, in any way tried to keep Dr. Hasenstab from continuing his folly.

I am optimistic if only because for the past weeks, a key TEI stockholder, Saba Capital Management LP, which owns about 10% of the shares out, has been selling about a million shares per week. Our fund has been underperforming in NAV terms for the past year and the market price has not reflected this underperformance.

To be on the safe side, sell half your TEI now at $9.86, taking a loss.

Our worst hit share today is Anhaueser-Busch-Inbev, BUD, now a Belgian brewer which earns about 60% of its before-tax income in emerging markets, like Argentina, Brazil, and South Africa. BUD borrowed heavily to grab SAB Miller, HQ'din South Africa. Nik Oliver of UBS says the risk is high but also thinks in the longer-term, inflation will offset the forex pressure. BUD lost 5.5% this week.

Tech & Tel

Germany's SAP (sold) is under investigation for alleged bribery to win a deal with the South African water ministry under the Jacob Zuma government. We sold when rumors hit my desk which I could not publish without getting sued. Under new President Cyril Ramaphosa, the anti-graft agency is looking into the $44 million SAP deal.

Tencent will apply a system of pre-long-on identification for Chinese players of on-line games to stop kiddie addiction.

It also signed up UK social video distribution firm Brave Bison plc to make videos for WeChat messaging, payments, and chat. Its plan to help list Qutoutiao ADRs at $7-9 next week may be delayed because JD.com, a potential backer of the IPO, is under pressure because its CEO is accused of rape. It was supposed to buy $40 million of the new shares, four of which equal a Chinese one. QTT would be the ticker symbol of the content aggregator which offers news to Chinese websites. I think this is a non-starter given the problems of Chinese censorship and would not buy. TCEHF in Hong Kong is down 6.6% yesterday and a further 4.1% today at HK$318 and here under $40/sh for the first time in a year.

Citigroup raised Vodafone from neutral to buy today. VOD yesterday reported a no-cash deal with Telefonica de Argentina and today it did another with Spain's Mas Movil for a joint move to provide fiber optics to 6.4 million more Spanish homes starting this year. They already cooperate over 33.9 million Spanish households. VOD rose 2%.

Pharma

The Novartis Sandoz generics arm is selling part of its US business to Aurobindo Pharma of India for $1 billion, lower than initial pricing, including $100 million in performance payments to come. The price includes factories in NY and NC plus NVS dermatology labs. That will make the Indian firm No. 2 in US generics after Teva. Generics are a tough market because of pricing pressure and pharmacy benefit manager demands for the discounts which otherwise would go to patients. Reuterswrote earlier this week that drug prices fell 5.8% on average in Q2 this year. The biggest sufferers are Danish Novo Nordisk and GSK among our holdings.

This does reduce pressure for NVS to sell off its Alcon arm, which is where we came in. Aurobindo is said to be better integrated than its Israeli rival, but with the new plants coming this may reverse. NVS shares rose moderately in a down day for drug firms.

Teva lost 2.5% on this setback and the FDA acting to add another temporary source of epi-pens to handle acute allergic reactions, because TEVA cannot make enough until later this year. TEVA launched partnership with Healint to help Europe-based migraine patients deal with their problems, in conjunction with the Migraine Trust of Britain. It will also incorporate its own NeurologyBytes portal into the Healint platform for giving non-UK neurologists information on treatment. Argus Research chopped TEVA to hold from buy today.

Zymeworks won a $2 million milestone from Eli Lilly for its Azymetric platform which brings its payments from LLY, its first major investor, to $6 million. Raymond James analyst David Novak notes that the original 2013 LLY deal was followed by a second with the US firm plus another potential payout of $223 million from Lilly alone. ZYME shares have been sold by LLY but this is not over fundamentals, Novak says, but because they were held by the conservative LLY corporation rather than its venture arm. He has a $27 target price for ZYME and an outperform rating. Our reporter on this stock, Martin Ferera, worried about the LLY sales but they were not an indicator of ZYME

The US FDA extended its deadline for ruling on Roche's Tecentriq for first line treatment non-small cell lung cancer to Dec. 5. It was paid to speed up approvals by today. I am not sure if the Swiss firm can ask for a fee refund. The delay is to check out how a combo of the new drug, plus RHHBY's older Avastin, combined with chemotherapy, can extend the progression free survival of NSCLC patients regardless of their PD-L1 level. If this pans out it will be a boost for Roche against Merck's Keytruda. Data on life extension may come at the World Conference on Lung Cancer in Toronto Sept. 23-26.

GlaxoSmithKline is cutting about 650 US jobs, mostly in the NJ-PA area.

France's Sanofi is paying fines of $25 million in the US for having bribed officials in the Middle East and Kazakhstan to sell more drugs. Its ticker symbol in France is SAN but this has nothing to do with our SAN, Banco Santander. SNY will also maintain records to prove that it has internal controls in place to keep from again bribing for business in Jordan, Lebanon, Bahrain, Kuwait, Qatar, Yemen, Oman, the UAE, and both Palestinian territories.

Industrials

Cosan fell 2.5% plus after its shares were downgraded to sell by ValuEngine. CZZ refines sugar cane, makes ethylene, and runs gas stations and infrastructure in Brazil.

However Vale, also of Brazil, gained 2.55% today. It mines iron ore almost all of which is exported.

Computer Modelling fell 3.22% on fear oil and gas reservoir analysis will end when fracking falls. This is unlikely. Canada's CMCXF has been operating since before fracking became the vogue.

Writing in seekingalpha.com about Schlumberger Ltd, Ray Merola calls the Dutch Antilles oil and gas exploration and production firm hitting multi-year lows “silly cheap.” While I have owned SLB since the early 1960s the current price level is tempting me too.

Ecopetrol of Colombia, sold, is down over another guerilla attack on its Cano Limon pipeline.

Delek Group sold a third 4.9% stake in its Phoenix insurance business today, this time to Israel Discount Bank. This follows sales this week to two other Israeli banks which raised NIS 772 million plus eventual performance-linked additional payments. DGRLY is raising money to fund its offshore gas sites in Israel, notably Leviathan, and to fund a deal to use the trans-Sinai pipeline to get the gas to the Egyptian delta for shipment to Europe. It is said to be aiming to sell the rest of the insurance firm at a premium to another firm, or to spin it out to shareholders.

Funds

Gold prices are recovering when denominated in falling dollars. SPDR Gold Trust is really oversold and should be in your portfolio, as I have been saying since it lost ~9% ytd. I was premature but now GLD is creeping up all of 0.2% Thursday. In London the yellow metal erased its last 2 weeks of losses while in Shanghai trade fears have boosted the price of gold by $7 (US) per ounce over trade disputes. Our fund has lost about 10% as the price fell starting in June and it sold its bullion. Even my favorite chartist, Richard Suttmeier, an engineer-stock analyst, says to buy under his quarterly pivot of $113.60.

Canadian General Investments, CGRIF, lost 46 loony cents in net asset value per share during August but the share price rose 3 loony cents, cutting the still huge discount. It added Canopy Growth Corp to its holdings, our first marijuana share, at 3.2%, even with master Card Canada and First Quantum Minerals, tied for 8^th to 10^th largest holding. The rest is unchanged from June.

Aberdeen Asia Pacific Income Fund is off nearly 1% on worries about higher US interest rates, since FAX is an income generating fund for Americans.

Stablemate Aberdeen Global Income Fund, FCO, is down even more, by 1.6% for fear it is invested in drooping emerging markets.