Bond Love Endures for Investors Unconvinced Rally’s Over

Bond Love Endures for Investors Unconvinced Rally’s Over

Bill Gross, the world’s largest fixed-income manager, says the bull market for bonds may have ended last month. Investors are staying put.

Four years into the biggest rally in U.S. stocks since 2000, bond mutual funds are attracting more money than their equity counterparts. After at least three warnings from Gross that the fixed-income market has peaked, there’s no evidence of what strategists including Michael Hartnett of Bank of America Corp. have predicted would be a ‘great rotation’ out of fixed income into stocks.

“For the past 25 years, you’ve seen the stable decline of interest rates and a level of comfort that bonds are the stable asset,” Rick Rieder, New York-based BlackRock Inc.’s co-head of fixed income in the Americas, said in an interview. “Money will still flow into bond funds for the next couple of years because of the tremendous need for income by an aging population.” Read more of this post

Gross to Buffett Omens Disregarded as Sales Soar: Credit Markets

Gross to Buffett Omens Disregarded as Sales Soar: Credit Markets

Sales of corporate bonds in the U.S. are surging toward the busiest May ever as borrowers race to the market before demand dries up with Bill Gross and Warren Buffett cautioning against buying debt at all-time low yields.

Petroleo Brasileiro SA’s $11 billion deal, the biggest on record for an emerging markets issuer, leads sales this month of $120.2 billion, on pace to exceed the unprecedented $162.6 billion sold in May 2008, data compiled by Bloomberg show. Issuance has already eclipsed the $108.2 billion sold in all of May 2012.

Borrowers are accelerating sales as speculation mounts that yields may only rise amid signs the economy is improving. Three Federal Reserve regional bank presidents called last week for phasing out the central bank’s monthly purchases of $40 billion in mortgage-backed securities as the housing recovery shows signs of gaining momentum, potentially reducing demand for riskier assets from stocks to speculative-grade bonds.

“Many issuers may decide it is not worth tempting that fate,” Edward Marrinan, a macro credit strategist at RBS Securities in Stamford, Connecticut, said in a telephone interview. The firm is one of the 21 primary dealers of U.S. government securities authorized to trade with the Fed. Read more of this post

Knesset to vote on law tightening pyramid structure of Israeli businesses

Knesset to vote on law tightening pyramid structure of Israeli businesses

Lawmakers agree to give holding groups six years to dismantle excess layers of their “pyramid” structure after the bill becomes law.

By Zvi Zrahiya | May.21, 2013 | 9:11 AM

The Knesset Finance Committee is scheduled to vote on Tuesday on the Business Concentration Law, after lawmakers agreed to toughen its terms to permit no more than two tiers of chained ownership, committee chairman Nissan Slomiansky ‏(Habayit Hayehudi‏) said Monday.

However, lawmakers agreed to give holding groups six years to dismantle excess layers of their “pyramid” structure after the bill becomes law. That is two more years than the government panel proposing the law wanted to allow. That panel had also proposed limiting pyramids to two tiers only for new holding groups, while letting existing groups retain three. Read more of this post

ThyssenKrupp Woes Tarnish 99-Year-Old German Steel Baron’s Legacy

ThyssenKrupp Woes Tarnish 99-Year-Old Steel Baron’s Legacy

For 60 years, the name of Berthold Beitz has been synonymous with Germany’s biggest steelmaker, ThyssenKrupp AG (TKA), at first for his role in rebuilding the former arms supplier and helping it break with its Nazi past.

Now, as head of the foundation that holds a 25.3 percent blocking minority, the 99-year-old has become a symbol of much that has gone wrong at the Essen-based company, whose stainless steel was used in Manhattan’s Chrysler and Empire State buildings. ThyssenKrupp is again seeking renewal after a botched expansion in the Americas and bribery and price-fixing scandals pushed it to a 4.7 billion euro ($6.1 billion) annual loss.

The power wielded by the German industrialist, who was a little known insurance executive when he was hired as general manager by the last Krupp family owner in 1953, is under attack from investors who hold him partly accountable for lax corporate governance that led to the missteps. With the company on May 15 refusing to rule out a capital increase to repair its balance sheet, the foundation over which Beitz presides risks losing its influence. Read more of this post

Mexico’s 400,000 Abandoned Homes Draw Venture Capital

Mexico’s 400,000 Abandoned Homes Draw Venture Capital

Mexico’s attempt to solve the country’s housing shortage by constructing millions of new homes far from city centers has crippled the nation’s homebuilders and fueled record foreclosures. For Antonio Diaz, a former investment banker with Banco Santander SA, it’s an opportunity.

Diaz’s company, backed by a venture-capital firm whose funders include JPMorgan Chase & Co. and the Soros Economic Development Fund, is buying foreclosed homes for as little as 60 percent of face value, refurbishing them and then selling them for up to 90 percent of a new home price. The number of properties sold by Tijuana-based Comunidades que Renacen SAPI, or ProVive, climbed 10-fold to 530 last year, and its target is to sell 1,300 units in 2013, said Diaz.

For Diaz, 53, it’s not just about making money. It’s an attempt to repopulate towns that face an exodus and plunging property values after the government subsidized developments that sprawled too far from cities and led to unattended buildings that lured criminals and illegal tenants. He estimates there are 400,000 deserted homes and another 200,000 held by squatters, even as the economy is projected by the government to grow 3.1 percent this year.

The number of empty properties “creates a very interesting universe for doing business,” Diaz said. Read more of this post

As Greece Struggles with Debt Crisis, Its Shipping Tycoons Still Cut a Profit

As Greece Struggles with Debt Crisis, Its Shipping Tycoons Still Cut a Profit

By Yannis Palaiologos / AthensMay 16, 201312 Comments

On December 5 last year, the Ob River, an 288-metre LNG (Liquefied Natural Gas) tanker with a capacity of 84,682 deadweight tonnes chartered by Russian energy giant Gazprom, arrived at the Japanese port of Tobata. The ship belonged to Dynagas, a privately held company owned by George Prokopiou, one of Greece’s preeminent shipping magnates.

It was a delivery of historic significance. To make it, the Ob River had traveled through more than 3,000 miles of the bleak, icy expanse of the Northern Sea Route, accompanied by two nuclear-powered Russian icebreakers. It was the first ever sea voyage of an LNG cargo through the frozen waters north of Siberia, cutting the distance traveled from Norway to Japan by more than 5,000 miles compared to the Suez Canal route. Read more of this post

Financial markets are at risk of a ‘big data’ crash

May 20, 2013 6:37 pm

Financial markets are at risk of a ‘big data’ crash

By Maureen O’Hara and David Easley

Regulation needs to adapt to computerised details, write Maureen O’Hara and David Easley

Regulators and investors are struggling to meet the challenges posed by high-frequency trading. This ultra-fast, computerised segment of finance now accounts for most trades. HFT also contributed to the “flash crash”, the sudden, vertiginous fall in the Dow Jones Industrial Average in May 2010, according to US regulators. However, the HFT of today is very different from that of three years ago. This is because of “big data”.

The term describes data sets that are so large or complex (or both) that they cannot be efficiently managed with standard software. Financial markets are significant producers of big data: trades, quotes, earnings statements, consumer research reports, official statistical releases, polls, news articles, etc. Read more of this post

Adaro Energy Chief Says Thermal Coal at $100 a Ton Is New Normal, which is half a peak reached in 2008

Adaro Energy Chief Says Coal at $100 a Ton Is New Normal

PT Adaro Energy (ADRO), Indonesia’s second-biggest producer of power-station coal, said miners will have to adjust to prices of about $100 a metric ton, which is half a peak reached in 2008.

“The new normal, I think, would be $95 to $100 a ton, based on the marginal cost of production in the region,” Adaro Energy President Director Garibaldi Thohir said in an interview.

A slump in coal prices will help ease oversupply as it would prompt some small and high-cost miners to reduce output or stop production, Thohir said in his office in Jakarta on May 17. Adaro is expected to report lower net income this year than in 2012, Thohir said, without giving a specific forecast.

The price of coal has fallen by more than half since a peak in mid-2008 amid slowing Chinese imports and rising output from producers including Indonesia and Colombia. The decline is forcing companies including Adaro to trim costs to safeguard margins. Thohir said the price may have bottomed. Read more of this post

15 years on, debate over Suharto’s legacy still simmers

15 years on, debate over Suharto’s legacy still simmers

BY – 5 HOURS 11 MIN AGO

JAKARTA — Tree-lined Cendana street in an upscale neighbourhood in central Jakarta has not changed much in recent decades, save for the demolition of a few Dutch colonial homes in favour of modernist villas. Yet, a former resident whose home once took up the entire middle of the block initiated dramatic changes in his country and, 15 years after he disappeared from Indonesia’s political scene, debate still rages about whether they were for better or worse.

Cendana is synonymous with Suharto, the army general-turned-President who ruled Indonesia for 32 years while residing in the houses at Nos 6, 8 and 10, which were renovated and connected. After his death in 2008, an Indonesian Web portal dedicated to paranormal activity published an account by an elderly servant who said Suharto’s ghost was still there and occasionally pinched and poked him.

Perhaps. But more certain is that Suharto’s spirit continues to loom over modern-day Indonesia. Read more of this post

Japan Inc. averse to further yen drop, poll finds

Exclusive: Japan Inc. averse to further yen drop, poll finds

By Kaori Kaneko, Tetsushi Kajimoto

Filed 10 hours ago

TOKYO – Signs are that most firms in export-driven Japan Inc, having got the weaker yen they craved, now want the currency to either stabilize or recover ground, rather than continue a slide that will increasingly raise their costs.

About half the Japanese companies in a new Reuters survey say the yen has fallen enough, just 15 percent want a further yen decline and more than one-third would in fact like to see the currency rebound from its 4-1/2-year lows.

At the same time, top officials in Prime Minister Shinzo Abe’s half-year-old government — who used to stress the urgency of reversing the yen’s strength — have also begun highlighting the downside of the yen’s steep slide, such as higher imported-energy costs. Read more of this post

A Japanese government panel warns there is “absolutely no guarantee” that domestic investors will keep financing the country’s massive public debt, citing the risk of a spike in bond yields that could crimp long-term growth prospects

Exclusive: Japan panel warns of dangers if debt not addressed

8:57am EDT

By Takaya Yamaguchi

TOKYO (Reuters) – A Japanese government panel warns there is “absolutely no guarantee” that domestic investors will keep financing the country’s massive public debt, citing the risk of a spike in bond yields that could crimp long-term growth prospects, according to a draft report seen by Reuters on Monday.

The warning from the advisory panel to Finance Minister Taro Aso comes at a critical time – when the government bond market has seen volatile price falls, underscoring a delicate balancing act for Prime Minister Shinzo Abe’s government.

Abe has unleashed huge fiscal and monetary stimulus to spur short-term growth, sending stock prices .N225soaring. But at the same time, he is trying to convince investors that over the longer term Japan will tackle a public debt that, at more than twice the nation’s annual economic output, is the biggest in the developed world. Read more of this post

Japan Inc. Should Take a Look in the Mirror

Japan Inc. Should Take a Look in the Mirror

Sony Corp.’s curt dismissal of a foreigner’s advice last week didn’t shock Michael Woodford, the former chief executive officer of Olympus Corp.

“The club, meaning corporate Japan, will do everything it can to mask and hide what’s wrong. That’s what’s most important,” said Woodford, a Briton who was fired in late 2011 after he exposed a $1.7 billion accounting fraud in his own company.

Woodford’s tale is worth revisiting as Sony rebuffs a proposal from hedge-fund investor Daniel Loeb for the company to sell off its entertainment divisions and focus on hardware. Far from being rewarded for trying to clean up the 93-year-old Olympus, Woodford was ousted by his board, which criticized him for being culturally insensitive. Clearly the non-Japanese CEO didn’t understand the clubby, docile ways of Japan Inc.

Now Loeb is running into a similar wall of disdain. Sony CEO Kazuo Hirai has 100 billion reasons — the market value in dollars the company has lost since 2000 — to consider the American’s plea to bring more focus to Sony’s disjointed businesses. Yet Hirai is unmoved. Why? Even though Loeb holds a sizable $1.1 billion stake in the company, Hirai knows a critical mass of domestic investors, the ones who really matter, are certain to support him against any brash outsider. Read more of this post

China trying to manage exposure of corruption online

China trying to manage exposure of corruption online

7:29am EDT

By Terril Yue Jones

BEIJING (Reuters) – China’s Internet is brimming with disclosures of officials collecting bribes, homes and luxury accessories as casually as they do mistresses.

But while the government tolerates such anti-corruption vigilantism, it is also extremely leery of the threat the Internet can pose to Communist Party rule.

The Internet is the new tool in the fight against corruption – a cornerstone policy of new President Xi Jinping, who has pledged to tackle the problem head-on.

But while acknowledging that China’s online world is helpful, authorities have also moved quickly to quash rumors that might fan protests that could escalate out of control, deleting microblog posts or even entire accounts. Read more of this post

The only Fortune 500 company that’s grown faster than Apple; A big player in a low-profile business has outpaced the tech giant in both revenue growth (10-Yr) and stock return (5-Yr)

The only Fortune 500 company that’s grown faster than Apple

May 20, 2013: 10:38 AM ET

A big player in a low-profile business has outpaced the tech giant in both revenue growth and stock return.

World Fuel Services sells fuel to cargo ships and tankers globally.

By Brian O’Keefe, assistant managing editor

Fortune — The growth of Apple (AAPL) over the past decade is one of the most extraordinary stories in American business history. Ten years ago, the computer giant ranked No. 300 on the Fortune 500 with $5.7 billion in revenues. This year — millions of iPods, iPhones, and iPads later — Apple is ranked No. 6 on the 500 with $156.5 billion in revenues. And yet, Apple is not the fastest-growing company in the Fortune 500 over that span — at least on a percentage basis. That honor belongs to a company called World Fuel Services (INT), which ranks No. 74 on this year’s 500 list with $38.9 billion in revenues. Over the past decade, World Fuel grew its revenues at a blistering annual rate of 39.8%, or just good enough to edge out Apple’s average annual growth rate of 39.2%. Here’s another surprising fact about World Fuel Services: Its stock has easily trounced both Apple and the broader market over the past five years: In that span World Fuel shares have risen 230% vs. 131% for Apple and just 17% for the S&P 500. Read more of this post