Bach: Cello Suites Yo-Yo Ma

Hollywood's hopes in China rest on Youku

 Look around the subway in Beijing or Shanghai and maybe nine of 10 passengers are watching videos on their mobile devices. Chances are most of them are watching content delivered to them by Youku Tudou . The country's leading internet television operator streams 400 million videos a day. In that sense, Youku is Netflixand YouTube - plus Comcast and Liberty Media - stuffed into one dumpling. It is also the nexus for Hollywood's high hopes in the Middle Kingdom.

You wouldn't know it from Youku's financial reports. The company founded by Victor Koo, and run day-to-day by a former student of central planning, Dele Liu, is listed in New York, where it commands a relatively modest $4 billion market cap compared to Netflix's $26 billion. In the first quarter, it lost $36 million on revenue of $113 million. Still, the company is making progress, enough that China's sultan of e-commerce, Alibaba , bought 16.5 percent of the group for $1 billion in April.

Youku's long-term fortunes depend on two things: securing and defending copyright for hit shows, and getting Chinese consumers to pay for the privilege of watching them, something they've long resisted. China's government even seems to be getting on board in the battle to protect the makers of intellectual content from robbery. For this reason alone, Tinseltown should hope the scrappy Chinese company can pull it off.

China is still the high seas of global internet piracy. But there are flickers of hope on the horizon. Last week saw a significant advancement in government promises to clamp down on copyright theft when Shenzhen's Market Supervision and Administration Bureau issued a fine of 260 million yuan ($42 million) to QVOD, a website accused of distributing videos without permission.

That's a grain in the rice bowl of Hollywood's $36 billion in global box office sales. And it was QVOD's alleged distribution of pornography that probably rankled Chinese authorities more than its breaches of copyright. But the fine amounted to three times the revenue QVOD booked on the stolen content. For a country that has long looked the other way on intellectual property violations, that was an encouraging sign.

Moreover, it came a week after the government launched a six-month campaign against online piracy. The crusade, according to an article posted on the Chinese Communist Party's official website, will run through November and include the efforts of four departments - the National Copyright Administration, the State Internet Information Office, the Ministry of Industry and Information Technology and the Ministry of Public Security.

"The move aims to promote cooperation between online and traditional media institutions and better protect copyright by standardizing the use of copyright owners' content online," the departments jointly proclaimed. True, this is the 10th drive of its kind in the past decade. But the QVOD action suggests there's something to the rhetoric this time around.

China's leaders aren't suddenly taking seriously the insistent whining from Los Angeles studio chiefs. As with all directives from Beijing, there is a larger motive here. China wants to develop a movie industry of its own. Not only do the riches of a homegrown version of Hollywood – or Italy's Cinecitta, India's Bollywood or British studio Pinewood, for that matter - appeal to an economy destined to become the world's largest. Movies and television are critical to projecting soft power.

This is where Youku plays a key role. When the government signals that copyright is worth protecting, media providers have an increasing incentive to pay for it. Koo negotiated with nearly every movie and television studio to secure the rights to series including Lions Gate's "Orange Is the New Black" and feature films like Walt Disney's "Captain America." For the studios, the deals are puny compared to the blockbuster agreements they regularly reach with Netflix and its rivals. All told, Youku spent $52 million on content in the first quarter. Netflix is spending $3 billion this year.

More importantly, once Chinese companies own copyright they are going to the courts to protect it, which gives China's fledgling legal system a helpful workout. That hasn't always worked to Youku's benefit – its Tudou site was found guilty on June 23 of allowing programs made by state broadcaster CCTV to be uploaded illegally, and fined 248,000 yuan. The precedent is encouraging, though, for Chinese studios and for foreign ones too.

What Youku is doing with the content matters even more. It's asking Chinese consumers – tens of millions of whom will watch shows on their phones before they ever flick on a television or a PC – to pay something. For the majority it will come in the form of time – watching the paid ads that bookend clips. For others, it will be 5 yuan for a film, or 20 yuan a month to subscribe to Youku's library. Either way, it teaches consumers that copyrighted material isn't free.

The Chinese government seems to recognize that without a flourishing market, there can be no hope of encouraging a local industry to produce programming to meet its cultural aims. Producers, scriptwriters, actors and directors need to feel secure that their work will also be valued. That's why a crackdown like that on QVOD provides an important signal.

Investors seem to be responding. Fosun International <0656.HK> said on June 23 it will invest in Studio 8, a studio run by Jeff Robinov, who oversaw the "Dark Knight" and

"Hangover" film franchises while at Warner. Fosun wants to capitalize on Studio 8's know-how "to drive the development of the Chinese film industry." The previous week, Light Chaser Animation Studios, which calls itself the Pixar of China, raised $20 million from investors including one of the founders of Youku, to "create world-class animated films with a Chinese cultural touch."

So is this the dawn of a golden age for Chinese cinema? Don't count on it. New productions first have to get through the censors. Youku has more than 300 of them combing through videos, and that's after software has already scanned the 170,000 submissions it receives daily for hints of nudity, violence or anything that suggests instability at home. China's government has very clear views about what its 1.3 billion people should, or should not, watch.

That doesn't always make for great viewing. Take "Game of Thrones." When it broadcasts on its U.S. home channel, Time Warner's HBO, the show runs about an hour. On CCTV in China, it is far shorter due to substantial cuts. A film industry is developing in China, and consumers are becoming habituated to paying for content, but the good stuff may still get taken out along the way.

Source: Reuters

Asian shares wilt, oil prices rise on Iraq fears

Asian shares were on the back foot early on Wednesday, taking their cue from Wall Street as the deepening crisis in Iraq and a report that the U.S. could be loosening restrictions on crude exports triggered a rally in oil prices.

U.S. Secretary of State John Kerry urged leaders of Iraq's autonomous Kurdish region on Tuesday to stand with Baghdad in the face of a Sunni insurgency, as security forces fought the rebels for control of the country's biggest oil refinery. 
A senior U.S. intelligence official said that the insurgents were "well positioned" to hold a broad swathe of territory captured in northern and western Iraq unless the Baghdad government can muster a counter-offensive. 
Adding to upward pressure on oil prices was a Wall Street Journal report that U.S. officials have allowed two companies to export a kind of ultra-light oil known as condensates, a first step that effectively loosens a 40-year ban on most U.S. crude exports. [
U.S. crude for August delivery added about 0.7 percent to $106.76 a barrel.

"Oil prices have been unusually stable in recent years, but events in Iraq are causing a reassessment of medium-term oil market fundamentals that we expect to translate into a phase of higher long-term prices and more volatile trading conditions," strategists at Barclays said in a note to clients.

"Geopolitical risks have replaced China's growth and Fed policy as the main concerns for investors," they said.

Spot gold was treading water at $1,317.95 an ounce after spiking to a more than two-month high of $1,325.90 on Tuesday.

MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> dipped about 0.1 percent, while Japan's Nikkei stock average <.N225> skidded 0.4 percent.

In volatile U.S. trading on Tuesday, the S&P 500 <.SPX> closed down more than half a percent for its sharpest loss since June 12, after earlier setting a fourth record high in five sessions following upbeat U.S. economic data.

Sales of new homes surged 18.6 percent to a seasonally adjusted annual rate of 504,000 units in May, the highest since May 2008 and the biggest increase since January 1992. Separate data from the Conference Board showed its index of consumer attitudes rose to 85.2 in June from a downwardly revised 82.2 in May.
But U.S. Treasury prices shrugged off the brighter data and yields fell, with the benchmark 10-year rate dropping to 2.577 percent in Asia from its U.S. close of 2.586 percent.

"While the improvement in consumer confidence and existing home sales are encouraging the decline in Treasury yields confirm what we have been saying all along which is that the data is just not good enough to push the Fed to tighten monetary policy early," said Kathy Lien, managing director of FX strategy at BK Asset Management in New York.

A trio of Fed officials gave investors no reason to believe the central bank's stance had changed. William Dudley, president of the New York Fed, said the U.S. central can wait to raise interest rates until mid-2015 without risking an undesirable rise in inflation.
San Francisco Fed President John Williams said on Tuesday that the U.S. economy is about two years from being "normal," while Philadelphia Federal Reserve Bank President Charles Plosser said the economy continues to improve, making steady rather than exuberant progress.

The dollar edged down about 0.1 percent to buy 101.92 yen , while the euro also inched about 0.1 percent lower to 138.66 yen .

Source: Reuters

Tencent, Innovation Works cash out on a $434 million acquisition of Elex Technology Company

A US$434 million acquisition between two Chinese companies that you’ve probably never heard of has just been announced. Chinese Universe Publishing and Media Company bought a 100 percent stake in Elex Technology Company for RMB 2.7 billion, according to QQ Tech. Chinese Universe distributes and publishes books, teaching materials, and other publications including audio and video products. It also has a logistics arm. Elex helps Chinese corporations go international by localizing their products for different global markets. It has partnered with Baidu (NASDAQ:BIDU), Tencent (HKG:0700), and Alibaba, along with several big gaming companies like Perfect World (NASDAQ:PWRD), Giant Interactive (NYSE:GA), and DD Tank. The company was founded in 2008 and operates in about 40 countries. Some of the biggest games that Elex has helped export include Happy Farm (a.k.a. Happy Harvest), Age of Warring Empire, and Chi-Star. The lattermost has over 300 million monthly active users, 50 million of them paying subscribers.

Elex’s investors include Chinese internet giant Tencent and venture capital and incubation firm Innovation Works, both of which will receive a big chunk of change from the deal. Chinese Universe paid with 130 million shares and about RMB 1 billion (US$160 million) in cash. The report didn’t mention how the two companies plan to work together down the line.

Source: TECHINASIA

China property primed for shake-up as downturn drains cash.(Don't panic not US sub-prime crisis).

HONG KONG, June 25 (Reuters) - An oversupply of residential property and a market slowdown have left Chinese developers with their worst cash crunch in more than two years, revealing the extent of China's real estate downturn and paving the way for further consolidation in the sector.

A Reuters study of more than 80 China-listed developers that have declared March quarterly earnings showed cash to short-term-debt ratios at two-year lows amid a steady decline in margins since 2011.

That was the year the government moved to rein in the overheating housing market through measures including higher mortgage rates and limits on how many homes each family can buy.

But the government crackdown is only part of the story. A downturn in property prices, pressure to pay for last year's record land purchases, and a tighter credit market have combined to put severe strains on developers' liquidity.

The mounting pressure could lead to sales of assets such as land banks and completed projects as the government presses for consolidation in the highly fragmented sector, analysts and investors said. 

Even without further government curbs this year, developers' financials will feel the pinch of subdued house prices, which fell for the first time in two years in May.

"The situation is quite severe now. Mid-sized developers are facing pressure as interest rates for trust loans are high, the impact will emerge eventually. The size of developers affected are getting larger," Hong Kong-based property agent Midland Realty COO Samuel Wong said.

"H2 will be worse than H1 when problems surface, unless there is more easing in policy or liquidity."

Caught between having to cut prices or raise capital, some developers are holding off for the moment, either using stop-gap measures or waiting for a bank rescue, according to industry insiders.

"The market isn't favourable. We haven't decided whether to cut prices," said an official at unlisted Shenzhen-based developer Guang Group, one of China's top 100 developers.

"We're in restructuring (mode) now, such as introducing financial partners and consolidating projects."

Last month, the company said it had failed to deliver some properties to homebuyers on time because of financial pressures.
The deterioration in developers' financials has been felt on two levels.

Firstly, competition both for land banks and apartment sales has squeezed margins. Margins on earnings before interest, taxes, depreciation, and amortisation are now in the low teens compared with nearly 20 percent at one point in 2011.

Meanwhile, the median cash to short-term debt ratio of the companies studied by Reuters has fallen to 0.77 from 1.11 at the end of 2012. A ratio below 1.0 is a red flag meaning cash is insufficient to cover debt coming due in a year.

Winsan Shanghai Industrial Corp Ltd <600767.SS> saw its cash to short-term debt ratio decline to 0.07 in the March quarter from 0.83 in end-2011. In that same period the company saw its EBITDA margin turn negative from 18.8 percent. The company did not respond to emailed questions.

London-based fund manager Yerlan Syzdykov at Pioneer Investments, which owns bonds in China property, said the deterioration in developers' financial positions was likely to trigger a long-overdue shake-up in the industry.

"We see more consolidation in the sector. They are leveraged and have lower cash balances because of land acquisitions - they need banks to step in and provide more liquidity," he said.

In a recent sign of such consolidation, Sunac China Holdings Ltd <1918.HK> last month bought a 24 percent stake in peer Greentown China Holdings Ltd <3900.HK> for HK$6.3 billion ($807 million).

Moody's said at a conference last month it expected to see more such moves as developers tried to scale up to win cheaper loans from banks.
Volatile as the sector may be, few expect China's property market to suffer a collapse like the sub-prime mortgage crisis that hit the United States.

"People are watching carefully but we're not worried yet," Pioneer Investments' Syzdykov said.

High downpayments, low household debt and expectations of continuing government support are commonly cited by experts forecasting the downturn will be short-lived, with prices expected to recover as economic growth steadies in the second half of the year. 

Furthermore, a repeat of events that brought Zhejiang Xingrun Real Estate Co to the brink of bankruptcy is unlikely. The developer is estimated to owe 15 domestic banks 2.4 billion yuan and individual investors another 1.1 billion, with only 3 billion yuan of assets on hand.

"Full-blown defaults in this sector are rare as developers own assets which are worth something," said Thomas Kwan, head of fixed income at Harvest Global Investments Ltd in Hong Kong.

"The smaller developers can sell their projects or land in times of difficulty."

Abe Unveils Japan's New Growth Strategy

       The WSJ reports,"Japanese Prime Minister Shinzo Abe unveiled an ambitious package of economic reforms aimed at revitalizing corporate earnings power and setting in motion structural changes to try to put the nation back on a clear growth path.

It was the second attempt by the popular leader to convince domestic and foreign investors that he has the will, ideas and political clout to carry out painful changes so Japan can withstand global competition and demographic challenges.

"We will break through whatever barriers there are to unlock the potential that the Japanese economy has," Mr. Abe said at a news conference. "Implementation of the growth strategy is the key to success."

Investors have long waited for Mr. Abe to come up with a convincing strategy for economic revitalization as the so-called third arrow of his economic policy. Such a package, they have argued, is needed  to solidify the growth generated by the first two arrows Mr. Abe implemented after taking power a year and a half ago: massive monetary easing and public-works spending.

While last year's growth strategy caused disappointment, especially among foreign investors, and sparked sharp falls in Tokyo shares, the latest batch looks set to receive a warmer welcome.

 This time around, government officials note that domestic stock prices have remained on a rising trend after the announcement of the draft package last week, even as some economists complained that it is a grab bag of myriad items short on specific deadlines or strategies for implementation.

The package calls for cutting the corporate-tax rate and knocking down long-standing regulations in areas such as employment rules, agriculture and health care. Mr. Abe also emphasized his plan would address the problems stemming from a shrinking working-age population by encouraging women to enter the workforce and bringing in more foreign workers.

"The announced package in general exceeds market expectations, and we like it," said Tomo Kinoshita, chief economist at Nomura Securities.

Among the pillars of the latest package is a plan to cut the nation's 35.64% corporate-tax rate to below 30% over the next few years. Other changes aim to allow for more-flexible work patterns, give patients more health-care treatment options, and make the farming industry more productive.

Some economists and analysts say they see merit in a plan that requires companies to adhere to a corporate governance code and better reward shareholders, which could help push up Japan's low return on equity—a longtime source of frustration for foreign investors in Japanese stocks.

"The revised growth strategy puts a strong emphasis on propping up Japan's earning power—something we didn't expect much," said Naoki Kamiyama, an equity strategist at Bank of America Merrill Lynch. "If implemented, this would increase the value of companies and they would spend more on investment instead of keeping their cash idle."

Mr. Abe is also committed to sending more women into the workforce and expanding their representation at the executive level. In addition to already announced plans to increase the number of child-care centers, the latest package mentions tax revisions that would prod more women at home to go to work.

Not all economists are giving a passing grade to the latest plan, citing disappointments over plans to establish special economic zones. They think this should be a flagship of the prime minister's third arrow".

Dow falls most in more than a month

 News reports of cross-border airstrikes in Iraq triggered a late afternoon selloff on Wall Street, sending U.S. stocks sharply lower on Tuesday. TheDow Jones Industrial Average had its worst one-day point loss in more than a month. The blue-chip index dropped 119.13 points, or 0.7%, to 16,818.13. The S&P 500 closed 12.63 points, or 0.6%, lower at 1,949.98. The Nasdaq Composite ended the day down 18.32 points, or 0.4%, at 4,350.36. 

Source: Marketwatch

WSJ: U.S. Ruling Loosens Four-Decade Ban On Oil Exports

The WSJ reports, "the Obama administration has quietly cleared the way for the first exports of unrefined American oil in four decades, allowing energy companies to chip away at the long-standing ban on selling U.S. crude overseas.

Federal officials have told two energy companies that they can legally export a kind of ultra-light oil that has become plentiful as drillers tap shale formations across the U.S. With relatively minimal processing, oil shipments could begin as early as August, according to one industry executive involved in the matter.

Using a process known as a private ruling, the U.S. Commerce Dept.'s Bureau of Industry and Security is allowing Pioneer Natural Resources Co. of Irving, Texas, and Enterprise Products Partners LP of Houston to export ultra-light oil known as condensate to foreign buyers who could turn it into gasoline, jet fuel and diesel.

Both companies confirmed they had received the rulings".

"Under current rules, companies can export refined fuel, such as gasoline and diesel, but not oil itself. The Administration's new approach, which hasn't been publicly announced, redefines some ultra-light oil as fuel after it has been minimally processed, making it eligible for sale abroad.

The Commerce Department said the companies have improved the processing of the crude in a way that qualifies it for export, even though the oil wouldn't count as being traditionally refined. Exactly how the agency defines condensate and remains unclear.

The first shipments are likely to be small, but could ultimately encompass a lot of the 3 million barrels a day of oil that energy companies are pumping from shale, industry experts say, depending on how regulators define what qualifies for export.

The Brookings Institution estimates as much as 700,000 barrels a day could be available for export starting next year".

When (and how) to long short invest

There are plenty of ways to go long-short. Joel Greenblatt of Gotham and Michael Aronstein of Marketfield offer their perspectives.
Sure, when it comes to long-short investing, advisors really need to understand the strategies that they're following. What are you long? What are you short? The way we do it is we buy the cheapest stocks we can find and short the most expensive. It's pretty straightforward. And we balance our risks, to stay out of trouble. There's a lot of different things you can short. There's a lot of different things you can buy, but we're actually valuing businesses. That's what we do. So our definition of value investing is figure out what something's worth and pay a lot less, so that's what we buy. And the things that are most expensive relative to our assessment of value, those are the things we short. We try to balance our risks with diversity, not too much concentration and, and the, the relative volatility of the long and short side. That's what we do. So we understand that. There are plenty of other ways to go long-short that. I, I think people can find a place in their portfolio structure for a long-short based on the notion that the extent somebody can do having some short exposure in customer's accounts makes sense because markets are not unidirectional. There is what I call directional diversification possible when you're allowed to be on the short side of certain markets, and there are times at which that's almost a more compelling opportunity than the long-term accretion of value that occurs when you own something. Even though over a long period of time the bias ought to be toward ownership and the compounding of capital within an instrument mainly within an operating company, but sometimes, for within an asset that's, by nature, fairly static that you can accrue value within those. But no, there are times at which the world gets carried away with certain theses and it results in valuations for entire sectors that are really, really fragile and over done. And having a little bit of that on the short side can often insulate the rest of a portfolio from the effects when those things that are over done unwind. Well the question is, why do, are liquid alts so hot right now? And, and the answer really is, is very few advisors have them in their portfolio, so their clients generally have one, two, or three percent of their assets on average in these, and perhaps the right number is 10, 20 or 30%, not two or three. So, I think they just haven't been available. Good ones haven't been available. Now there's gonna be a lot more, and, once again, it's always caveat emptor. You know, not everyone's gonna be good except and probably most won't be good. So you really have to be selective, but they're a great opportunity for investors to get some diversification and, and higher returns. Now that's a tough question to ask me. Obviously, I have a dog in this fight, but I, I've always been of the belief that somebody managing someone else's money ought to find between say six and a dozen managers whom they trust. And across various styles that's, and perhaps across asset classes and just give the money to those people. And I think a among them, I think people who have some, on a conversance with the short side would make sense, and seeing as long-short equity is pretty much the only category in which you are going to get some short exposure, I think that tends to be somewhat the default application on that basis. 

BlackRock's Dennis Stattman: Think Globally

2014 Morningstar Investment Conference

         Dennis Stattman says,we think the best opportunities in the global markets today are in stocks. And really, stocks outside the US more than stocks inside the US. And in particular, the biggest opportunity we see, is in Japanese equity. With the currency hedged. Well, we like currency hedged, Japanese stocks. For, a bunch of reasons. Let's start with valuation. The Japanese stock market is at a big discount to the US Market. It's at a discount on, price to earnings. It sells at 1.2 times, price to book compared to 2.7 times for the US, it's at one third, of the price to sales ratio of the US market and offers a much more attractive dividend yield, than the bond yield in Japan. But in addition to great value, there're good things going on, on earnings. There's a very positive, monetary policy in Japan and we're seeing Japanese corporate managements. Pursue shareholder value, to a much greater extent than ever before. the, allocation that an investor, should have to cash, varies with the investor. At Blackhawk Global Allocation Fund we have some cash today. Almost 20% of the portfolio. But that's not because we're bearish on stocks, we're not. We think, the stock market looks okay. We are, very concerned about the outlook for the bond market, and so, a lot of that cash, represents what it takes to keep the duration, of our fixed income portfolio low. And to manage the overall risk of our portfolio. Well, we're concerned about the fixed income market. Because quite simply, coupons are low. The yield on government bonds, is low. And it's not very good compared to, the volatility of the bond market. And doesn't protect against the risk of higher interest rate. Nor does it reward, people for taking risk with inflation, which has already running at 2% year after year. Well, we can never be sure what the stock market is going to do. Today, stocks looked more attractive than bonds. And, stocks outside the US looked more attractive than US stocks. The big question mark about the outlook on markets, is what happens to monetary policy. And 18 months from now we could be seeing some tightening of monetary policy, in the U.S. but we think in Japan, monetary policy will remain favorable. And that's another reason, we like the outlook for the Japanese stock market. 

The yield on government bonds, is low. And it's not very good compared to, the volatility of the bond market. And doesn't protect against the risk of higher interest rate. Nor does it reward, people for taking risk with inflation, which has already running at 2% year after year.

Going global pays dividends

Life expectancies are getting longer and for many, saving for retirement is becoming increasingly difficult. In this yield-starved, low-interest rate environment, investors are seeking out new sources of income. In a rising rate environment, a global equity income product has the added benefit of potentially diversifying overweight fixed income risk.

The good news for these investors is that while bond yields remain low, equities continue to be an attractive income opportunity.

But advisers should not be steering investors to just any equities — they should turn their attention to the array of quality dividend-paying stocks beyond U.S. borders, where they will find significant benefits, including higher yields.

Advisers don't always have the tools and resources at their fingertips to easily spot such trends. In an effort to supply advisers with helpful research and dividend information, Henderson Global Investors recently commissioned a study on global dividend payments to measure and track the income the world's listed companies are returning to their investors.Currently, about 75% of the world's dividends come from outside the U.S. But, surprisingly, the search for dividend yield by U.S. advisers and investors is largely limited to U.S. companies. It's understandable that investors might have a home bias, and default to an equity investment that's overweighted in the U.S. but in many regions around the world, the practice of returning earnings to shareholders is actually more common than it is in the U.S.

The Henderson Global Dividend Index (HGDI) is a long-term study into global dividend trends. It is not an investable index, but rather a measure of the progress that global firms are making in paying their investors an income on their capital. The index breaks down by region, industry and sector, and enables readers to easily compare the dividend performance of countries like the U.S. that provide a larger proportion of global dividends than that of smaller countries. It is a resource that has been developed to help advisers and investors gain a better understanding of the world of income investing.

Most significantly, the study points to the impressive start global dividends saw in 2014, soaring 31.4% to a record $228.4 billion in the first quarter, compared to the same period last year. Although the British mobile telecoms firm Vodafone's $26 billion special dividend — a world record — accounted for almost half that increase, the numbers show that the underlying year-on-year growth rate in Q1 still reached 12.1%. That is the fastest quarterly growth rate since the end of 2012, when U.S. firms made big payouts ahead of an expected tax change.

Embracing a global dividend strategy benefits investors on multiple fronts. For instance, foreign companies yield more, on average, than U.S. issues do. And equity valuations outside the U.S. are looking more attractive, while the yields offered on those non-U.S. companies are nearly double those inside the U.S.

By focusing on companies overseas that have a higher-dividend paying culture, experienced portfolio managers are able to help their clients capture more yield through a U.S. based investments such as a mutual fund domiciled in the U.S. These funds are able to access foreign companies that are operating similarly to U.S. companies, but feature those more impressive valuations and yields.

The key is to look for high-quality names — value-oriented companies that aren't just paying dividends, but growing dividends every year. It is the growth of a dividend that serves as the best gauge of the company's health. The strategy also should involve conducting focused research to avoid value traps.

The search for yield is ongoing as central banks around the world maintain historically low interest rates. But the picture advisers can paint for investors is one of opportunity in the global dividend space. For example, the large cap dividend-paying stocks currently look attractive in Europe. Also, M&A activity is starting to accelerate, which is a good forward indicator for business activity.

Companies in many regions have been recognizing more and more the need to provide investors with dividends. So while a domestic bias is understandable, investors should take note of the evolving global landscape. With the right diversification and a strong research-driven stock-picking approach, 2014 is shaping up to be a good year for equity income investors.

Source: InvestmentNews

‘Wall of Liquidity’ Headed to Emerging Markets

         The WSJ reports,"the fear that emerging markets will lack liquidity has been overstated, partly because the “wall of liquidity” beginning to come out of Japan has been ignored by the market, Franklin Templeton Investments fund manager Michael Hasenstab says.

The Bank of Japan is embarking on its largest ever quantitative easing effort and is on a path to start printing $1 trillion a year, which will be “quite meaningful” to emerging markets", Mr. Hasenstab told nearly 2,000 attendees at Wednesday’s opening session of the 2014 Morningstar Investment Conference in Chicago.

Japan’s huge pool of savings has begun to shrink as its population ages and the only entity big enough to fund its debt is the government, he said. That gives him confidence that Japan is going to be “massively expanding” its quantitative easing for some time, he said.

“We think that global liquidity is going to be fairly abundant for many emerging markets,” Mr. Hasenstab said.

As for the impact of interest-rate increases by the U.S. Federal Reserve, there are big differences between now and the mid-1990s, when the Fed raised rates and emerging markets had a lot of trouble, he said.

Pretty much across the board, these markets have doubled or tripled their international reserves, a cushion they didn’t have in the 1990s, he said.

In addition, many emerging-market nations have delevered massively their government balance sheets through decades of prudent fiscal policy, Mr. Hasenstab said. Korea, for example, has around 30% debt-to-GDP, and the Ukraine has only 40% debt-to-GDP, he said.

“We can no longer be universal about emerging-market economies,” but there is adequate liquidity and China will be a source of stability, he said. “We want to be very selective country-by-country.”

As for the bond markets, they will face losses and his concern now is how to deliver positive returns. He’s shifted his portfolio almost entirely into very short duration assets and is “selectively adding short duration assets in countries of good quality globally,” he said.

He now has long-dollar positions against the yen and the euro. When the Fed ends its tapering and begins raising rates, Japan and Europe will still be printing money, which is bullish for the dollar, he said.

“We think the dollar will decline in value over time against place” like Korea and Mexico, he said.

“There are opportunities, but it’s a smaller pool and you have to be very careful,” Mr. Hasenstab said of emerging markets.

Kerry urges Kurds to save Iraq from collapse

U.S. Secretary of State John Kerry held crisis talks with leaders of Iraq's autonomous Kurdish region on Tuesday urging them to stand with Baghdad in the face of a Sunni insurgent onslaught that threatens to dismember the country.

Security forces fought Sunni armed factions for control of the country's biggest oil refinery on Tuesday and militants launched an attack on one of its largest air bases less than 100 km from the capital.

More than 1,000 people, mainly civilians, have been killed in less than three weeks, the United Nations said on Tuesday, calling the figure "very much a minimum". 

The figure includes unarmed government troops machinegunned in mass graves by insurgents, as well as several reported incidents of prisoners killed in their cells by retreating government forces.

Kerry flew to the Kurdish region after a day in Baghdad on an emergency trip through the Middle East to rescue Iraq after a lightning advance by Sunni fighters led by an al Qaeda offshoot, the Islamic State in Iraq and the Levant.

U.S. officials believe that persuading the Kurds to stick with the political process in Baghdad is vital to keep Iraq from splitting apart.

"If they decide to withdraw from the Baghdad political process it will accelerate a lot of the negative trends," said a senior State Department official who briefed reporters on condition of anonymity.

Kurdish leaders have made clear that the settlement keeping Iraq together as a state is now in jeopardy.

"We are facing a new reality and a new Iraq," Kurdish President Massoud Barzani said at the start of his meeting with Kerry. Earlier, he blamed Prime Minister Nuri al-Maliki's "wrong policies" for the violence and called for him to quit, saying it was "very difficult" to imagine Iraq staying together.

The 5 million Kurds, who have ruled themselves within Iraq in relative peace since the U.S. invasion that toppled Saddam Hussein in 2003, have seized on this month's chaos to expand their own territory, taking control of rich oil deposits.

Two days after the Sunni fighters launched their uprising by seizing the north's biggest city Mosul, Kurdish troops took full control of Kirkuk, a city they consider their historic capital and which was abandoned by the fleeing Iraqi army.

The Kurds' capture of Kirkuk, just outside the boundary of their autonomous zone, eliminates their main incentive to remain part of Iraq: its oil deposits could generate more revenue than the Kurds now receive from Baghdad as part of the settlement that has kept them from declaring independence.
Kerry thanked the Kurds for their "security cooperation" in recent days, and said their forces were "really critical in helping to draw a line with respect to ISIL."

Kurdistan now shares a border more than 1,000 km long with territory held by insurgents. Militants have skirmished with Kurdish peshmerga forces, but both sides have sought to avoid an all-out confrontation for now.

U.S. President Barack Obama has offered up to 300 American advisers to Iraq but held off granting a request by Maliki's Shi'ite Muslim-led government for air strikes.

The insurgency has been fuelled by a sense of persecution among many of Iraq's Sunnis, including armed tribes who once fought al Qaeda but are now battling alongside the ISIL-led revolt against Maliki's Shi'ite-led government.

Maliki's State of Law coalition won the most seats in the election in April but still needs support from rival Shi'ite factions as well as Kurds and Sunnis to keep him in power.

Some State of Law figures have suggested they could replace Maliki to build a government around a less polarising figure, although Maliki's allies say he has no plan to step aside.

His main foreign sponsors, Washington and Tehran, have both called for a swift agreement on an inclusive government, suggesting they may be ready to abandon the combative 64-year-old Shi'ite Islamist after eight years in power.

Maliki has put himself at odds with the Kurds, who accuse him of reneging on promises made in exchange for their backing to stay in power after the last election in 2010. Relations are now characterised by deep mistrust, but the State Department official said Washington hopes the Kurds can be wooed back.

"If we are to have a chance ... to use this process of forming a new government to reset the political foundation here, the Kurds have to be a critical part of that process, and we think they will be," the senior State Department official said.

The Kurds have signed oil deals on their own terms with Turkey and late last year completed an independent export pipeline, despite opposition from both Baghdad and Washington. A tanker delivered a cargo of oil from the new pipeline for the first time on Friday, to Israel.
Some senior Kurdish officials suggest in private they are no longer committed to Iraq and are biding their time for an opportunity to seek independence. In an interview with CNN, Barzani repeated a threat to hold a referendum on independence, saying it was time for Kurds to decide their own fate.

Source: Reuters

Morningstar: Alibaba IPO May Raise $26 Billion

         The WSJ reports,"as  Alibaba’s upcoming listing nears, many analysts and brokerages are coming up with their own estimates of how much the Chinese e-commerce giant’s initial public offering might actually be worth.

The latest is from Morningstar, which puts Alibaba’s equity value at $220 billion and expects the Chinese e-commerce giant’s IPO to raise $26 billion".

"At that price, it would make it the biggest IPO in history to top Agricultural Bank of China* s record $22.1 billion offering in Shanghai and Hong Kong in 2010, according to Dealogic, which tracks IPO data.  It would also top the U.S.’s largest IPO to date–Visa’s $19.7 billion offering in 2008—as well as the top tech IPO in the U.S. – Facebook FB +1.72%’s $16 billion offering in 2012. Morning Star said its IPO estimate is based on media reports that Alibaba is likely to offer 12% of its stock in the IPO".

The estimates are no doubt on the bullish side. Sanford C. Bernstein put Alibaba’s valuation at $230 billion in late May, lower than its previous estimate of $245 billion before Alibaba filed its first IPO document in early May.

Morningstar analysts wrote in a report this week that Alibaba’s shopping sites are well-positioned to benefit from the market’s growth in part because they have powerful “network effects” — millions of sellers keep attracting hundreds of millions of shoppers, which in turn attracts more sellers and makes the sites even more dominant.

The report also said that China’s nascent e-commerce market has plenty of room for growth, citing expectations that the country’s middle class population – with annual incomes between $10,000 and $60,000 – will double to about 600 million by 2020.

All of those points – the prospects for China’s e-commerce market and Alibaba’s dominance – are similar to those emphasized by other analysts who are also bullish on Alibaba’s IPO.

“We believe Alibaba’s IPO should be on the radar screens for investors seeking exposure to China’s emerging middle-class consumers as well as its e-commerce, technology, and logistics industries,” it said.  Morningstar expects Alibaba to price its IPO in early August.

U.S. consumer confidence rises to 85.2 in June

A gauge of consumer confidence rose to 85.2 in June -- the highest level since January 2008 -- from 82.2 in May, the Conference BoardTuesday. Economists polled by MarketWatch had expected a June reading of 83.5, compared with an original estimate of 83 in May. Both the present situation and expectations indexes rose in June. Consumers were more optimistic about the labor market. 

Source: Marketwatch

Sales of new homes rise in May at fastest rate in 6 years

New U.S. homes sold at an annual rate of 504,000 in May to mark the fastest increase in six years, the government said Tuesday. Yet the surprising gain - economists polled by MarketWatch expected a 440,000 increase - was led by a huge surge in the Northeast. The region typically has the fewest sales in the U.S. and the seasonally adjusted numbers can be particularly volatile. Just a month before in April, for instance, sales in the Northeast were the smallest in almost two years. Meanwhile, sales climbed 34% in the West and 14.2% in the South. A bounceback after a winter-induced lull may have boosted sales in the warmer spring months Sales rose just 1.4% in the Midwest, however. The median price of new homes rose 4.6% to $282,000 last month. The supply of new homes on the U.S. market dropped to 4.5 months at the current sales pace from 5.3 months in April. New home sales were 16.9% higher in May compared to one year ago. In April, however, they were 6% lower, showing how erratic the report on new home sales can be. 

Source: Marketwatch

Oil Drops as Iraq Violence Seen Sparing Crude Supplies

Brent crude traded near its lowest in a week and West Texas Intermediate slipped amid speculation that Iraqi oil production won’t be disrupted by violence in OPEC’s second-largest producer.

Futures fell as much as 0.5 percent in London. Iraqi forces regained control of the Baiji refinery in the north from Islamist militants, and fighting hasn’t spread to the south, home to more than three-quarters of the country’s crude output. Saudi Arabia can boost oil output to more than 12.5 million barrels a day if needed, according to a Saudi oil official. There isn’t a shortage of supply or need for OPEC to meet because of the Iraq crisis, the group’s secretary-general said.

“Iraq is still the talk of the town, even though the situation on the ground has not escalated materially,” Amrita Sen, chief oil markets analyst at London-based Energy Aspects Ltd., said in a report. “Iraqi supply losses have been minimal so far.”

Brent for August settlement dropped as much as 57 cents to $113.55 a barrel on the London-based ICE Futures Europe exchange and was at $114.27 at 1:01 p.m. London time. The contract slid 0.6 percent to $114.12 yesterday, the lowest close since June 17 and the biggest loss since May 16. The volume of all futures traded was almost double the 100-day average for the time of day. Prices are up 3.1 percent this year.

WTI for August delivery fell as much as 92 cents to $105.25 a barrel in electronic trading on theNew York Mercantile Exchange. The U.S. benchmark crude traded at a discount of $7.94 to Brent, from $7.95 yesterday.

Source: Bloomberg

Gazprom CEO: South Stream Gas Pipeline is completely on schedule