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Faux Pas

Happy Bastille Day! Pres. Trump is in Paris as the representative of the country which 100 years ago sent troops to France under the slogan: “Lafayette, nous voilà” or Lafayette, here we are! He managed two faux pas already, first complimenting Mme Macron (who is closer in age to Trump than she is to her husband, the French president) for looking so good, which translates as “être bien preservée” not considered a compliment to a Frenchwoman.

Then he stumbled some more in his tweet about “their failed Obamacare replacement approved” which put the adjective failed in the wrong place.

Which brings me back to gold. I am not keen on buying gold to prepare for a stock market crash or a rise in inflation risk because these cannot be predicted based on past history. In economics, history tends not to repeat because everyone is looking at the same patterns.

My call is for investors to hold gold as a hedge against likely geo-political upheaval. Between the risks to his family members over the Russian involvement in his election win and potential loss of wealth, between his visible weight gain and distraction and loss of focus, there are real risks of something bringing the Trump Administration to a premature close. Having lived through Watergate I want an exit strategy.

As the operator of a blog on foreign securities I would normally expect that to offset US risks for my readers. But in case you haven't noticed, there are unexpected political risks in other countries as well. I am not talking about Venezuela or Zimbabwe or other long-term basket case economies. I am referring to normal boltholes for US investors in the Americas, Europe, and the Far East: Mexico, Canada, Brazil, Britain, Germany, Hungary, Poland, Italy, Israel, India, Hong Kong, South Korea, Taiwan, Malaysia, South Africa, The Philippines, all facing political crisis whether generated internally or in reaction to missteps by the US, the Fed, the European Union, North Korea, whatever.

More news from several of the countries listed above including a quarterly report. Plus two stock recommendations.

Technology

*Infosys (INFY) reported modest gains in its Q1 last week and the stock fell modestly as well but on immodest volumes. Its profits rose 1.4% to 34.83 bn rupees ($540 mn), beating the analyst forecast of INR 34.44 bn gathered by Thomson-Reuters. Revenues also beat at INR 170.78 bn, up 1.8% y/o/y., CEO Vishal Sikka credited new signups and said he was “very happy with our performance.” INFY repeated its forecast that revenues in the 17-18 FY to next March will rise 6.5%-8.5% and 7.1-9.1% in US$s, revealing dependence on H1-B visas to bring skilled Indians to work in the USA, which is going to be limited by Pres. Trump. To overcome the challenge it is aiming to provide more advanced services to clients, like cloud computing and big data analytics—but so its everyone else. Its 2.5% yield is safe but its growth is definitely slowing. Consensus for the stock, according to Thomson-Reuters, is a low hold with the 12-mo average target price $15, 4% under its current level. So we exited.


*Naspers again made a new 52 wk high in London (and Johannesburg) last week. Apart from exiting South Africa, it rose because Yandex.taxi, part of its Russian Internet investment, managed to force Uber to agree to share with it control of their new joint venture for car and informal taxi booking. Having tried...


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