E Dear Numpty

Dear fellow Numpty:

What is astonishing about the way banks cheated their clients by colluding to fix exchange rates to extract higher sums is not only that they did this to what they called “Numpty’s”, but when they did this.

The FX faux fix went on until early this year, according to the $4.5 bn settlement made with regulators in Europe yesterday. And the settlement will exceed $4.5 bn. There are still other fixes for which further fines are payable covering US exchange rate manipulation and at least one banking major, Barclays, refused to join the settlement.

Anyone who ever bought a foreign share using a US discount brokerage foreign exchange facility; anyone who ever paid for foreign travel or hotels using a credit card in a different currency; anyone who ever imported or exported anything was cheated by the banks.

We learned about early on. About a decade ago, I sold a French stock called Stellergènes from my account with Fidelity when its compliance officer called me to say I could not accept a takeover bid from a Swiss buyer. Actually he was wrong but I listen to lawyers and doctors.

The trade was mistakenly booked in US dollars although French stocks are priced in euros. I was left short by ~25% at the then-exchange rate. Some readers proceded to legally get the Swiss takeover payments, so the whole compliance routine was unnecessary. I had found the stock by my own research work, without help from readers or Fidelity (Fido).

After long hemming and hawing, Fido converted my proceeds into dollars at a weird exchange corresponding to nothing public. They refused to adjust the rate to what was shown for the trading day.

A certified grouse, I then sought arbitration with Fido to try to get this adjusted. Instead of displaying zeal for customer satisfaction, Fido then simply banned me from having a Fido account. That is how E-trade won my fidelity, such as it is. The Swiss buyer relisted the share in 2009 and it even trades now on the Euronext part of the NYSE and as an ADR again.

Now I am thinking maybe the Fido global trading desk was treated as a Numpty and not just me. The fine is trivial considering the pattern of deceit.

A new Van Eck China Bond ETF is offering yield-hungry investors a chance to buy RMB bonds under the planned Hong Kong-Shanghai link. The CBON yield is expected to be ~4%. The amount of taxation is unclear as Shanghai interest is taxed while Hong Kong’s is not.

China was looking poorly yesterday apart from the worry about one of our shares discussed for subscribers below. Chinese industrial output failed to meet expectations, rising only 7.7% in Oct vs estimates of 8%, continuing the Q3 pattern of slow growth. This may require govt stimulus, which however, risks boosting retail sales, which are growing exponentially based on the 11/11 frenzy at Alibaba. More on this below.

Our newly returned India reporter offers better ideas. India is gaining from yield hunger. Its debt markets have drawn in $23 bn ytd, while equities inflows were only $15 bn, according to Barron’s Blog. So we are aiming Abhimanyu Sisodia’s attention to stocks. He wrote earlier on 2 key deals reached with India by the supposedly lame duck Obama administration:

India won okay from the USA allowing to publicly stockpile food, which paves the way for a global World Trade Organization accord that could add $1 bn and 21 mn jobs to the global economy (according to Reuters). India now has US support before the WTO General Council, The deal will allow large state food purchases to continue, despite other countries saying the food buying and stockpiling amounts a subsidy leading to surpluses and dumping on world markets. Just some food for thought. [Ed: Pun intended.]