Dear rss free blog,
The
prospect of a journey to Berlin and eastward concentrates the mind. I
am of the generation that in elementary school had to hide under the
desk in case there was a nuclear attack on Manhattan, to “escape” the fallout. I remember the Wall going
up, and it coming down.
Tomorrow I take off for Berlin via London, and then on to Prague where I’ve never been. We are going to Berlin for my husband’s Oxford Reunion taking place there to fete the 20th anniversary of the fall of the Wall. I cannot imagine a U.S. college holding a reunion in a foreign city, but apparently there are over 1000 German Oxford graduates.
While I am flying and railroading around Europe, Frida Ghitis will be in charge of the newsletter. I will try to contribute as well but I do not know if it will work.
Today I am breaking down my own wall, axing some positions in the
Model Portfolios to add more safe yield positions for other Cold War
relics who are getting on in years like me. These will replace some
of our exotic finds which have not panned out as planned or which
have produced such high returns that nobody new to this service will
bother to buy them now.
There
are several reasons for the changes like populism. Many new subscibers find it hard to justify buying long-terms positions where the
market is very narrow at prices above what
old-timers and I paid decades ago. Or to drive their brokers nuts
trying to buy a pink-sheet traded high-risk speculation that caught
my eye and is doing well except it only trades on Thursdays when
there is a full moon visible in Ouagadougou.
Replicating
my portfolios should not require paying very high commissions and
wide spreads. Frankly, it is not necessary to pay these fees going in
and again going out. They slash returns. So here today is easier stuff.
My ability to cover the movements of some shares is limited by poor
data, even when I am not east of the Oder. The spate of new American
Depositary Receipts (nearly 1000 in the last year) has not enhanced
the ability of market makers to quote bid and ask prices for them and
indeed older ADRs. In one case paid subscribers know about (mentioned again below) the spreads are over 25%, not
market-making at all, but price gouging.
I suspect that if I bought one of these rara avis stocks from
Fidelity or E-trade, the rapacious market maker is lying in wait for
my order to sell via the same brokerage to gouge again. Since I
invest for my own and my reader gains and not those of the intermediaries, I deeply
resent these shenanigans. But the solution is to buy more common less rare birds.
I
want to make my own life easier. And let some closed-end yield fund
managers take over part of my workload. I must add yield to the
portfolios to get ready for my dotage, after doing pretty well
getting even again with high risk equities since March of this year.
Here is a secret. Our outperformance was not only about stock picking according to Citigroup data. I will be humble however hard it is for the second best of all U.S. newsletter stock pickers for the past decade (according to Hulbert Financial Digest). Moreover I went to Harvard where humility is as hard to find as coconut palm trees in the Yard.
Humility note. What made the money was my investment style and not just my sharp brain, my Rolodex of contacts, my team of reporters, our hard work, and our honesty. But the non-style factors mean that you can have confidence that our advise is independent and intelligent, not a minor factor.
But here are the facts. During Oct., U.S. markets underperformed non-U.S. markets. The Citi World ex-U.S. Liquid DR Index decreased by only 1.39%, compared to a 1.98% drop in the S&P 500 Index. Year-to-date, U.S. markets also underperformed non-U.S. The YTD return of the Citi World ex-U.S. Liquid DR Index was 31.91%, against only 14.72% for the S&P 500.
Over the last 12 months, U.S. markets also underperformed non-U.S. The 12-mo return of the Citi World ex-U.S. Liquid DR Index was 27.43%, vs 6.96% for the S&P 500 Index.
While I did better, nearly back to my account high water mark (reached and then alas lost again), I think it is as much my investment style as my stock picking that gets the credit. Global is the way to go.
Today two countries on the Pacific Rim made major moves with implications for continued outperformance by foreign markets. India bought 200 tonnes of gold from the International Monetary Fund for $6.7 bn to diversify its reserves. You don’t need a lot of jewelry purchases at Diwali to see the impact of India on the price of gold. It’s now official.
And Australia again raised interest rates by another quarter percent to fight bubbles in its economy, something our own Maestros failed to do. Oz rates are now 3.5% and rising.
Meanwhile the US Treasury will borrow $276 bn this quarter, only 57% of its borrowing in Q3, because it will not sell bills for the Fed under the Support Finance Program. However I think the Fed can still print money ad lib if required.
The
stock changes follow for paid subscribers only. If you want to join
them, sign up for a trial or better yet, sign up for a year. Unlike
trials which are non-refundable, if you sign up for a year you have
the right to cancel at any time for a refund on all undelivered
issues. We prefer credit cards to any other payment mechanism.
