The big news is surprise good results from a firm called Persimmon, PSN on the London Exchange, a very odd name indeed for a builder. UK analysts are all rushing to recommend it after the fact.

Another fool's game is buying the relics of Banco Espirito Santo which went bust 3 ½ years ago in Portugal. Now called Novo Banco it is being sold off by the government bailout commission, which seeks to make a gain. US hedge fund Lone Star reportedly will pay up if the price is right. Bank of Cyprus is another recovery play the hedgers are after.

Our future president is now taking on Toyota (over the Japanese firm making cars in Mexico) and the US intelligence establishment over whether Russia having interfered in the US election. James Clapper's contention that the Kremlin hacked Democrat Party computer files was supported by Sen. John McCain. I tend to follow the former head of the Republican ticket over Julian Assange, whom the PEOTUS seems to think is a reliable source. It reminds me of the nonsense during the campaign about the Clintons' alleged pizza parlor child molestation ring—if you believe Assange I have a big blue fin tuna fish to sell you for $640,000!

Meanwhile Theresa “Maybe” (as renamed by The Economist) is losing control of the Foreign Office over who will negotiate British EU exit. Our leaders are no smarter at figuring out what to do in the future than stock analysts.

Friday we updated at 8 am NY time on a firm we own. Meanwhile we have news from around the globe including a recent buy which benefits from the Persimmon frenzy. The report today will be the last from London as we fly back Sunday. Today we report first on the update sector and then on funds, insurance, heavy industry, and IT. We have reports from Australia, Bermuda, Canada, China, Denmark, the Dutch Antilles, Finland, Germany, Hong Kong, India, Ireland, Israel, Mexico, and the UK.

Healthcare

CEO Erez Vigodman presented the business outlook for Teva before the US opening. TEVA fell 3.8% in the pre-market and even lower in Israel over what was coming as it cut its sales estimate to $23.8-24.5 billion vs earlier talk of $24.91 billion from Capital IQ and $25.32 from Thomson-Reuters. It expects to have revenues of $21.6-21.9 billion this year. It expects to earn $4.9/sh adjusted to $5.3/sh (both non-GAAP) vs a prior consensus estimate of $5.82/sh estimate from Thomson down sharply from the 2016 figure of $5.1-5.2/sh.

The main cause the Israeli firm said is delays in new drug launches. But currency moves by the shekel against the US$dollar it says will also hurt sales and earnings nipping revenues by $800 million and operating income by $200 million. That's the bad news, but there is good too. Its maker doesn't expect a generic for its latest Copaxone multiple sclerosis drug in its newer formulation to hit the market this year. So the MS drug will have US sales of $3.8-3.9 billion. However its share of sales will fall to 16% of TEVA's total vs 19% in 2016 and generate 36% of profits in 2017 vs 42% in 2016. Older formulations may face more competition, however, from two generics which may hit the market reducing revenues by $1 billion or more, and EPS by 65-80 cents.

Non-MS patented specialties will have sales of $4-4.2 billion. Some 80 new products will be launched from the pipeline resulting in $750 million in US revenues overall, but the total is down from earlier estimates.

The deck chairs are being reorganized as the generics and OTC segments will be merged. This potentially may produce misleading figures of total revenues for the pair at $13.9-14 billion, which is purely an accounting change. Vigodman said the reason for the combination is to extract synergies from the Activis Generics takeover which was completed in 2016. These will total $1.4 billion this year and enable Teva to cut its debt by 2019, helped also by lower taxes.

Debt at the end of this year will be barely down at $35.8 billion, or 4.88x cash flow (EBITDA) but this will fall in 2018 to $30.5 billion or 3.64x cash flow.

Generics will account for about 58% of revenues next year post Activis vs 55% last year, with revenues rising from $12 billion to $13.9-14.3 billion. Teva is back in generics, but also plans a neurological push with a drug for Huntington's disease coming in Q2 and for tardive dyskinesia in Q3—both SD-809. TEVA will also launch a generic of Azilect, another neuro drug, in the current quarter.

Vigodman called “2016 a transition year for TEVA” and cited “headwinds” against the entire pharma industry “to which we have not been immune”. TEVA expects its US generics revenues to account for 43-45% of the total; European for 26-28%; and the rest of the world (including Israel) for 28-30%. In the US and Europe TEVA is no. 1 in the US and Europe. Generics profits will be 30%-31% this year. After the fall the stock traded only down ~2% on the premarket after Vigodman spoke.

I am not bothering to include the forecasts for 2018 because they will change.

GlaxoSmithKline and Novo A/S are both investing in a startup called NeRR in Britain which aims to find neurokinin receptor antagonist treatments for chronic diseases. Its most advanced finds are a drug for chronic refractory cough moving to phase II and a treatment for post-menopausal vasomotor syndrome which is in Phase I-II trials. The condition causes chronic pelvic pain. GSK also provided the CEO of NeRR which wants to cure chronic debilitating and common conditions.

Australian Benitec Biopharma is presenting at the JP Morgan Healthcare conference next Monday in San Francisco. BNTC.

Irish Alkermes was recommended by Jefferies as a mid-cap biotech pick according to Barron's. ALKS is one of 14 recommendations.

Funds

Aurora IT, the share we bought last week, is a clear winner over the surprise boost in home construction orders which ended 2016, not just at PSN. I tried to buy more AIVTF but the price shot up beyond my target. After the Brexit vote it invested about 25% of its AUM into home builders like Barratt.

Canadian General Investments (CGRIF) reported on an unaudited basis that its net asset value per share closed 2016 at C $27.98 resulting in a one-year NAV return, with dividends reinvested, of 18.2%. This compares with the 21.1% return of the benchmark S&P/TSX Composite Index on a total return basis for the same period. The closing price for CGI’s common shares at December 31, 2016 was C$19.45, resulting in an annual share price return, with dividends reinvested, of 8.2%.

For now Mexican central bank support of the peso by selling dollars (about a billion of the) has kept our two South of the Border funds, Mexican Equity & Income and REIT Fibra Uno from falling some more. MXE; FBASF also gained because the Chinese did the same thing with greater impact. But today FBASF fell nearly 3%. Mexico has rehired Luis Videgaray who arranged the Trump visit with Pres. Peña Neto, for which he was fired as finance minister. His new job is minister of foreign affairs. I am far from convinced that the peso will continue to rise without another round of intervention, which Mexico cannot afford. The CB is reported by Marc Chandler of Brown Brothers Harriman to have intervened against the US$ in Asian markets this morning, but it cannot go on. Meanwhile gas price hikes have led to demonstrations.

Chinese currency intervention also boosted the offshore Renminbi against the US$ which helped our JP Morgan China Regional Fund along with the present buying activity of activist investor Philip Goldstein in JFC. Today the offshore RMB fell back over 1.1% in Hong Kong, reversing half the gain of Thursday, and Goldman Sachs says it will continue to “grind down” this year. Note that the Trumpean focus on Mexico is leaving China with a relatively free hand to hit US MNCs in China with tax and antitrust investigations.

Aberdeen Global Income and Asia Pacific Income CEFs will report dividends Monday. FAX, FCO.

Heavy Industry

Mexichem rose 6% yesterday on the outlook for global chemical production which will produce better profits for MXCHF in pesos.

Schlumberger Ltd is buying Peak Well Systems of Scotland, which designs downhole tools for flow control and cased-hole well integrity. Price was not given. SLB is on an acquisition binge because its expects oil prices to stay high.

IT

BAE Systems landed a $49 mn 5-yr USAF Research Labs contract to enhance sharing sensitive intelligence between allied govt networks across domains, something surely needed given the Trump view of Putin. BAESY also gained because its pension fund liabilities can be offloaded onto UK investment specialists, reducing the overhang on its shares. However BAE lost 0.59% in London trading over US military confusion and protectionism.

Hong Kong-based Tencent Holdings rose 5.3% today because it is a backdoor way to exit the RMB. It is again near HK$200.

Nokia says its OZO platform of sound and cameras was chosen to bring virtual reality to China by Youku digital entertainment. Youku is a sub of Alibaba, BABA. NOK.

Insurance

Standard Life hit regulatory delays over its attempt to combine its Max and HDFC Bank's insurance joint ventures from the Insurance and Regulatory Development Authority of India. We bought into SLFPY over its India plans and are now down nearly $1 or 4% so I am buying more.

Insider Lixin Zhang sold $268,000 of Validus Holdings shares according to the SEC. VR is a reinsurer out of Bermuda and rose on the news.

Allianz SE won an A+ rating for its long-term subordinated notes from S&P, two ranks below is earlier rating because of the subordination and the fact that AZSEY can defer interest payments if solvency capital is at risk. It is German and rated well because German good borrowers are scarce.