the week ahead - april 8th 2013

7/28/2019 The Week Ahead - April 8th 2013

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THE DAY AHEADREUTERS NEWS North American Edition For Monday, April 8, 2013

Stocks slipped on Friday and Treasury yields fell to theirlowest levels of the year after data showed far fewer jobswere created than expected in March. The dollarhit a fresh3-1/2-year high against the yen. Oil fell, while gold saw itsbiggest one-day gain since November.

MARKET RECAP COMING UP - NEXT WEEK

The equity market has stumbled a bit of late and now it will have achance to react to the first batches of earnings set to comethrough, specifically with big banks like Wells Fargo later in theweek. The more defensive posture in stocks should persist; it maynot be a negative week but one where utilities and staples continueto outperform. Bonds have rallied to levels not seen since thefourth quarter of 2012 and may be in for a test of those levels, whilethe dollar, hit by weak jobs figures, should resume an upward pathagainst the yen, if not also the euro.

Its a busy week looming for the Federal Reserve, dominated by aspeech on bank stress-testing from Chairman Ben Bernanke onMonday at the Atlanta Feds annual financialmarkets conference. Also on tap are minutesof the March meeting on Wednesday, thatcould yield insight into the debate on taperingbond purchases sooner rather than later anargument dented by a weak March job report.A total of 13 other appearances by various Fed policymakers, fromhawks like the Richmond Feds Jeffrey Lacker to doves like EricRosengren of Boston, during the week could also stir things up.

The sharp slowdown in hiring last month has dented the view that

the U.S. economy was gathering momentum, and data on retailsales due on Friday could show ifconsumer spending also suf-fered at the end of the first quarter. Total retail sales growth is ex-pected to slow in March, a potential sign that a January tax hike isweighing on consumers. Tighter fiscal policy is also denting con-sumer sentiment. The Thomson Reuters/University of Michigansurvey of consumers, also due Friday, is seen weakening in thepreliminary reading for April. Another report on Friday could show afall in wholesale prices in March, due mostly to a drop in volatileenergy prices.

U.S. President Barack Obama is expected to offer cuts to SocialSecurity and other entitlement programs in a budget proposal, dueto be laid out in full on Wednesday, and aimed at swaying Republi-

cans to compromise on a deficit-reduction deal. Under a proposalthat would cut the deficit by $1.8 trillion over 10 years, the presidentwill offer to apply a less generous measure of inflation to calculatecost-of-living increases. However, the president will only acceptthese spending cuts if congressional Republicans, for their part,agree to higher taxes.

Alcoa, the largest aluminum producer in the United States, reportsquarterly earnings as the years second earnings reporting periodgets underway. The first S&P 500 company to report, Alcoa iswatched closely, and seen as a bellwether for the materials sector.Investors typically focus on the company's forecasts for the alumi-num market, and will be watching for any updates to cautiouslyoptimistic forecasts given last quarter. Alcoa said then that it saw

global aluminum consumption growing 7 percent in 2013, com-pared with 6 percent growth in 2012. But aluminum prices havebeen falling since mid-February.

STOCKS Close Change % Chng Yr-high Yr-low

DJ IA 14565.25 -40.86 -0.28 14684.50 12035.10

Nasdaq 3203.86 -21.12 -0.66 3270.30 2726.68

S&P 500 1553.28 -6.70 -0.43 1573.66 1266.74

Toronto 12331.85 -31.20 -0.25 12904.71 11209.55

Russell 923.28 -2.38 -0.26 954.00 729.75

FTSE 6249.78 -94.34 -1.49 6533.99 5897.81

Eurofirst 1162.21 -18.44 -1.56 1209.05 1132.73

Nikkei 12833.64 199.10 1.58 12650.26 10398.61

Hang Seng 21726.90 -610.59 -2.73 23944.74 21975.90

TREASURIES Yield

10-year 1.7077 17 /32

2-year 0.2302 0 /32

5-year 0.6860 2 /32

30-year 2.8743 76 /32

Price FOREX Last % Chng

Euro/Dollar 1.3005 0.54

Dollar/Yen 97.61 1.33

Sterling/Dollar 1.5340 0.70

Dollar/CAD 1.0165 0.40

COMMODITIES Price $ change % change

May crude $ 93.00 -0.26 -0.28

Spot gold (NY/oz) $ 1578.46 25.75 1.66

Copper U.S. (front month/lb) $ 3.3400 -0.0055 -0.16

Reuters/Jefferies CRB Index 288.79 -0.19 -0.07

BIG MOVERS Price $ change % change

Daqo New Energy 5.03 -0.58 -10.34

Pandora Media 12.82 -1.05 -7.57Finisar 12.66 -0.70 -5.24

Strayer Education 47.51 -2.59 -5.17

Radioshack 3.34 0.24 7.74

Exco Resources 7.15 0.46 6.88

Rambus 5.89 0.36 6.51

Groupon 6.07 0.34 5.93

KEY ECONOMICS EVENTS ET/GMT REUTERS POLL PRIOR SOURCE

Chicago Midwest for Feb 0830/1230 -- 97 .0 Federal Reserve Bank of Chicago

Employment Index for Mar 1000/1400 -- 111.1

For The Day Ahead - Canada, click here


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COMING UP - NEXT WEEK(continued)

THE DAY AHEAD For April 8, 2013

JPMorgan Chase & Co, the biggest U.S. bank, is expected todeliver a mixed bag of quarterly financial results on Friday,laced with bad memories of its London Whale trading debacle.Earnings per share are expected to be up nearly 9 percentfrom the same quarter a year earlier. But any apparent growthwill be tarnished by the fact that the year-earlier profits were

retroactively slashed by nearly 10 percent when the companyhad to restate results because its financial controls had failedto pick up the derivatives loss. For a related Reuters Insidervideo, click here

Also on Friday, Wells Fargo, the No. 4 U.S. bank by assets,reports first-quarter earnings and investors will be closelywatching for an update on the mortgage business as a harbin-ger of what to expect in the rest of the industry.

Chevron, the second-largest U.S. oil company, updates inves-tors on Wednesday on how its push to start growing produc-tion this year has progressed.

Constellation Brands posts results on Wednesday, and WallStreet will no doubt want to hear the company's view on nego-tiations with U.S. regulators over Anheuser Busch InBev's pro-

posed takeover of Grupo Modelo. As part of that deal, Constel-lation will take over the Modelo business in the United States,giving the world's largest wine company a big footprint in thebeer business.

A handful of leading U.S. retailers, including Costco Whole-

sale Corp, Gap Inc, TJX Co and L Brands report Marchsales on Thursday, with Wall Street expecting modest gains,largely because of the timing of Easter this year that pushed alot of business into April. But the details companies provide willprovide a window into consumer sentiment in March and shop-pers' willingness to spend money in the first real spendingoccasion since the Christmas holiday season. Separately, RiteAid posts fiscal fourth-quarter results on Thursday.

Canadian economic data out next week includes March hous-ing starts and February building permits numbers on Tuesday,as well as February new housing price figures on Thursday.

The reports are likely to confirm that activity in the countrysonce hot housing market has slowed dramatically following the

Canadian governments move last summer to tighten mort-gage rules. But with prices holding steady, economists con-tinue to debate whether the property market faces a hard orsoft landing.

COMING UP - MONDAY

Federal Reserve Chairman Ben Bernanke speaks on "Stress-Testing Banks: What Have We Learned?" before a dinner atthe Federal Reserve Bank of Atlanta Financial Markets Confer-ence in Stone Mountain, Ga.

The second phase of trial between HP and Oracle begins overItanium server platforms. Santa Clara County judge JamesKleinberg ruled in the first phase that a contract existed be-tween the two companies and now he will decide whether Ora-cle broke the contract, and what damages are due, if any.

Alcoa reports results (See Coming Up Next Week)

U.S. Treasury Secretary Jack Lew arrives in Brussels, formeetings with European Council President Herman Van Rom-puy, European Commission President J ose Manuel Barroso,European Commissioner for Economic and Monetary Affairsand the Euro and European Commission Vice President OlliRehn, and European Commissioner for Internal Market and

Services Michel Barnier. In the evening, Secretary Lew travelsto Frankfurt where he will meet with European Central BankPresident Mario Draghi.

U.S. District Judge Sidney Stein holds a hearing to considerthe fairness ofCitigroup Inc's $590 million class-action settle-ment with shareholders who accused the third-largest bank ofhiding tens of billions of dollars of toxic mortgage assets andits ability to manage risks, resulting in a roughly $250 billion

decline in its market value from peak to trough. The casegained renewed attention after Stein asked both sides to ad-dress why it is fair not to hold several former top executives,including former CEO Charles Prince and former senior ad-viser Robert Rubin, individually responsible to make paymentsto shareholders who still own the stock they bought during theclass period.

Blackstone Group is expected to visit Dell's headquarters tobegin an in-depth analysis of the company, a strong sign thebuyout firm is proceeding with an offer that could upset foun-der Michael Dell's $24.4 billion buyout bid. Blackstone andbillionaire investor Carl Icahn separately made preliminaryproposals in late March that, if finalized, could be superior to

the offer on the table from Michael Dell and private equity firmSilver Lake Partners LP.
http://reut.rs/11RRvdIhttp://reut.rs/11RRvdI


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MARKET MONITOR

Click on the chart for full-size imageStocks ended their worst week this year with losses on Fridayafter a weaker-than-expected jobs report undermined confi-dence in the economy and first-quarter earnings growth. F5 Net-works dropped 19.03 percent. Several of F5's peers were alsolower, with Juniper Networks off 3.09 percent and Citrix Sys-tems down 1.19 percent. Delta Airlines fell 2.44 percent. The

Dow was down 0.28 percent, the S&P 500 Index was down0.43 percent and Nasdaq was down 0.66 percent. For the week,Dow fell 0.1 percent, S&P 500 was off 1.0 percent and Nasdaqwas down 1.9 percent.

Treasury prices jumped and yields fell to their lowest this yearafter data showed far fewer jobs were created than expected inMarch, fueling worries the beleaguered labor market is stillstruggling. "It caught a lot of people offside and they are scram-bling to get back into bonds," said Bill Irving, portfolio managerat Fidelity Investments. "The pace of growth will be slow but wewill still get 2 percent. Yields will remain very low, but I don'texpect we will get back to the record lows we saw last summer,"Irving said. Benchmark 10-year Treasury notes rose 17/32yielding 1.71 percent. Analysts argued the weak report wouldlikely keep the U.S. Federal Reserve buying bonds to try to keepthe economy on a growth path. The price of the 30-year Treas-ury bond rose 2-12/32 to yield 2.87 percent.

The dollar weakened against most major currencies, droppingto a two-week low against the euro, as worse-than-expected

jobs data raised concerns that the pace of recovery in the Ameri-can labor market has slowed. "This data interrupts the strongdollar trend against the euro for example, but medium-term, I amnot convinced that this weakness in the dollar will continue," saidFederico Garcia Zamora, director of currency strategies andsenior portfolio manager at Standish Asset Management in Bos-ton. The yen, meanwhile, extended its downward slide, hitting afresh 3-1/2-year low against the dollar and a near two-month

trough against the euro. The euro was last trading at $1.2997,up 0.48 percent on the day. Against the yen, the dollar lasttraded up 1.36 percent at 97.64 yen after earlier hitting sessionlows at 95.80 yen.

Crude futures fell and posted the biggest percentage week-on-

week loss since September, as a weak U.S. jobs report fuelledconcerns about the economy of the world's largest oil consumer.Richard Ilczyszyn, founder and chief market strategist atiitrader.com LLC in Chicago, said traders were far less optimisticabout the strength of oil demand than at the start of the year.Crude dropped 0.21 percent to $93.06, off an earlier low of$91.91 a barrel. Crude has fallen by almost 5 percent this week,its biggest weekly loss since September. Its discount to Brent,however, narrowed to less than $12 a barrel for the first time inover nine months.

Gold rallied over 1.5 percent, its biggest one-day gain sinceNovember, as disappointing U.S. job data fuelled expectationsthe Federal Reserve will continue its bullion-friendly bond pur-

chases. Spot gold was up 1.71 percent, at $1,579.20 an ounce.June delivery futures climbed 1.69 percent, to $1,578.60 anounce. Trading volume, however, was relatively weak, given therally.

http://link.reuters.com/ram54t


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TOP NEWS

Click on the chart for full-size imageWeak job gains cast shadow on U.S. economic outlookAmerican employers hired at the weakest pace in nine months inMarch, a sign that tax hikes that kicked in early this year as partof Washington's austerity drive could be stealing momentumfrom the economy. The economy added just 88,000 nonfarm

jobs last month, the Labor Department said. That was well be-

low market expectations for a 200,000 increase. The jobless rateticked a tenth of a point lower to 7.6 percent largely due to peo-ple dropping out of the work force. Separately, Commerce De-partment data showed the U.S. trade gap narrowed unexpect-edly in February and overall exports increased slightly. The defi-cit narrowed to $43.0 billion. Meanwhile, the Federal Reserveshould continue buying bonds through this year due to a"scarring" of the U.S. labor market, and even more aggressivepolicies may be warranted if unemployment remains persistentlyhigh, Boston Fed President Eric Rosengren said.

ITC judge says Samsung infringes key part of Apple patentSamsung Electronics infringed a key portion of anApp le patentby including a text-selection feature in its smartphones and tab-lets, an International Trade Commission judge said in a prelimi-nary decision. Samsung did not infringe portions of a secondApple patent that allows a device to detect if a microphone orother device is plugged into its microphone jack, the judge saidin a decision that was issued on March 26 but kept confidentialuntil late Thursday. Meanwhile, Samsung estimated its J anuary-March operating profit rose 53 percent to 8.7 trillion won assales of mid-tier smartphones helped the South Korean gianttide over the off-peak season. The guidance was better than anaverage forecast by analysts for 8.3 trillion won.

Disney to begin layoffs in studio, consumer productsWalt Disney expects to begin layoffs at its studio and consumerproduct divisions within the next two weeks, according to twopeople with knowledge of the matter, in the latest cost-reduction

step to emerge from a company-wide review. The studio jobcuts will center on the marketing and home video units and in-clude a small number from the animation wing, said the sources.It is unknown how many jobs will be lost at either division. Staffreductions at the consumer products unit will largely result fromattrition, another person said. Disney started an internal cost-cutting review late last year to identify cutbacks in jobs it nolonger needs because of improvements in technology, one ofthe people said. It is also looking at redundant operations thatcould be eliminated following a string of major acquisitions overthe past few years, said the person.

Hedge fund manager Ackman says mistakes made inJCPenney turnaround

Hedge fund manager William Ackman is turning up the heat onthe man he handpicked to turn around struggling retailer JCPen-ney. The "criticism is deserved," Ackman said ofRon Johnson,the former Apple executive. Speaking bluntly, Ackman said bigmistakes have been made remaking the 110 year-old retailbrand. There was "too much change too quickly without ade-quate testing," Ackman said, adding that while J ohnson faces atough challenge in fixing the company's cost structure andchanging the merchandise, so far the execution "has beensomething very close to a disaster."

HP shakeup poin ts to more " shareholder friendly" board

Wall Street's psycho-analysis ofHewlett-Packard's latest boardroom shuffle has begun. The resignation of Hewlett-PackardChairman Ray Lane and appointment of activist investor RalphWhitworth as his interim replacement has raised hopes for amore "shareholder friendly" board at the flailing PC maker. WellsFargo analyst Maynard Um said the shakeup at HP could resultin longer-term "shareholder friendly" actions "potentially from acapital allocation perspective."

Apple, Google won' t face poaching class action, for nowA federal judge will not allow a lawsuit accusingApple, Googleand other technology companies of conspiring not to poach eachother's employees to proceed as a class action, but left the dooropen for affected workers to eventually sue as a group. In a de-

cision, U.S. District J udge Lucy Koh in San J ose, California saidthe five software engineers who brought the case had yet toshow that the proposed class plaintiffs had enough in commonto allow them to sue together. However, in light of new evidence,she said the nature of the "alleged overarching conspiracy" anddesire to litigate it all at once weighed "heavily" in favor of classcertification. As a result, she gave the plaintiffs a chance to seekclass certification again.

Boeing has 'good' Dreamliner battery plan fix -U.S. officialBoeing has a "good plan" to fix the battery problem that hasgrounded its 787 Dreamliner jets since J anuary, U.S. Transpor-tation Secretary Ray LaHood said. LaHood said he wants toensure the Dreamliner is safe before allowing the planes back inthe air, and no decision had been made on commercial flights.Boeing may make a test flight on Friday to gather data for theFederal Aviation Administration to show the new battery systemis safe and performs as designed.

Some U.S. wealth advisers take a fee for clients' fund assetsAt least three wealth management firms that market themselvesas objective financial advisers are getting payments for investingtheir clients' money in certain mutual funds, a practice that evensome of these firms say could create conflicts of interest. Fidel-ity Investments and Charles Schwab are paying these finan-cial advisers as much as 0.25 percent of the assets that theirclients put in no-transaction-fee mutual funds. The three wealthmanagement firms receiving product-related fees are LuminousCapital, a division of First Republic Bank; Sontag Advisory

LLC, a unit of National Financial Partners; and PHH Invest-ments, a Reuters review of regulatory filings shows.

http://link.reuters.com/vyx54t


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TOP NEWS (continued)

GM, Opel CEOs to meet German leader MerkelThe chief executive of General Motors and the head of its Opelunit in Germany will meet ChancellorAngela Merkel next weekto discuss the rejection of a plant closure timetable by workerswhich could speed the factory's shutdown. With job losses loom-ing at Opel's Bochum plant and against a background of Euro-

pean car sales in freefall, government spokesman Georg Streitersaid Dan Akerson and Karl-Thomas Neumann will have a one-hour session with Merkel in Berlin on Thursday.

Bankruptcy judge approves MF Global's liqu idation planMF Global won court approval of a plan to liquidate its assets,pay back creditors and end the $40 billion bankruptcy thatrocked the financial world in 2011. The approval marked a majorstep in ending the massive Chapter 11 filing, as MF Global isnow able to implement the plan and pay creditors. J udge MartinGlenn approved the plan at a hearing in U.S. Bankruptcy Courtin Manhattan, after noting the "long road" to confirmation. "Whilethere have been some very strongly held views and differences,counsel have worked exceedingly well together to resolve mostof them, limiting what the court had to decide," Glenn said.


PIC OF THE DAY

A Bolivian man breaks salt to be trucked away from the Uyuni salt lake,which holds the world's largest reserve of lithium, located at 3,656 me-ters (11,995 ft) above sea level in southwestern Bolivia.

Company Name Action

Evercore PartnersKBW cut rating to market perform from outperform and cut price target to $41 from $42, says the first quarter results will beweaker than originally forecast and that M&A activity industry-wide has slowed in the first quarter.

F5 NetworksBMO cut price target to $90 from $120 after the company reported disappointing second quarter results driven by a spend-ing slowdown in North America.

MattelKeyBanc cut rating to hold from buy on valuation, says the company has meaningfully outperformed the S&P 500 over thepast year.

U.S. AirlinesJ P Morgan raised price target of Alaska Air to $64 from $45, raised Delta Airlines to $19 from $18 and raised United Conti-nental Holdings to $31 from $30, says the impact of sequestration will be more than compensated by declining fuel costs.

U.S. BrokersJ P Morgan raised price target on Blackrock to $265.50 from $262, raised Franklin Resources to $154 from $145 and raisedInvesco to $31 from $30 citing a solid quarter in terms of equity market returns and equity and fixed income fund sales.

ANALYSTS RECOMMENDATIONS

KEY RESULTS vs. THOMSON REUTERS I/B/E/S ESTIMATES

Company Name Quarter EPS Estimates Year Ago Rev Estimates (mln)

Alcoa Q1 $0.08 $0.10 $5,884

** Includes companies on S&P 500 index. Estimates may be updated or revised.


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THE DAY AHEAD - CANADA For April 8, 2013

COMING UP MARKET MONITOR

No major events are scheduled. Canada's main stock index capped a five-day losing streak byrecording its biggest weekly decline in 10 months on Friday asweak Canadian and U.S. jobs data renewed investor concernsabout the health of North American economy. The TorontoStock Exchange's S&P/TSX composite index was down 0.25percent at 12,331.85, after sinking to 12,244.23, its lowest pointsince Dec. 17, 2012. Royal Bank of Canada dropped 1.28 per-cent. Goldcorp gained 1.19 percent and Yamana Gold rose0.55 percent.

The Canadian dollarwas up 0.40 percent at $1.0165.

BIG MOVERS Price C$

Romarco Minerals 0.65 -0.06

% Change

-8.45

Air Canada 3.13 -0.13 -3.99

Pacific Rubiales 19.36 -0.74 -3.68

Aquila Resources 0.14 0.01 7.69

Ithaca Energy 1.81 0.09 5.23

Canaccord Financial 6.67 0.26 4.06

TOP NEWS

Canada posts worst monthly job losses in more than fouryearsCanada posted its worst monthly jobs loss in more than fouryears in March, another sign the economy is struggling to copewith weak foreign markets and a strong Canadian dollar. Can-ada shed 54,500 positions in March, more than wiping out the50,700 jobs that were added in February, Statistics Canadasaid. Market operators had expected a modest gain of 8,500

jobs. The March unemployment rate rose to 7.2 percent from7.0 percent. Adding to the gloom were trade figures for Februarythat showed Canada's deficit increased to C$1.02 billion onboth lower exports and higher imports. Traders had expected asurplus of C$200 million. In a contrary signal, the pace of pur-chasing activity jumped more than expected in March. The sea-

sonally adjusted Ivey Purchasing Managers Index rose to 61.6from 51.1 in February, higher than the analysts' forecast of 52.4.For a related graphic, click here

Canada Pension Plan backs Agrium board nominees inJana battle

The Canada Pension Plan Investment Board said it has votedto supportAgriums board nominees ahead of a crucial share-holder meeting next week, a setback for activist investor JanaPartners. A J ana executive, Charles Penner, played down thesignificance of the CPPIB support, noting that based on the lat-est filings, CPPIB only controls 385,465 Agrium shares, or 0.25percent of the outstanding stock. He said J ana remains confi-dent.

CP Rail says 400 barrels of oil spilled in Ontario, not fourCanadian Pacific Railway raised its estimate of the amount ofoil spilled in a derailment in northern Ontario a hundred-fold, andsaid 400 barrels had leaked from two tanker cars, up from itsinitial estimate of four barrels. CP Rail spokesman Ed Green-berg said the size of Wednesday's spill, the company's secondin a week, was not evident when crews first arrived at the re-mote site of the derailment near White River, Ontario, about 700

kilometers northeast of Toronto.

Click on the chart for full-size image
http://link.reuters.com/muj56thttp://link.reuters.com/muj56thttp://link.reuters.com/zam54t


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ANALYSIS AND INSIGHT

DEALTALKBlackstone heading to Texas to firm up Dell strategyBy Nadia Damouni and Poornima GuptaBlackstone Group will visit Dell Inc'sheadquarters on Mondayto begin an in-depth analysis of the company, sources said, astrong sign the buyout firm is proceeding with an offer that could

upset founder Michael Dell's $24.4 billion buyout bid.Blackstone and billionaire investor Carl Icahn separately madepreliminary proposals in late March that, if finalized, could besuperior to the offer on the table from Michael Dell and privateequity firm Silver Lake Partners LP.

The outcome of the auction would determine the future of Dellas well as Chief Executive Michael Dell, who founded the com-pany in a dorm room in 1984 and turned it into the world's No.3personal computer maker.In its first step toward firming up a bid, Blackstone is workingclosely with Michael Dell in putting together a new business planand actively talking to him about staying on in his current role asCEO, two people familiar with the matter said.If Michael Dell gets on board with Blackstone's still-developingstrategy for Dell, he would be Blackstone's preferred choice run-ning the new company, the sources said. But the buyout firmalso is putting an alternative executive plan in place.Blackstone has hired an executive consulting firm that hasreached out to about half a dozen high profile industry execu-tives to help evaluate Dell's businesses and provide advicearound strategy, the sources said.

The New York-based private equity firm and its consultant arealso talking to a few of the executives for potentially runningDell, while some others are being considered for board posi-tions, the sources said.

The executives that have been contacted by the executive refer-ence firm include Cisco Systems Inc director Michael Capellas,former IBM Corp services head Michael Daniels, Oracle CorpPresident Mark Hurd and Hewlett-Packard Co's PC boss Todd

Bradley, the sources said.Hurd, who sources previously have said was being pursued for aCEO job, has said he is happy at Oracle. Representatives forCapellas and Daniels did not return calls seeking comment.Bradley said in an email he was not contacted for a CEO posi-tion.

The leading external candidate for the Dell CEO job is Capellas,who has been in extensive discussions with Blackstone in recentweeks brainstorming on strategy for Dell and evaluating the in-dustry, the sources said.Capellas, best known as CEO and Chairman of PC maker Com-paq, that he sold to Hewlett-Packard in 2002 for $25 billion, hasbeen spotted entering and leaving Blackstone's Park Avenueheadquarters several times over the past few weeks.

In recent years, Capellas served as Chairman and CEO of VCE,a collaboration between EMC Corp, Cisco and VMware. He stillremains chairman."No one knows who will ultimately sign on yet," one of thesources said. "(Blackstone) is exploring options with those peo-ple."Executives from the private equity firm and its consultants willhead to the Round Rock, Texas, Dell's headquarters on Mon-day, to kick off the due diligence that is expected to last aboutfour weeks, people close to the matter said."What Blackstone is trying to do is develop a smarter structurethat provides more options than what Michael Dell and SilverLake seem to be doing," another said, adding that the firm istrying to figure out a different way for Dell going forward.All the sources asked not to be named because the discussionsare confidential. Spokesmen for Blackstone and Silver Lakedeclined to comment. A spokesman for Michael Dell was not

available for comment.STRATEGY FOR DELLBlackstone's team leaders for the bid include Dell's former headof strategy, Dave J ohnson, currently a senior managing directorat Blackstone. In the past, J ohnson and Michael Dell have notseen eye-to-eye over a strategy that would take Dell forward, the

sources said.J ohnson is working with Chinh Chu, one of Blackstone's mostexperienced partners, who has been carrying out transactionsfor the firm since 1990.Michael Dell and Silver Lake envision Dell as an integrated com-pany, with the No. 3 PC-maker continuing to focus on a diverseoffering that includes enterprise software, servers, PCs and fi-nancial services.

J ohnson's strategy, if Blackstone acquires Dell, would be to fo-cus the company on enterprise software and accelerate the ef-fort to bring together all the acquisitions made in this space, asource close to J ohnson said.In addition, under J ohnson's plan, the company would exit itsfinance business, the source said, adding that J ohnson alsowants to make the company less Texas-centric and more globalto attract more talented employees.During J ohnson's three years at Dell, he oversaw an aggressiveacquisition strategy with some 18 to 20 deals, including the 2009purchase of Perot Systems Corp, which catapulted Dell into thetechnology services market alongside IBM and HP.But one of the sources cautioned that the due diligence processis still in the early stages, and that Blackstone is just starting toput together a business plan.

COLUMNA f ive-point strategy for riding the bullBy J ohn WasikWith the U.S. stock market rallying this year, it may be enticingto take extra cash on hand and ride the bull.

If anything, it is all too easy to pour contributions into activelymanaged U.S. large-stock funds. Some 90 percent of all retire-ment plans surveyed last year by the Plan Sponsor Council ofAmerica, an employer group, offered actively managed domesticstock funds, and most IRAs and 401(k)s hold these funds.But a stock fund may not track the market as closely as an indexfund. And there are several other asset classes that are worthscrutinizing. If you are jumping into the market with a bit of cashthat goes beyond what you already have set up - say, $10,000out of savings - it would make sense to cover a broad range ofglobal options instead of exclusively focusing on U.S. large-company stocks.What kinds of funds should you consider if you are a moderate-risk individual already invested in large U.S. stocks? Here are

some often-ignored alternatives:1. A broad sampling of U.S. stocks (60 percent).If you're a U.S.-based investor, you're going to have natural biastoward blue chips in the S&P 500 Index, which has climbedsome 9 percent this year, dividends included. But certain indus-trial sectors have done even better: healthcare is up 16 percent;consumer staples have risen nearly 14 percent, and consumerdiscretionary stocks are higher by about 11 percent.If your actively managed fund covers just a slice of the U.S. mar-ket, you could be missing future gains. For your extra money,look for a "total market" index fund that includes large, mid-sizedand small companies such as the Fidelity Spartan Total Mar-ket Index Fund, which is up 12 percent for the year.2. Developed market stocks (20 percent)

Your backyard is not always the best place to invest. By"backyard," I mean the country you're living in and name-brandcompanies that are familiar to you. While U.S. stocks are cer-



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ANALYSIS AND INSIGHT (continued)

tainly outpacing Chinese and European stocks this year, that isnot the case with other countries. J apanese stocks, for one, areshowing a robust rebound. The iShares MSCI Japan Indexfund, which tracks the J apanese market, is up 11 percent yearto date. A broader choice is the Vanguard Total World StockIndex ETF, which is up about 10 percent for the year. The index

fund covers some 98 percent of the word's public market capi-talization. So you'd get a piece of most U.S. sectors plus non-U.S. and developed markets, including J apan.3. Emerging markets stocks (10 percent)Investors have a tendency to pile into what is hot at the momentand ignore laggards that could offer future appreciation. Emerg-ing markets stocks fit that bill now. Although trailing U.S. stocks,they represent potential economic growth. China, India and Bra-zil are growing in terms of economic activity and population. Astheir standards of living rise, their citizens will be buying moreconsumer goods, food and energy.

The iShares MSCI Emerging Markets Index ETF, which is down1.5 percent over the past year but offers a good opportunity forgrowth, focuses on the leading stocks from Asia, South Americaand other developing regions.4. Commercial real estate (5 percent)Companies that buy and hold retail, office, storage, healthcare,industrial and multi-unit residential properties and mortgages areoften ignored. In the first quarter, the FTSE NAREIT All-REITindex climbed 9 percent after rising 20 percent last year. Con-sider global funds that hold real estate investment trusts(REITs).

The SPDR DJ Global Real Estate exchange-traded fund,which is up about 18 percent over the past year, holds real es-tate investment trusts in developed and emerging markets.5. Global bonds (5 percent)Another clear temptation is to keep all of your money in U.S.government or corporate bonds. You may, however, find higheryields in international bond funds. That means investing in

bonds from emerging and developed markets. The iShares S&PCitigroup International Treasury ETF holds government bondsfrom countries across the world. The fund has gained almost 3percent in the annual period.By no means is this a complete portfolio by itself. It's meant tosupplement what you already own in U.S. stocks and bonds.

To put all this together into one package for an investment in the$10,000 to $100,000 range, you would contact your investmentadviser, financial planner or broker and have them properly di-versify your portfolio with low-cost index funds or do it yourselfusing the guidelines above.

You need to ensure that your money is spread out among as-sets that do not move in lock step and that it follows your finan-cial goals. Even though it is tempting to shift assets to current

winners, do not load up on any one category.At the very least, make sure that you maintain a global perspec-tive, despite the fact that returns are lagging in Asia and Europe.

Those areas may offer better stock prices now and could climbwhen U.S. stock prices sag.

(The author is a Reuters columnist and the opinions expressedare his own.)

BREAKINGVIEWSFacebook super-app wants to li ve off GoogleBy Robert CyranFacebook's new super-app wants to live offGoogle. The socialnetwork's Home software, unveiled on Thursday, sits on top ofthe Android smartphone operating system. That encourages

people to use Facebook over rival services. Google built An-droid, but Mark Zuckerberg's company plainly likes the idea ofgrabbing a piece of it.Android came to exist partly because Google didn't want onecompany, Apple, controlling the software running all the world'ssmartphones and tablets. By developing its own operating sys-tem, Google could ensure that services such as Gmail, YouTubeand its search engine would run smoothly on phones and tablets and that it would collect advertising dollars.

The huge success of Android now powering over half of allU.S. smartphones, according to Comscore owes much to itsbeing freely available to any hardware maker, in stark contrast toApple's closed approach. Now, though, just as Google mar-shaled the Internet through its service and made money out ofdoing so, Facebook's new software largely supplants the An-droid interface for users.In Home, pictures and messages from friends will appear on adevice's lock and home screen, users can text each other di-rectly, and notifications will pop up. Other services like video andsearch will surely appear soon. In short, people will have morereasons and require fewer screen-taps to use Facebook's toolsthan Google's Gmail, YouTube and the like. That in turn willprobably mean more advertisements served by Facebook andfewer by Google, especially considering the 680 million activemonthly users that Zuckerberg's company claims.Google's wariness over Facebook has increasingly morphed intoactive rivalry, as evidenced by the search giant's attempts tobuild its own social network, Google+. Facebook in turn movedinto core Google territory, launching a search service earlier this

year. The nature of the Home software potentially aggravatesthese tensions.Google faces limits, however, in how it can react. Restrictingaccess to Home might annoy users and bring antitrust regulatorscalling. But it shouldn't surprise anyone if future tweaks to An-droid make Googles services slightly more prominent, smoothand speedy than Facebook's. If the social network wants to takea bite out of Google, the feeling assuredly is mutual.CONTEXT NEWSFacebook on April 4 unveiled its new Home software for mobiledevices running Google's Android operating system. Home actsas an interface on smartphones and similar gadgets, displayingFacebook newsfeeds and messages on a device's homescreen.

Home will be available as a download starting on April 12, andwill initially work on a limited number of devices. It will come pre-installed on the HTC First handset, which goes on sale on April12 through U.S. carrier AT&T.

(The author is a Reuters Breakingviews columnist. The opinionsexpressed are his own.)



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the week ahead - april 8th 2013

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