Volcker Rule Slashes $GS’s Capital Pledges to Investment Funds

“NEW YORK (Reuters) – Goldman Sachs Group Inc has slashed its capital pledges to investment fundsby nearly half since the Volcker rule was signed into law in 2010, as it prepares its principal investment business for restrictions on investing its own money, according to regulatory filings.

The Wall Street bank has reduced future commitments to hedge funds and funds that invest inprivate equity, credit and real estate, by $5.8 billion since June 2010, the last period before the Volcker rule was included in the Dodd-Frank financial reform act. That represents a reduction of 48 percent, according to data in filings with the U.S. Securities and Exchange Commission.

The Volcker rule – which has not yet been finalized or implemented – will prevent banks from investing more than 3 percent of Tier 1 capital in hedge funds or private equity funds, or from contributing more than 3 percent of capital from those funds.

Goldman’s existing hedge fund and private-equity fund holdings represented 14 percent of its Tier 1 capital as of March 31, according to its most recent filing on Thursday. Including future private-equity fund commitments, that ratio goes up to 17 percent.

It is not clear how the Volcker rule will treat credit funds or real-estate funds, or how much time banks will get to come into compliance with the law. Regulators are expected to release a final rule by the end of this year, after reviewing hundreds of letters from industry groups and the public about a proposal they released in October 2011….”

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“NEW YORK (AP) — A look at the 10 biggest percentage gainers on Nasdaq at 1 p.m.:

Tesla Motors Inc. rose 26.8 percent to $70.72.

Green Mountain Coffee Roasters Inc. rose 24.9 percent to $74.31.

Synta Pharm rose 12.8 percent to $7.74.

CSP Inc. rose 10.7 percent to $8.25.

Parametric Sound Corp. rose 10.6 percent to $20.68.

Syntroleum Corp. rose 9.3 percent to $6.02.

Providence Service Corp. rose 9.3 percent to $20.19.

Sangamo BioSciences Inc. rose 8.5 percent to $8.54.

Groupon Inc. rose 8.4 percent to $6.06.

Cirrus Logic Inc. rose 8.2 percent to $23.40.”

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“Every earnings season, companies share the details of their financial performance.  Additionally, many managers will reveal what they are seeing and what they are expecting for the economy.

The view out of Q1 2013?

Things have turned a corner, but it’s still slow going.

For instance, China is slowing down, but not so much that it will disrupt markets.

North America is looking great, especially in Mexico.

Among regions, it’s really just the European Union that’s really struggling — but even there, we may have bottomed out.

Consumer sentiment remains solid, even in the face of the sequester. And at least one company believes we’d be able to weather a pullback in dovish monetary policy.

Some companies are seeing scattered softness.

But overall, the snapshots indicate strength.

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“……The S&P has been up 56 of the 88 trading sessions so far,” writes Cashin.  “That rate of success is not only extremely rare, it is, borderline, unprecedented.  Fifty years of experience suggests streaks ultimately end – just ask Joe DiMaggio.  For now, enjoy the ride; be wary of rumors; stay very nimble and have a great weekend.”

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“Facebook appears to be close to makinganother billion-dollar acquisition to once again ramp up its mobile efforts: according to three reports in the Israeli press at Calcalist and sister publication Ynet andThe Marker (all in Hebrew), Facebook has approached Waze, the social mapping and traffic app maker, and is now in advanced due dilligence on a deal that Calcalist puts at between $800 million and $1 billion. The negotiations between the social network and crowdsourced mapping app apparently began six months ago.

We have been digging too and have picked up confirmation from a source that both sides have privately confirmed that the deal is happening, and that the pricing reported first by the Calcalist is accurate. The main issue right now, the source said, is whether to keep Waze in Israel or take it to the U.S., as Facebook did with two previous Israel acqusitions. Those were of feature phone interface developer Snaptu (bought for up to $70 million in March 2011) and facial recognition specialistFace.com (bought in June 2012 for $50-60 million).

But! Facebook and Waze have already come back to us with flat non-responses. “We do not comment on rumors or speculation about the business,” a spokesperson at Waze told TechCrunch. The company tells me that it currently has over 47 million active users — more than double what it had in July last year when it reported 20 million.

“We won’t comment on speculation,” a Facebook spokesperson said.

However, if the rumors are true, adding Waze to Facebook makes a lot of sense in some respects: Facebook has been putting a lot of effort into its mobile business, which now has 751 million monthly active users as of March 31, 2013, an increase of 54% year-over-year. That puts mobile on a faster track at the moment than Facebook’s desktop business, which currently has 1.11 billion MAUs, an increase of 23% year-over-year….”

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“Microsoft is offering to pay $1 billion to buy the digital assets of Nook Media LLC, the digital book and college book joint venture with Barnes & Noble and other investors, according to internal documents we’ve obtained. In this plan, Microsoft would redeem preferred units in Nook Media, which also includes a college book division, leaving it with the digital operation — e-books, as well as Nook e-readers and tablets.

The documents also reveal that Nook Media plans to discontinue its Android-based tablet business by the end of its 2014 fiscal year as it transitions to a model where Nook content is distributed through apps on “third-party partner” devices. Speculation about the plan to discontinue the Nook surfaced in February. The documents we have are not clear on whether the third-party tablets would be Microsoft’s own Windows 8 devices, tablets made by others (including competing platforms) or both. Third-party tablets, according to the document, are due to get introduced in 2014.

Nook e-readers, meanwhile, do not appear to fall into the discontinuation pile immediately. Rather, they’re projected to have their own gradual, natural decline — following the general trend of consumers moving to tablets as all-purpose devices.

Microsoft and B&N representatives declined to comment for this story.

A deal to buy the digital assets of Nook Media is the natural next step for Microsoft, which first announced a plan to work with Barnes & Noble on its Nook devices and content in April 2012, ponying up $300 million at the time to help. That plan included an additional $180 million advance to develop content for its Windows 8 devices — which Nook has been doing.

To date, there have been 10 million Nook devices sold, including both tablets and e-readers, with more than 7 million active subscribers. Microsoft has seen limited interested in its Windows 8 devices (although it says it has sold more than 100 million licenses for the OS to date). Currently the Nook app is available on every major platform, including Android, iOS and Windows…..”

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On the Wires 

“JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC) had perfect trading records in the first quarter, making money every day of the period as Morgan Stanley posted losses in eight sessions and Goldman Sachs Group Inc. in two.

One daily gain at JPMorgan exceeded $200 million as the biggest U.S. bank by assets recovered from last year’s London Whale derivatives loss, the New York-based company said yesterday in a regulatory filing. Bank of America, the second-largest lender, generated more than $25 million of revenue on 97 percent of trading days, compared with 76 percent at Morgan Stanley, the firms said in separate filings. Goldman Sachs, which generated about half its revenue from trading last quarter, said its team made more than $100 million on 17 days…..”

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“WASHINGTON (AP) — The number of Americans who applied for unemployment benefits fell by 4,000 last week to a seasonally adjusted 323,000, a fresh five-year low. The decline signals fewer layoffs and possibly more hiring.

The Labor Department said Thursday that the four-week average, a less volatile figure, dropped 6,250 to 336,750. That the fewest since November 2007, before the recession began.

Applications are a proxy for layoffs. Weekly applications have fallen about 9 percent since November and are now at a level consistent with a healthy economy.

The job market has also improved over the past six months. Net job gains have averaged of 208,000 a month from November through April. That’s up from only 138,000 a month in the previous six months.

Still, much of the job growth has come from fewer layoffs — not increased hiring. Layoffs fell in January to the lowest level on records dating back 12 years, though they have risen moderately since then. At the same time, overall hiring remains far below pre-recession levels and unemploymentremains high at 7.5 percent….”

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“DETROIT (Reuters) – Consumer Reports magazine awarded a near-perfect score to Tesla MotorsCo’s Model S, citing the electric car’s power, “pinpoint” handling and quiet, well-crafted interior.

The score of 99 out of 100 puts the Model S far ahead of other electric and gas-powered rivals, including the Porsche Panamera sports car and the Fisker Karma plug-in hybrid.

“Slipping behind the wheel of the Tesla Model S is like crossing into a promising zero-emissions future,” the highly influential magazine said in its review on Thursday. “It’s what Marty McFly might have brought back in place of his DeLorean in ‘Back to the Future’.”

Consumer Reports last gave a near-perfect score six years ago to the Lexus LS 460L luxury sedan made by Toyota Motor Corp, according to the magazine, which has more than 8 million subscribers.

The positive review comes on the heels of Tesla reporting its first quarterly profit in its 10-year history. Chief Executive Elon Musk is attempting to reach a broader group of buyers with the Model S electric sedan.

Consumer Reports said a Model S equipped with an 85 kilowatt hour battery was able to get 200 miles between electric charges. Range varied between 180 miles on cold winter days to about 225 miles in more moderate temperatures….”

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“WASHINGTON (Reuters) – Fannie Mae , the nation’s biggest mortgage finance company, said on Thursday it will pay $59.4 billion in dividends to the U.S. Treasury after a record profit in the first quarter that reflecting a multibillion dollar gain from reversing an earlier writedown of tax benefits.

The government-controlled company reported pretax income of $8.1 billion for the quarter and booked an additional gain of $50.6 billion on the tax assets, resulting in net income of $58.7 billion. That compared to a $2.7 billion profit in the same three months a year earlier.

Since its return to profitability, Fannie Mae has been considering when to start counting potential tax credits as part of its net worth….”

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“Brent futures fell for a third session as crude inventories in the U.S. increased. Iraq resumed oil exports via Turkey today after a halt caused by sabotage to a pipeline.

Brent dropped as much as 0.8 percent. Total U.S. crude stockpiles rose by 230,000 barrels, according to the Energy Department. Iraq’s state-run North Oil Co. repaired the pipeline to Turkey following a bombing attack yesterday in the city of Mosul. The weekly U.S. jobless claims will be announced at 8:30 a.m. Washington time and are expected to show an increase to 335,000, according to a Bloomberg survey.

“The market looks to be taking stock, awaiting the next economic data,” said Michael Hewson, a market analyst at CMC Markets Plc in London who expects WTI to peak at $98 this year. “It’s a demand story at the moment as inventories keep rising. We need positive economic news to stop the fall and that could come with the weekly jobless claims.”

Brent for June settlement fell as much as 78 cents to $103.56 a barrel, and was at $103.73 as of 12:39 p.m. London time on the ICE Futures Europe exchange.

West Texas Intermediate for June delivery was down 71 cents at $95.91 a barrel in electronic trading on the New York Mercantile Exchange. The front-month European benchmark was at a premium of $7.82 to WTI. It closed at $7.72 yesterday, the narrowest gap since January 2011.

U.S. Inventories….”

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“U.K. industrial production rose more than economists forecast in March as cold weather boosted demand for electricity and gas.

Output increased 0.7 percent from February, when it gained 0.9 percent, the Office for National Statistics said today in London. The median forecast of 31 economists in a Bloomberg News survey was for a gain of 0.2 percent. Electricity and gas surged 2.4 percent, the most since October. The data also showed that production increased 0.2 percent in the first quarter, matching an estimate in last month’s gross domestic product report.

Britain’s economy grew 0.3 percent in the three months through March and surveys suggest that the recovery may have continued into this quarter. Bank of England policy makers meeting today will probably maintain their target for asset purchases at 375 billion pounds ($583 billion) as they weigh risks to the rebound from the contraction in the fourth quarter.

The data “suggest that the economic recovery gained some momentum towards the end of the first quarter,” said Samuel Tombs, an economist at Capital Economics Ltd. in London. Still, “we doubt that this strong growth will be maintained. With the euro zone still deep in recession, any recovery in the export-dependent industrial sector this year is likely to be limp at best.”

The pound advanced against the dollar and the euro. It rose 0.2 percent to $1.5559 as of 10:31 a.m. London time and was 0.3 percent stronger at 84.43 pence against the euro. The yield on the 10-year U.K. government bond was little changed at 1.77 percent.

Manufacturing Growth…”

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“Sony Corp. (6758) forecast annual profit that missed analyst estimates as Chief Executive Officer Kazuo Hirai tries to win back customers from Samsung Electronics Co. with new Xperia smartphones and Bravia TVs.

Net income may rise 16 percent to 50 billion yen ($507 million) in the year started April 1, the Tokyo-based company said in a statement. That compares with the 66.4 billion-yen average of 18 analyst estimates compiled by Bloomberg.

Hirai used job cuts, asset sales, a weaker yen and blockbuster movies to return the company to profit after four years of losses as the electronics business struggles to recapture ground lost to Samsung. The South Korean company’s smartphones outsold Sony’s 7-to-1 last year, and its flat-panel TVs generated more than triple Sony’s revenue.

“Sony is being bullish,” said Takashi Oba, a senior strategist at Okasan Securities Co. “It’s up to whether it can reduce the losses in its electronics business and produce hit products.”

Sony posted a profit in the year ended March after it generated about $2 billion in one-time gains selling stock holdings and properties including its New York headquarters, a chemicals unit and shares in health-care data provider M3 Inc. (2413) Sony’s movie studio also topped the U.S. box-office last year with hits including “Skyfall” and “The Amazing Spider-Man.”

Operating Profit…”

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“China’s consumer inflation stayed subdued in April while the decline in factory-gate price declines deepened, adding to evidence of softer demand and giving the government room to raise utility fees.

The consumer price index (SHCOMP) rose 2.4 percent in April, the National Bureau of Statistics said today in Beijing, compared with a median forecast of 2.3 percent in a Bloomberg News survey. The producer price index fell 2.6 percent, after March’s 1.9 percent drop.

Inflation running below the government’s annual goal of 3.5 percent gives new Premier Li Keqiang leeway to loosen resource-fee controls that the World Bank says encourage pollution and limit incentives for new technologies. The producer-price deflation may reflect lower commodity prices and factory overcapacity…..”

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“Australian and New Zealand jobs growth surged, sending the currencies soaring and undermining central bank efforts to relieve pressure on manufacturers and exporters.

The number of people employed in Australia rose by 50,100 in April from a month earlier, more than four times economists’ estimates, and the jobless rate unexpectedly fell to 5.5 percent, government data showed today. New Zealand employers added a record 38,000 jobs last quarter and its unemployment plunged to a three-year low of 6.2 percent. Economists expected 6.8 percent.

Both currencies surged to levels that preceded the Reserve Bank of Australia’s decision two days ago to cut the benchmarkinterest rate to a record low and New Zealand Governor Graeme Wheeler’s announcement a day later that he has intervened to weaken the kiwi. South Korea also cut rates today to ease pressure on exporters. The surge in Australian jobs may undermine the case for RBA Governor Glenn Stevens to add to 2 percentage points of reductions in the past 19 months.

“Reserve Bank Board members probably winced when they heard the job numbers,” said Craig James, a senior economist at a unit of Commonwealth Bank of Australia, the nation’s biggest lender. “The Reserve Bank will probably leave a rate cut on the table over the next few months. But more figures like this and it clearly won’t be acting on the easing bias.”

Currency Reaction

The Australian dollar jumped as high as $1.0254 from $1.0165 before the jobs data. The three-year bond yield rose six basis points, or 0.06 percentage point, to 2.57 percent. The move in yields was the biggest since March 25.

The kiwi bought 84.61 U.S. cents at 6.24 p.m. in Wellington from 84.09 cents before the report. The currency had declined to a five-week low yesterday…”

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“The Bank of Korea cut interest rates, following the lead of policy makers in Australia, Europe and India this month, as strength in the won and weakness in the yen dim the outlook for the nation’s exports.

Governor Kim Choong Soo and his board lowered the benchmark seven-day repurchase rate to 2.5 percent from 2.75 percent, the central bank said in a statement in Seoul today. Six of 20 economists surveyed by Bloomberg News predicted the move while the remainder forecast no change. Kim supported a cut after opposing one last month.

As central banks around the world move to counter currency appreciation, the won’s 24 percent jump against the yen in six months is hampering South Korean exporters of autos and electronics and aiding their Japanese rivals. In Seoul, ruling New Frontier Party floor leader Lee Hahn Koo yesterday urged a “more active role” for the BOK, adding to political pressure that the central bank resisted last month.

“Japan’s policies must have played a very big role in today’s decision,” said Huh Kwan, a Seoul-based fixed-income trader at Korea Investment & Securities Co., one of South Korea’s 20 primary dealers. “The cut can be seen as action to ease a worsening impact on exports.”

The won was little changed against the dollar, trading at 1,086.65 as of 11:44 a.m. in Seoul. The Kospi stock index rose 0.8 percent.

China, Australia

Across the Asia Pacific region, data gave a mixed picture. China reported inflation below the government’s 3.5 percent target and the steepest decline in producer prices in six months, highlighting weakness in the world’s second-biggest economy. Australian employers added more than four times as many jobs as analysts estimated, sending the local currency higher…..”

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“Asian stocks dropped, with the regional benchmark index retreating from a five-year high. Japan’s Topix Index erased gains as the yen strengthened, dimming the outlook for the nation’s exporters.

Canon Inc. (7751), which loses almost $80 million for every 1 yen Japan’s currency gains against the dollar, fell 1 percent. Bridgestone (5108) Corp., the world’s biggest tire maker, sank 6.6 percent in Tokyo after keeping its full-year profit forecast below analyst estimates. GS Engineering & Construction Corp. jumped 6.8 percent after the Bank of Korea cut interest rates….”

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