Dear rss free blog,
.
New
additions were announced following the quarterly review of the
exchange-traded NASDAQ OMX European Government Relief Index (EUGR.Q)
which became effective today. It added Heidelberger Druckmaschinen
(printing presses) an Banco Popolare, an Italian bank. Here is
the list.
Aegon NV
Heidelberger Druckmaschinen AG
Allied Irish Banks
PLC
Hypo Real Estate Holding
Banco
Popolare
ING Groep NV-CVA
Bank of Ireland
KBC Groep NV
BNP Paribas
Lloyds TSB Group PLC
Caisse Regionale Mutuel Brie Picardie
Peugeot SA
Commerzbank AG
Renault SA
Credit Agricole SA
Royal Bank of Scotland Group
Dexia
SA
SNS Reaal Groep
Erste Bank der Oester Spark
Societe Generale
Fortis B ORD
UBS N ORD
For
those who do not know our position, these are handout-dependent shares to avoid.
There
is a hint out of Europe that there will be no intervention to try to
stop the rise of the euro to new heights. This came from a member of
the European Central Bank board, a German who claims that the euro’s
rise was in line with “fundamentals”. Presumably, notes Marc
Chandler of Brown Brothers
Harriman (BBH) that means there will be no concerted central
bank intervention to push the common currency down.
In
the past, when currencies (including the dollar) had risen too high,
swaps and other arrangements were used by central banks to get the
moneys back to where they were “supposed to be”. This seems to
have fallen by the wayside this time around. There will be no
Pittsburgh Agreement based on the Plaza Agreement.
The
weakness of the dollar is not only a reflection of the rise of the
parity of the euro, which broke through its options level of $1.40.
Marc Chandler argues that the dollar is being used “as a financing currency”.
US investors are again diversifying internationally after their
panicky repatriation of foreign investments in the latter half of
2008.
Mr.
Chandler thinks that some currencies like the euro and the Australian
dollar are still highly correlated with an increased taste for risk
by Americans, for which he uses the S&P 500. However, the C$ has
a hefty negative correlation with the S&P, perhaps because it is
viewed as an alternative safe haven by Canadians, Americans, and
others.
The
yen is more confusing, as the correlation has sunk from 43% a
year ago to only 17% now. Here is Mr. Chandler’s explanation and
forecast: “The fiscal year end portfolio adjustments and the tax
break on repatriation of earnings and dividends have replaced the
more usual external yen drivers. If this hypothesis is valid, it
would suggest that as these factors wane, the dollar-yen’s
correlation may increase from these low levels”.
Mark Chandler
adds: “We have consistently
argued against the structural arguments for the dollar’s weakness,
like the current account deficit or the diversification of central
bank reserves. We have generally argued that cyclical factors play a
more important role and in particular we have pointed to the low
level of US rates in relative and absolute terms. Recently there
have been a number of press reports and analytic pieces that also
recognize the role of
the dollar as a funding currency.
“Last
week saw a near record amount of dollar bond issuance. Investment
grade issuance, which would include bonds issued with government the
guarantees and preferred shares. Dealogic estimates that
around half the dollar denominated issuance here in H2 will be from
parties not domiciled in the US.
“This
month, at least four euro zone countries have issued dollar
denominated bonds. This does not seem to reflect a judgment about the
dollar’s outlook, contrary to what Barron’s Current Yield
column has argued. Rather the key consideration is that the cost of
exchanging dollar floating rate payment for a euro fixed rate. There
is strong investor demand for the dollar-denominated instrument and
the favorable swap rate means that dollars can raised and swapped
into euros cheaper than it costs to raise the euro directly.”
Note
that BBH does not cover equities outside the US,
as we do, only currencies and bonds.
For
global investing equity investing, the lower US$ interest rates, the
likely non-intervention by Cbs, and the new appetite for risk means
that the dollar is likely to fall further. That means more gains in
our portfolio of foreign company American Depositary Receipts and
closed-end and exchange-traded funds, all listed in the USA and
easily bought by our readers and other Americans.
The
non-correlation with Canada is another green light for our portfolio,
which is overweight our neighbor to the north. Of course it is the
easiest foreign market to invest in directly from directly to the
south. More news for our paid
subscribers follows. My apologies for the mess and non-delivery we
ran into yesterday. The webmaster is still trying to find out
whom to blame.
We
are committed to delivering your newsletter subscription to you
whenever due, particularly if you are a paid subscriber seeking
information on specific stock picks (as well as bonds and funds).
Having been in the newsletter business since we mailed issues out, I
am totally committed to fulfilling our end of the bargain.
That
is why, once again, I would urge all paid subscribers to give us
alternative email addresses, a postal address, and a telephone number
we can use if there are delivery problems at your end, like an
overladen mailbox. Even if you are a presubscriber, you might want to
give us your full coordinates. Just log into www.global-investing.com
and fill in the spaces in the Global Investing member lodge.
I
stop boosting GE, where my voice has little impact, although
it rose 12.5% last week. Instead, I look at some other likely
beneficiaries of the global recovery today. One Brazilian and one
Finnish. And the usual Canadians of course.
