Goldman established the Japan Renewable Company in August of last year and the bank’s energy projects look to add about 1,000 megawatts to Japanese renewable generation. The country currently generates about 6,100 megawatts of its total supply of around 285,000 megawatts from renewable sources. By the end of this year, that total is expected to grow to 9,400 megawatts. Clearly, there’s a lot of room to grow the renewable share.

After France and the U.S., Japan was the largest consumer of nuclear power generation in the world. And while both the U.S. and France remain committed to keeping nuclear generation in the mix, the defections of Germany and Japan and the shutdown of several plants in the U.S. due to age continues to squeeze demand for new nukes.

The U.S. Department of Energy recently committed $150 million to a subsidiary of engineering firm The Babcock & Wilcox Co. (NYSE: BWC), mPower, that is working on a design for a small module reactor (SMR) that is projected to cost about $5,000 per kilowatt of generation. A 200-megawatt version would cost about $1 billion, far below the double-digit billions of a full-scale 1,000-megawatt plant.

Whether the SMRs will be viable and acceptable remains to be seen, but as old reactors are shut down in the U.S. and new coal-fired plants are highly unlikely to be built, natural gas-fired plants and renewables like solar and wind are set for more growth, provided financing does not become a major obstacle.

Goldman’s bet in Japan is not a very large risk. The big risk these days is betting on nukes.

The federal government starts its case against Apple Inc. (NASDAQ: AAPL) made on the basis of e-book price fixing. (Reuters)

Goldman Sachs Group Inc. (NYSE: GS) becomes part of the debt consortium for Alibaba as the Chinese company readies an initial public offering. (Reuters)

ARM Holdings PLC (NASDAQ: ARMH) will release a new chip for portable devices as its continues to compete with Intel Corp. (NASDAQ: INTC). (Reuters)

Increases in Treasury yields hurt the value of dividend stocks. (WSJ)

Dell Inc. (NASDAQ: DELL) will sell laptops that have functions similar to tablets. (WSJ)

SAC Capital Advisors may lose $3.5 billion in investments because of insider trading concerns. (WSJ)

Under Armour Inc. (NYSE: UA) will do more to compete with Nike Inc. (NYSE: NKE) and Adidas overseas. (WSJ)

China benefits from the revived oil industry in Iraq. (NYT)

Apple begins to set deals to create an Internet radio business. (NYT)

Google Inc. (NASDAQ: GOOG) may pass Apple in app downloads as Android gains share. (FT)

Microsoft Corp. (NASDAQ: MSFT) will cut the price of Windows for small tablets to better compete with Apple. (Bloomberg)

The International Air Transport Association expects airline profits to rise 20% this year because of better seat management. (Bloomberg)

Intel Corp. (NASDAQ: INTC) beats out tough competition to get a chip in the new Samsung Galaxy tablet. (Reuters)

The past approval by the federal government of Chinese acquisitions of U.S. companies should help the Shuanghui International Holdings $4.7 billion buyout of Smithfield Foods Inc. (NYSE: SFD). (WSJ)

Procter & Gamble Co. (NYSE: PG) will put four people in senior positions to compete for the CEO job held by A.G. Lafley. (WSJ)

Sony Corp.’s (NYSE: SNE) CEO says he is against a breakup and tells why he supports current plans. (WSJ)

A new version of Microsoft Corp.’s (NASDAQ: MSFT) Windows 8 will not have the current start menu. (WSJ)

Portugal will cut government spending to reach a budget deficit goal of 5.5% of gross domestic product. (WSJ)

American demand for Subaru could cut supplies to levels at which some cars will not be available. (WSJ)

Neiman Marcus rejects a plan by Kohlberg Kravis Roberts & Co. (NYSE: KKR) to combine it with Saks Inc. (NYSE: SKS). (WSJ)

Bitcoin hopes to improve its method for confirming the value of shares that are taken in or out of its inventory. (WSJ)

Japan kills imports of some U.S. genetically altered wheat. (NYT)

OPEC likely will keep its output target for 2013 steady. (NYT)

The International Monetary Fund expresses concern about the weak value of the yen. (FT)

Goldman Sachs Group Inc. (NYSE: GS) receives 17,000 applications for 350 intern jobs. (FT)

Sony hires Citigroup Inc. (NYSE: C) and Morgan Stanley (NYSE: MS) to advise it on a shareholder break up proposal. (Bloomberg)

Lockheed Martin Corp. (NYSE: LMT) was covered on this morning’s top analyst upgrades and stocks to buy because this stock was moved up to the prized Conviction Buy List. The firm’s price target is now $127, for about 20% in implied upside. Be advised that the consensus price target is $100.60 as of now, and that is about $7 lower than the current share price. This $127 now counts as the street-high analyst price target.

Other Goldman Sachs research calls for defense and warfare stocks were as follows:

• Communications Holdings Inc. (NYSE: LLL) was raised to Buy from Neutral with a $102 price target.
• Northrop Grumman Corp. (NYSE: NOC) was raised to Buy from Neutral with a $95 target.
• Raytheon Co. (NYSE: RTN) was raised only to Neutral with only a $70 price target, but that removes the Sell rating that the firm had in place.

The basis for the upgrades is that the worst may have been seen from spending cuts and sequestration. Valuations in the sector are low and under the S&P 500 index, and the Goldman Sachs research team now feels that the defense sector could outperform the broader stock market for a period of several years.

China’s National Energy Administration (NEA) may try to improve the quality of coal used in the nation to cut air pollution (Reuters)

Yahoo! (NASDAQ: YHOO) has bid for Hulu (All Things D)

Google (NASDAQ: GOOG) will build and support wireless networks in developing nations (WSJ)

“Fast & Furious 6” from Universal brought in $122.2 million in North American box office its debut weekend (NYT)

China Investment Corporation, the $500 billion national sovereign fund has had trouble finding a leader (FT)

The EU continues to look into fair trade practices of China’s telecom equipment suppliers (FT)

The EC has stated an examination of Apple (NASDAQ: AAPL) sales efforts in Europe (FT)

China leaders may back off of GDP growth targets to cut pollution (Bloomberg)

Google Inc. (NASDAQ: GOOG) may face antitrust investigations by the U.S. government. (Reuters)

Carl Icahn may raise $7 billion to support his effort to buy Dell Inc. (NASDAQ: DELL) (Reuters)

Google and Facebook Inc. (NASDAQ: FB) may compete to buy satellite firm Waze. (Reuters)

Sprint Nextel Corp. (NYSE: S) and Softbank receive the state regulatory approval needed for the Japanese company to buy 70% of the American one. (Reuters)

The U.S. government sets a deal for Chinese companies to provide auditors access to some of their finances. (WSJ)

Dish Network Corp. (NASDAQ: DISH) moves closer to getting $9 billion to finance its possible buyout of Sprint. (WSJ)

Sears Holdings Corp. (NASDAQ: SHLD) posts an unexpected loss. (WSJ)

After a drop in sales due to territorial disputes, Chinese consumer purchases of Japanese cars pick up. (WSJ)

Gap Inc.’s (NYSE: GPS) earnings support belief in a huge turnaround. (WSJ)

AT&T Inc. (NYSE: T) puts a new charge on wireless customers that could add half a billion dollars to its revenue. (WSJ)

Twitter will sell ads to people who are watching programs on TV related to tweets. (NYT)

Goldman Sachs Group Inc. (NYSE: GS) will create a committee to monitor its relationships with customers. (FT)

Official numbers for German GDP growth in the first quarter confirm a previous estimate of 0.1% as construction activity tampers off. (Bloomberg)

The call from Goldman Sachs may not look like much on the surface, but investors who are holding all of these 10-year Treasury notes and 30-year Treasury Bonds better understand that the safety they purchased in uncertain times could literally come with years’ worth of interest and coupon payments gobbled up if rates rise handily.

Goldman Sachs sees 10-year U.S. Treasury yields rising from 2.03% or so today to 2.25% in the next few months and to as high as 2.50% by the end of 2013. The firm also sees inflation-adjusted TIPS rising back into positive yields from negative yields as of now. Get ready for higher yields in Japan as well. Goldman is now expecting that Japanese Government Bond yields will rise to 1.0% rather than 0.8% by the end of 2013.

So, what does this really mean to you and your money?

Investors should not have to panic over a 50 basis point rise all that much on the surface. The problem is that once rates rise, they have historically not just risen by 50 basis points or so and then stabilized. Rate cycles have historically risen much more and the only difference now is that we are coming off of historic low yields and investors currently do not demand as high of a “return on capital” after a period that a “return of capital” was temporarily good enough.

What investors need to brace for is what happens if rates rise 100 basis points or more say over the course of a year. If the 30-year long bond rises 100 basis points in a short period of time then the holder of that Treasury Bond will see the face value or market price of that bond fall by about 15% or a tad worse.

Many investors do not realize the price risk in long-dated Treasury and other bonds because bonds have been in a secular bull market for so long. The real risk is if interest rates rise 150 basis points, 200 basis points, or even more. Most long-term Treasury investors are not really prepared for that sort of move. Most would even feel like they had been duped by the Fed and the government if the value of their long-term bond portfolio is suddenly worth 10%, 20%, or even 30% less than what they paid.

Rates will ultimately go higher. What remains up for debate is when and by how much.

Sony also cuts targets for smartphones and camera sales. (Reuters)

A complex Irish tax loophole helps Apple Inc. (NASDAQ: AAPL) save billions in taxes. (Reuters)

Merck & Co. Inc. (NYSE: MRK) sets a $5 billion share buyback through Goldman Sachs Group Inc. (NYSE: GS). (Reuters)

Sprint Nextel Corp. (NYSE: S) raises its offer for Clearwire Corp. (NASDAQ: CLWR), but many investors think the new sum is inadequate. (Reuters)

Jamie Dimon has a stronger position at J.P. Morgan Chase & Co. (NYSE: JPM) now that he will keep both the CEO and chairman jobs. (WSJ)

Prosecutors may use the Racketeer Influenced and Corrupt Organizations Act (RICO) to charge SAC Capital Advisors. (WSJ)

Ford Motor Co. (NYSE: F) will increase production by 200,000 vehicles this year. (WSJ)

ESPN, which is majority owned by Walt Disney Co. (NYSE: DIS), begins a series of large layoffs. (WSJ)

Phone companies start to sell subscriber data to marketers. (WSJ)

Vodafone Group PLC (NASDAQ: VOD) says it will use a dividend from Verizon Wireless to expand its main businesses in Europe. (WSJ)

Renault and Nissan aggressively invest to increase market share in India. (WSJ)

J.C. Penney Co. Inc.’s (NYSE: JCP) $2.25 billion loan, backed by real estate, will show how much leverage such assets hold. (WSJ)

The new Microsoft Corp. (NASDAQ: MSFT) Xbox will face rising competition from online games. (NYT)

The Bank of Japan decides not to increase its monetary easing plans. (FT)

Japan’s trade deficit rises as high-priced imports offset the effects of a weaker yen. (FT)

Rumors surface that Sony may spin out its entertainment unit. (Bloomberg)

The Standard & Poor’s 500 index will rise 5% from current levels to reach 1,750 by the end of this year, said Goldman Sachs in a research note dated May 20. A team of strategists led by David J. Kostin, chief U.S. equity strategist, said the index will “advance by 9% to 1,900 in 2014, and climb by 10% to 2,100 in 2015.” The 2013 return implies a year-end price/earnings ratio of 15 times, which is a one mutiple-point premium to Goldman’s fair-value estimate. Improved economic growth, rising dividends — Goldman expects those dividends to gain 30% between 2013 and 2015 — and potentially low sustained interest rates are all contributors to the higher S&P 500 forecasts. If interest rates stay low despite better growth then upside to those S&P 500 targets could be bigger than they are currently forecasting, said Kostin.

Near the top of the business headlines is the battle that Congress has started to wage with Apple Inc. (NASDAQ: AAPL) over the taxes it pays. By some measures, the company barely pays taxes at all. Among the evaluations of the Apple showdown with Capital Hill, one comes from CNN Money:

Apple executives are set to defend the company’s tax practices and call for corporate tax reform on Capitol Hill Tuesday amid harsh criticism following a Senate investigation.

A report released Monday by Senators John McCain, R-Arizona, and Carl Levin, D-Michigan, charged that Apple “has used a complex web of offshore entities — including three foreign subsidiaries the company claims are not tax resident in any nation — to avoid paying billions of dollars in U.S. income taxes.”

The report says Apple relies on a number of unusual accounting tactics along with a handful of subsidiaries in Ireland — where it has negotiated a tax rate of less than 2% — to reduce its tax bill. The U.S. corporate tax rate stands at 35%.

And The Wall Street Journal says on findings about Apple’s tax practices:

Apple used technicalities in Irish and American tax law to pay little or no corporate taxes on at least $74 billion over the past four years, according to the Senate panel’s findings. The investigation found no evidence that Apple did anything illegal. Aides to the subcommittee said they have never seen a company use a subsidiary that didn’t owe corporate income taxes to any country.

Apple didn’t dispute that entities it set up didn’t pay corporate taxes but denied they were designed to avoid taxes. The company said it pays local taxes on overseas earnings and U.S. taxes on investment income generated at its Irish subsidiaries.

Goldman’s S&P 500 Target

The sentiment about the value of stocks continues to be relentlessly positive. None other than the powerful investment bank Goldman Sachs Group Inc. (NYSE: GS) has increased its target for the S&P 500. According to MarketWatch:

The Standard & Poor’s 500 index will rise 5% from current levels to reach 1,750 by the end of this year, said Goldman Sachs in a research note dated May 20. A team of strategists led by David J. Kostin, chief U.S. equity strategist, said the index will “advance by 9% to 1,900 in 2014, and climb by 10% to 2,100 in 2015.” The 2013 return implies a year-end price/earnings ratio of 15 times, which is a one mutiple-point premium to Goldman’s fair-value estimate. Improved economic growth, rising dividends — Goldman expects those dividends to gain 30% between 2013 and 2015 — and potentially low sustained interest rates are all contributors to the higher S&P 500 forecasts. If interest rates stay low despite better growth then upside to those S&P 500 targets could be bigger than they are currently forecasting, said Kostin.

New Xbox Unveiled

Microsoft Corp.’s (NASDAQ: MSFT) most important product announcement since Windows 8 will happen today as it releases details about its next generation Xbox. The hype already has begun. NBC News says of the new Xbox launch:

On the eve of Microsoft’s planned Xbox reveal, the company has finally ended its long silent streak to say that the new console will actually be unveiled in two stages.

Speaking on the latest Major Nelson podcast, Microsoft’s interactive entertainment chief of staff Aaron Greenberg said that his company will roll out its next-generation video game hardware in two steps — first at a special event held tomorrow at the Redmond, Wash., Microsoft campus, and then at a more game-centric event during the Electronic Entertainment Expo (E3) in June.

“We have so much goodness that there’s no way we could have packed it all into one event,” Greenberg said.

“The best way I can describe it is: We’re really going to tell one story across two events,” he added. “So we’re going to start on the 21st [of May]; and really that’s about revealing the next Xbox platform and our vision for the future of games, the future of entertainment.”

If sales are poor, Greenberg will be out of work by the end of the year.

Douglas A. McIntyre