Dear Readers,

    Apparently the Rightside Advisors server is down for incoming messages to me. Several long-term readers have contacted me with important strategy and tax questions directly, saying that the support@rightsideadvisors.com link does not work now.

     Given the incredibly volatile markets and the need to do tax planning at this time, I would be happy to give my views to any paid subscriber writing to me directly rather than through support. You can write to

vivian@global-investing.com

     If you want to know my current views, please contact me directly and I will do my best to halp you. Write to

vivian@global-investing.com and it should get through. I will make a special effort to control my spam blocker on your behalf.

      Here is a message sent to reader PP which normally would not be poasted here in reply to a question.

For drug startups,. the big question is do they have enough cash to keep going?

the theory is you develop drugs until you get to phase III trials after which a big firm comes and takes you over. this has worked int he past. the progen people raised some money about 18 months ago and then they had a boardroom coup by essentially a bunch of Taiwanese who wanted to stop the broad approach and get more focused. the stock is down very sharply.

if you want to be really smart you can take the loss and buy the 2010 warrants which also trade in the US which give you a crack at buying more shares then. note that the last time I looked the warrants were more expensive than the stock. tickers are PGLAF and PGLAW on the nasdaq capital market. they had a trial which did not pan out but they have another hepatitis drug which looks good.


Stada is much richer and not only a takeover prospect but also a political one. it is a small maker of generics in europe. I always thought Teva would buy it buy they didn't. I would be careful with selling that one.

as for Novozymes it is not really a drug company; it makes yeasts for breweries, other compounds for drug production, and enzymes which convert stuff into ethanol. so it is an alternative fuel stock, although one with a real business and sales, not like some US variants which were just living on handouts.

Hurting here is the low oil price which I do not really believe in. You have better experience of the Middle East than me, but I would suggest that the minute the global economy shows signs of recovery OPEC will raise the oil price by not increasing supplies for the new boom. I also think the oil companies have already factored this in their plans.

For the record, I am not supposed to give non public stock advice under SEC rules. It is also just a personal view; I have no idea what will happen next week to say nothing of next year. But for the record also I am personally adding to my position in Progen and hanging on to the rest

best wishes  vivian@global-investing.com 

"I believe that banking institutions are more dangerous than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and the corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered."

 Thomas Jefferson
Letter to the Secretary of the Treasury Albert Gallatin
(1802)

    Alan Keyes, a Republican who had hoped to become the first African-American president, is among those suing to stop Obmana taking office. They claim he was not born in Hawaii, but in Kenya, despite the fact that the Obamites have posted his birth certificate on the web. Ironically enough, the situation would have been worse had John McCain won, because he was born on a U.S. Navy base in Panama.

    As the mother of two European-born children (and 5 U.S. native grandchildren), I am something of an expert on the subject of how citizenship is transmitted. When I was born my parents, refugees from Hitler, were stateless, but I became an American by the simple fact of having been born here. But for my children, it was a slog, involving turning in local birth certificates and lots of paperwork. Neither of my children is interested much in politics, which is just as well, because as non-native-born Americans, they and Arnold Schwarzenegger can never become president unless they change the law.

    The U.S. assigns citizenship according to the place where you first drew breath, under a system called jus solis, the law of the soil. But there are special rules for children born overseas like mine. Other countries use a different system, jus sanguinis, the law of blood. For example, my own rights to German nationality are based on my father's having been German before he was illegally stripped of his citizenship on grounds of religion before he went to the U.S. (They are not interested in my mother's sitution although it was exactly the same; the Germans only care about your father's bloodlines.)

   Most other countries use a patchwork of different rules but Britain is mainly jus sanguinis and France (where our son was born) is firmly jus solis, so much so that he had to formally renounce his French nationality to avoid being drafter, although he only had it about 4 days until he was registered with the U.S. Embassy.

      *Carbon emission controls are hated by coal-depedent European countries (like Poland above all), but they may provide an opportunity for cash-rich oil companies.This according to Christope de Margeroe, the general manager of Total (which we own only indirectly, through our stake in Power Corp. of Canada. The french company chief wants to reduce the environmental impact of oil production by better dealing with associated gas. CUrrently, particularly in older offshore drilling platforms, the only sensisble thing to do with the gas is to flare it, wasting its energy potential and adding to global warming.

       He thinks short-term more of the gas can be reinjected into the fields (to boost pressure) or stockpiled. Note that green oil companies can only go so far in dealing with hydrocarbon pollution. Only about 15% of the greenhouse gases from oil and gas are generated when the stuff is produced; the other 85% comes when it is used. Nonethelss, I think that with expensive tarsands no longer economic at $45 oil, there is a case to be made for cleaning up the production system using the cash which will not be spent in Canada, Venezuela, Madagascar, or wherever.

     *BCE, the Canadian telco left at the altar, may now be so cheap that some of the pool of pension plans and private equity investors who failed to complete the deal will wind up taking a minority stake through common stock purchase or special preference shares. In French, they call this "la vente par appartements". Meanwhile you can expect to get a 4.2% dividend (based on current prices) which had been held back pending the aborted privatization.

     *Areva of France is the subject of a rather upbeat assessment in the current issue of The Economist, linked to its British contracts with very firm approval deadlines to get the show moving. The magazine reports on the renewed drive by EdF, the French state-owned electric firm, to take over half of Constellation Energy in the U.S. after being gazumpfed by Warren Buffett taking over the whole company last summer. EdF is one contender to take over ARVCF.PK from France, its current dominant shareholder. aREVAh CEO Anne Lauvergeon is fighting against this. But if EdF gets half of Constellation, it will be a U.S. nuclear star, under U.S. laws which require that nuclear power plants be American-owned. This will make the an independent ARVCF.PK harder to justify.

       *A U.S. FDA analysis of four drugs used to treat juvenile asthma linked the products to higher risks of asthma-related side effects. The study examined GlaxoSmithKline PLC's (GSK) Serevent and Advair, Novartis's (NVS), Schering-Plough's (SGP) Foradil, and AstraZeneca's (AZN) Symbicort. The only drug where the FDA said there was no risk present was GSK's Advair.

      GSK with Neptunus of Shenzhen will take 40% with cash of a new jv to work on human flu. The HK-listed partner will chip in mostly plant, equipment and technology. Separately GSK is still buying back its shares in London although it will stop doing this isn 2009. However, a generic off its Wellbutrin has won FDA approval for Watson, whcih is also taking over some lines post-merger from Teva-BArr.

     *Teva filed a shelf registration to issue stock to help pay for taking over Barr. TEVA.Q having been priced for perfection, this may reduce its price and create a buy opportunity. TEva may have to spinoff more lines to meet EU regs beyond what Watson picked up here.

      *Suntech is building in sunny Spain where STP will provide half the sun-tracking modules at two sites which will turn sunshine into fuel. The Chinese firm's partner is a sub of the Gildermeister Group. Total installation is 15.9 mW.

       *Zacks has confirmed its 'hold' on DryShips which after selling half is roughly where we come out. The latest DRYS.Q rumor is that CEO George Economou will take it private.

       *Its sister closed-end fund from Macquarie, Macquarie Global Infrastrcuture (MGU), having cut its dividend "to preserve capital", we would watch Macquarie First Trust Global (MDF) carefully. Both funds are at 30-plus percent discounts from Net Asset Value and have lost over 60% of their value in the last year. Both invest in infrastructure which sounds like a good idea in a period of pump priming.

       MGU had a higher yield but met it most recently with "raturn of capital" (amount not specified) which means that shareholders got their own money back. The key difference is that MDF is not run directly by the troubled Oz fund manager, but by 1st Trust. The last dividend was paid in Nov. You can sell early in the new year to be safe. MFD is down pretty far too but just not as far.

       *Bombardier may not have sold many small private or commercial jets but it sure did sell trains. It earned $245 mn (U.S.) in Q3, more than double prior year levels, on revenue up 8% to $4.57 bn. The Canadian firm's margins rose but it warned that its orderbook may fall because of currency impact. BDRAF.PK

    As an alumna, I tend to keep an eye on Harvard's money. Today the headlines cream that the college lost at leat 30% of its endowment in the past 4 months. The amount may rise as illiquid private equity or real estate holdings are sold.

   For the record, here is what I wrote very early in September in my blog.

   While I teased Frida Ghitis for her misplaced enthusiasm for the record of Mohammed El-Erien, who probably did not engender the reported 23% boost in the Harvard Endowment during his one-year tenure managing it, the overstated rise did not hurt M. El-Erien's career. He has now been named successor to Bill Gross in managing the huge Pimco bond fund, ultimately owned by Allianz of Germany. He takes over next year.

    Mr. El-Erian appealled to Frida by calling for U.S. investors to put 2/3 of their money abroad. I am an enthusiast for global investing, but I think that way too high. I think Pimco will find this way too high too.

    Pimco will be seeking more from the SEC and Wall St. as it is planning to create a managed bond Exchange Traded Fund, which still has to get past the regulators. But you can be sure that the Harvard pseudo-performance will be featured in the eventual promotions if the ETF gets a green light.

    Why am I skeptical? First because the endowment counts increases resulting from donations in the year along with manager performance. Secondly, because nobody can change the track-record of a monster non-profit like Harvard in a mere year. And most importantly, some of the stuff being invested in by Harvard is just not available to the rest of humanity. Moreover, the valuation of a lot of the investments is pure guesswork when you are dealing with private placements, real estate, hard assets, hedge fund positions.

    By the time I get a letter from Fair Harvard asking this alumna to help fill the performance gap with a new big donation, Mr. El-Erian will have been in San Diego for a while and will escape any blame.

 Buy SPDR Gold Trust, GLD, the gold ETF traded on the NYSE. My  favorite stock for 2009 does not depend on the economy coming right nor is it a play on recession and doom. Forecasting the  macroeconomic trends in the U.S. and worldwide is very difficult in the current unprecedented economic crisis.

 But there is one thing you can be sure of: the measures already  taken by governments around the world to stimulate their enfeebled companies and unclog their banking systems will result in an inflation problem.

 The vast government deficits engendered by the bailouts and  stimulus will eventually have to be addressed. There aren't many  options. Countries around the world can raise taxes, unlikely  because tax hikes would hinder recovery. They can cut spending but that will also hamper  their economies. Given the interconnected world, I do not expect any  government to show fiscal rigor when its trading partners are still being lax.

  There is only one way out: printing money. More money chasing the same amount of goods and services will cause inflation. Gold is the classic way to protect against inflation. Selecting individual mining companies is harder because they are different although if  you get the right mining stock it may well beat the performance of GLD.

  Note that some gold-miners sell their future gold production  forward to finance continuing to drill so they will not privide  inflation protection. Others facing a shortage of cash in the  current crisis may go under. But the precious metal itself is a  perfect no-brainer inflation hedge.

 It was John Maynard Keynes who called gold a barbaric relic back when it traded at $35 per ounce.

 The new blockbuster 2009 Outlook for Asia from Daiwa Securities frankly scares me. I could not persuade this blogsite to let me reproduce the chart they did showing the trend of the Japanese 1997 deflation and our own current mess. The fact is they track each other eerily closely. Too closely.

So all the measures taken by our Fed and our Treasury to unblock the pipes turn out to be irrelevent.

I wish I could put up the chart, because then I would send a copy of this blog to my college classmate, Betsy Warren, who is now in charge of Congressional oversight of the TARP. Betsy is a law professor who has specialized in credit issues.

*Nudged by a reader and intrigued by the low p/e and Daiwa research (see above), I gave some thought to buying Yanzhou Coal, YZC. Then I thought better of it.

This stock is trading at 2.3 times earnings for a reason. It has expansion issues. That means its mines are a declining asset and its margins will continually creep upward. Moreover, Chinese coal prices are very volatile. Right now a set of non-recurring events (the earthquake, and downpours in Queensland, Australia) have pushed prices up. These are one-offs.

Pushing the other way is the economic slowdown in China which is becoming a major negative. The push toward domestic consumption, which I applaud, may not require as much energy as the traditional Chinese business of producing for export.

When China again takes up the cudgel to make stuff for Wal Mart, the demand for coal will pick up. But I would just as soon play that with Dry Ships as with some polluting strip miner. Sure, there's risk. But I know the guy running the company, and his pluses and minuses. All I know is that management is not considered to be a strong suit at YZC.

If you want to do something right now, sell your CNY, the ETF to play a rise in the renminhbi, the Chinese currency. It isn't going to rise.

*Cosan has completed the takeover, for cash, of the Esso ethanol refinery and service stations in Brazil. CZZ.

*Tesco undermined the impact of German deep discount grocery competition by slashing its own prices to become Britain's biggest discounter. It worked. TSCDY.PK reported an 11.7% sales rise in the last quarter, well ahead of what analysts expected and “solid” profits (the firm does not publish interim profit data.) This is a defensive stock.

*GSK and Theravance announced positive phase 2b results for experimental asthma drug '444 which showed dose dependent improvements in lung function. It is also working on a new treatment for acute migraine with another outside drug research team.This is another defensive stock.

*Teva will have to meet some commitments to the European Union to complete its takeover of Barr. Thsi will probably require some asset sales where the two companies overlap enough to queer competition, a major concern of the EU in the drug business. TEVA.Q has ten days to act. 

*Gewalt. SGL Carbon, SGLFF.PK was downrated to sell by Goldman Sachs today and the share fell 5.6%. The U.S. “bank” says that it will not be able to pass through higher raw materials costs.

*I apologize to Fei and all the Chens for failing to report Q3 results from Vance Information Technolgy, VIT. It earned net profit of $4.33 mn up 49% year over year. Sales were up 53% to $27.7 mn. Note those nifty margins. On a per share basis, EPS at 11 cents was up from pro forma pre-ipo 6 cents in Q3 2007.

*Here are some replies to readers. 1) NPK stands for nitrogen-potassium-phosphates, the standard fertilizer melange from Yara and others.  Sorry. I should have explained that yesterday.

*More details on the Mexican ADR from Dataflux S.A. de C.V. which is now being cancelled, which readerMS and others are are advised to turn in. The transaction will allow you to take a tax loss on the stock with a “worthless letter” from your broker, which cannot be done until the share is cancelled.. Dataflux was called Datacapital. It runs schools teaching English and computers in Mexico and owns half a U.S. Website firm, Todito.com. The principal is Guillermo Salinas Pliego, brother of Ricardo Salinas Pliego, the Mexican magnate and serial stock manipulatory.

In mid 2005 Ricardo, a Mexican under SEC (and Mexican) investigation for a fraudulent debt switch which yielded him $109 mn at the expense of U.S. shareholders in his companies, decided to withdraw and cancel three NYSE-listed ADRs because of “regulatory excess” (his term.) They were: Grupo Elektra, EKT., which retails and finances electric goods; TV Azteca, TZA, a Mexican network with a Spanish broadcasting affiliate here; and Grupo Iusacell, CEL, a cellphone network. His brother's firm did not cancel its ADR which had been on Nasdaq and then on the pinks because there is a fee for that.

Note that Ricardo owns the other half of Todito.com (a Delaware company.) Dataflux was merged into a firm listed in Mexico called Universidade SNCAB but I doubt if ADR owners will get any benefit from this. Bank of NY-Mellon is depositary for the entire Salinas Pliego family of stocks and will get its cancel fee. I am waiting for the depositaries to return the Salinas Pliego ADRs to pink sheet trading, which is just the sort of thing they would try.

Dear readers, this site is still dysfunctional and rather than fighting to insert carriage returns and indents, or post tables, which I am not technically savvy enough to do, I will take it easy continuing to post. Of course I have pleaded for help but nobody seems to care enough to respond to me or do anything about this mess.

People write to me complaining about the fact that the model portfolio prices do not update. Naturally if I could make this happen I would. We had updates until June when the site was interfered with by order of Jason Kulpa, a member of the board and major shareholder of the parent company of Rightside Advisors, the publisher, Ad Authority. Since then the pricing is erratic and I cannot change the advice given after each share, except if it is sold. And then the price is shown wrong.

Please let Rightside Advisors know if you find my abandoning you or the model portfolio not updating any longer to be an issue.

Write to support@rightsideadvisors.com and let the customer service people know you are irritated. You can even say in your note that you want it passed on to Jake Vale, the president of RSA or to Jason Kulpa who is still our largest shareholder.