E Smart Or Lucky?

Festivities for the 25th anniversary of “Die Wallfall”, the fall of the Berlin Wall between the old Communist East Germany and the rest of the world were rather subdued because the now free German railroad workers went on strike. Strikes were illegal in the old German “Workers' Paradise”.

All our NRI and other India fans should cheer the return of Abhimanyu Sisodia as a contributor after family crises kept him away from the 'Net. We missed his coverage of India and Asia while he dealt with a family illness and a complicated inheritance. Interestingly enough, a complex inheritance also cut off a Pakistani journalist friend from London who doesn't write for us. He also went upcountry after his grandfather died, out of contact for months.

Common traditions survive on both sides of the 1947 border, including cricket and food. The arbitrary borders of the former Raj are perhaps why the Taliban murderously attacked fellow-Pakistanis watching the ceremony near Karachi to close the barrier between the two countries as night fell. Goose-stepping soldiers in gorgeous turbans strut smartly at each other without actually landing a kick. And the similarity of their choreography and kit is strikingly obvious.

To quote another contributor, Amb. Harry Geisel: “Sometimes it's better to be lucky than smart.” More on this in today's blog where we again have results to report and news from Israel, Egypt, Spain, Switzerland, Brazil, Britain, Canada, and Mongolia.

*We'll start with Mongolia, a special sauce as we own Mongolia Growth Group, MNGGF. The country's parliament (the Grand Nural) voted “no-confidence” yesterday dismissing Prime Minister Norov Altankhuyag. It will take about a month to find a new PM and cabinet, according to observers of the fledgeling Mongolian democracy. The dispute is over a cabinet reshuffle and new fears for Mongolian growth after the World Bank forecast it would be 6.3% vs a midsummer forecast of 9.5%.

Mongolia is anxious to bring on the Oyu Tolgoi copper and gold mine which will boost GNP, but the owner, ultimately Rio Tinto has sought concession because of mounting costs and taxes. The dispute delayed moves to get project finance for the undergound mine.

Now without a govt, everything is on hold. MNGGF aims to develop real estate to serve the global corporate influx the mine will bring in eventually: modern offices, hotels, and shopping malls, and apartments instead of yurts. But of course it is also derailed by the interregnum.

And why we are lucky? Because to the horror of many Asia hand readers I sold half our MNGGF last summer.

*We also sold half of our double-weighted Zurich Insurance. We had averaged down over the suicide last year of its CFO and pulled back to normal weighting mainly because it is very hard to predict hurricanes and other disasters. These push down insurance company profits and combined ratios (of investment returns and premiums). In Q3 it was hit by claims over Hurricane Odile in Mexico.

Yesterday ZURVY reported Q3 operating profits fell 6% to $1.21 bn, and net income down 16% to $928 mn. EPS was $6.23 vs $7.44 in Q3 '13. Net came in well below [Bloomberg] consensus of $1.04 bn, but we had a hint of this earlier (as I reported) because Credit Suisse produced lower estimates last week. To get a grip on profitability, ZURVY is cutting costs and laying off people and also getting rid of money-losing businesses, most recently its Russian general insurance arm. The good news is that the US sub, Farmer's Insurance, which the CFO who killed himself had run, was turned around with a 0.6% rise in gross premiums after declines over the past 18 months.

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