‘Target’ Funds Vulnerable to Rate Rise; “People think this is safe money. Losing money in bonds is a brutal way to lose money.”

Updated April 23, 2013, 8:04 p.m. ET

‘Target’ Funds Vulnerable to Rate Rise

LIAM PLEVEN and JOE LIGHT

Millions of workers saving for retirement risk losing part of their nest eggs if interest rates jump. The cause for concern: target-date mutual funds, designed for investors who lack the time or expertise to balance their investment portfolios. The funds typically increase their bondholdings with the approach of the target date, which is pegged to the investor’s expected retirement year. In theory, more bonds should make portfolios safer, because bonds tend to be less risky than assets such as stocks. But if yields rise and bond prices slump, as many experts predict, the funds could suffer losses.

“People think this is safe money,” said Dave Scott, chief investment officer of Sunrise Advisors, a registered investment adviser in Leawood, Kan. “Losing money in bonds is a brutal way to lose money.”

Read more of this post

Falling Yen Sets Stage for Profit Windfall

April 23, 2013, 3:00 p.m. ET

Falling Yen Sets Stage for Profit Windfall

By MAYUMI NEGISHI And DANIEL INMAN

TOKYO—When Japan’s biggest companies begin to report earnings this week, they are expected to forecast the highest profits in six years and higher capital spending, raising hopes that this time, the country’s corporate recovery could have staying power.

After years of belt tightening, the yen’s recent drop is expected to propel corporate earnings to new heights. At ¥100 to the dollar—around the current level—pretax profit at the top 200 Japanese companies is forecast to rise 75% to ¥16.09 trillion ($162.15 billion) in the fiscal year that started this month, according to Daiwa Securities.

Read more of this post

How the Wheels Came Off for Electric-Car Firm Fisker; U.S. Loans Saddled It With Factory Never Used

Updated April 24, 2013, 4:09 a.m. ET

How the Wheels Came Off for Fisker

Untested Electric-Car Firm Was Ripe for the Times; U.S. Loans Saddled It With Factory Never Used

By YULIYA CHERNOVA and MIKE RAMSEY

For a few months in 2012, Bruce Simon, the chief executive of gourmet food retailer Omaha Steaks International Inc., drove a $100,000 plug-in hybrid electric car known as the Fisker Karma. No longer.

Mr. Simon says his car broke down four times over the span of a few months. Each time, Fisker Automotive Inc. picked it up and sent it by trailer from his home in Omaha, Neb., to a dealer in Minneapolis.

The Karma was “so vulnerable to software errors, and the parts used were of such poor quality that eventually I insisted they take the car back and return my purchase price, which they did,” he says. “It’s a real shame, the car itself was beautiful.”

The near collapse of the Anaheim, Calif., company—it missed a loan payment on Monday, earlier dismissed most of its staff and has hired bankruptcy advisors—comes as affluent buyers like Mr. Simon have turned away from the once promising startup and falling gasoline prices have chipped away at demand for electric cars. Read more of this post

Soros looking set to attack Asian currencies again

Soros looking set to attack Asian currencies again

Staff Reporter

2013-04-24

George Soros may be paying attention to Asian currencies again. The currency speculator recently paid a visit to China and Hong Kong, triggering concerns of his return to the region after his large bet against the Thai baht in the late 1990s.

The hedge fund billionaire has reportedly made more than U$1.2 billion betting against the Japanese yen since November of last year.

Early this month, Soros attended an annual convention in Hong Kong organized by the Institute for New Economic Thinking, a New York City-based nonprofit thinktank he co-founded.

At the conference on April 6, Soros joked that he was ready to attack the Hong Kong dollar, in response to a question from the audience on whether Soros might be shorting the currency as his next target after the yen. Read more of this post

Bond Bubble, Or Rational Expectations? Visualizing 220 Years Of Treasury Yields

Bond Bubble, Or Rational Expectations? Visualizing 220 Years Of Treasury Yields

Tyler Durden on 04/23/2013 22:09 -0400

Near multi-generational low bond yields, driven at least in part (and some think in full) by the undeniably large asset purchase program (Quantitative Easing (QE)) that the US Federal Reserve has been implementing in one form or another since the 2008 Global Financial Crisis (GFC), have pushed the question of whether or not the bond market is a bubble to the front of many people’s minds. However, while the chart below of over 220 years of 10-year treasury yields shows the extraordinarily low bonds yields, they have resulted from many fundamental and rational drivers (expectations of weak economic growth and safe haven flows amid the European sovereign debt crisis) in addition to Fed purchases. So while bond prices look expensive, there is nothing particularly bubbly about the bond market today.

How to Predict the Next Big Bailout; Real estate agents who help Chinese investors buy homes abroad say the easier it is for their clients to buy citizenship, the likelier it is for the country’s economy to tip over into crisis

April 23, 2013, 6:16 PM

How to Predict the Next Big Bailout

After Cyprus, who’s next to fall? Real estate agents in China have their own crude method for identifying the next domino. And it doesn’t involve number crunching banks’ balance sheets.

Real estate agents who help Chinese investors buy homes abroad say they can guess which country is facing financial ruin by the level of restrictions attached to their investment immigration programs. That is, the easier it is for their clients to buy citizenship, the likelier it is for the country’s economy to tip over into crisis.

Read more of this post

Everyone wants to be a REIT; Restyled as Real Estate Trusts, Varied Businesses Avoid Taxes

April 21, 2013

Restyled as Real Estate Trusts, Varied Businesses Avoid Taxes

By NATHANIEL POPPER

A small but growing number of American corporations, operating in businesses as diverse as private prisons, billboards and casinos, are making an aggressive move to reduce — or even eliminate — their federal tax bills. They are declaring that they are not ordinary corporations at all. Instead, they say, they are something else: special trusts that are typically exempt from paying federal taxes. The trust structure has been around for years but, until recently, it was generally used only by funds holding real estate. Now, the likes of the Corrections Corporation of America, which owns and operates 44 prisons and detention centers across the nation, have quietly received permission from the Internal Revenue Service to put on new corporate clothes and, as a result, save many millions on taxes. The Corrections Corporation, which is making the switch, expects to save $70 million in 2013. Penn National Gaming, which operates 22 casinos, including the M Resort Spa Casino in Las Vegas, recently won approval to change its tax designation, too.

Read more of this post