Smith & Wollensky, the NYC restauranteur, advertises that it offers “steak for stock” to potential customers facing liquidity problems because they did not got cash bonuses. The steakhouse will buy NYSE shares at the closing price for desperate diners using stock to pay for a meal. It is probably illegal if you got shares hanging in a deep freeze in lieu of a bonus. And if you didn't.

     Portugal is run by a Premier called Socrates, being tainted with the hemlock of budget troubles in Greece. Europe’s southern tier and Ireland all hurt the Euro exchange rate (and "help" the dollar, in fact delaying a US recovery because exporting will be tougher.) Greece and Portugal are not as badly off as Iceland, because they have fixed currency exchange rates with the other Euro-bloc countries.

     PIIGS cannot devalue as Iceland did, but that means their troubles afflict the whole currency union. The only southern country in good order is France. It can now sell us cheaper wine and cheese and Airbuses and nuclear power stations and tourism. This means trouble for Boeing, Napa Valley, and Wisconsin.

     The mispricing of Exchange Traded Funds is becoming more widespread as a two-tier market develops, between the one or two dozen top highly liquid ETFs and the rest. You can see gaps of one or two percent between the price and the net asset value of even the most popular ETFs, as I have learned doing my weekly tables. (Our tables for paid subscribers show the performance of recommended stocks and funds. Paid subscribers also get daily information on portfolio developments. Pre-subscribers only get the macro-economic material, not stock advice which we charge for.)

     Moreover you cannot even get net asset value data for the smaller ETFs including the gold vaulted in Switzerland should you be tempted. The incomplete close-of-day data are published on yahoo finance. If an ETF is not even matching its price to net asset value, it is even less likely to be tracking whatever index is claiming to copy.

     Since I published my report on Exchange Traded Portfolios (for sale on the website, www.global-investing.com) there has been big news. Fidelity Brokerage will allow free US trading in the 25 largest iShares ETFs, This no-brokerage-fees policy takes a leaf from an earlier free-trading program by Schwab with BlackRock. This move is part of an increase in competition over low-cost brokerage services.

     But there is a dark side. The ads say that “Fidelity receives compensation from the ETF sponsor and/or its affiliates in connection with a marketing program that includes promotion of iShares ETFs and certain commission waivers.” That means the ETFs themselves will be paying a fee to Fido for trading them. No free lunch.

     A limit: you will not be allowed to do more than 6000 free ETF trades per year if you have less than $50,000 in assets with Fidelity; more assets mean more trades. Even the small account can do about 20 ETF trades/day.

     Cui bono? Not actually the shareholders of the 25 biggest ETFs using an on-line broker. It doesn't have to be Fido: the largest will be determined based on positions at E*Trade, Schwab, and TD Ameritrade. All shareholders will bear 12(b)1 (SEC allowed marketing) fees to encourage the hot-hand day-traders to use Fidelity. Buy and hold investors in the biggest exchange-traded funds will pay Fidelity for letting the funds be traded more actively. Smaller ETFs will become even less visible.

     In fact the problems of less liquid less active ETFs will become greater. Tracking error will increase. Here’s what reader RW writes (a certified libertarian who puts up with my liberalism because he likes good stock ideas): “they're enticing Joe Sixpack to put his 401k in ETFs, with NO Commission! We're just doing this because we love you.”

     We already reported that Wisdom Tree next month will shutter ten ETFs it created, mostly for trading outside the USA. They are being closed down because Wisdom Tree cannot make enough money to run them from the small number of investors who have bought.

     From Dow Jones, my reason for not selling one beaten down share:

      “Mexico's bank loans rose 5.2% to 1.969 trillion pesos ($152 bn) in 2009 from 2008 … according to preliminary data published Wednesday by banking and securities regulator CNBV.

     “Last year Mexico experienced its worst recession since the 1995 peso crisis, with gross domestic product expected to have contracted nearly 7%. Banks responded to a surge in bad credit card loans by restricting consumer credit, while high unemployment also made consumers more reluctant to take on debt.

     “Lenders, however, saw strong demand for commercial loans as volatility in the financial markets early in 2009 made it difficult for many corporations to sell debt. Mortgage lending also held up during the recession thanks to a chronic housing shortage and to government home loan programs.  [Year over year] mortgage loans increased 15.6% to MXN330.13 bn.

     “Bank lending is expected to recover with the economy in 2010. The Bank of Mexico expects GDP to grow between 3.2% and 4.2% this year as Mexico benefits from an economic recovery in the U.S., its largest trading partner.”

     The Mexican credit increase was blamed for the latest wave of selling of Spanish bank shares, including Banco Santander which we sold last year over protests from half our Spain-based readers (the other half applauded). It may be just concern over contagion from Greece to Spain. More below for paid subscribers.

     *From Jonathan Anderson of UBS in Hong Kong, why not to sell another beaten-down share. Note that the last Chinese housing bubble burst only in 2003-4 and real estate fell again in 2007-8 when the Shanghai stock market crashed. This makes the statistical exercise even harder for China than other developing countries:

     “As UBS China economics head Tao Wang has continually emphasized, there is no real evidence of a structural bubble in Chinese housing. Prices have been relatively well-behaved. There has certainly been an upward trend in the physical volume of housing construction as a share of the economy over most the past decade, but not an unreasonable one given the magnitude of reforms that opened up private housing market in the late 1990s. And crucially, overall mainland leverage ratios barely rose between 2000-08, and actually fell from 2004 onwards. [Leverage ratio is the level of private sector credit to GNP, a crude measure of housing prices as a share of wages. VL]

     “The problem comes when we look at the last 12 months. Housing prices have started to rise at a pace faster than incomes. Physical construction and sales volumes skyrocketed over 2009, by much more than could be explained from a post-2008 "rebound" alone. And for the first time in many years the credit/GDP ratio jumped to record heights.

     “In short, all the warning flags that normally point to trouble ahead -  especially volumes and leverage - have suddenly appeared. Does this mean that China is now threatened with a pending structural collapse? Well, no; once again, using the historical experience from the Asian crisis countries or the more recent stories in the US, UK and Eastern Europe, the "normal" length of a bubble cycle with excessive leverage and overblown construction and real estate activity would be at least 4 to 5 years before things fell apart - by this metric it's still early days in China, plenty of time for the authorities to step in and cool things down.

     “The bad news, though, is that the process of tightening monetary policy almost inevitably means a sharp y/y slowdown in property and construction, given how inordinately fast the numbers have run in the second half of last year. And this means that a lot of "big China bears" - although very wrong on the structural call in our view - could appear very right for a few quarters as momentum drops off.”

     To find out which are the beaten-down stocks still in the portfolio, you have to be a paid subscriber to read on. You also have to pay to get current views on the 5 recommended stocks which reported today, why this blog is so long and late appearing. And our take on Toyota.

            *Bonus stock Ormat Technologies (ORA) announced that its sub, Ormat Andina SA., won a geothermal exploration concession in northern Chile. The concession is 26,000 acres north of the San Pablo/San Pedro twin volcanic complex and close to access roads and to copper mines that could be a potential user of the electricity. ORA will do preliminary tests and studies on the feasibility of the site for commercial development. ORA is a USA company with Israeli ownership, why it is a bonus stock. We do not cover USA shares.