$SNE Board Considers Entertainment Spinoff

“Sony Corp. (6758) directors are discussing whether to adopt billionaire Daniel Loeb’s proposal for an initial public offering of its entertainment business, a week after the TV maker said the assets weren’t for sale.

“It’s only a start,” Chief Executive Officer Kazuo Hirai said of the talks, without giving a timeframe for any response. “It’s important that the board will discuss this and come to a decision that represents Sony’s stance.”

Sony has jumped 22 percent since Third Point LLC’s Loeb told Hirai that partially spinning off the entertainment assets would bring a higher valuation and raise cash for the company, whose movie studio topped the U.S. box office last year. Film and financial services earnings have helped the Tokyo-based company counter nine straight annual losses from making TVs.

“Sony will consider how to keep control of the company and may be forced to throw a bone to prevent a long, ugly fight,” said Edwin Merner, president of Tokyo-based Atlantis Investment Research Corp. “They will try to give up as little as possible and are no doubt receiving advice on how to fight off the aggressor.”

Elissa Doyle, a spokeswoman for Third Point, declined to comment.

Sony, which held its corporate-strategy meeting yesterday, rose to the highest in more than two years in Tokyo. Japan’s biggest TV maker surged 5.9 percent yesterday to 2,290 yen, extending gains this year to 139 percent, while Japan’s benchmark Nikkei 225 Stock Average rose 1.6 percent. Sony American Depositary receipts fell 3.3 percent to $22.15.

Third Point

The Nikkei newspaper reported that the board may discuss a potential IPO. Hirai said during a news conference yesterday that talks have started, and he declined to give his view on the proposal….”

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“Spanish and Italian bonds led losses among the securities of Europe’s so-called peripheral nations as Chinese manufacturing and euro-area services and factory output all contracted, sapping demand for higher-yielding assets.

Spanish five-year note yields rose the most in a month as the nation’s borrowing costs increased at a sale of 4.08 billion euros ($5.26 billion) of government debt maturing in 2016, 2018 and 2026. Italian 10-year yields climbed to a one-week high. Benchmark German bunds advanced as a report showed output in the euro area’s manufacturing and services industries shrank for a 16th month in May. Japan’s Topix index tumbled the most since the aftermath of the March 2011 tsunami.

“There’s a bit of a reduction in risk appetite following the big moves down in Japanese equities, so it’s more the macro theme,” said Peter Chatwell, a senior fixed-income strategist at Credit Agricole Corporate & Investment Bank in London. “Of course, we’ve got the supply factors also. Bunds have managed to trade a lot higher today.”

Spain’s 10-year yield rose seven basis points, or 0.07 percentage point, to 4.25 percent at noon London time after reaching 4.27 percent, the most since May 17. The 5.4 percent bond due in January 2023 fell 0.56, or 5.60 euros per 1,000-euro face amount, to 108.965.

The rate on Italian 10-year bonds increased eight basis points to 3.99 percent.

Output Contracts…”

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“A euro-area services and factory output gauge increased more than economists forecast in May, adding to signs the currency bloc is starting to emerge from its record-long recession.

A composite index based on a survey of purchasing managers in both industries rose to 47.7 from 46.9 in April, London-based Markit Economics said today. That exceeded the median estimate of 47.2 in a Bloomberg News survey of 27 economists. A reading below 50 indicates contraction.

While the euro-zone manufacturing index rose to a three-month high of 47.8 in May, Chinese factory output contracted for the first time in seven months, signaling the country’s economic growth is losing steam for a second quarter.

“We see the euro zone being out of recession in the third quarter,” said Christian Schulz, senior European economist at Berenberg Bank in London. “We’ve seen improving confidence since the ECB provided a safety net, and the risk of countries having to leave the euro has decreased. Also austerity is fading.”

The euro extended gains after the data were released, trading at $1.2903 at 10:56 a.m. in Brussels, up 0.4 percent on the day. The Stoxx Europe 600 Index was down 2.1 percent to 303.97.

Rate Cut…”

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“Commodities fell for a third day, paced by declines in copper and oil, as manufacturing in China unexpectedly shrank for the first time in seven months and the head of the Federal Reservehinted that stimulus may be tapered.

The Standard & Poor’s GSCI Index (SPGSCI) of 24 commodities dropped as much as 1.2 percent to the lowest level in a week, and was 0.5 percent lower at 623.11 at 11:46 a.m. inLondon. Copper in London, seen as an indicator of economic activity because of its use in construction, lost 2 percent to $7,324 a ton. Oil in New York sank 0.7 percent.

The preliminary reading for a Chinese Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics missed analysts’ estimates and came in below the level of 50 for May, indicating a contraction. China is the biggest metals consumer and the second-largest oil user. The S&P GSCI has fallen 3.7 percent this year as base metals dropped on prospects for surpluses while gold and silver tumbled into bear markets.

“China’s PMI data coming in below forecast is adding a strong downdraft across most commodity markets,” said Mark Keenan, a director of commodities research and strategy at Societe Generale SA in Singapore. “The comments from the Fed, hinting at the scaling back of quantitative easing if the economy improves further, have driven the dollar higher, which is also contributing to the general weakness.”

Fed Chairman Ben S. Bernanke said yesterday that the U.S. central bank may reduce the pace of asset purchases in the next few meetings if policy makers can be confident of sustained improvement in the world’s largest economy. The Dollar Index rose to its highest in almost three years today before declining as the yen surged after stocks tumbled.

Labor Market

Bernanke also said in testimony to Congress yesterday that a premature withdrawal of stimulus could endanger the U.S. economic recovery. Many Fed officials said more labor market progress is needed before paring $85 billion in monthly asset purchases, minutes of their last meeting showed yesterday….”

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“Global stocks fell, led by the biggest drop in Japanese shares since the aftermath of the Fukushima disaster, while metals sank as Chinese manufacturing unexpectedly contracted and speculation mounted the Federal Reserve will cut bond purchases. The yen and Treasuries rose.

The MSCI All-Country World Index declined 1.2 percent at 7:20 a.m. in New York. Japan’s Topix Index (TPX) slumped 6.9 percent, the most since March 2011. Standard & Poor’s 500 Index futures fell 0.8 percent, paring losses of as much as 1.4 percent. The yen strengthened against its 16 major peers, surging 1.4 percent to 101.79 per dollar. The yield on 10-year Treasuries slid four basis points to 2 percent. Copper retreated 2 percent and oil slipped 0.8 percent.

Factory output in China shrank for the first time in seven months, a report from HSBC Holdings Plc and Markit Economics showed. Fed Chairman Ben S. Bernanke told lawmakers yesterday a premature withdrawal of stimulus could endanger economic recovery as policy makers debated tapering the pace of bond purchases. Japan’s Topix had surged 48 percent this year to yesterday and the S&P 500 rose to a record this week as central banks worldwide pledged stimulus measures to bolster growth.

“We got the perfect storm for risky assets, with negative signals from both monetary policy and macro-fundamentals,” Witold Bahrke, who helps oversee $55 billion as senior strategist at PFA Pension A/S in Copenhagen, wrote in message. “Quantitative-easing fears got boosted yesterday, which can have quite an effect in an extremely central-bank manipulated market.”…”

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World Markets

Currencies

Commodities

USD Libor

Euribor

Yields for Italy, Spain, France,  and Germany …

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[youtube://http://www.youtube.com/watch?v=DED812HKWyM 450 300]

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[youtube://http://www.youtube.com/watch?v=2ffxUT7Puf0 450 300]

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“Societe Generale‘s latest guide on Exchange Traded Funds notes a rise of bearish calls on U.S. exchange listed companies in the semiconductor and natural gas sectors. Short interest in both ETFs, Market Vectors Semiconductor ETF (MUTF:SMH) and United States Natural Gas Fund (NYSEARCA:UNG), has risen 391 percent and 243 percent respectively since December 2012.

The semiconductor industry shows cyclical growth with periods of boom driven by developments in thesmartphone industry and pressures from inventory supply. Conforming with this view, Goldman Sachs in its note said that 2013 would be the year for another semiconductor boom. Their report said that the industry has a history of outperforming only once every five years and this could be that year. However their analysis admitted that the under-performance in 2012 was attributable to bearish investor sentiment prevailing in the industry.

Semiconductors Target of hedge funds…”

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“Richard Koo of Nomura is out with his latest piece and it focuses on one of the hottest topics, Japan.  Richard Koo is worried about some of Japan’s policies and goes so far as to state about the countries Central Banker ‘Mr. Kuroda’s psychological tactic of repeating a lie often enough that it becomes the truth has succeeded brilliantly.’ Richard Koo also says that Japanese BOJ actions could causes losses equal to 7.5% of GDP! Below is the full report from Richard Koo titled  Surge in long-term rates/talk of exit strategy highlight problems with quantitative easing.

Richard Koo on JGB Volatility

The surge in Japanese long-term interest rates between Friday, 10 May and Wednesday, 15 May probably caused some lost sleep among bond market participants and policymakers as the 10-year JGB yield climbed 34bp from 0.58% to 0.92% over the course of four days. Had this trend continued, it could well have marked the “beginning of the end” for the Japanese economy.

Fortunately, interest rates settled down that Wednesday and fell back below 0.8% at one point. But as of 20 May the 10-year yield is still trading at 0.84%, which is higher than it was the preceding Thursday. I suspect the rise in yields has left market participants and observers alike much more cautious for the first time in years.

Although the stock market has welcomed the yen’s continued slide against the dollar, this trend needs to be carefully monitored, as simultaneous declines in JGBs and the yen can be interpreted as a loss of faith in the Japanese government and the Bank of Japan. It is also worth noting that small-cap equities and REITs both fell in tandem with government bond prices during this period.

Overseas, meanwhile, a major debate on an exit from quantitative easing by the Fed and the Bank of England seems to be starting in the US and the UK. The IMF has also released a paper discussing the costs of this exit, and I expect the discussion to become more active going forward.

Further Reading  Kyle Bass’ Latest Poll Tells Him Japan Will Implode

Richard Koo: Sharp rise in JGB yields despite BOJ easing is cause for concern….”

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“In August 1956, the Calder Hall Power Plant in Seascale, England began generating electricity and earned the distinction of being the world’s first commercial nuclear power plant. It was a humble beginning for nuclear power; the plant only had a 50-megawatt (MW) output capacity, whereas the smallest US plant today has a 478 MW capacity. Nonetheless, Calder Hall represented the launch of a new era in energy that promised to bring electricity too cheap to meter.

But early on, the promising power source had its detractors. They objected to the high initial cost of constructing nuclear plants, the problems of radioactive waste disposal, and the risks of nuclear accidents and nuclear proliferation.

The detractors had an impact. The heavy regulation they pushed for and the litigation they initiated extended construction times and drove up construction costs. But despite their efforts, over 100 reactors had been placed in service in the United States by 1974.

Then came 1979 and a landmark event – the nuclear accident at Three Mile Island. In the aftermath, public opinion turned solidly in favor of the anti-nuclear movement, several construction projects were canceled, and no new US building permits for nuclear power plants were issued for the next 33 years.

Though the US abandoned nuclear expansion in the 1980s, other countries forged ahead. Worldwide startups peaked in 1984 and 1985, as over 30 plants were brought online in each of those years. However, escalating regulatory and litigation costs and pressure groups were not unique to the US. By the 1980s, it was becoming difficult to cost-justify new projects. On top of all that, the Chernobyl accident occurred in 1986, and the world had its own Three Mile Island moment.

In the 1990s, global startups fell to an annual average of less than six per year; in the first decade of the new century, average annual startups were just over three per year. In fact, since 1990 there have barely been enough startups to offset shutdowns.

The recent flurry of closures was caused to a great extent by yet another accident. After the earthquake and tsunami in Japan on March 11, 2011 and the ensuing catastrophe at the Fukushima Nuclear Power Plant, several countries began to rethink their nuclear energy policies. In May 2011, Germany announced that it would abandon nuclear energy entirely, shutting down all 17 of its plants by 2022. In June 2011, Italian citizens voted overwhelmingly in favor of a referendum to cancel plans for new reactors. The Japanese Cabinet, though unclear about a specific plan, has issued a white paper calling for less reliance on nuclear power.

So is nuclear on its last legs? It would appear so… but before we make the funeral arrangements, let’s take a closer look.

A Nuclear Renaissance….”

 

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“Pope Francis criticized what he called “savage capitalism” on a visit to a food kitchen, in an address in which he called for the values of generosity and charity to be revived.

“A savage capitalism has taught the logic of profit at any cost, of giving in order to get, of exploitation without thinking of people … and we see the results in the crisis we are experiencing,” the pope said.

Francis greeted the men and women coming to the “Gift of Maria” food kitchen, located at the walls of the Vatican….”

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“As the BoJ prepares to thrill us with even moar in its latest policy meeting (or not as we discussed earlier) and with Amari et al. now jawboning JPY to some extent to control the out-of-control chaos in JGBs, it is perhaps worth taking 20 minutes to comprehend just what all this extreme policy action means….”

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“Federal prosecutors are considering charging hedge fund SAC Capital Advisors LP as a criminal enterprise through a powerful legal tool used against the Mafia and drug gangs, people familiar with the probe said.

It is rare for investment firms to be charged criminally under the Racketeer Influenced and Corrupt Organizations Act, commonly known as RICO. Such a step would require approval from top Justice Department officials….”

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“Despite the sequester—huge cutbacks in federal spending that were mandated by law in March—some high-level Federal executives are scheduled to get millions of dollars in bonuses, unless there’s a law to stop them.

According to a report released Fridayby the Senate Subcommittee on Financial and Contracting Oversight, the bonuses must be paid under current Congressional regulations, even with some $85 billion in government funding cuts in effect.

Senator Claire McCaskill, (D-Mo) chairperson of the subcommittee, has introduced legislation to prevent the bonuses from being handed out during the sequester. Senators Tom Coburn (R-OK) and Ron Johnson (R-WIS) are co-sponsors of the legislation.

“”The idea that some of the highest paid federal government employees could be getting bonuses while others are being furloughed is outrageous,” said McCaskill, on her web site. “This legislation will ensure that doesn’t happen.”

The bonuses would go to Senior Executive Service employees who meet certain performance criteria. The group makes up less than one percent of the federal workforce…..”

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“Richard Russell, the author behind the Dow Theory Letters, has long been one of the most bearish voices in the market.

So, it was a shock back in March when he told his followers to buy stocks.

While his sentiment continues to be overwhelmingly bearish, for now he reiterates his bullishness toward the market.

Here’s Russell via King World News:

“To be honest, I’m outright bullish on the market myself.  Strange, I woke up Sunday morning with this dream.  Bear markets are meant to clean out the financial garbage, and put the fear of God into investors and politicians.  The crash of 2008-09 failed to do that, mainly because the Fed stepped in and reputedly saved the US and the world from disaster….”

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“After thumbing through the latest quarterly filings from the world’s 50 biggest hedge funds, Factset has published its Q1 Hedge Fund Ownership Report.

“The 50 largest hedge funds increased their equity exposure by over 5% in Q1 2013,” said FactSet‘s Michael Amenta.

Their biggest holdings include popular names in familiar industries like internet search and personal electronic devices.

“While the top 50 hedge fund managers largely increased their exposure to equities, the funds also made significant reductions to their stakes in two successful stocks in 2013: News Corp. (Cl A) and American International Group Inc,” added Amenta.

Factset included its list of stocks most widely held by the 50 biggest funds.  Google was the most popular with 31 one funds betting on the search engine. At the bottom of their list was Icahn Enterprises, which is basically owned by none other than Carl Icahn.

We ranked this list of stocks by number of holders.  We also included the percentage of shares outstanding held by the top 50 funds.  And for your information, we also included the top three hedge funds that hold each of these stocks.

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“FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.

Rosenberg: “The Bull Market May Well Be In Complacency” (Gluskin Sheff)

“The gold-silver ratio has risen to its highest point in three years (August 2010) and in the past this served as a flash-point for a renewed risk-off trade. See the chart below and the divergence (S&P 500 surging and the gold-silver ratio sliding — historically this has a 71% correlation, likely because silver has far more industrial applications and as such this ratio is viewed as somewhat of a global economic barometer.) I have to say that when I read the front page of the USA Today business section and see this lead title: With Stocks This Hot, Why Worry?, with famed strategist Ed Yardeni declaring this to be the “mother of all melt-ups,” I do begin to worry. The bull market may well be in complacency.”

 

BlackRock’s Russ Koesterich Identifies 3 Places To Put Your Cash (Advisor Perspectives)

 

BlackRock‘s Russ Koesterich writes that it isn’t too late to move cash into  the market, though he warns that certain parts of the stock market look very expensive. Instead he suggests investors focus on 1. Some international markets like Brazil, China and Hong Kong. 2. U.S. Mega Caps – “they’re the cheapest area of the U.S. market and ten to be less volatile that small and mid-cap names.” 3. Some cyclical sectors like energy and technology….”

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“Eesha Khare, who is only 18 years old, just created the device of our dreams.

It’s a tiny a gadget that fits inside cell phone batteries, and allows them to fully charge within 20- to 30 seconds. Typically, it takes several hours to get a full charge.

We first saw the news over on SF Gate.

Khare demoed her “super-capacitor” last Friday at the Intel International Science and Engineering Fair…”

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