Iconic Piano-Maker Steinway Is Getting Acquired By A Private Equity Firm (LVB)

Steinway Musical Instruments is being acquired by an affiliate of Kohlberg & Company, a private equity investment firm, for about $438 million. 

The public company will go private once the acquisition is complete. 

The Steinway & Sons factory in Queens, New York is a subsidiary of Steinway Musical Instruments.

Our agreement with Kohlberg represents an exceptional valuation for our shareholders, while also representing an important next step in the growth of Steinway," said Michael Sweeney, Chairman and interim CEO of the Company in the press release.

We previously reported that during the recession Steinway cut the Astoria factory headcount to 215, from about 300. In the last decade the company averaged about 3,300 grand pianos a year.

At the time Steinway's president Ron Losby said he expected the company to return to that figure soon.

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The Winklevoss Twins Would Like To Help You Trade Bitcoins With Their Bitcoin ETF

REUTERS/Brian Snyder

Cameron (L) and Tyler Winklevoss, co-founders of ConnectU Inc., leave the U.S. District Court in Boston, Massachusetts July 25, 2007 following a court hearing on ConnectU's lawsuit against Facebook Inc.

Bitcoin, the obscure digital crypto-currency, has been out of the headlines for a little while.

But this hasn't stopped Cameron and Tyler Winklevoss from moving forward with their effort to make it more mainstream.

According to a new filing with the SEC, a trust sponsored by Winklevoss Capital Management has registered to offer shares the will give buyers exposure to Bitcoin.

"The Trust holds “Bitcoins,” a digital commodity based on an open source cryptographic protocol existing on the online, end-user-to-end-user network hosting the public transaction ledger, known as the “Blockchain,” and the source code comprising the basis for the cryptographic and algorithmic protocols governing the issuance of and transactions in Bitcoins," reads the filing.

"The investment objective of the Trust is for the Shares to reflect the performance of a weighted average price of Bitcoins, less the Trust’s expenses. The Sponsor believes that, for many investors, the Shares will represent a cost-effective and convenient means to access exposure to Bitcoins."

It appears that this will operate like an exchange-traded fund (ETF), a security that basically trades like a stock.

The ticker symbol for the fund has yet to be determined.

The Winklevosses became famous when they sued Facebook founder Mark Zuckerberg for allegedly taking an idea that was theirs.

Before you even consider trading Bitcoin, you should consider the risks. Like this one from the filing:

If a malicious actor or botnet obtains control in excess of 50 percent of the processing power active on the Bitcoin Network, such actor or botnet could manipulate the source code of the Bitcoin Network or the Blockchain in a manner that adversely affects an investment in the Shares or the ability of the Trust to operate.

If this is incomprehensible to you, then maybe Winklevoss Bitcoin Trust isn't for you.

Read the whole filing at SEC.gov.

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California Has A Historic Opportunity To Reduce Its Debt ... And It Looks Like It's Going To Blow It

MikeBehnken via Compfight cc

California is projected to have its first budget surplus in years by 2014.

It has so much money, in fact, that it doesn't know what to do with it.

But now it's already on the verge of blowing this rare window of fiscal stability, according to S&P analysts Gabriel Petek and David Hitchcock.

In a new note, they warn the state for going against Gov. Jerry Brown's recommendation to retire debt and choosing instead to restart funding.

Standard & Poor's Ratings Services believes the higher-than-expected cash receipts presented the state an opportunity to accelerate its plans for retiring the $26.9 billion in budget liabilities that remain leftover from prior years' deficits. Compared with what the governor recommended in May, however, the final budget agreement moves in the other direction, decelerating somewhat the repayment of a portion of these debts.

They say the state has exchanged a $650 million deferral repayment for a $500 million one-time spending measure, along with $150 million in new ongoing education spending.  

"Although the repayment shift is relatively modest in our view, and the [department of finance] still forecasts retiring all of the education deferrals by the end of fiscal 2016, we believe it could set a precedent for similar delays in the future," they write.

The pair note this was made possible in part by a Sacramento quirk: The legislature gets to negotiate the revenue estimates used in the budget:

Whereas more than half the states have independent revenue estimating bodies, California allows political negotiations to influence the revenue number assumed in the budget. As the recently concluded cycle demonstrates, the revenue estimates themselves have sometimes become subject to negotiations in California.

They conclude by bemoaning the state's weak flesh:

With limited resources, we believe the presence of the budget liabilities impedes the state from making meaningful progress on its longer-term liabilities, particularly its retiree health care and teachers' pension liabilities.

But by enacting even small new ongoing spending commitments this year -- which could increase future year expenses -- we detect a softening of resolve when it comes to paying down the internal debts.

There is also a potential cascade effect. We believe that by opening the door to new programs while waiting for future (uncertain) revenue to repay some internal debts, the state delays, or jeopardizes altogether, its ability to confront the long-term liabilities.

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Investors Are Their Own Worst Enemies

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Jason Zweig: Investors Are Their Own Worst Enemies (The Wall Street Journal)

Jason Zweig of The Wall Street Journal writes that  investors who receive constant news updates on their investors have lower returns that those who don't. He also argues that investors are their own worst enemies.

"One of the main reasons we are all our worst enemies as investors is that the financial universe is set up to deceive us. From financial history and from my own experience, I long ago concluded that regression to the mean is the most powerful law in financial physics: Periods of above-average performance are inevitably followed by below-average returns, and bad times inevitably set the stage for surprisingly good performance.

"But humans perceive reality in short bursts and streaks, making a long-term perspective almost impossible to sustain – and making most people prone to believing that every blip is the beginning of a durable opportunity.

"My role, therefore, is to bet on regression to the mean even as most investors, and financial journalists, are betting against it. I try to talk readers out of chasing whatever is hot and, instead, to think about investing in what is not hot. Instead of pandering to investors’ own worst tendencies, I try to push back. My role is also to remind them constantly that knowing what not to do is much more important than what to do. Approximately 99% of the time, the single most important thing investors should do is absolutely nothing."

FINRA Reports $10.4 Million Profit In 2012 (Investment News)

The Financial Industry Regulatory Authority (FINRA) reported a profit of $10.5 million in 2012 driven by higher fees, cost cutting, and better returns on its portfolio, according to Investment News. On an operating basis, however, it posted a $89.2 million loss. This was better than the $89.8 million loss in 2011.

The Chart That Says The Gold Sell-Off Still Has A Long Way To Go (Credit Suisse)

Gold prices fell 23% in Q2 2013. While gold prices were up today, a chart from Credit Suisse that compared the inflation adjusted gold prices during the 70s bull market with gold prices today. A look at this chart says gold prices could tumble further.

Busting The Myth That Active Strategies Are Better Than Passive Ones (Index Universe)

The debate over active and passive management never seems to die down. In a new piece, Larry Swedroe at Index Universe debunks a paper by American Century Investments called Six Reasons to Emphasize Active Investment Management. One reason cited in the paper is that active portfolios can outperform passive portfolios.

The paper argues, "Even a simple equity portfolio, such as an equal-weight portfolio, has historically outperformed its market cap-weighted counterparts over various market cycles. The equal weighting captures an important stock price behavior, the mean-reversion." 

Swedroe however sees three problems with this argument. 1. : "The paper confuses indexing/passive investing with the exclusive use of a total stock market fund or an S&P 500 Index fund." 2. "An equal-weighted portfolio’s outperformance over a market-cap one has nothing at all to do with mean reversion." 3. "If active managers were able to persistently identify in advance which sectors/stocks were going to outperform or revert to mean, we would see evidence of persistent outperformance beyond the randomly expected."

S&P 500 Investors Don't Need To Freak Out About An Emerging Market Meltdown (Goldman Sachs)

S&P 500 companies have great exposure to international markets. But there have been growing concerns about emerging market growth and investors have been fleeing EMs. But David Kostin at Goldman Sachs says investors needn't worry too much. 

"We believe weaker EM growth poses little risk to S&P 500 earnings. We estimate roughly 5% of S&P 500 revenues are derived from EM, and BEA data suggest a similar EM share of total US corporate profits. Two-thirds of S&P 500 sales are domestic, making our forecast for stronger US GDP the biggest driver of our EPS growth forecasts of 11% and 8% in 2013 and 2014."

Goldman Sachs

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Tesla's Stock Surged 9% After A Bullish Analyst Upgrade (TSLA)

REUTERS/Brendan McDermid

Tesla shares improved 9.15% today after Jefferies analyst Elaine Kwei raised her price target for the company to $130. 

The stock ended the day at $117.18.

Here's some of her commentary:

Based on reported [calendar year to date] sales and customer VIN numbers, we believe there is likely upside to prior 2Q guidance for deliveries of 4,500 units, as well as 2013 guidance of 21,000 units. We estimate TSLA has taken 9% market share in the U.S. full-size luxury sedan market, accounting for nearly all growth in the segment. We increase our estimates and PT to $130 based on a 10-year DCF and update our EV market forecast. 

Tesla's stock has more than doubled since May.

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Step Inside The Factory Where Steinway & Sons Makes Its Gorgeous Grand Pianos (LVB)

Steinway Musical Instruments is about to be taken private in a $438 million deal with an affiliate of Kohlberg & Company, a private equity investment firm.

Last year we toured the Steinway & Sons factory in Astoria. The company is a subsidiary of Steinway Musical Instruments with two factories: one in New York, the other in Hamburg.

Click here to jump straight to the photos >

Steinway prides itself on having retained manufacturing jobs in the U.S. since all its Grand pianos are made here.

It does however manufacture and market its two lower end Boston and Essex pianos in Asia.

Sales for the company were hit in the New York area and across the world during the recession, with 'hobbyist' buyers cutting back on spending.

At the time, Steinway cut a third of its New York staff, reducing the Astoria factory head count to 215, from about 300.

But the New York market recovered quickly. In fact, in 2011 the company sold 2,013 Grand pianos, not including upright pianos. In the last decade the company averaged about 3,300 grand pianos a year.

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This Chart Shows How Unhappy Zynga Employees Have Been With Their Boss, Mark Pincus (ZNGA)

Looks like a lot of Zynga employees might be cheering the news that Mark Pincus is out as CEO, replaced by Microsoft Xbox chief Don Mattrick.

Pincus will become chairman and chief product officer of Zynga when Mattrick starts as CEO next week.

Job hunting site Glassdoor put together a report that shows Pincus' approval ratings by employees dropping like a rock.

That's not surprising considering that the company has been laying off some 18% of its workforce, slashing over 500 jobs.

A year ago, Pincus had a 70% approval rating. Flash forward to last quarter, and it's down to 23%. Ouch.

Glassdoor

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