E A New Stock Pick

Even before the Pope hit NYC, my 7 am newspaper delivery was short The Financial Times. I don't think it was shipped from Japan now that Nikkei owns the pink paper, but “who am I to judge?” On a day when everyone is quoting Yogi Berra, I want to quote Pope Francis.

The handshake between the head of FARC and the president of Colombia Juan Manual Santos (with Raul Castro holding their hands down) marks the conclusion of negotiations over ending the 5-decades-long guerilla war on Colombia's governet. This should result in a peace treaty in six months or before. The arrival of Senor Santos marked acceptance of a fudge over punishing the rebels, most of whom will be amnestied and tried by a special tribunal and not jailed. They may have to do public service or suffer house arrst. Only those who committed crimes against humanity or war crimes will not be amnestied and have to help with de-mining, which is dangerous. Victims will get reparations in all cases. But the devil is in the details. We have a stock for this.

The latest whizz in exchange traded funds is ETFs covering global markets overall or the emerging markets or even the BRICS—while excluding China. How much simpler to just buy stocks!

For whatever it is worth, after a 3 day market shutdown, Tokyo re-opened sharply down. 


*After Ana Patricia Botin presented new targets at Banco Santander's (SAN) Investor Day on Wednesday, the share actually fell, mainly because her plans to cut costs, above all in Brazil; up earnings; and boost capitalization ratios failed to impress investors. SAN stock has continued to under-perform the European banking sector all this year.

The main problem is that SAN is a hodgepodge with a global presence built up by Ms Botin's late father, Emilio, who snatched at bargains when offered. Crafting a way to continue to grow without overpaying (for example for HSBC's Brazil arm) requires disciplined management, which will take time and require better return on equity. Ms Botin, with UK experience, was caught flat-footed when the government there opted to impose a new 8% tax on UK bank profits, after she was instrumental in bringing on tighter management controls and removing management layers on the banks her father had acquired during the global financial crisis. She aims to boost its equity bumper against bad loans.

Profit falls may threaten our divies even after the capital increase at parent SAN early this year. I think some of the sniping is because CEO A.P.Botin is a woman and the designated heir of the former chief at the Spanish bank, 2nd largest in the Eurozone. She presented a 3-yr plan to boost earnings to double-digits by 2018; get 15% more customers (15 mn in all) and 33% more on-line customers (20 mn). She also aims to bring ROTE (return on tangible equity) to 13%; and cut overheads to below 45% of earnings vs nearly 47% now.

*Pimco, the investment management arm of Allianz Insurance (AZSEY), has greatly outperformed its former rainmaker Bill Gross in bond fund returns. Gross's followers at Janus Capital have lost 2.5% in the first year since he walked out. Pimco's flagship Total Return Fund gained 1.7% over the same period. We bought Allianz right after the Grexit and suffered as investors fled from Pimco. Revenge is a dish best eaten cold.

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