Month: February 2013

Microsoft is losing $2.5 bn a year by no being on iPad

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Microsoft’s pride may be costing it billions of dollars. The tech giant may be missing out on about USD 2.5 billion in revenue by not offering its Office Suite — which includes Word, Excel, and PowerPoint — on Apple’siPad.

(Read More: Microsoft Surface Pro Gets Tough Early Reviews )

According to a recent note investors, Morgan Stanley analyst Adam Holt said he estimates that priced at USD 60, about 30 percent of iPad users would buy the software. With 200 million iPad users in 2014, Microsoft could generate USD 2.5 in revenue, and that is after it pays Apple a 30 percent App Store commission.

(Read More: When to Expect Apple iTV, iPhone 5S and Tablets: Analyst )

That’s a nice chunk of revenue for the company. But so far Microsoft has been reluctant to offer a full version of its software suite on Apple’s iOS because they are relying on their software to be something that entices consumers to buy the Surface tablets. Their strategy may not be paying off though, at least not yet.

“While MSFT has resisted offering a full version of Office for the iOS, the co. may ultimately decide there is more upside with Office on iPads, particularly if Win tablets fall short of expectations,” Holt said in the note.

Holt also noted that while Microsoft new operating system Windows 8 gives the company potential for a new source of revenue growth, the limited availability of Windows touchscreen devices has slowed consumer demand at the same time the corporate upgrade cycle is slowing.

(Read More: Supply Shortage Sours Microsoft’s Surface Pro Launch)

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Warren Buffett: ‘I’m Ready for Another Elephant’

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Warren Buffett told CNBC that even after teaming up with 3G Capital Management to acquire H.J. Heinz, he’s still looking for another big acquisition and has the cash to pay for one.

Speaking in a live “Squawk Box” telephone interview with CNBC’s Becky Quick, Buffett joked, “I’m ready for another elephant. Please, if you see any walking by, just call me.”

That’s a reference to his letter to Berkshire Hathaway shareholders in 2011, in which he wrote about the need for major acquisitions to maintain growth in the company’s non-insurance businesses. “We’re prepared. Our elephant gun has been reloaded, and my trigger finger is itchy.”

Buffett said Berkshire is contributing “something between” $12 and $13 billion of the deal, so there’s plenty of cash available for another big acquisition if Buffett finds one.

(Read More: Is Buffett Still a Bargain Hunter?)

Buffett said that at the end of 2012, Berkshire had $47 billion of cash. He likes to always have around $20 billion available, so the “excess cash” was roughly $27 billion. That would leave something between $14 and $15 billion for another purchase.

He added, “Of course, the cash builds from month to month, so the gun is always getting reloaded.” Berkshire uses the cash “float” generated by premiums for its insurance businesses to make investments and acquisitions.

Buffett said that while Berkshire is putting up half the equity for the deal, 3G will be primarily responsible for running Heinz. “It’s their baby from an operational standpoint.”

That’s fine with him. “It’s a great partnership for us. And any partnership where I don’t have to do the work is my kind of partnership.”

Buffett said he has full confidence in 3G’s ability to run Heinz. “I don’t think I’ve ever seen a better developed management group than the one Jorge Paulo Lemann has developed over the years in Brazil. He’s an incredible guy.”

Asked why he is willing to pay a 20 percent premium for Heinz, Buffett replied, “It’s our kind of company. It’s got a group of fantastic brands led by ketchup. Referring to his fondness for cheeseburgers, Buffett joked that he had sampled Heinz ketchup “many, many times.”

As for the U.S. economy, Buffett said conditions have been “remarkably similar since the late summer of 2009.” Berkshire’s economy-dependent businesses have “steadily gotten better but not at a fast clip, and that continues to this day.”

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

India’s e-Commerce ‘gold rush’ fraught with risks

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Increasing at an unprecedented pace, India was home to the fastest growing online market among the BRIC (Brazil, Russia, India and China) nations last year, fueling a booming e-commerce market.

The number of unique online visitors in India grew 50 percent in the 12 months to November 2012, according to internet analytics firm comScore, outpacing the likes of China and Brazil, which grew just 2 to 3 percent each.

And with an estimated three out of five online Indians visiting retail websites during that period, analysts say India is well on its way to becoming one of the world`s biggest online retail markets.

But there are also some major challenges ahead. Low internet penetration, the lack of profitability among online retailers, the fact that bricks and mortar shopping is still a relatively new concept in India`s developing economy means it could be up to another five years before online retail truly takes off and commands a larger slice of the country`s $450 billion retail market, experts say.

“[There are] 110 million people who have access to the internet of any sort, and not all of them are keen on participating in e-commerce – so the space that you`re playing in is still very, very small,” said Dheeraj Sinha, author of the book “Consumer India: Inside the Indian Mind and Wallet.” “The population that you have online has built up over a period of five years.”

According to the Mumbai-based Sinha, the “big jump” among India`s billion-plus consumers from surfing the internet to becoming keen online shoppers will take time and retailers considering entering the online retail market should have at least a five-year horizon in mind.

Right now, online retail makes up less than 1 percent of India`s retail market, according to Euromonitor, but is expected to reach up to 8 percent market share by 2020.

Some of the big players in India`s online retail market include the U.S.`s Amazon.com, which also runs Indian website Junglee.com, book-seller Flipkart.com, online marketplace Snapdeal.com and apparel retailer Jabong.com.

Saloni Nangia, president of management consulting firm Technopak, which focuses on the consumer goods industry, says it could be another three to four years before a dramatic shift in shopping habits takes place.

“The number of (online) transactions have increased, the number of people who are more comfortable shopping online has increased, but in terms of the businesses which are in e-commerce – there has been a slowdown overall from earlier growth,” Nangia said.

Biggest Challenge: Profitability

The cost of attracting consumers to shop online in India has come at a very high price for online retailers, according to Nangia, who says developing the country`s e-commerce ecosystem is impacting their bottom line.

“E-commerce companies have spent a lot of money, so they have ended up with a very high activation cost and the cost of acquisition at times is much higher than the average purchase or business that is generated from that customer,” Nangia said. “The first few years have been good to develop the base for the industry, but it`s increasingly becoming important that companies look at the profitability of the business as well.”

Manu Jain, co-founder of Jabong.com, a leading Indian online apparel retailer that entered the market just over a year ago says that while he expects year-on-year growth for his business to be on track with industry estimates of a 300-350 percent rise in revenue, the company is not in profit yet.

“I think we`re moving in the right direction towards the path to profitability and we hope that we should be able to achieve it faster than anybody else in India. We still require investor money, but we hope to become profitable soon,” Jain said.

Snapdeal.com, India`s leading business to consumer or B2C website, which has over 20 million registered users is also waiting to make a profit despite seeing the cost of purchases on its website more than triple over the past year.

“Our cost base is very, very low given that we don`t hold any inventory, we don`t have any warehouses, we don`t own delivery vans and all those things,” Kunal Bahl, co-founder and CEO of Snapdeal.com said, when asked about profitability. “We`re still in the early days, investments have to be made in driving consumers and brands to digital commerce.”

Unique Shoppers

To attract consumers to online shopping, retailers have used tactics such as payment by cash or credit card on delivery and no questions asked return policies.

Technopak`s Nangia expects retailers to increasingly pull back on these offers as they try to rationalize costs in 2013. “We should see much emphasis on profitability per shipment than we have seen till now,” she said.

Shabori Das, reseach analyst at Euromonitor in Bangalore, however, says that if online retailers take back offers like cash on delivery (COD), they`ll lose out on big segment of the Indian consumer base: those who do not have bank accounts or debit and credit cards.

“India is an extremely price-sensitive market and if someone is taking back the offer and the other one is still offering, it`s bound to happen that the one who`s offering COD will get more sales,” Das said.

Bahl of Snapdeal.com said he has no plans to change options like COD, because India is an 85 percent cash economy and people will not make a “significant behavioral change overnight.”

“While cash on delivery may create 3 percent more returns, I see it as a small price given the market expansion that it facilitates,” he said.

Mumbai resident Surova Kar opts more for COD than paying directly online when she`s not sure of the fit of items like shoes or clothing or even the reputation of the retailer.

“It feels like the product comes faster for cash of delivery – delivery is very fast, within 24 hours sometimes,” Kar, 34, said.

The stay-at-home mom says she orders everything from diapers to clothing up to twice a month for her 15-month old baby online and is now very comfortable with the retailer she uses.

“Since I use this one website, they are extremely good, and now I can order completely blindly with them – that`s the level of trust I have got now,” Kar said.

And building trust is a big part of how India`s online retailers plan to keep their businesses growing.

“The overall acceptability and willingness to buy online has increased tremendously and we see a huge amount of orders coming from not only bigger metros, but also from smaller cities,” said Jabong.com`s Jain.

Consumers are buying more now, because there`s more trust in the system, Bahl of Snapdeal.com added.

“We`re making sure he`s [the customer`s] giving you a dollar very quickly then coming back again and again to give you more dollars,” Bahl said.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Come on G-20, Cut Japan Some Slack

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Japan’s economic policies, which have driven down the yen’s value and given local exporters a powerful boost, are expected to be in the firing line at a meeting of G-20 finance ministers. But perhaps it’s time to cut Japan a little bit of slack, some analysts say.

Policymakers from Asia and Europe have stepped up criticism of Japan, where expectations for aggressive monetary easing have pushed the yen down 15 percent against the dollar over the past three months. The yen has shed 20 percent of its value against the euro and fallen 13 percent versus South Korea’s won over the same time period.

While the yen has fallen sharply and quickly, its weakness should be seen in the context of a period of prolonged strength, said Vasu Menon, vice president for wealth management at OCBC Bank.

“The yen is weakening from a position of extreme strength,” he told CNBC Asia’s “Squawk Box.” “So, I think the G-20 will cut Japan some slack.”

The G-20, a forum of developed and emerging market nations for the most important global economic and financial issues, kicks off a meeting in Moscow on Friday.

“Japan is still the world’s third largest economy – this is a point that the media and the markets are not talking enough about,” Menon said. “Japan has been in the doldrums for the past two decades… If it’s able to revive itself that’s in everyone’s interest.

Data released on Thursday showed Japan’s economy remained in recession in the final three months of last year.

(Read More: Why You Should Look Past Japan’s GDP Miss)

The yen may have fallen sharply in recent months, but it’s a different story when viewed in the context of recent years. In the past five years, the yen is about 13 percent stronger against the greenback. Compare that with other major currencies: the euro has depreciated about 16 percent against the dollar over the past five years while sterling is down about 20 percent.

“In Japan’s defense, what they (policymakers) are trying to do is fight deflation and revive economic growth, so if they do this by increasing their balance sheet (via monetary stimulus) a by-product of that will be a weaker yen,” said Jonathan Cavenagh, senior FX strategist at Westpac Bank in Sydney, adding that the G-20 would probably shy away from making any accusations about “currency manipulation.”

“Obviously, there will be some accusations thrown from the sidelines of the meeting,” he said.

Let’s Fight

Russia’s finance minister on Thursday added his voice to the heated currency debate, saying that countries “should not be competing through their currency policies.”

(Read More: Russia: Don’t Compete Through Currency Devaluations)

Some analysts believed the G-20 meeting could mark an intensification in a global “currency war” – a term now used widely to describe deliberate policy action by countries to bring about a fall in their currency that boosts exports and in turn economic growth.

An ultra-lose monetary policy in the U.S. in recent years, for example, has put pressure on the dollar to weaken.

“The comments from Russia are in spirit with the BRICs’ (Brazil, Russia, India, China) position, which for some time has been that the G-7, particularly the U.S. has been manipulating its currency. And that argument can also be made of Japan,” said Michael Woolfolk, senior currency strategist at BNY Mellon in New York.

“What is this going to get us at this G-20 meeting? I don’t think Russia and the BRIC nations are going to get what they are after. However, I think we do get a consistent G-20 statement but this will mark the beginning of an escalation in currency wars,” Woolfolk said.

He believes the yen is likely to weaken to the 100-mark to the dollar by year-end.

(Read More: Is the G20 Meeting Being Wrecked Before It Starts?)

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

I am ready for another elephant: Warren Buffett

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Warren Buffett told CNBC that even after teaming up with 3G Capital Management to acquire H.J. Heinz, he’s still looking for another big acquisition and has the cash to pay for one.

Speaking in a live “Squawk Box” telephone interview with CNBC’s Becky Quick, Buffett joked, “I’m ready for another elephant. Please, if you see any walking by, just call me.”

Also read: Warren Buffett on Heinz: ‘My Kind of Deal’ 

Warren Buffett: ‘My Trigger Finger is Itchy’ for Major Acquisitions

Berkshire Hathaway’s 15 Biggest Stock Holdings

That’s a reference to his letter to Berkshire Hathaway shareholders in 2011, in which he wrote about the need for major acquisitions to maintain growth in the company’s non-insurance businesses. “We’re prepared. Our elephant gun has been reloaded, and my trigger finger is itchy.”

Buffett said Berkshire is contributing “something between” USD 12 and USD 13 billion of the deal, so there’s plenty of cash available for another big acquisition if Buffett finds one.

Buffett said that at the end of 2012, Berkshire had USD 47 billion of cash. He likes to always have around USD 20 billion available, so the “excess cash” was roughly USD 27 billion. That would leave something between USD 14 and USD 15 billion for another purchase.

He added, “Of course, the cash builds from month to month, so the gun is always getting reloaded.” Berkshire uses the cash “float” generated by premiums for its insurance businesses to make investments and acquisitions.

Buffett said that while Berkshire is putting up half the equity for the deal, 3G will be primarily responsible for running Heinz. “It’s their baby from an operational standpoint.”

That’s fine with him. “It’s a great partnership for us. And any partnership where I don’t have to do the work is my kind of partnership.”

Buffett said he has full confidence in 3G’s ability to run Heinz. “I don’t think I’ve ever seen a better developed management group than the one Jorge Paulo Lemann has developed over the years in Brazil. He’s an incredible guy.”

Asked why he is willing to pay a 20 percent premium for Heinz, Buffett replied, “It’s our kind of company. It’s got a group of fantastic brands led by ketchup. Referring to his fondness for cheeseburgers, Buffett joked that he had sampled Heinz ketchup “many, many times.”

As for the US economy, Buffett said conditions have been “remarkably similar since the late summer of 2009.” Berkshire’s economy-dependent businesses have “steadily gotten better but not at a fast clip, and that continues to this day.”

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Big bet that gold will hit an all-time high

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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If you are a gold bug, the last three months has not been fun. You have watched stocks rise to multi-year highs, while gold has fallen roughly 4.6 percent.

In February alone, gold is off 20 points, but now we are at least seeing some bullish bets being placed.

Wednesday morning, we saw an institutional trade in the Gold ETF in which a trader bought 9,517 GLD May 172-strike calls while selling the May 188-strike calls. The trader paid USD 65 for this trade, and it will profit if GLD trades above USD 172.65 by May expiration. The trader also allowed plenty of room for the stock to run-the position is not called away until up at USD 188.

What`s most interesting about the trade is that the trader is not really outlaying a whole lot of cash to enter into the trade. In addition, notice that the trader is not willing to be long GLD until it nears an all-time high, which for the record is USD 174.07 per share.

When you see traders buy cheap calls or call spreads, it has been my experience that a move higher is going to happen relatively soon or not at all. Indeed, this trader is seeking a near-term rally that potentially ends what has been a bear market for gold.

So do I agree that gold is headed higher in the next 30 to 60 days? The answer is simple: No!

I am long GLD myself and for clients, but I have sold in-the-money calls against my position to reduce my exposure to the commodity. The fundamentals are just not lining up for a gold bug kind of year, despite the continued money printing by the Federal Reserve and other central banks.

How’s that? Well, I think some gold traders forget to look at how monetary purchases by central bankers actually affect the real lending and circulation of those printed currencies. The monetary base has really not increased as much as you would have expected, as banks continue to hold massive amounts of cash in reserve. This lack of lending has diminished the real monetary base expansion that the Federal Reserve had hoped and dreamed of.

Also, the European Central Bank and the rest of Europe has been tame on their monetary base expansion, and we have seen euro/dollar strengthen this year. Throw those two together along with a gold volatility index that is up over 10 percent in the last couple of weeks, and there is concern that gold will see more pain in the next few weeks.

The option trade that went up Wednesday morning could have been intended as a hedge against volatility and a move to a risk-off environment, and I do think that this is a decent hedging trade.

That said, there is a gap in the chart of GLD between USD 158.50 and USD 157.25, and it is likely that gold could head down to those levels before this option trader sees the pop that the trade needs.

Disclosures: Brian Stutland is long GLD for himself and his clients.

Brian Stutland is Managing Member of Stutland Equities and a contributor to CNBC`s “Options Action.”

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Currency wars or just currency confusion?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The world’s major economies may be trying to ease concerns about a currency war, but it appears that they are sowing confusion in the foreign exchange markets instead, adding to the wild swings already seen this week.

In a statement released on Tuesday, the Group of Seven (G7) nations said fiscal and monetary policies must not be aimed at devaluing currencies. The yen initially weakened after Japan`s finance minister Taro Aso said the statement recognized that the country`s reflationary policies were not aimed at weakening the currency, which has fallen sharply in recent months as expectations of aggressive monetary easing grow.

But the currency reversed direction soon after in a volatile overnight session, when a G7 official said the G7’s statement was, in fact, directed at Tokyo.

“Last night the G7 attempted to pour water on the escalating currency war but instead added fuel to the fire,” Jason Hughes, head of premium client management at IG Markets said in a note.

“The G7 had intended to send a warning to Japan about its aggressive devaluation of the yen but instead appeared to show support. It later said its statement was misinterpreted and raised concerns about yen weakness,” he added.

Talk about a “currency war” has intensified this year, triggered by Japan`s new government pushing for an aggressive monetary policy. The yen has fallen more than 8 percent against the dollar since the start of the year and about 10 percent against the euro.

“What we saw overnight is that we got something of a mixed message from what was happening with G7 leaders in terms of their view on the currency war issue,” Paul Bloxham, chief economist for Australia and New Zealand at HSBC said on CNBC Asia`s “Squawk Box.”

The problem, say analysts, is that agreement is hard to come to because the G7 is made up of different economies with different views on recent currency developments.

The wild swings in currency markets overnight follow a volatile Monday when the yen spiked lower after comments by U.S. Treasury official Lael Brainard, who said that while competitive currency devaluations should be avoided, Japan`s bid to revive its weak economy and end deflation were supported by Washington.

European Central Bank chief Mario Draghi weighed in on Tuesday, saying that exchange rates are important for growth and price stability.

The dollar was trading at about 93.15 yen on Wednesday, off a 33-month high hit above 94 yen on Monday.

“It`s a usual statement with no real agreement,” Societe Generale`s Senior Currency Strategist Sebastien Galy said with regards to the G7 statement.

“You`ve got the Europeans on one side, the Americans in the middle and the Japanese at the other extreme…. All in all it (the statement) tells you that nothing really has happened, dollar/yen and euro/yen are still in an upward trend until we reach a much more large-scale correction,” Galy said.

G20 finance ministers and central bankers meet in Moscow this Friday and Saturday and analysts said there may be some comments, but nothing too significant.

“The G20 will be reluctant to talk too much about which way currencies should move,” said HSBC`s Bloxham.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Obama challenges GOP on taxes & state of the Union spending

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

President Barack Obama paired major tax and entitlement reform proposals with sweeping new initiatives he said would bolster the middle class in Tuesday’s State of the Union address, the first of his second term.

The president traveled to Capitol Hill on Tuesday for the annual speech, where he outlined an ambitious agenda for the next four years that called for efforts to address the national debt, but also new programs.

“Let’s be clear: deficit reduction alone is not an economic plan,” said Obama, who argued that his second term priorities did not represent “bigger government,” but rather, “smarter government.”

Those plans will have to survive the brier patch of Capitol Hill, where Republicans have strenuously opposed much of Obama’s agenda and are girding for a major springtime showdown on budgets and the swift, automatic spending cuts known as the “sequester.”

Obama spent much of the first half of his speech challenging Republicans on that central issue after two years of legislating in Washington that saw the government lurch from the brink of a shut down to the brink of a debt-limit default to the brink of automatic tax hikes.

“Let’s agree, right here, right now, to keep the people’s government open, pay our bills on time, and always uphold the full faith and credit of the United States of America,” the president said.

(Watch Now: Blankfein on US Economy, Stocks & Activists)

The assertive rhetoric from Obama was a variation upon the themes on which he successfully campaigned for re-election last fall. Furthermore, Tuesday’s speech was regarded by the White House as a coda to Obama’s second inaugural address, a liberal call-to-arms on issues ranging from government spending to gay rights and immigration reform.

Still, Obama struck an upbeat note regarding the slowly but steadily improving economy: “Together, we have cleared away the rubble of crisis, and can say with renewed confidence that the state of our union is stronger.”

Obama’s speech on Tuesday was delivered in the same vein; the president embraced proposals that might encounter resistance in this Congress, such as new legislation to address climate change. But, in a reflection of Obama’s newfound feistiness in a second term, the president vowed to take executive action if Congress would not act.

Obama made other proposals he said would bolster the middle class. Among Obama’s proposals were: Universal access to preschool for all four-year-olds, increasing the federal minimum wage to USD 9 an hour by the end of 2015, USD 50 billion in infrastructure spending, and partnerships to promote cleaner energy and improved manufacturing.

Those initiatives, the president pledged, should not increase the deficit “by a single dime.”

To help finance those initiatives, Obama called for broad individual and corporate tax reforms, as well as savings from entitlement programs like Medicare – changes to which have been a lightning rod in recent election cycles. Those proposals carefully track with Obama’s previous demands to close loopholes and deductions to raise new revenue in tax reform.

But Republicans have argued that the matter of new revenue is “settled” following a fiscal cliff deal that saw the GOP relent to higher taxes on household income above USD 450,000. To that end, Florida Sen. Marco Rubio, in the official Republican response, called on Obama to “abandon his obsession with raising taxes and instead work with us to achieve real growth in our economy.”

Obama’s ambitious plans come as he’s asking lawmakers to approve two other major proposals: comprehensive immigration reform that gives undocumented immigrants a pathway to citizenship, and a series of tighter controls on firearms as part of a broader effort to curb gun violence.

(Watch Now: Curbing Gun Violence in the US)

On immigration, the president lauded a bipartisan Senate group’s work on immigration. “As we speak, bipartisan groups in both chambers are working diligently to draft a bill, and I applaud their efforts,” he said. “Now let’s get this done. Send me a comprehensive immigration reform bill in the next few months, and I will sign it right away.”

As lawmakers started to stake out coveted seats in the House chamber on Tuesday evening, the pomp and circumstance surrounding the annual speech also played out. Rocker Ted Nugent made an appearance as a guest of a Republican lawmaker, and first lady Michelle Obama welcomed several guests, including families of victims in last December’s shooting in Newtown, Conn.

Also, in keeping with tradition, outgoing Energy Secretary Steven Chu was kept spirited away from the Capitol to ensure continuity of government in case of a security incident.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Central banks gone wild: What can investors do?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Depending on your point of view, global central bank policies either are going to imperil financial markets or simply propel prices to a place beyond imagination.

The answer, though, could be both.

Investing professionals, even the best and brightest, can’t seem to make up their minds whether the US Federal Reserve and its global brethren are the salvation or the doom of capital markets.

They’re just trying to survive under conditions they say they’ve never seen before.

The Fed alone has sent its balance sheet to the USD 3 trillion mark in freshly created money, while central bank easing has been aggressive as well in Europe, China, Japan, and elsewhere

“All asset classes have an upward bias now — precious metals, stocks, bonds, real estate, art. That upward bias is robust and we have not experienced anything like it in our lifetimes,” said David Kotok, chief investment officer at Cumberland Advisors. “The limit to which those prices can rise is beyond our normal imagination. It’s huge.”

That, however, is not the talk of a raving bull trying to pump up the markets. It’s merely the observation of an investing veteran who believes markets are being manipulated to historic levels, putting investors in a place where they can only ride the tide- at their own future peril.

(Read More: What Will It Take to Get the Fed to Stop Easing?)

“The single most important thing for everybody in this room and everybody in the investment climate boils down to one simple issue: When does zero interest go away, by how much, and what are the early warning signs,” Kotok said at the Inside ETFs conference presented by Index Universe.

Advisors will need to discern “the market’s forecast of the then-impact of the then-policy announcement, which will finally show up in a change in interest rates for the central banks. Not one of us in this room has that answer,” he said.

The goal, he said half-facetiously, is “to stay invested broadly in the market” and then be sure “to exit the day before the interest rate change.”

(Read More: Bears on the Brink: ‘I Can’t Fight It Anymore’)

Of course, that’s not what will happen in the market when central banks do pull back- which Kotok said might not happen for five years, a time during which he said the S&P 500 conceivably could surge to 2,500, a 65 percent rise from current levels.

“The world is riskier the longer and longer it goes on,” said Scott Mather, managing director and head of global portfolio management at bond giant Pimco. “Periods of calm will be interrupted by periods of roiling prices. You can’t make the case that we’re on a stable trajectory.”

Nonsense, said well-known hedge fund manager Dennis Gartman, whose daily Gartman Letter is among the most widely read morning missives around Wall Street. Central banks, he said, have always been active in the markets.

“The world’s always been this way,” he said. “I don’t think there’s any more risk or any less risk than there ever was.”

“Is there less debt?” Pimco’s Mather asked.

“So what?” Gartman retorted. “What does the level of debt have to do with it?”

Gartman’s assessment, though, was disputed.

Nick Colas, chief market strategist at ConvergEx and a widely read morning newsletter author in his own right, was asked to break a logjam on the panel over the importance of debt.

“The deciding vote agrees that there is always risk. The deciding vote also says that when the Fed owns 40 percent of the yield curve it’s uncharted territory,” Colas said. “To stick your head in the sand and say that it is not a problem is naive.”

The mission, then, is to decide how much risk the market truly holds and what investors can do to hedge against the fallout.

For Mather, the best approach is to “get away from the mindset of the home bias” and invest in countries that have less activist central banks and thus more predictable markets.

(Read More: Goldman Sachs Downgrades Global Stocks as Rally Stalls)

Kotok has stuck with a long-running favor towards municipal bonds, while Gartman also holds to a central bank hedging strategy he often has espoused in his newsletter — buying gold, but with currencies other than the US dollar.

Of the group, Colas was the most vanilla, recommending investors hold plenty of large-cap US stocks for stability in an unstable world.

Investors also should try to find noncorrelated assets, such as precious metals that don’t move in unison with stocks, he said. Correlation has heightened with increased central bank intervention.

“Correlations are still sky high,” Colas said. “It simply means that when things go up and things go down you feel the pain in every piece of the portfolio.”

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow