Another Tough Day For Markets

The stock market resumed its negativism today mainly linked to fear of inflation and higher interest rates, on the argument that the most dangerous thing to believe is “it's different this time.” It is never different except superficially. Over the weekend there was plenty in Barron's about how to protect yourself from both. I already mentioned Mirova Global Sustainable Energy, a sub of Paris-based Natixis, a fund manager. I noted that their top 10 holdings include two of my own big positions: Microsoft and Thermo Fisher Scientific, the latter of which is my largest US stock position. MSFT fell today as a tech stock to $243.83 but I am still ahead

Paris is where I learned about inflation as a young mom and part-time journalist with The Sunday Times, a British weekly. A mere stringer, I wound up on the front page when General de Gaulle decided he would not devalue the currency, then the French franc, after the student riots of May. 1968. It happened all the same, without his acceptance, and marked the end of Gaullism a few years later.

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Which tells you that inflation has dreadful political consequences. We were allowed to take francs with us on traveling to England because we weren't French and subject to exchange controls. We had a quota of francs for my husband, myself, and each of our tiny children so we could get rid of them before they lost more value. The dog did not get to travel with us because Britain barred foreign pooches, and we used some more depreciating francs to place it into a kennel near our apartment.

The fear here is not only because of the risk of investing. It is also about the risks to our COVID-19 recovery and the wildly gyrating data on personal consumption headlined by Ben Levisohn in the weekly, 5.5 standard deviations above its average. The new Fed is scary; the new Fed Treasury Secretary is indiscrete; the Biden Administration is committed to hefty and possibly unnecessary pump-priming. And commodities like oil and gas, copper, iron ore, and steel are pricier while simple chips for telephony and cars are in very short supply. This means inflation. Commodities are showing inflation risks.

Or to quote what Ben Levisohn almost wrote: “it's hard to predict, particularly about the future,” famously attributed to Yogi Berra.

As I write, having been frustrated again by a corporate result not showing up in my brokerage account with Schwab-TDAmeritrade-Think or Swim (a triple-negative because they no longer cover news as they have to pay for it, and brokerage is now supposed to be free). In fact, I am charged fees for trading even NYSE-listed ADRs and would prefer linkages to my holdings even if I have to pay to trade.

Today's hidden stock was Cosan, which reported Friday in Portuguese and in retail, the currency of Brazil. I am not the only one troubled by this as the stock has fallen 2.33% today in US trading.

There is no way simply using the exchange rate today, which is 19¢/real will work to examine the last Q1 with that of 2020, because the currency is different against the dollar. Moreover, standard Brazilian accounting standards might leave something to be desired. This share is quoted on the Big Board.

With these warnings, it reported Rs 827.7 mn in net earnings adjusted to Rs764.6 mn on revenues of R22.51 bn, up 14.7% y/y. If you are willing to buy or sell CSAN today, I will give you a free bitcoin.

My brokerage moreover insists it is a short-term holding because there was a name change two months ago, but I have owned the former CZZ for years. I bought Cosan as an ethanol fuel play in 1999.

The same thing happened Friday with Dr Reddy's of India, which reported under local rules in lakhs of rupees.

More news follows:

*Johson Matthey surprised London with a report on shortages of palladium and rhodium as global car-making revives and autocatalyst demand for these metals grows despite a surplus of platinum. The shortfall results from clean air rules, plant outages in South Africa, and flooding in Russian mines. Palladium prices will be over $3000/t and rhodium $30,000/t, because of auto-maker needs This rules out new retail buying of the metals.

*Coutt's & Co, which has the queen's checking account, saw the arrest of one of its bankers who was sharing customer data for money with hackers. I assume he or she had enough sense not to try to sell the information about Queen Elizabeth II. 

*Nio was boosted by BoNY-Mellon which revealed it owns 18.6% of the China electric car-maker. German Munich Re also upped its stake and rumor has it that Cathie Woods wants to buy some NIO in place of Tesla.

*Spdr Gold, GLD, is up 1.25% in part from fear of loose monetary policy and from fear of untethered bitcoin. I am ahead 95%, a near double on boring old gold.

*Kirkland Lake, KL, my gold mine pick, is up 4.7% and nearly at my cost. The main reason is the crypto crash over the weekend fed by Elon Musk who is pushing a new cryptocurrency.

Tech & Tel

*Of course I own AT&T but T is not covered by this newsletter.

TSM plans to build a more advanced and larger Arizona chip foundry to win US govt business and to making smaller chips. It will cost $25 bn, double the price for a smaller plant announced last year.

*Trip.com was raised to overweight from neutral by Morgan Stanley and gained 4.4%.

*South Korean Coupang, a variant of Amazon, turns out to have similar labor problems with those delivering its goods free. They are treated as contractors to cut their pay. Meanwhile, other South Korean firms like Samsung and SK Hynix are moving into the chip business.

*Mercado Libre of Argentina gained 0.6%, an older and wiser clone of Amazon in Latin America.

*Hot news from T boosted BCE of Canada, up 0.4%;

*Swedish Ericsson and Finnish Nokia fell because consolidation will cut their customer numbers.

*Qualcomm fell 1.05% on worries QCOM will not be able to sell its chips. It will have no problem.

*Japan's gaming stock Nintendo gained 0.7% because people are not going to stop playing with its kit.

*Naspers rose because JP Morgan and Neuberger Berman told Barron's it is stronger than people think and Brandes Partners agreed. If you insist on buying a Jo'burg share pick one with a global reach.

*Multichoice, MCHOY, is down 3.61%. If you want global reach in South Africa you don't want exposure to the rest of Africa.

*ABB fell 1.2% after hitting a new high last week.

Drugs

*Glaxo and Sanofi achieved a near 100% efficacy level in phase II trials of their COVID-19 vaccine and are moving to Phase III. GSK is up 1.3% and SNY by more. The Financial Times thinks there may be a spinoff by GSK of its vaccine arm. 

*Abcelera Biologics gained 6.75% today but is still down 40% YTD. ABCL is our top performer.

*Aurnina Pharma jumped 2.8% but is still down a fraction YTD. AUPH.

*Novacure fell another 3.5%. Israelis sold over the weekend, I think. It did very well until earlier this month when the country went into crisis.

*India's Dr Reddy's, RDY, rose on a bullish forecast by Jefferies for its making the Sputnik V Russian jab along with a generic of Vascepa but failed to note that it now has a US partner in Gland Pharma.

*Majors did better. Astra Zeneca rose because it will be the biggest winner from the Biden Administration plan to ship 80 million surplus COVID-19 vaccine doses to poor countries. Other winners are JNJ, Moderna, and PFE, but AZN jabs have not been approved by the CDC US drug regulators and account for 60 mn of the dose donations planned.

*Zymeworks of Canada is up 4.72% on no news. ZYME with its Muslim CEO is an anti-Israeli drug firm and also the anti-RDY because the Indian firm has an Israeli CEO.

*Teva gained 1% to 10.7 and we are in the black again. It garnered support while small firms lagged.

*Roche gained 0.14%. RHHBY. But fellow Swiss Novartis lost 0.24%.

*Danish Novo Nordisk rose 1.71% and is our top Euro-drug play today. NVO is gaining from its drug against obesity. Flab has increased during the lockdown because people eat more and exercise less.

Energy

*BP plc is up again along with Royal Dutch Shell, RDS-B.

*Schlumberger Ltd is up another1.4%.SLB.

*Energy Fuels, UUUU, is up 2.65% to $5.92 on huge volume. It reported last week.

*Cameco is up 3% despite a neutral rating by the Bank of Montreal. CCJ is 0.6% below its all-time high.

*Earthstone Energy is up 5.5% to a new yearly high of $9.95. ESTE hit one earlier this month before the Colonial Pipeline mess.

Funds

*I sold Korea Fund to put money into Taiwan Fund. CPNG is down nearly 5%, our worst performer but opened down 7.7%. KF is down today, by 2.05%. Taiwan is down on news over TSM plans (above) as this is its 22.8% holding and also it's the largest weighting. It is also suffering a new found of COVID-19 outbreaks and Chinese flyovers. But it breaks with the listed closed-end funds in management reporting its errors and bad performers, which last year was Speed Tech, supplier for Apple AirPods, which did not launch as expected. TWN expects chip shortages and higher prices will continue at least till mid-year 2021.

*I am not publishing the weekly closed-end fund data from Barron's because it is showing the 12-month gains from 2020 dating from the peak of pessimism about COVID-19. For whatever it is worth, income funds are way down whereas convertible securities are up the most in the yield arena, notably Advent Convertible & Income Fund. Note that for some reason, Value Line has ceased covering these funds, although they fill a real need. How many of us retail investors dare buy convertible bonds on our own?

*The tech spill-off also hurt funds that invest in tech by 2.8% according to the Herzfeld closed-end fund average published this week.

*Among our country funds, the top performer was New Ireland, up 103.9% according to Barron's. IRL is now doing a buy-back of its stock to chop the discount from Net Asset Value. And I haven't yet found a 4-leaf clover.

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William K. 1 year ago Member's comment

Indeed, again. And certainly it is possible to predict the past quite accurately, while the future is a lot harder to get right.

And it IS different this time, A different year and a different month. Same disasters the last fifty disasters, but different dates. So the fools are not totally wrong, except about the important details.