Creative Design Concepts

Por ROGERIO JELMAYER , de São Paulo

Um volume extraordinário de ofertas de ações de empresas brasileiras este mês pode forçar uma valorização do real e novas intervenções do governo no câmbio.

Quatro empresas brasileiras planejam captar pouco mais de R$ 6 bilhões (US$ 3,3 bilhões) com ofertas de ações em abril, sendo que investidores internacionais devem ter um papel importante. Historicamente, os estrangeiros compram 65% das ações emitidas no Brasil, e a entrada substancial de capital provavelmente será motivo de alarme para o governo.

“A intervenção do Banco Central sempre foi voltada a compensar o tamanho das entradas de capital privado. Em abril, com as novas ofertas iniciais de ações provavelmente acontecendo, acredito que os leilões de dólares do BC aumentarão em tamanho e frequência para compensar o esperado influxo de capital”, disse Nick Chamie, diretor mundial de estratégia cambial do RBC Capital Markets, sediado em Nova York.

O governo já afirmou claramente que vai tentar conter qualquer valorização do real, tanto para suavizar a volatilidade quanto para proteger a indústria nacional, que tem mais dificuldade para concorrer com produtos estrangeiros quando o real está forte. O governo já realizou uma série de medidas, desde compras pelo BC de dólares à vista ou em contratos futuros até um aumento do Imposto sobre Operações Financeiras para alguns tipos de fluxos de capital.

O BC já aumentou as compras de dólares em março, adquirindo US$ 3 bilhões no mercado à vista, contra apenas US$ 842 milhões em fevereiro. As reservas internacionais brasileiras aumentaram US$ 8,9 bilhões em março e atingiram o maior nível da história, batendo em US$ 365,2 bilhões.

“Estamos confortáveis com o aumento de nossas reservas e continuaremos comprando dólares por meio dos leilões cambiais”, disse recentemente o ministro da Fazenda, Guido Mantega.

Depois de começar 2012 valorizado, o real caiu em relação ao dólar em março, mas ainda acumula alta de 2% este ano, depois de ter se desvalorizado 11% em relação à moeda americana em 2011.

As intervenções do governo tiveram um papel crucial em impedir que o real se valorizasse.

“Analisando apenas os fundamentos, o real deveria estar sendo negociado atualmente a uma taxa de R$1,64 ou R$ 1,65 [em relação ao dólar]“, afirmou o economista-chefe do Banco Bradesco, Octavio de Barros. “Isso se baseia no fato de que o real é uma das chamadas moedas de commodities, como os dólares australianos ou canadenses. A única razão para o real não ter chegado a esse nível foi a intervenção do governo.”

Embora a expectativa seja de que o governo vai realizar novas intervenções com leilões de compra de dólares, os participantes do mercado preveem que medidas mais drásticas, como um imposto sobre aplicações acionárias, são improváveis e podem prejudicar o financiamento das empresas brasileiras.

“O governo já impôs o IOF para transações com ações e derivativos. Embora funcione com os derivativos, para as ações isso se mostrou um desastre”, disse recentemente ao The Wall Street Journal Edemir Pinto, diretor-presidente da BM&FBovespa, enfatizando que as empresas do país usam o mercado como uma ferramenta importante para obter financiamento.

“Uma iniciativa de aumentar impostos como o IOF sobre o investimento estrangeiro em ações brasileiras prejudicaria fortemente as cotações e a capacidade das empresas brasileiras de conseguir capital barato”, disse Chamie, do RBC.

By SHEFALI ANAND

Individuals got some income tax breaks in the federal budget on Friday, but its net benefit could be muted because Finance Minister Pranab Mukherjee also raised indirect taxes and took a step to make gold costlier.

Here’s a look at key announcements in the budget which affect individuals:

Income Tax: Mr. Mukherjee gave individuals higher exemption levels from income tax and raised existing tax slabs.

At present, individuals don’t have to pay taxes on annual income of up to 180,000 rupees ($3,600.) Mr. Mukherjee raised this limit to 200,000 rupees ($4,000.)

He also revised the tax slabs thus:

Individuals with an income between 200,000 rupees and 500,000 rupees: 10% tax rate

500,000 rupees to 1 million rupees: 20%

Income of more than 1 million rupees: 30%

Other direct tax breaks: Mr. Mukherjee proposed that interest of up to 10,000 rupees ($200) earned on savings bank accounts would be exempt from income tax.

Also, as much as 5,000 rupees ($100) spent on preventative health check-ups would be exempt from income tax.

Tax-free bonds: Expect a slew of tax-free bonds to come to market. Mr. Mukherjee allowed some infrastructure companies to issue as much as $12 billion-worth of such bonds in the year starting April 1 – double their allowance for the year gone by. They will be issued by entities like the Housing and Urban Development Corp. Ltd. and National Housing Bank. Such bonds issued earlier this year received a good response from wealthy individuals.

Indirect Hit: On the flip side, get ready to pay more indirect taxes and more on services than ever before.

At the moment, 69 categories of services are subject to service tax, but Mr. Mukherjee on Friday expanded this net. He introduced a “negative list” of 17 categories of services which would not be subject to service tax. Social services, such as hospital and education services, public transport, home rentals, and entertainment services will be exempt from service tax.

Everything else – from the services of a lawyer to that of your barber — will be now become taxable.

The tax rate will be higher too, up from 10% to 12%.

These will go into effect from June 1.

Gold: There was another hit for gold lovers, as Mr. Mukherjee doubled the import duty on standard gold (of 99.5% purity) bars and coins to 4%.

—Write to Ms. Anand at shefali.anand@wsj.com, follow Ms. Anand @shefalianand.

By JOE WALKER

Willi Wong

Omar Wasow knew that the transition from Internet executive to graduate student at the age of 35 would be a dramatic one, and so in a symbolic break from his old life, he lopped off the two feet of dreadlocks he had been growing since he was a teenager.

That was 2005, when Mr. Wasow was the executive director of BlackPlanet.com, a social networking site that he founded seven years earlier and turned into the most popular African-American Web site at the time. Previously, he had developed Web sites for the New Yorker and Consumer Reports magazines.

His hair, good looks and penchant for Italian suits helped him stand out in the New York’s Silicon Alley from the late 1990s until he left in 2005. He appeared frequently on television as a technology pundit, most famously on the Oprah Winfrey Show when he taught the talk-show host how to use the Internet in 2000. That same year, People magazine named him the “Sexiest Internet Executive.” Mr. Wasow’s business acumen and ability to translate complex ideas to a general audience earned him quasi-celebrity status and an annual six-figure income.

So it surprised many in the technology world when he decided to resign his leadership position at Community Connect Inc., BlackPlanet’s parent company (which was later sold for $38 million in 2008), and move to Cambridge, Mass., to pursue a Ph.D. in African-American studies and government at Harvard University.

His transformation began on the drive to the airport after delivering a speech at a technology conference. “I realized that just giving speeches wasn’t enough,” Mr. Wasow says. “I wanted to write prose, not just PowerPoint. I wanted to be held accountable for my ideas, not just applauded. I wanted to develop a level of mastery over some body of knowledge rather than just be a mile-wide and an inch-deep.”

Until his mid-30s, Mr. Wasow, whose father, uncle and grandfather were all professors, had rebelled against the idea of teaching and instead aimed to be a socially conscious entrepreneur.

His heroes were businesspeople with a mission, like filmmaker Spike Lee and Anita Roddick, founder of the Body Shop. The university was a fate to be avoided, Mr. Wasow recalls. “I knew that academics were disconnected to real-world problems,” he says. “It was this rebellious nature of, ‘I’m not in the ivory tower; I’m an activist and an entrepreneur.’”

Eventually, though, Mr. Wasow found the problems he was most concerned with—the academic-achievement gap between black and white children and the disproportionately high incarceration rate for black men—couldn’t be adequately addressed through his role as a businessman and public speaker. “The questions he wanted to answer required real research,” says Keith Darden, Mr. Wasow’s undergraduate roommate at Stanford, now a professor of political science at Yale University.

Still, going back to school was a frightening prospect. He worried that leaving his well-paid job running BlackPlanet would mean a “vow of poverty.” He hadn’t taken calculus in over a decade. The former wunderkind also didn’t look forward to being the oldest pupil in class. The biggest obstacle, though, would be finishing his bachelor’s degree. He had several incompletes when he left Stanford University and had to hand in five term papers to make up for them before he could matriculate at Harvard.

“The decision to go to grad school became a very powerful motivation to clean up this mess that I had left” at Stanford, he says.

Now in his fifth year as a doctoral candidate finishing his dissertation, Mr. Wasow, 39, has integrated into the world of academia. He has a 3.8 GPA and has received fellowships to fund his academic research from the National Science Foundation and the Institute for Humane Studies. He earns money from consulting and speaking engagements, and still occasionally appears on television and radio to discuss the impact of new devices, like the iPad—and increasingly, race and politics.

Even if he lands a professorship at an elite research university, Mr. Wasow expects his income to be halved from his Internet days, but he says he isn’t in it for the money.

“Very few people…have penetrating insights and then share them in an articulate, accessible, thoughtful manner, and Omar is one of those people,” says Henry Louis Gates Jr., Mr. Wasow’s adviser and mentor at Harvard. “His future is as bright as any graduate student I’ve ever met. He could be a public intellectual on the level of Cornel West.” 

With interest rates stuck at rock-bottom levels, retirees and soon-to-be retirees are hungry for better returns on their low-risk investments.

Wall Street is rushing to capitalize on this need, rolling out a raft of interest-bearing investments known as “structured notes” that promise higher yields but often carry big risks. Brokers also are hyping dividend stocks, which generate income but can lose value during market storms.

The best places to look for yield and safety, advisers say, are long-term, high-grade bonds and certificates of deposit, which typically offer much better yields than shorter-term bonds and CDs.

But long-term holdings pose a problem for investors in their 70s or 80s who are looking both to generate returns and leave something behind for their heirs. Many economists expect interest rates to start rising—and bond prices to start falling—in the next few years. By locking up money for the long term, seniors could end up sticking their heirs with investments that fall in value or no longer keep pace with inflation.

A growing number of financial advisers are pointing to a little-known strategy that can help solve this problem: “death puts.” Formally known as estate-feature puts, they are available on a handful of high-grade corporate bonds as well as most CDs sold through brokerages.

Death puts guarantee that when the owner of the bond or CD dies, the heirs can redeem it at face value, meaning they get back all the money that originally was invested. The fees usually amount to about 0.125% a year, and come out of the interest payments.

Meantime, buyers collect yields significantly higher than they can get on shorter-term investments. A typical investment-grade 10-year corporate bond currently yields about 3.5%, roughly double the yield of a similar five-year bond. A 10-year CD yields about 2.85%, more than a percentage point better than a five-year CD.

Those yields are far better than can be gotten from longer-term government bonds. A 10-year Treasury note now yields only about 2%, while a German bund yields only about 1.75%.

Some caveats are in order. The biggest risk is that the issuer of the death put defaults on the payments. While the CDs are guaranteed by the Federal Deposit Insurance Corp. up to $250,000, the bonds offer no such backstop. And most of the issuers of bonds with death puts are financial-services companies—Bank of America,

Barclays Bank and Principal Financial Group

among them. That’s a lot of exposure to one sector of the economy.

Another risk death puts pose: Some of the bonds and CDs are “callable,” meaning the issuer has the right to retire the investments early. The owner would then have to reinvest the money in a lower-rate environment.

Still, those risks are worth taking, say some advisers.

“When you can get a 75-year-old couple 5% instead of 0.7% or 0.9% in a bank, it’s pretty attractive,” says Larry Rosenthal, president of Rosenthal Wealth Management in Manassas, Va., who recently approached a client with the strategy for his elderly parents.

His proposal, for a $100,000 portfolio of four such bonds, included General Electric‘s

GE Capital, paying 4.35% and maturing in 2032; Barclays Bank, paying 5.125% and maturing in 2036; Goldman Sachs Group,

paying 5.75% and maturing in 2041; and Bank of America, paying 5.9% and maturing in 2025. Together, the investments would return more than $5,000 a year in income.

Growing Market

Death puts, first introduced on corporate bonds in the 1990s, have largely flown under the radar. “People don’t know they exist,” says Jonathan Kurtz, a certified financial planner in Vienna, Va., who told Mr. Rosenthal about them.

But that is changing. Jim Schaberg, a managing director at bond-underwriting firm Incapital, says about $12 billion in notes with death puts have been issued annually in the past three years, and issuance is on pace to rise about 10% in 2012.

Some advisers expect the market to grow more in coming years. “The first wave of the baby boomers need this stuff,” says Mr. Rosenthal. “The Fed’s not going to raise interest rates for another year or two. The advantage for boomers is to garner this substantially better income for the next decade or so until the banks catch back up again.”

Gary Martin, a 75-year-old retiree from military service and the federal government in Sun City Center, Fla., several years ago invested $50,000 in Federal Home Loan Mortgage Corp. bonds with death puts paying 5.35% annually.

So far, he and his wife have used the proceeds to make other investments, such as buying gold, and to take trips, including a tour of New England last fall.

“We go places and have fun, and we don’t have to worry,” Mr. Martin says. “When rates go up or down, the value remains what we paid for them.”

How They Work

Only a handful of companies offer bonds with death puts at any given time. Since the bonds are designed mainly for older retail investors, they’re typically underwritten in small chunks and sold through brokerages including Merrill Lynch, Charles Schwab

and Fidelity Investments.

About 18 companies regularly issue bonds with death puts through Incapital, according to the company. Among them: Dow Chemical

and Prudential Financial

. The bonds are investment-grade, rated at least Baa3 by Moody’s or BBB- by Standard & Poor’s and Fitch Ratings, and are considered less risky than high-yield or “junk” bonds.

Right now, Goldman Sachs is offering a 10-year bond with a 5% coupon. Bank of America, Prudential Financial, Public Service Enterprise Group,

Dow Chemical and the financing arms of Deere

& Co. and Caterpillar

might be offering bonds in the near future, according to Incapital.

Why do companies offer death puts on their debt? It gives them a way to access retail investors, who otherwise would be shut out of buying bonds because their orders wouldn’t be big enough.

“It’s just a little thing that sweetens [the offering] a bit because they need to borrow a lot of money, and they need to figure out how to get that done,” says Gary Cotter, a certified financial planner in Sun City Center, Fla.

Be warned: Some bonds must be held for at least six months before the death put could be used. Others have limits on the amount that a bondholder can redeem at one time or on the number of redemptions allowed in a given year. Most companies, including GE Capital and Goldman Sachs, have the six-month restriction, though some stretch it to 12 months, says Mr. Kurtz, the Virginia financial planner.

On the other hand, if you died tomorrow, your heirs probably wouldn’t need to use a death put to redeem bonds at par value, because prices are so high that the bonds likely would be worth at least the face value in the open market, says Larry Plaxe, a senior vice president of investments at Wells Fargo

Advisors in Florham Park, N.J., who has been using death puts for a decade.

Certificates of deposit have lower yields than corporate bonds but offer FDIC protection. There are two types: those issued directly by a bank and those sold through a broker.

Death puts are much more common on brokered CDs, and typically are labeled a “survivor’s option.” All the CDs sold by Schwab, for instance, offer the feature. Right now, Schwab offers three traditional 10-year CDs, issued by GE Capital, Goldman Sachs and CIT. Each has a 2.85% coupon and a survivor’s option, and is FDIC-insured. Interest rates on CDs with death puts typically are competitive with other CDs of the same duration, Mr. Plaxe says.

The main risk with a brokered CD: If you sell it before it matures, you could lose principal, because the products function like bonds. When interest rates go up, their value in the secondary market could fall. In contrast, with a bank-held CD, you would get the principal back but wouldn’t collect all of the interest.

Who Should Consider Death Puts?

The people who benefit the most are investors in their 70s and 80s who need to generate income from their savings to pad out a retirement paycheck, says Mr. Cotter, the Florida financial planner.

The investments also make sense for married couples who stand to lose a large portion of their Social Security or pension income when one spouse dies.

Harry Porter, an 85-year-old retired engineer and one of Mr. Cotter’s clients, invested in GE Capital bonds with death puts a few years ago. He and his wife use the returns to pay insurance and medical bills.

But if he dies first, his wife could redeem the bonds for the same amount they invested and have more cash available for living expenses. “My company was poor with the pension itself, so you have to start thinking of investments that give you money to live on,” he says.

Families receiving the bulk of their inheritance in tax-deferred retirement accounts could redeem such bonds as a source of cash to pay estate expenses while leaving the retirement money untouched, Mr. Rosenthal says.

Death-put bonds might also hold appeal for some younger investors. While they might not have a use for the put itself, the bonds often make monthly payments, rather than the usual quarterly or semiannual payments, says Mr. Schaberg of Incapital.

As for the CDs, if you’re counting on living off the interest but might have to cash in a CD early to pay for a big expense, this strategy might not be your best bet. But if you’re planning to leave the investment intact as your family’s inheritance, it makes sense, advisers say, because the death put removes the risk for your heirs of losing principal if they need to cash in early.

Mr. Plaxe, the Wells Fargo adviser, says he has been using CDs with the survivor’s option to help retirees replace maturing CDs that were paying 4% interest, because comparable shorter-term CDs are now paying 2%. He recently found a 3.3% rate on a 20-year CD for an 85-year-old retiree who wanted “the highest rate possible, since he’s going to live on the income,” says Mr. Plaxe.

—Ben Levisohn contributed to this article.

Email:
familyvalue@wsj.com

Corrections & Amplifications

The first name of Gary Cotter, a certified financial planner in Sun City Center, Fla., was misspelled as Garry in an earlier version of this article.

A version of this article appeared April 28, 2012, on page B7 in some U.S. editions of The Wall Street Journal, with the headline: Retirees: Pump Up Those Yields!.