Judy Lewis Herman M.D., no relation, a Harvard Medical School psychiatrist whom I know from college, has co-authored an article with Bandy X. Lee of Yale whom I don't know, arguing that Donald Trump is mentally unstable and should be impeached by Congress because he cannot be trusted with the life and death powers of the presidency. It apparently referred to his aggressive behavior, constant self-praise, and well-documented lies to diagnose the Commander-in-Chief as a narcissistic personality.
The article was cited today on the front page of the Frankfurter Allgemeine Zeitung website so I cannot give exact quotations. FAZ wrote about “seinen sprunghalftern Verhalten, dem dauernden Selbstlob, den gut dokumentierten Luegen und Trumps Umgang mit Kritiern Anhaltspunkte fuer psychische Probleme, zum Beispiel fuer Soziopathie und eine narzisstische Persoenlichkeitsstroerung.” Your editor, who sometimes had to read Freud in the original version, translated.
The article extracts from Lee's book called “The Dangerous Case of Donald Trump: 27 Psychiatrists and Mental Health Experts Assess a President” just published by Macmillan. There are no extracts available on line in English, the language in which the book was written, and it costs $27.99 new and $17.04 used—amazing since it only came out Oct. 3. I ordered a used copy but it will be a few days before I have read Judy's commentary and that of 26 others. Assuming that Judy remains as compelling a debater as she was in college, you will be able to learn more after I get the book.
Japan is on a roll with the Tokyo index up 1.l% after Shinzo Abe aced his snap election with a landslide. What a contrast to Theresa May!. However the yen is down to the lowest level in 3 mos. Our Japan funds are split, one up and one down.
More follows from Australia, Brazil, Britain, Chile, China, Congo-Kishasa (a first), the Dutch Antilles, Hong Kong, Ireland, Israel, Kenya, Mexico, Russia, South Africa, and Switzerland. We also have a company report from Norway today.
*Tomra Systems screwed up its Q3 webcast and had to resend it today, which was just as well because I had no one to cover it live Norwegian time. Its revenues rose 8% to NOK 1.855 bn from Q3 2016 but adjusted for currency shifts and acquisitions, sales were flat for the group. By sector collection solution, the original business (reverse vending machines for empties) lost 4% in sales which sorting solutions for food and drug companies gained 8% from a lower base and also had marginally higher margins this year than last. However operating margins at 43% overall were also flat. The main culprit was the decline of the US$ in which much business is conducted against the NOK, a currency gaining with oil price recovery. Operating expenses were up nearly 25% to NOK 496 mn mainly because of a rampup of operations Down Under, where a bottle return law goes into effect Dec. 1.
The result was that pre-tax earnings fell by 10% y/y to NOK 303 mn although operating cash flow was up 8% to NOK 375 mn. Thanks to the high Norwegian krone its debt was slashed by currency gains of NOK 7 mn.
The Tomra problem arose because it won a contract as Network Operator for the New South Wales Container Deposit Scheme with Australia's leading waste management firm,Cleanaway, announced at the end of July. Getting ready to go live at 500 collection points is proving tough and more expensive than anticipated. With operating expenses n the quarter already high from US currency losses, the sorting solutions business saw lower margins (43% vs 45% a year ago) and much higher operating expenses, up 40% to NOK 278 mn—all from New South Wales. It also got a boost in orders and the backlog hit NOK 1.226 bn, a record, thanks to boosted order intake. TMRAF lost 3.2% in Norway today but the US ADR TMRAY is unchanged.
Finance
*The UK Financial Conduct Authority plans new action and fines against Royal Bank of Scotland for how it treated small businesses before it went bust. RBS current management argues that there were failing then, but that the bank has turned over a new leaf. As owners of some of its remaining non-cumulative preferred shares, we really like the idea of penalizing RBS because it will delay the eventual privatization and the redemption of our high-yielding shares. The most generous NCP shares of RBS (and its sub Nat West) have been called but there are still a few with finger-lickin' good yields.
Drugs
*Teva has a new potential blockbuster drug coming if the US FDA approves the biologic license for fremananezumab, a treatment which did well its trials in 2000 patients with chronic and acute migraine. This is building on the work by TEVA chief scientist Michael Hayden MD, PhD, who was appointed to that job by Dr Jeremy Levin, the first fired Teva CEO. Citigroup estimated that it can get $2 bn in annual sales starting next year.
*GlaxoSmithKline was recommended today by UK brokerage Beaufort Securities at GBX 1521 with a target price of 1800. It will report on Q3 Weds and the broker expects revenues of ~$7.9 bn, up 4% y/y, despite weakening sales in consumer health products. It also expects marketeer and new CEO Emma Walmsley who heads the most troubled part of GSK to act “as a consolidator” in this sector by snatching bits of Johnson & Johnson and Reckitt Benckiser, here and in Britain. It will not cut its dividend which former management promised to maintain at 80 pence, a yield of 5.3%. The broker says its valuation is “undemanding in relation to its peers” at 9x enterprise value divided by cash flow (earnings before interest, taxes, depreciation, and amortisation.)
The report cheers that no generic to Advair has yet emerged this year. It also likes the multiple GSK business model: pharmaceuticals, consumer health, and vaccines.
Separately, today the US FDA approved GSK's Shingrix jab to prevent herpes zoster in adults aged over 50. Shingles is a painful disease which afflicts seniors who had chicken pox as children, as the immune system declines with age. Existing shingles vaccines are less effective than the GSK version which provided 90% efficacy over 4 years or more in its trials with 38,000 people. The recombinant zoster vaccine will now be voted upon by the US Centers for Disease Control at its meeting which also takes place Weds. “Shingrix is a lot better than we have now,” according to the FDA panel. (I was inoculated against shingles years ago using a much dodgier drug, Zostavax from Merck.)
Canada has already approved Shingrix.
GSK also has high hopes for its HIV 2-drug regimen (replacing a more complex one, which is good for those fighting against AIDS infection.) It also has a chronic obstructive pulmonary drug inhaler combining 3 meds, Trelogy, which already was approved by the FDA.
*Novartis may have got the better of GSK when it picked up cancer drugs Tafinlar and Mekinist two years ago as the drugs in combination won a US FDA breakthrough designation for BRAF V600 mutation-positive melanoma after phase 3 survival rates of 58% after 3 years vs 39% with placebo. It also got a leg-up against Swiss rival Roche which is testing another melanoma combo, of Cotellic and Zelboraf which is still in phase 3 trials. If it works the RHHBY drug cannot be launched until 2019, according to Fiercepharma.com, a web site.
*Israeli Taro which produces drugs for its Indian parent is one of the few Jewish state stocks rising today. No idea why.
Industrials and Mining
*Schlumberger Ltd was tipped by Credit Suisse today after its report last Friday which we covered. It cut its target price for SLB to $71 from 73, but the stock is at $63, and rated outperform. CS worryies about operating inefficienies as fracking exploration resumes, and also some impact from hurricanes, both of which hurt margins in its best market, North America. The rest of the world is mostly flat with rig counts down, except in Russia, North Sea, and Asia. CEO Paal Kibsgaard faced a lot of questions during the conference call about SLB investing alongside its customers because analysts fear commodity risk, competition against customers, and capital leakage from its 15 SLB Production Management projects in 7 countries, which CS said “received inordinate airtime relative to its revenue contribution.” SPM generates return 5-7% higher than straight contracting work. Moreover “it picks spots so as not to compete with clients” and says “we like this leg of the business. It also approves other innovations like performance-based payments with its venture fund; integrated work flow; and new contract models as well as SPM. “The technology shift from equipment design to artificial intelligence is slow” but accounts for the outperform rating.
Morgan Stanley analysts cut their target price for SLB to $81 from $90 and rate it overweight.
*Now that Potash of Saskatchewan has put its stake in Soquimich on the auction block, it turns out that China was not really anxious to boost competition in fertilizer as claimed. (India may have been worried about potash pricing once POT merges with Agrium, AGU, in Canada.)
In fact China wants more lithium
,
a key product of SQM and firms are lining up around the block to bid for a $4 bn stake in the lithium producer: GSR Capital (a private firm); battery-maker Ningbo Shanshan; local producer Tianqi Lithium; and now Sinochem, the state chemical colossus. China is already the world's biggest electric car market and user of lithium-ion batteries. Chinese firms have also gobbled up lithium producers in Australia: Great Wall Motors buying Pilbara li and China Molybdenum buying Congo-Kinshasa's Tenke.
*CRH plc of Ireland won approval to take over Ash Grove Cement Co. but a counter-bid for the bid from Summit Materials seems to have not led to a legal proposal so the Irish won ASHG pending EU okay. Its stock rose because it avoided a bidding war.
*BAE Systems is up 0.6% today on no news except sterling weakening. BAESY earns dollars.
*Delek Group gave back half its gains from last week over its signing a deal to buy Gazprom Siberian gas until its own huge offshore field, suitably named Leviathan, comes online.
Emerging Markets
*Blood on the streets pick. BofA-Merrill Lynch advises upping your risks to Kenya where it is “positive beyond the politics”, citing “robust macro fundamentals”. The Supreme Court threw out the most recent election which was won by Uhuru Kenyatta and a rerun will be run Thursday. Our only Kenya plays are indirect, via brewer Anhaeuser-Busch InBev and Vodafone. BUD inherited the SAB-Miller Castle and Crown brands in Kenya which so far lag Tuskers; VOD also via a South African sub, owns a big stake in mPesa, the Kenyan cellphone payments system. BUD reports on Thursday.
*Tencent reportedly plans to offer an online reading platform to raise over $1 bn in an ipo for China Literature. TCTZF is a Hong Kong gaming and social media site which is becoming more responsive to Beijing pressures to do good as well as cash in.
*Vale coverage was renewed by Goldman Sachs with a neutral rating for the Brazilian miner.
*Cemex was upgraded to neutral from sell by Citigroup with a $9 target price. CX is a Mexican cement giant. It is a rare Mexican winner today,up 2.1%.
*Mercado Libre, the Amazon clone of Latin America, fell further today on no news. MELI is formally Argentinian but has the largest operation of its sales and finance business in Brazil, followed by Mexico. Mexican shares are down because of Nafta worries.
*Naspers rose 6.1% today in early trading. It is an exit from South African political chaos and a way to own Hong Kong's Tencent on the cheap. TCTZF.
*Manoeuvers by Russian oligarch Oleg Deripaska who is listing his energy holdings in Britain have boosted the stock price of one of its stakes, MMC Norilsk Nickel, which we own. Deripaska is raising cash with his En+ London listing to buy Rusal in Hong Kong which it already controls, a supplier of Siberian hydro power to Singapore. It owns about $4 bn worth of NILSY whose GDR is based on its London share. Deripaska is a quarrelsome non-conformist who has managed to offend NILSY CEO Vladimir Potanin, another oligarch, as well as Vladimir Putin (and survive). He is not on the non-trading list of Putin pals being boycotted over Ukraine.
NILSY trades at a p/e ratio of under 13 and yields 9.84%--all in Russian rubles. It has 3-yr average return on equity of 67%/yr; nearly 18% return on assets; and 22.5% return on investment according to Reuters. Last year its eps doubled in rubles from 2015; we have no insight on what will happen this year or what Deripaska is up to. He lives on a yacht parked near our London flat and Canary Wharf. Analysts who cover NILSY tend to rate it buy or outperform, but of course Russia is a big risk and Russian reporting is inadequate. Its shares are widely held by ETF plays on Russia or platinum (which is a buy-product of mining nickel).
Reporting
*Nasdaq reports tomorrow. It is a key holding of Investor, the Swedish holding company we recommend as a pseudo CEF, IVSBF.
*Nokia and Validus Holdings both report Thursday along with Anhaeuser mentioned above.
