E Catching Up With Our Holdings And With Michael Lipper

Sunday the blog of Wall Street fund performance tracker Michael Lipper was quoted by a UK group, CityWire. He wrote that he thinks US portfolio managers and savvy investors are keeping their portfolios “frozen in place with very little” trading. Mike then set out to find out why with a round robin of calls to institutional investors, analysts, portfolio managers, NYSE specialists, trust lawyers, and a very successfully private global investor. What's up?

Lipper concluded that these Wall Street veterans are facing “a political/economic/market environment they had not seen before”. “And if you slice a securities analyst, a historian will bleed.” Here are some of the comments he quoted:

“Americans are losing faith in institutions and concerned about government intrusion.” As are Britons who voted for Brexit.

“Central banks' interest rate manipulation is not working.”

Lipper went on: “Market prices are above average with one exception. Price divided by free net cash flow is trading below average. Either the market is doubting the soundness of financial statements or suggesting that cash is less valuable than it was in the past. The latter view might suggest that other assets are more valuable than cash to both stock and company buyers.

“The former doub the quality of net free cash flow calculations because of the widening gap between price earnings ratios published and more conservatively constructed GAAP earnings according to strict accounting rules. (Ed: GAAP stands for generally accept accounting principles, the gold standard in accounts which many company override with non-GAAP reporting.)

“I learned that our brains are wired to use memory as a critical filter in making judgments. To all of us who served in the investment wars, our memory does not recognize the current situation. We are perplexed. When people are perplexed their action orientation tends to shut down until a somewhat familiar pathway is found.”

Lipper is former president of the NY Society for Security Analysts and was the founder and president of Lipper Analytical Services Inc. before he sold it.

This week is crunch time for central banks particularly in Japan and the USA. As I know nothing more than the rest of the world about how they will act, I am refraining from comment.

However, I think China's market rise yesterday was a one-off. Japanese markets are closed for a holiday and Samsung was sold off heavily in South Korea after the recall of its smartphone which risks catching fire.

To make up for last week when I was out of the country, we have a lot of news from yesterday including a company annual report and news from Argentina, Australia, Canada, Cayman Islands, China, Denmark, Germany, India, Ireland, Israel, Japan, Russia, Slovakia, South Africa, Sweden, and Switzerland.

*Alimentation Couche-Tarde (ANCUFwas retained as a best buy by Canada's Investment Reporter which analyzed the impact of its complex US$4.4 bn buy of Texan CST gas stations and highway shops and diners. IR likes the deal because it is friendly with both sides on board. They're Canadian and have to be nice, perhaps why ANCUF paid a 42% premium after CST put itself on sale. The mag also applauds that CST being paid for with cash rather than ANCUF shares.

Another factor is that the Canadians in the US will head for the facilities under the new Canadian management: snowbirds in the sun-belt and border hoppers in the US northeast. Being very big in Canada Couche is now moving across the 64'40 border here where it can combine purchasing and logistics with its Canada network. Yet another good thing is that selling some of its Canadian assets to Parkland of Alberta in a separate deal. This will raise $750 mn, reduce anti-trust concerns in Ottawa and also repay ANCUF debt.

Heavies

*Orocobre (OROCF ) of Australia, listed in Canada, operating in northwestern Argentina, reported full-year sales in FY 2015-6 (to June 30) fell 20% to US$15.53 mn, on which it generated a loss of $21.9 mn,nearly 26 times the prior year loss level. The main reason was a non-cash forex loss of $20.9 mn from the devaluation of the Argentine peso. A year earlier its Olaroz operations produced a $8.7 mn forex gain. It suffered a further $1.6 mn loss from an arbitration agreement with Rio Tinto Minerals, neither of which is likely to recur.

ORL-Toronto produces lithium carbonate and borax by brine evaporation in Jujuy Province in partnership with Toyota Tshusho of Japan and the province via a Singapore holding company, and without these partners in development sites in Jujuy and Salta provinces. It also produces borax solo.

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