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Daily International Briefing from Global Investing

|Includes: BLX, GSK, Japan Equity Fund (JEQ), NABI, WILC’s model manager Vivian Lewis offers her daily international briefing. Note that not all companies are held in the International Yield Covestor Model. Rather, some are just International Companies that Vivian tracks.

Market Update

Pundit Jeremy Grantham (of Grantham, Mayo, Van Otterloo) writes bearishly:

"I, for one, am more or less willing to throw in the towel on behalf of Inflation. For the near future, his adversary in the blue trunks, Deflation, has won on points. Even if we get intermittently rising commodity prices, quite likely, the downward pressure on prices from weak wages and weak demand seems to me now to be much the larger factor. Even three months ago, I was studiously trying to stay neutral on the “inflation” issue, mesmerized by the potential for money supply to increase dramatically, given the floods of government debt used in the bailout. But now, better late than never, I take sides: With weak loan supply and fairly weak loan demand, the velocity of money has slowed, and inflation seems a distant prospect."

He adds, "it is fairly clear that a weak economy and declining or flat prices are the prospect for the immediate future. With unexpectedly strong fiscal conservatism from Europe and perhaps from us, this slowdown looks downright frightening. I recognize that in this I agree with [Paul] Krugman, but I can live with that once in a while."

Many Americans (except Grantham and Krugman) don't believe our government's stimulus measures did any good, as unemployment is still so high. Imagine how many more people would be jobless had stimulus not been tried. If you want a been-there-done-that insight into how to deflect deflation, what better source than Japan which managed to inch its way out of deflation over the past decade?

From Japan, Daiwa Securities forecasts the world economic outlook:

On concerns over the possibility of a 'double-dip recession', there are reasons why it is not the most likely outcome. Moving toward fiscal tightening appears generally to be relatively measured. This year, the euro area and China are likely to run somewhat expansionary fiscal policies while others are likely to start on some fiscal restraint. Next year, almost all countries are likely to tighten policy, but the contraction fiscal impulse seems fairly modest in most cases. While fiscal policy is tightened, monetary policy is likely to remain expansionary.

Earlier expectations of an exit from the low interest rate and non-standard monetary policy have been shifted well into 2011. With discretionary spending on durables and structures already having fallen to recent historical lows, this key driver of economic downturns has much less room to be compressed than before the crisis began. Indeed, this is one reason double dip recessions are so rare. The more and the longer such spending are [sic] compressed, the more pent-up demand builds to support the eventual expansion. Durable goods that have worn out eventually need to be replaced. With pent-up demand beginning to show through consumer and business spending, the economy is developing sufficient momentum through 2010 to deflect the upcoming headwinds to a significant degree. A positive feed-back look between investment, employment, and consumption seems to have emerged in most major countries.

Meanwhile Japan Equity Fund (NYSE: JEQ) is behaving like a rabbit staring at the approaching headlights, with Toyota still its 3rd largest holding despite flaws, because the portfolio is looking for “names.” With political disarray and a high yen hurting Japan Inc., we are happy with more modest names small caps for the long-term, companies, not so bound up with current exports. These are selected by Chris Loew from his base in Osaka. JEQ is off 2.51% in the last month vs a mere 1.45% drop in Topix index. And it is off 10.19% in the last quarter vs a drop of 9.48% in the index. Which is not to say that we haven't also lost in Tokyo.

Followed Securities

GSK) for years was lifted. An FDA panel voted against banning GSK's diabetes drug, Avandia, from the market, despite heart disease risks. The drug was in the portfolio acquired by GSK of Britain when it bought SmithKlineBeecham (SKB) of the USA 9 1/2 years ago. The pending deal may have motivated SKB's North Carolina researchers to overstate the advantages of their drug against rival diabetes med, Takeda's Actos. This study, of Actos by SKB, was the “suppressed' and “manipulated” data which started the witch-hunt.


By now it is only a year before the generics hit, and what with black labels on both drugs and hysterical and misleading meta-statistical analysis zapping Avandia sales, it is no longer a blockbuster for GSK in any case. But the fact that it had not been banned reduces the risk of legal action by diabetics over heart problems they would like to blame on GSK.


So the share rose sharply and it still yields over 5%. As I have been saying, the Cleveland Clinic heart surgeon's meta-analysis of the risks of Avandia was statistically illiterate and picked up on by politicians looking for a cause. It is significant that about 2/3 of the plaintiffs in suits against GSK over Avandia accepted payments right before the FDA panel ruled, knowing that their odds of winning a lawsuit were poor.

GSK announced a capped and booked Q2 legal charge of GBP1.57 bn to settle long-standing legal cases relating to its Paxil and Avandia drugs and a U.S. probe into a closed manufacturing facility in Puerto Rico.

There is one sequel. GSK suspended testing of its embattled diabetes drug Avandia at Indian sites participating in a global clinical trial, after the Indian government requested a hold due to recent studies raising safety concerns. The Drug Controller General of India wrote to Quintiles Transnational asking that the test be ended. QI was the manager of the controversial SmithKline RECORD trial.

Nabi Biopharmaceuticals (NASDAQ: NABI) completed enrollment in the first Phase III clinical trial of NicVAX (Nicotine Conjugate Vaccine), its innovative proprietary vaccine under development to treat nicotine addiction and prevent smoking relapse. Nabi began the clinical trial last Nov. and expects to have final data in late 2011, now that enrollment is complete. A second Phase III trial began in March and enrollment is going well, and here final data is expected by early 2012.

Both Phase III NicVAX studies are “gold standard”, double-blinded, placebo-controlled, each enrolling some 1,000 patients. The primary endpoint is long-term abstinence from smoking at 12 months as evaluated by several measures, including self-reported cigarette consumption and exhaled carbon monoxide. Secondary endpoints include the abstinence rate at various intervals, safety, immunogenicity, and the effect of NicVAX on withdrawal symptoms, cigarette consumption, smoking satisfaction, and nicotine dependency. The FDA agreed on Nabi's study design, protocol and end points through a Special Protocol Assessment, which may be used to support a New Drug Application. Nabi also received scientific advice from the European Medicines Agency supporting the trial protocol.

Nabi exclusively licensed NicVAX to GSK Biologicals in Mar. for up to $500 mn, a nonrefundable $40 mn of which was paid upfront. Nabi may also receive royalties on global sales of NicVAX and next-generation nicotine vaccines.

Our food play G. Willi Foods International, (NASDAQ: WILC), announced launch of a line of gelato being tested currently at Blue Square supermarkets in Israel but intended for the global market in kosher food. There are two variants of death by chocolate, vanilla, and cappuccino flavors. Two of my grandchildren currently in Haifa and their mothers are encouraged to become testers of the product. What makes gelatin kosher is also what makes them tasty, not using mystery fats and unaccountable milk and eggs.

Panama-based multilateral trade finance entity Banco Latinoamericano de Comercio Exterior, (NYSE: BLX), approved a quarterly cash dividend of US$ for Q2, payable on August 4, to stockholders of record date July 26. Yield is 4.8%.

Rule 144 planned sales reported to the SEC by corporate brass exiting from Vance Info Tech (NYSE: VIT) pushed down the Chinese IT stock price. VIT may also be affected by poorish results from Infosys, the Indian IT firm. Having already sold half we are sticking with the company.

Disclaimer: In her Covestor International Yield Model, Vivian owns GSK and BLX. VIT, WILC and NABI are currently not owned in the Covestor International Model.