Once again China has come up short of expectations with a 5-year low level of Q3 growth at 7.3% last month. The Chinese locomotive for global growth is late. And the air is still unbreathable and the Hong Kong demonstrators still demand democracy rather than merely a full rice-bowl.

Germany meanwhile is suffering an unexpected lag in growth despite its being the European Fuehrer of arch-orthodox fiscal conservatism. Meanwhile Germans want repairs on the Autobahn, but who will fianance them?

Who will Germany's heralded Mittenstand export goods to if the rest of Europe is forced to cut deficits to meet German standards of rectitude?

Macro-economist Russell Jones today has come out in favor of fiscal activism. He writes in a paper published today by Llewellyn Consulting in London:

“If fiscal policy is to be reactivated to expand demand, it will have to be innovative, designed [so] that debt sustainability is properly taken into account, and the maximum value extracted from each initiative. It will have to be closely dovetailed with monetary policy, and appropriate political fig leaves provided.” Here is more from Jones:

Keynesians in a Foxholes

“As Nobel laureate (and hitherto arch fiscal policy conservative) Robert Lucas put it: 'We are all Keynesians in a foxhole.'”

Jones's reasoning follows:

“On one side are those who aver that fiscal profligacy was the core of the world's recent problems; that budgetary stimilus is impossible to calibrate with busines; that it cannot deliver 'permanent' jobs and 'crowds out' productive private sector activieites; that it risks excessive inflation; and imposed an unfair burden on future generations.

“On the other side are those [with] a more constructive view [of fiscal activism], especially when output is far from potential; private sector animal spirits are depressed; households and businesses are debt- or liquidity-constrained; interest rates are historically low; market failures are numerous; and there is a clear shortage of high-quality infrastructure.

“Notwithstanding the enduring difficulties of fine-tuning and co-ordination, and recognition that exessive optimism and political short-sightedness encouraged disastrouse fiscal incontinence for decades following World War II, we find ourselves much more aligned with the second group than the first.

“Low growth can be as much of a catalyst for high debt as high debt can be a catalyst for low growth.”

*A profits warning and a disappointing Q3 from Reckitt Benckiser zapped the stock by nearly 3%. RBGLY is off less sharply because of the rise of sterling, but the interim statement was still grim with revenues off 7% to GBP 2.37 bn, and absolutely every single secor in which the firm operates showing a drop. The worst was for pharma which is being divested by the end of this year, a maker of sub-lingual opioid replacements now off-patent. This is the lowest growth for 3 years and the first down quarter under new management.

Management cited efficiency gains as a way to improve margins going forward but said “conditions will be challenging”. CEO Rakesh Kapoor said full year revenues would rise “at the lower end of the range of 4-5%” (excluding pharma.) RBGLY makes household goods and OTC nostrums.

*Also down pending its report is GlaxoSmithKline, also expected to report a poor Q3 with sales off 8% according to the anayst consensus (Dow Jones). GSK gains no traction despite having the inside-track to creating a jab against Ebola virus. It reports tomorrowafter US markets close.

*Bavarian Nordic, our Danish biotech play, won coverage from Maxim Group brokers which set a buy rating and a target price of $35. The share is now under $19.5. BVNRY or BAVYY.

*Novartis won US FDA committee approval (normally then allowed by the full FDA) for its novel AIN457 (secukinumab) interleukin 7A inhibitor in treating moderate to severe plaque psoriasis following phase 2-3 trials. Full approval is expected early next year.

Big Ticket Deal In China

*Veolia won a big ticket deal in China worth $500 mn (euros 390 mn) for recycling and treating wastewater for a coking gas plant owned by Chinese steel leader, Hebei Iron & Steel. The plant is in Hebei and run by its Tangsteel sub.

*Also doing well in China is Nokia which is selling networks there. It landed a $970 mn deal for China Mobile for 4G rollout. It also has HERE which does mapping and direction in vehicles. NOK was written up on seekingalpha.com by Chris Lau who signs his name.

*Our Irish infrastructure play, CRH, is exiting 3 Texas markets via Redi-Mix buying its Oldastle sub which runs 11 concrete facilities in Houston, San Antonio, and Austin. CRH is up 0.5% on the news.

*However Paddy Power is up 2.6% in Irish trading today, to euros 55.92. PDYPF was half-sold.

*Schlumberger Ltd is up sharply today as its forecast that oil demand will remain high despite the price drop filters into the market. SLB's optimistic outlook was echoed byHalliburton, which boosted both shares. Morningstar today called Schlumberger its “favorite oil services firm” and “best in class.”

Whistle-Blower

*Whistle-blower Royal Bank of Scotland blabbed to the Swiss authorities about how their interest rates were being rigged. Today UBS, Credit Suisse, and JP Morgan-Chase were fined over SwFr 1 mn, but RBS pays nothing. We own its preferreds but do not want the govt-controlled UK banks to spend money on fines which will reduce their security and delay the payoff when the bank is re-privatized.

*Australia's Benitec Biopharma is up again today. Your editor argued that the share is being attacked by know-nothing Down Under short-sellers and a brilliant newsletter writer who recommended BTEBY in the past but now feels he is being neglected.

*Another Oz share, Orocobre, which is about to open a lithium plant in Jujuy Province, was heavily boostered by www.seekingalpha.com, once again using an anonymous author. We all know about the risks of Peronist govt but OROCF benefits from its shareholding base including the Province and a sub of Toyota. The author of the articles is “The Investment Doctor” whoever that may be. Our author was Frida Ghitis who signs her contributions.

*Aie de mim. Brazilian shares are off sharply, notably Cosan, down 5.5% on fear of Dilma. CZZ is also ex-dividend as of Oct. 20.

*Vale is not down as much. VALE.

Neiges d'antan

*China Chaintek, which is no longer in the model portfolio as it cannot be tracked, won a new shareholder, Utilco Emerging Markets Fund, a UK listed investment trust (close-end fund). UEM took a 4% stake in CTEK. It actually appears to trade at a premium to its NAV. CTEK which we cannot trade (and which I want to keep) is up over 4% today in London on the news.

*Also on the matter of Alternative Investment Market shares, after dithering for years about delisting its AIM shares, Energy XXI (a Bermuda firm with most of its operations in the US) is seeking shareholder approval to delist its common shares.

Fund Notes

*Herzfeld Caribbean Fund is issuing 1:1 un-tradable rights of which 3 will allow you to buy a new share. This will marginally cut the cost/sh of the small fund's management while also beefing up the total they collect. CUBA is quirky. The shares are up 1.9% on the prospectus hitting. I will subscribe because the shares will probably be cheap, according to the calculations.

*Fibra Uno is up sharply today in Mexico City. FBASF is a REIT.

*Our closed-end New Ireland Fund, IRL, is a likely gainer from the takeover of Arysta Life Sciences, a maker of insecticides and veterinary meds, one of its top-10 holdings (but not of course as heavily weighted as Ryanair.) The buyer is Bill Ackman's Platform Speciality Products which is paying $3.5 bn for the Irish firm.