Category: zerohedge

On any other 30yr auction day, i would be selling 30yr bonds right here (9am in NY) (30yr bond yield @ 3.79% and UB futures @ 140-21   both higher in price by 4 basis points on the day) in anticipation of the 16bln 30yr bonds (32bln 10yr equivalents) to be auctioned in 4 hours.

(pictures 30yr UB bond futures vs inverse DX)

However, today is not any other day.  Unemployment claims are slightly up…more than expected, labor productivity is up, and unit labor costs are down.  All of these point to no desire to increase hiring.  That is bad for the consumer (because the consumer is labor), and hence bullish for bonds.  These numbers ought to also be bearish for stocks (a weaker consumer does not increase spending)…but it seems the QE fever is still keeping S&P futures high before the open.  In a world where more QE = higher stock prices…Yellen’s prepared remarks released yesterday made no mention of taper, and were highly supportive of QE continuation (though she did not explicitly state that).  The remarks were vague, but erred on the side of continuing current accommodative policy (so, QE-4-ever).

This causes a conundrum. Regardless of Yellen’s testimony and Q&A session this morning, there will still be a 30yr bond auction at 1pm (ET).  Given the strength and low volume yesterday, and the current bullish tone of the bond market (4bps stronger from yesterdays closes) the bond market does not feel like there is a significant setup of short 30yr positions.  This must take place before the auction.  Primary dealers must each bid for their pro-rata share of the auction (so about 800mm each).  No dealer wants to come out of a 30yr bond auction long 800mm 30yr bonds…its just too much risk in a world where directional risk is shunned.

This is the backdrop in the minds of bond traders as we approach Yellen’s testimony and Q&A session.  We will be reacting to her testimony with this in mind.  However…to be clear…if she does not indicate a desire to extend QE (either in fact, or by indicating a lower unemployment threshold) then there should be good selliing of 30yr bonds to setup for the 1pm 30yr bond auction.

Typically, bond traders want to come out of the 30yr bond auction long bonds…but typically that occurs from a very low price, as the market usually sells off going into the auction.  Today that is not the case (so far).  I expect today to have unusually high volatility in the bond market….but we will just have to wait and see.

I’ll be active on twitter today…so feel free to join in the conversation.

http://govttrader.blogspot.com/

https://twitter.com/govttrader

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/F08nAmtHL_4/story01.htm govttrader

Earlier today consulting company McKinsey, which has now become the new Moody’s, released a 72 page report titled “QE and ultra-low interest rates: Distributional effects and risks” which contains the following pearls of wisdom: “The impact of ultra-low rate monetary policies on financial asset prices is ambiguous. We found little conclusive evidence that ultra-low interest rates have boosted equity markets. Although announcements about changes to ultra-low rate policies do spark short-term market movements in equity prices, these movements do not persist in the long term.” Uhh, does McKinsey have an S&P chart that goes back to 2008? One would think whoever commissioned this report can at least pay for “bigger charts.” Continuing: “Moreover, there is little evidence of a large-scale shift into equities as part of a search for yield. Price-earnings ratios and price-book ratios in stock markets are no higher than long-term averages.”

We will spare any analysis, in-depth or otherwise, of the report: it merits none, and certainly not for those who watch the farce that the “market” has become.

Sadly, by issuing such drivel McKinsey has just tarnished what little reputation and credibility it may have had.

Instead we will just point out, visually, what McKinsey is saying: namely that the chart below which shows the causation between the S&P and the Fed’s balance sheet, doesn’t exist and is purely a figment of overactive realists’ imaginations.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/3ZKVsxI5i9M/story01.htm Tyler Durden

Earlier today consulting company McKinsey, which has now become the new Moody’s, released a 72 page report titled “QE and ultra-low interest rates: Distributional effects and risks” which contains the following pearls of wisdom: “The impact of ultra-low rate monetary policies on financial asset prices is ambiguous. We found little conclusive evidence that ultra-low interest rates have boosted equity markets. Although announcements about changes to ultra-low rate policies do spark short-term market movements in equity prices, these movements do not persist in the long term.” Uhh, does McKinsey have an S&P chart that goes back to 2008? One would think whoever commissioned this report can at least pay for “bigger charts.” Continuing: “Moreover, there is little evidence of a large-scale shift into equities as part of a search for yield. Price-earnings ratios and price-book ratios in stock markets are no higher than long-term averages.”

We will spare any analysis, in-depth or otherwise, of the report: it merits none, and certainly not for those who watch the farce that the “market” has become.

Sadly, by issuing such drivel McKinsey has just tarnished what little reputation and credibility it may have had.

Instead we will just point out, visually, what McKinsey is saying: namely that the chart below which shows the causation between the S&P and the Fed’s balance sheet, doesn’t exist and is purely a figment of overactive realists’ imaginations.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/3ZKVsxI5i9M/story01.htm Tyler Durden

It would appear that much of the rally yesterday (and early overnight) was driven by hope (and confirmed relief) that Fed chair nominee Yellen is not about to take on a substantially less-dovish tone in today’s testimony in an effort to garner the support of the more hawkish elements of the Senate Banking Committee. There was a great deal of confirmation bias in the market’s move and interpretation but, as BofAML notes below, this may be misplaced. The more important part of today’s testimony is yet to come in the Q&A session – where we will hear likely more unscripted thoughts from the QEeen at her Senate confirmation this morning.

 

Deutsche’s Jim Reid notes that:

The market has zeroed in on the 5th and 6th paragraphs of the statement where Yellen describes the economy as performing “far short” of its potential. She goes on to say that inflation has been running below target and that unemployment is still too high. As such, Yellen concludes that the Fed will continue to use monetary policy tools to promote a more robust recovery.

 

On the question of QE, Yellen says that a strong recovery will enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools. She adds that supporting the recovery is the “surest path to returning to a more normal” approach to monetary policy.

 

So while the tones are certainly dovish, it’s impossible to infer precise policy thoughts from her remarks. She clearly views that the economy has not yet reached a strong enough trajectory but is she making a grander point that they won’t start tapering until the data is better than now?

 

Or does tapering to $70bn, $50bn, $30bn etc a month still represent supporting the recovery. Indeed, it’s difficult to infer anything concrete regarding the path of monetary policy from Yellen’s prepared comments.

So while dovish, he implies that perhaps the market is experiencing a little to much confirmation bias.

BofAML also notes that markets read her comments as dovish, inferring that she might wait some time to taper Fed asset purchases… but disagree with that interpretation.

Markets see prepared statement as dovish

 

Janet Yellen, the current vice chair of the Federal Reserve and nominee to replace Ben Bernanke as Fed chair, released a brief prepared statement (see full report for footnote) Wednesday afternoon, ahead of the Senate Banking Committee hearing that begins at 10 AM ET on Thursday, November 14. Markets read it as dovish, particularly as many commentators expected her to retreat to a “balanced” (i.e., more hawkish) position. We view her comments as supporting continued Fed accommodation, consistent with ongoing official FOMC statements but not revealing any specific policy plans. Overall we expect continuity in Fed policy following her confirmation.

 

Support for dual mandate and inflation target

 

No surprise, Yellen’s text confirms she strongly supports the Fed’s dual mandate. She acknowledges progress in the recovery (to push back against the inevitable suggestion on Thursday that Fed easing has been ineffective), but notes unemployment is “still too high” while inflation may remain below the Fed’s 2% goal for some time. Hence, she concludes, the Fed “has more work to do.” To front-run questions that presume she will be too soft on inflation, Yellen notes that she “led the effort to adopt … a 2% goal for inflation.” This, she argues, sends a “clear and powerful message” that “has helped anchor the public’s expectations” for “low and stable” inflation. Expect her to repeat this argument multiple times on Thursday.

 

The taper question, ultimately

 

Yellen states that “supporting the recovery today is the surest path to a more normal approach to monetary policy” – in other words, policy needs to remain easy now to tighten later. Additionally, “a strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases.” Early commentary focused on the word “ultimately” as a possible signal that Yellen does not plan to taper for a while.

 

But “reduce its monetary accommodation” typically has meant rate hikes in official Fed communication, while reducing “reliance on unconventional tools” likely refers to the eventual reduction in the size of the Fed’s balance sheet rather than tapering. Recall, most Fed officials take a “stock approach” to QE; in that view it’s the total amount of assets owned and not the purchase pace that defines the degree of accommodation. No doubt she’ll get questions about the Fed’s tapering plans on Thursday.

 

On financial stability

 

Yellen further pledges to continue to support Fed efforts to address financial stability concerns. She emphasizes supervisory and regulatory tools “to reduce the threat of another financial crisis,” but notes that the Fed also is taking financial stability “into consideration when carrying out its responsibilities for monetary policy.” This suggests she may be open to tightening policy to address bubble concerns. Look for her to be questioned on whether there are bubbles now (expected answer: no, or at least not systemic) and how the Fed should respond to such risks.

One thing appears clear – QEeen Yellen will bring continuity to Fed policy once she is confirmed… but a taper may still be on the table.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/y3TfcPsxc2k/story01.htm Tyler Durden

It would appear that much of the rally yesterday (and early overnight) was driven by hope (and confirmed relief) that Fed chair nominee Yellen is not about to take on a substantially less-dovish tone in today’s testimony in an effort to garner the support of the more hawkish elements of the Senate Banking Committee. There was a great deal of confirmation bias in the market’s move and interpretation but, as BofAML notes below, this may be misplaced. The more important part of today’s testimony is yet to come in the Q&A session – where we will hear likely more unscripted thoughts from the QEeen at her Senate confirmation this morning.

 

Deutsche’s Jim Reid notes that:

The market has zeroed in on the 5th and 6th paragraphs of the statement where Yellen describes the economy as performing “far short” of its potential. She goes on to say that inflation has been running below target and that unemployment is still too high. As such, Yellen concludes that the Fed will continue to use monetary policy tools to promote a more robust recovery.

 

On the question of QE, Yellen says that a strong recovery will enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools. She adds that supporting the recovery is the “surest path to returning to a more normal” approach to monetary policy.

 

So while the tones are certainly dovish, it’s impossible to infer precise policy thoughts from her remarks. She clearly views that the economy has not yet reached a strong enough trajectory but is she making a grander point that they won’t start tapering until the data is better than now?

 

Or does tapering to $70bn, $50bn, $30bn etc a month still represent supporting the recovery. Indeed, it’s difficult to infer anything concrete regarding the path of monetary policy from Yellen’s prepared comments.

So while dovish, he implies that perhaps the market is experiencing a little to much confirmation bias.

BofAML also notes that markets read her comments as dovish, inferring that she might wait some time to taper Fed asset purchases… but disagree with that interpretation.

Markets see prepared statement as dovish

 

Janet Yellen, the current vice chair of the Federal Reserve and nominee to replace Ben Bernanke as Fed chair, released a brief prepared statement (see full report for footnote) Wednesday afternoon, ahead of the Senate Banking Committee hearing that begins at 10 AM ET on Thursday, November 14. Markets read it as dovish, particularly as many commentators expected her to retreat to a “balanced” (i.e., more hawkish) position. We view her comments as supporting continued Fed accommodation, consistent with ongoing official FOMC statements but not revealing any specific policy plans. Overall we expect continuity in Fed policy following her confirmation.

 

Support for dual mandate and inflation target

 

No surprise, Yellen’s text confirms she strongly supports the Fed’s dual mandate. She acknowledges progress in the recovery (to push back against the inevitable suggestion on Thursday that Fed easing has been ineffective), but notes unemployment is “still too high” while inflation may remain below the Fed’s 2% goal for some time. Hence, she concludes, the Fed “has more work to do.” To front-run questions that presume she will be too soft on inflation, Yellen notes that she “led the effort to adopt … a 2% goal for inflation.” This, she argues, sends a “clear and powerful message” that “has helped anchor the public’s expectations” for “low and stable” inflation. Expect her to repeat this argument multiple times on Thursday.

 

The taper question, ultimately

 

Yellen states that “supporting the recovery today is the surest path to a more normal approach to monetary policy” – in other words, policy needs to remain easy now to tighten later. Additionally, “a strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases.” Early commentary focused on the word “ultimately” as a possible signal that Yellen does not plan to taper for a while.

 

But “reduce its monetary accommodation” typically has meant rate hikes in official Fed communication, while reducing “reliance on unconventional tools” likely refers to the eventual reduction in the size of the Fed’s balance sheet rather than tapering. Recall, most Fed officials take a “stock approach” to QE; in that view it’s the total amount of assets owned and not the purchase pace that defines the degree of accommodation. No doubt she’ll get questions about the Fed’s tapering plans on Thursday.

 

On financial stability

 

Yellen further pledges to continue to support Fed efforts to address financial stability concerns. She emphasizes supervisory and regulatory tools “to reduce the threat of another financial crisis,” but notes that the Fed also is taking financial stability “into consideration when carrying out its responsibilities for monetary policy.” This suggests she may be open to tightening policy to address bubble concerns. Look for her to be questioned on whether there are bubbles now (expected answer: no, or at least not systemic) and how the Fed should respond to such risks.

One thing appears clear – QEeen Yellen will bring continuity to Fed policy once she is confirmed… but a taper may still be on the table.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/y3TfcPsxc2k/story01.htm Tyler Durden

Despite the great shale revolution, US exports posted a $0.4 billion decline to $188.9 billion in October driven by decreases in industrial supplies and materials ($1.3 billion), other goods ($0.2 billion), consumer goods ($0.2 billion), and capital goods ($0.1 billion). This was offset by a $2.7 billion increase in imports to $230.7 billion broken down by increases in industrial supplies and materials ($0.9 billion); automotive vehicles, parts, and engines ($0.9 billion); capital goods ($0.8 billion); and consumer goods ($0.6 billion). End result: a September trade balance of $41.8 billion, which was higher than the highest forecast of $41.6 billion among 72 economists queried by Bloomberg, and the highest deficit print in 4 months.

The major deficits broken down by grography: with China $30.5 ($29.9), European Union $8.0 ($9.8), Germany $6.1 ($5.4), OPEC $5.9 ($7.3), Japan $5.5 ($6.4), Mexico $5.3 ($4.9), Canada $3.2 ($2.4), Saudi Arabia $3.2 ($3.6), Korea $2.1 ($1.7), Ireland $1.8 ($1.9), India $1.7 ($1.6), and Venezuela $1.3 ($1.5).

This was the largest trade deficit gap with China posted on record.

More from the report:

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total September exports of $188.9 billion and imports of $230.7 billion resulted in a goods and services deficit of $41.8 billion, up from $38.7 billion in August, revised. September exports were $0.4  billion less than August exports of $189.3 billion. September imports were $2.7 billion more than August imports of $228.0 billion.

 

In September, the goods deficit increased $3.0 billion from August to $61.3 billion, and the services surplus decreased $0.1 billion from August to $19.5 billion. Exports of goods decreased $0.2 billion to $132.1 billion, and imports of goods increased $2.8 billion to $193.4 billion. Exports of services decreased $0.2 billion to $56.8 billion, and imports of services decreased $0.1 billion to $37.3 billion.

 

The goods and services deficit increased $0.2 billion from September 2012 to September 2013. Exports were up $2.1 billion, or 1.1 percent, and imports were up $2.3 billion, or 1.0 percent.

End result: Q3 GDP forecasts are about to gap down by 0.2-0.4% points.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/vA9RCv1SU3o/story01.htm Tyler Durden

Following the end of the plague of system glitches last week, the Labor Department admits that 5 states estimated levels this week. The initial jobless claims print remains near 4 month-highs (adjusted to for the prior glitch unreality). At 339k vs 330k expected, this is the 6th straight week of disappointment for the ‘critical real-time indicator of the economy’s health’ that some have called this noisy data series. Last week’s ‘encouraging’ print was revised higher from 336 to 341k, we can’t wait to see how the 5 estimates affect next week’s revision.

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/vH9ITTCttc8/story01.htm Tyler Durden

Curious where the “hedge fund hotel” is currently located, for both most loved and hated asset classes? The following table shows both the penthouse and the basement of the most recent groupthink, which not surprisingly, indicates that hedge funds, which have simply become highly-levered momentum and beta chasers, are most bullish on the Nasdaq, and offsetting this, are most bearish on 10 Year notes. Of course, since the bulk of the very highly levered marginal cash (for those who haven’t seen it, Balyasny’s leverage chart is a stunning eye opener) is already deployed, all that remains now is the profit-taking, and as such anyone who wishes to take advantage of the inevitable and recurring hedge fund hotel collapse would be advised to put on a short Nasdaq, long 10Y pair on and await the unraveling.

Source: SocGen

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/4OuJJUy2SQg/story01.htm Tyler Durden

It’s deja vu time for Wal-Mart. Spot the trend:

• Q1: Wal-Mart Misses Revenue, Guides Below Expectations: Weather Among Factors Blamed
• Q2: Wal-Mart Misses, Guides Below Expectations; Blames Weak Consumer Spending, Payroll Tax, FX And Lack Of Inflation

Spot it yet? Good. Sure enough, in Q3 continuing the trend, moments ago Wal-Mart just missed revenues, and you got it: lowered guidance.

Full breakdown:

• EPS $1.14 vs Expectations of $1.13. This was driven by a buyback of 23 million shares for $1.7 billion in the quarter
• Revenues missed $115.69 billion vs Expectations of $116.82 billion
• Q3 WalMart US comp store sales missed, and ex-fuel printed at -0.3% vs +0.5% expected, and down from +1.5% a year earlier
• Q3 Total comp store sales missed, ex-fuel printed at -0.1%, +0.3% expected, and down from +1.7% a year earlier
• WMT guided to Q4 EPS of 1.50-1.60 (including adjustments) vs expectations of $1.69
• WMT guided to year end EPS of $5.01-$5.11 (including adjustments) vs a previous guidance of $5.10-$5.30

From the report:

“For the fourth quarter, we expect EPS to range between $1.50 and $1.60. Our guidance includes the impact of approximately $0.10 per share for certain items described below. Accounting for these factors, we believe our fourth quarter underlying1 EPS will range between $1.60 and $1.70,” said Holley.

 

“For the full year, we are updating our EPS guidance to range between $5.01 and $5.11. Accounting for the $0.10 of certain items that will impact the fourth quarter, our full year underlying1 EPS will range between $5.11 and $5.21,” added Holley.

 

The company’s guidance reflects a view of global economic trends, including ongoing headwinds from currency exchange rate fluctuations, a competitive holiday season, and a full-year effective tax rate that is expected to range between 31 and 33 percent.

And the punchline:

“A challenging global economy and negative currency exchange rate fluctuations impacted our sales growth in the third quarter,” said Doug McMillon, Walmart International president and CEO. “In the fourth quarter, we will continue our progress on managing expenses well and staying focused on growing sales, including e-commerce. Still, the slow-growth macroeconomic environment is persisting through the first month of this quarter, and the markets continue to be competitive.”

And now, BTFATH.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/KhOWF_prDEs/story01.htm Tyler Durden

• Yellen to defend Fed’s ultra-easy monetary policy (Reuters)
• Japan growth slows on global weakness (WSJ)
• Eurozone third-quarter growth falters (FT)
• Fed Debates Its Low-Rate Peg (Hilsenrath)
• Yellen: Economy Still Needs Fed Aid (WSJ)
• ‘Obamacare’ launch fiasco rouses sceptics (FT)
• DoubleLine’s Gundlach says U.S. equities ‘only game in town’ (Reuters)
• Indian Inflation Exceeding Estimates Adds Rate-Rise Pressure (BBG)
• HUD Said to Fail in Bid to Sell $450 Million of Mortgages (BBG)
• Boeing machinists reject labor deal on 777X by 67 percent (Reuters)
• Australia’s Senate Rejects Raising Debt Ceiling to A$500 Billion (BBG)
• ECB’s Praet puts asset buying on agenda (Reuters)
• Default ‘Wave’ of $1.6 Trillion Looming for Junk, Fridson Says (BBG)
• Carney’s economic glass is half full (FT)

 

Overnight Media Digest

WSJ

* The government’s antitrust settlement with AMR Corp and US Airways Group Inc sets up what may be the last big land grab at major airports for some time, as the planned merger cements a new structure for the industry after a decade of bankruptcies and consolidation.

* In a sign of the fervor once again rising around Internet startups, the 23-year-old CEO of a two-year-old company with no revenue has rejected a $3 billion buyout offer from Facebook . Snapchat Inc is being wooed by other investors and potential acquirers. Chinese Internet giant Tencent Holdings Ltd had offered to lead an investment that would value Snapchat at $4 billion.

* Boeing’s largest union rejected an eight-year contract that would have guaranteed the plane maker’s updated long-range 777X jetliner and its wings would be built in unionized facilities in Puget Sound.

* Crocs, famous for its colorful plastic clogs, is considering going private, its sales and stock price off their peaks.

* Business owners throughout the U.S. used-smartphone market are reporting they suddenly cannot unlock old Apple iPhones. None of them knows exactly what changed, but AT&T seems to be at the center of it.

* The nation’s railroads are asking safety regulators to require that all existing tank cars that carry crude oil, ethanol and other flammable liquids be modified or upgraded to better withstand accidents or be “aggressively” phased out of service.

* KKR and Google have struck a pact to invest about $400 million in six solar power plants being built by Recurrent Energy in California and Arizona, according to people familiar with the matter.

* With thousands of debt-laden new lawyers entering the market at a time when plum jobs at big firms are in short supply, the influential New York City Bar Association is trying out some alternatives.

* Fairholme Capital Management said it wants to buy parts of bailed-out mortgage-finance giants Fannie Mae and Freddie Mac from the government in a recapitalization valued at $52 billion.

* Sotheby’s sold a silvery Andy Warhol diptych of a man slumped amid his crumpled car, “Silver Car Crash (Double Disaster),” for $105.4 million, an auction high for the Pop artist.

 

FT

Network equipment maker Cisco Systems Inc warned that revenue would decline by as much as 10 percent in the current quarter, blaming sliding demand due to a “level of uncertainty or concern” among customers after recent revelations about internet surveillance by the U.S. National Security Agency.

Two of Barclays’ most senior bankers, including Britain’s former top financial industry regulator Hector Sants, have resigned, dealing a blow to Chief Executive Antony Jenkins’ attempts to revive the lender and restore its reputation.

The Bank of England brought forward its unemployment forecast on Wednesday and said it believes the UK economy is recovering so quickly that it is likely to consider raising interest rates from their historic lows as soon as this time next year.

The latest income tax bill for Starbucks Corp has been cut to zero after it was ordered on Tuesday to pay $2.7 billion to Kraft Foods for ending the companies’ packaged coffee partnership early, the coffee chain revealed in its restated accounts on Wednesday.

Rolls-Royce, the world’s second-largest maker of aircraft engines, is preparing to use 3D printing technology to make components, in a bid to speed up production and reduce the weight of parts.

Research Group CCS Insight predicted unprecedented mergers and acquisitions activity in the next two years in the technology and telecommunication sectors with a handful of large companies expected to expand their regional and global reach by 2016.

 

NYT

* A contract between JPMorgan Chase and a consulting firm run by the daughter of the former prime minister points to the bank’s strategy to build its influence in China.

* Snapchat, a social media service based in Venice Beach, California, has become one of the most sought-after businesses in the technology industry.

* Janet L. Yellen, President Obama’s choice to lead the Federal Reserve for the next four years, plans to tell senators at her confirmation hearing on Thursday that continuing the Fed’s enormous stimulus campaign is the best way to revive the economy and hasten the program’s end.

* Just over 106,000 people picked health plans in the first month of open enrollment through the state and federal insurance marketplaces established by the Affordable Care Act, President Obama’s health secretary said Wednesday, a fraction of the administration’s initial estimate for enrollment during that period.

* The race for consumers’ dollars has prodded more retailers to open their doors on Thanksgiving, a day before the traditional start of the holiday season.

* On Thursday IBM will announce that Watson, the computing system that beat all the humans on “Jeopardy!” two years ago, will be available in a form more than twice as powerful via the Internet.

* Online real estate brokerage Redfin has raised $50 million in a new round of mezzanine capital, led by Tiger Global Management and T. Rowe Price. Five existing investors, including Greylock Partners and DFJ Venture Capital, also participated.

* JPMorgan called off a question-and-answer session with James Lee, its vice chairman and top deal maker, after Twitter users complied with its reque
st for queries with a stream of ribald questions and hostile jokes.

* A Brazilian tour operator backed by the Carlyle Group could raise as much as 1 billion reais ($428 million) for its existing shareholders through a planned offering.

* Goldman Sachs has promoted 280 executives to managing director, one step down from the brass ring of partner. Promotions are up 5 percent over last year, when the firm named 266 employees managing director.

 

Canada

THE GLOBE AND MAIL

* Canada boasts world-class destinations such as the Rockies and Niagara Falls, but it’s missing out on a global tourism boom, costing the economy billions of dollars a year. The number of international visitors to Canada has plunged 20 percent since 2000 even as global travel soars, according to a sobering report being released Thursday by Deloitte Canada.

* Former staffers in the office of Toronto Mayor Rob Ford have alleged a series of abusive behavior by their boss, with one staffer telling police detectives the mayor drove while intoxicated, and another describing a lurid night in 2012 when there were allegations of cocaine use and a “professional escort.”

Reports in the business section:

* Mounting competition from giant U.S. chains is forcing supermarkets to lower their prices, a trend that hit grocers Loblaw Companies Ltd and Metro Inc in their latest financial quarter. Basic commodities such as corn and sugar have also fallen this year, meaning there is virtually no inflation pressure in food to help the bottom line.

* Governments in Ontario and Quebec have thrown political hurdles in front of Alberta’s efforts to expand markets for its crude, launching public hearings into controversial pipeline proposals the industry regards as necessary to enable its fast-growing oil production.

NATIONAL POST

* With the dust barely settled on a day of tense face-offs, interrogations and intervention-like pleas to a defiant Toronto mayor, Rob Ford learned on Wednesday that he is facing a new attempt to curtail his power, as city councillors try to strip him of his ability to deal with city emergencies.

* Canada and Sri Lanka traded shots on Wednesday in the build-up to the Commonwealth meeting in Colombo, which Canadian Prime Minister Stephen Harper is boycotting over Sri Lanka’s human rights record.

FINANCIAL POST

* It’s a relatively small upscale mall in Toronto’s north end but the $500 million price being paid for Bayview Village is sending a strong message about the property market in Canada. Real estate prices in the right markets are still strong.

* Quebec is asking companies involved in public contract bid-rigging years ago to repay the sums they overcharged or risk a civil suit.

 

China

CHINA SECURITIES JOURNAL

– Some of China’s provincial authorities have set dates by which state-controlled developers will exit property development, official sources said. By the end of 2013, 23 part or full state-owned Nanjing developers will complete their exit from projects.

SHANGHAI SECURITIES NEWS

– Shanghai Jinfeng Investment Co Ltd said its parent is in talks with real-estate developer Greenland Group on a possible restructuring deal.

– Private equity firm Warburg Pincus has invested $100 million in privately-run hospital Amcare Corp, and will help it accelerate expansion over the next five years.

CHINA DAILY

– China and the West hold different views on human rights, said an editorial in the paper. No country has the right to impose its own perceptions of human rights upon others or use the concern as an excuse to interfere in internal affairs, it said.

PEOPLE’S DAILY

– An important political task for China’s Communist Party is to ensure strong entrepreneurial and opportunity awareness, said a commentary in the paper which acts as the party’s mouthpiece.

 

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

CAE (CAE) upgraded to Outperform from Sector Perform at RBC Capital
Carlyle Group (CG) upgraded to Buy from Neutral at Goldman
Finish Line (FINL) upgraded to Buy from Neutral at B. Riley
Invesco (IVZ) upgraded to Buy from Neutral at Goldman
LifePoint Hospitals (LPNT) upgraded to Buy from Hold at Deutsche Bank
Office Depot (ODP) upgraded to Buy from Underperform at BofA/Merrill
PGT, Inc. (PGTI) upgraded to Outperform from Neutral at Credit Suisse
Sony (SNE) upgraded to Overweight from Equal Weight at Morgan Stanley
SunTrust (STI) upgraded to Outperform from Perform at Oppenheimer
Zogenix (ZGNX) upgraded to Outperform from Perform at Oppenheimer

Downgrades

Affiliated Managers (AMG) downgraded to Neutral from Buy at Goldman
Cisco (CSCO) downgraded to Hold from Buy at Deutsche Bank
Fortress (FIG) downgraded to Neutral from Buy at Goldman
Hercules Technology (HTGC) downgraded to Hold from Buy at Wunderlich
NetEase.com (NTES) downgraded to Hold from Buy at Deutsche Bank
PNC Financial (PNC) downgraded to Perform from Outperform at Oppenheimer
Penn National (PENN) downgraded to Neutral from Overweight at JPMorgan
Telefonica Brasil (VIV) downgraded to Neutral from Buy at Goldman
WhiteHorse Finance (WHF) downgraded to Neutral from Outperform at RW Baird
lululemon (LULU) downgraded to Underperform from Neutral at Sterne Agee

Initiations

Bright Horizons (BFAM) initiated with an Outperform at Wells Fargo
Burlington Stores (BURL) initiated with a Buy at BofA/Merrill
Burlington Stores (BURL) initiated with an Outperform at BMO Capital
Echo Global (ECHO) initiated with an Outperform at Cowen
Essent Group (ESNT) initiated with an Outperform at JMP Securities
Gaming and Leisure Properties (GLPI) initiated with a Neutral at JPMorgan
Heritage Oaks (HEOP) initiated with an Outperform at Keefe Bruyette
International Rectifier (IRF) initiated with a Buy at Drexel Hamilton
Maxim Integrated (MXIM) initiated with a Hold at Drexel Hamilton
NXP Semiconductors (NXPI) initiated with a Buy at Drexel Hamilton
SanDisk (SNDK) initiated with a Buy at Drexel Hamilton

HOT STOCKS

Fairholme Capital proposed purchase of Fannie Mae (FNMA), Freddie Mac (FMCC) MBS insurance units
Eli Lilly (LLY) to invest $700M to enhance global insulin manufacturing capacity
BlackBerry (BBRY) CEO: Company has significant financial strength for long-haul
Boeing (BA) sees $550B market in Middle East for new airplanes
Cisco (CSCO) CEO Chambers: Emerging markets more challenging than anticipated
Cisco raised stock buyback program by $15B
BorgWarner (BWA) announced two-for-one stock split
NetApp (NTAP) said ongoing macro environment ‘uncertain’

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
North American Palladium (PAL), Chimerix (CMRX), Helmerich & Payne (HP), eLong (LONG), Kinross Gold (KGC), Spark Networks (LOV), Tetra Tech (TTEK), Radiant Logistics (RLGT), SeaWorld (SEAS), Cisco (CSCO), NetApp (NTAP)

Companies that missed consensus earnings expectations include:
Penford (PENX), WGL Holdings (WGL), NetEase.com (NTES), Eagle Bulk Shipping (EGLE), CUI Global (CUI), American Midstream Partners (AMID), ExOne (XONE)

Companies that matched consensus earnings expectations include:
GasLog (GLOG), Luxfer (LXFR), Aegean Marine (ANW)

NEWSPAPERS/WEBSITES

• KKR (KKR) and Google (GOOG) struck a deal to invest about $400M in six solar-power plants being built by Recurrent Energy LLC in California and Arizona, sources say, the Wall Street Journal reports
• The roaring market for IPOs  has hit some speed bumps this month, with a number of deals attracting less investor
  enthusiasm than had been the case for much of the year. IPOs remain on track for their busiest year since the financial crisis, with bankers and investors expecting a steady stream of deals through year-end and into 2014, the Wall Street Journal reports
• Riverbed Technology (RVBD) is not now considering a sale, sources say, denying a media report that pushed up the technology company’s stock earlier yesterday, Reuters reports
• Alitalia’s board approved a revised business plan, promising severe cost cuts to make the Italian airline more profitable, but that failed to convince top shareholder Air France-KLM (AFLYY), which voted against the plan, sources say, Reuters reports
• Google (GOOG) and Hewlett-Packard (HPQ) are stopping sales (BBY, AMZN) of the Chromebook 11 laptop after some users reported overheating power supplies, a setback for the devices that have been gaining momentum with consumers, Bloomberg reports
• Fed Vice Chairman Janet Yellen will testify before the Senate Banking Committee today and signal that she will carry on the central bank’s unprecedented stimulus until she sees improvement in an economy that’s operating well below potential, Bloomberg reports

SYNDICATE

CDW Corporation (CDW) 15M share Secondary priced at $20.50
Genesee & Wyoming (GWR) announces sale of 5.98M shares by Carlyle funds
Hougton Mifflin (HMHC) 18.25M share IPO priced at $12.00
Lumos Networks (LMOS) files to sell 2.512M shares of common stock
Parametric Sound (PAMT) announces $5.1M registered direct offering
Sapiens (SPNS) announces proposed public offering of 5.65M shares
Tandem Diabetes Care (TNDM) 8M share IPO priced at $15.00
Vertex Energy (VTNR) files to sell $8M in common stock

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/XwpX2SzSHjs/story01.htm Tyler Durden