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Overnight weakness from China’s ‘taper talk’ has been exaggerated this morning as Fed’s Rosengren, speaking on CNBC, warned that while inflation was not a problem, the costs of QE were a potential problem and risk to financial stability.

• *ROSENGREN SAYS FED MUST BE ATTENTIVE TO POSSIBLE QE COSTS
• *ROSENGREN SAYS `WE’RE IN UNUSUAL TIMES’ WITH FED POLICY

This somewhat hawkish tone sent the USD higher in a hurry, Treasury yields higher and US equities lower as the ‘market’ reacts to every headline once again.

 

 

Charts: Bloomberg

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/T-uj8m826wE/story01.htm Tyler Durden

Overnight weakness from China’s ‘taper talk’ has been exaggerated this morning as Fed’s Rosengren, speaking on CNBC, warned that while inflation was not a problem, the costs of QE were a potential problem and risk to financial stability.

• *ROSENGREN SAYS FED MUST BE ATTENTIVE TO POSSIBLE QE COSTS
• *ROSENGREN SAYS `WE’RE IN UNUSUAL TIMES’ WITH FED POLICY

This somewhat hawkish tone sent the USD higher in a hurry, Treasury yields higher and US equities lower as the ‘market’ reacts to every headline once again.

 

 

Charts: Bloomberg

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/T-uj8m826wE/story01.htm Tyler Durden

Over the past year, pictures of China’s unprecedented air pollution have been seen around the world (for a sample see here and here), Chinese smog has been exported to Japan, and there is even a dedicated hourly twitter update looking at the quality, or lack thereof, of Beijing air. As such, it was only a matter of time before the tragic consequences of China’s unprecedented and unplanned scramble to industrialize started manifesting themselves. This happened overnight when an eight-year-old girl has become China’s youngest lung cancer patient, reports said, with doctors blaming pollution as the direct cause of her illness. The girl, whose name was not given, lives near a major road in the eastern province of Jiangsu, said Xinhuanet, the website of China’s official news agency.

Since this is just what is officially reported, one can only imagine just how bad the reality is behind the Ministry of Truth firewall, but at least China is finally starting to come clean on its pollution problem, in what one can only hope is an attempt to remedy it. However, if that means even slower growth and a less furious scramble to industrialize through the construction of ghost cities, this will likely mean even slower economic growth, even less of an inflation tolerance by the premier and the PBOC, and even more animosity toward Bernanke’s QE, which as we reported earlier is the main reason for today’s reddish tint in the equity futures.

AFP reports that according to a doctor at Jiangsu Cancer Hospital in Nanjing, the 8-year old girl had been exposed to harmful particles and dust over a long period of time.

Lung cancer cases among children are extremely rare, with the average age for diagnosis at about 70, according to the American Cancer Society.

 

But the incidence of the disease has skyrocketed in China as the country’s rapid development has brought with it deteriorating air quality, particularly in urban areas.

 

Lung cancer deaths in China have multiplied more than four times over the past 30 years, according to Beijing’s health ministry. Cancer is now the leading cause of death in the smog-ridden capital.

 

The report of the eight-year-old girl’s diagnosis comes after choking smog enveloped the northeastern city of Harbin two weeks ago, bringing flights and ground transport to a standstill and forcing schools to shut for several days, with visibility in some areas reduced to less than 50 metres.

 

At the height of the smog, the city’s levels of PM2.5 — the smallest, most dangerous type of airborne particle — reached 1,000 micrograms per cubic metre, 40 times the World Health Organization’s recommended standard.

High levels of PM2.5 have been linked to health problems including lung cancer and heart disease.

And now with China finally admitting it has a health hazard problem, one wonders how long until Japan does the same with the even greater environmental catastrophe that is Fukushima, or will Abe continue to hide the disastrous health consequences of the worst nuclear catastrophe since Chernobyl until his entire economic revitalization house of cards comes tumbling down and he is once again escorted out of the building in yet another epic case of diarrhea?

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/KuOvM6XLGKQ/story01.htm Tyler Durden

Over the past year, pictures of China’s unprecedented air pollution have been seen around the world (for a sample see here and here), Chinese smog has been exported to Japan, and there is even a dedicated hourly twitter update looking at the quality, or lack thereof, of Beijing air. As such, it was only a matter of time before the tragic consequences of China’s unprecedented and unplanned scramble to industrialize started manifesting themselves. This happened overnight when an eight-year-old girl has become China’s youngest lung cancer patient, reports said, with doctors blaming pollution as the direct cause of her illness. The girl, whose name was not given, lives near a major road in the eastern province of Jiangsu, said Xinhuanet, the website of China’s official news agency.

Since this is just what is officially reported, one can only imagine just how bad the reality is behind the Ministry of Truth firewall, but at least China is finally starting to come clean on its pollution problem, in what one can only hope is an attempt to remedy it. However, if that means even slower growth and a less furious scramble to industrialize through the construction of ghost cities, this will likely mean even slower economic growth, even less of an inflation tolerance by the premier and the PBOC, and even more animosity toward Bernanke’s QE, which as we reported earlier is the main reason for today’s reddish tint in the equity futures.

AFP reports that according to a doctor at Jiangsu Cancer Hospital in Nanjing, the 8-year old girl had been exposed to harmful particles and dust over a long period of time.

Lung cancer cases among children are extremely rare, with the average age for diagnosis at about 70, according to the American Cancer Society.

 

But the incidence of the disease has skyrocketed in China as the country’s rapid development has brought with it deteriorating air quality, particularly in urban areas.

 

Lung cancer deaths in China have multiplied more than four times over the past 30 years, according to Beijing’s health ministry. Cancer is now the leading cause of death in the smog-ridden capital.

 

The report of the eight-year-old girl’s diagnosis comes after choking smog enveloped the northeastern city of Harbin two weeks ago, bringing flights and ground transport to a standstill and forcing schools to shut for several days, with visibility in some areas reduced to less than 50 metres.

 

At the height of the smog, the city’s levels of PM2.5 — the smallest, most dangerous type of airborne particle — reached 1,000 micrograms per cubic metre, 40 times the World Health Organization’s recommended standard.

High levels of PM2.5 have been linked to health problems including lung cancer and heart disease.

And now with China finally admitting it has a health hazard problem, one wonders how long until Japan does the same with the even greater environmental catastrophe that is Fukushima, or will Abe continue to hide the disastrous health consequences of the worst nuclear catastrophe since Chernobyl until his entire economic revitalization house of cards comes tumbling down and he is once again escorted out of the building in yet another epic case of diarrhea?

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/KuOvM6XLGKQ/story01.htm Tyler Durden

The extreme experiment of current US monetary policy has evolved (as we noted yesterday), from explicit end-dates, to unlimited end-dates, to threshold-based end-dates. Of course, this ‘threshold’ was no problem for the liquidty whores when unemployment rates were extremely high themselves, but as the world awoke to what we have been pointing out – that it’s all a mirage of collapsing participation rates – the FOMC (and sell-side strategists) realized that the endgame may be ‘too close’. Cue Goldman’s Jan Hatzius, who in today’s note, citing two influential Fed staff economists, shifts the base case and forecasts that the Fed will lower its threshold for rate hikes to 6.0% (and perhaps as low as 5.5%) as early as December (as a dovish forward-guidance balance to an expected Taper announcement).

 

Via Goldman Sachs,

• The most senior Fed staff economists for monetary policy analysis and domestic macroeconomics, William English and David Wilcox, have published separate studies that imply a strong case for a reduction in the 6.5% unemployment threshold for the first funds rate hike. We have proposed such a move for some time, but have been unsure whether it would in fact happen. And while the uncertainty around near-term Fed policy remains very considerable, our baseline view is now that the FOMC will reduce its 6.5% threshold to 6% at the March 2014 FOMC meeting, alongside the first tapering of QE. A move as early as the December 2013 meeting is possible, and if so, this might also increase the probability of an earlier tapering of QE.

It is hard to overstate the importance of two new Fed staff studies that will be presented at the IMF’s annual research conference on November 7-8. The lead author for the first study is William English, who is the director of the Monetary Affairs division and the Secretary and Economist of the FOMC. The lead author for the second study is David Wilcox, who is the director of the Research and Statistics division and the Economist of the FOMC. The fact that the two most senior Board staffers in the areas of monetary policy analysis and domestic macroeconomics have simultaneously published detailed research papers on central issues of the economic and monetary policy outlook is highly unusual and noteworthy in its own right. But the content and implications of these papers are even more striking.

It will take us some time to absorb the sizable amounts of new analysis in the two studies, and we are only able to comment on a few selected aspects at this point. But our initial assessment is that they considerably increase the probability that the FOMC will reduce its 6.5% unemployment threshold for the first hike in the federal funds rate, either coincident with the first tapering of its QE program or before.

The first study, written by William English, David Lopez-Salido, and Robert Tetlow and entitled “The Federal Reserve’s Framework for Monetary Policy–Recent Changes and New Questions,” uses a smaller version of the staff’s large-scale econometric model FRB/US to analyze the optimal path for the federal funds rate. Using “small FRB/US,” a set of assumptions about Fed preferences, and a set of assumptions about the baseline performance of the economy, the authors find that the theoretically optimal policy involves a commitment to hold the federal funds rate near zero until 2017, followed by a series of hikes that push the rate well above neutral by the early 2020s. In this simulation, the unemployment rate falls below the structural rate for a time, and inflation rises modestly above the 2% target. (The optimal policy in the English et al. study is more aggressive than that shown in Vice Chair Yellen’s earlier set of optimal control simulations, which points to the first hike in early 2016; the reasons seem to include a lower assumption for the structural unemployment rate and a later baseline for the first hike in the funds rate.)

However, the authors note that such an optimal policy is possibly infeasible because it is complex and model-dependent, and because it simply assumes that policymakers are able to overcome the credibility problems associated with a commitment to a particular policy path far in the future. Hence, they investigate several different ways in which Fed officials might be able to approximate the optimal policy: (1) different sets of unemployment and inflation thresholds for the first hike, (2) a higher inflation target, and (3) a switch to a nominal GDP level target. They see potentially sizable benefits from a higher inflation target or a nominal GDP level target but also very sizable risks, and conclude that “it is hard to be confident” that such a change would enhance performance.

Regarding the unemployment and inflation thresholds, they simulate the performance of unemployment thresholds for the first hike ranging from 5.0% to 7.0% and inflation thresholds ranging from 1.5% to 3.0%. The results with respect to varying the inflation threshold are not very surprising. The authors find that the current 2.5% threshold performs no worse than other choices, and the differences are relatively minor (at least in the baseline simulation). But the results with respect to varying the unemployment threshold are much more striking. The key conclusion is that “…reducing the unemployment threshold improves measured economic performance until the unemployment threshold reaches 5.5 percent; a further reduction in the threshold to 5.0 percent, however, reduces welfare, as the control of inflation becomes notably less precise.” In other words, a 6% unemployment threshold outperforms a 6.5% threshold, and a 5.5% threshold outperforms a 6% threshold!

The second paper, written by David Reifschneider, Willam Wascher, and David Wilcox and entitled “Aggregate Supply in the United States: Recent Developments and Implications for the Conduct of Monetary Policy,” discusses the considerable evidence that the US economy’s supply-side performance has deteriorated significantly since 2007, with very slow potential GDP growth and an increase in structural unemployment. They estimate that real potential GDP growth has only averaged 1.3% since 2007, the output gap is currently about 3% of GDP, and the structural unemployment rate had risen to 5.75% by 2012 (although it is now again on a slight downward trend). They then use a modified version of FRB/US with an added role for “hysteresis” in labor markets–that is, a gradual transformation of cyclical unemployment into structural unemployment and/or labor force withdrawal –to analyze the sources of this deterioration, using a simulation in which the model economy is hit by a major financial crisis that is calibrated to match the size of the 2007-2009 episode. In a nutshell, they find that the post-crisis period “features a noticeable deterioration in the economy’s productive capacity” and that about 80% of the deterioration “…represents an endogenous response to the persistently weak state of aggregate demand.”

The authors then go on to discuss the “optimal” policy response to the crisis, taking into account not just the cyclical position of the economy but also the implications of weakness in aggregate demand for the supply side and therefore the longer-term structural position of the economy. They are careful to note that optimal control solutions are sensitive to the specification of the model economy, assumptions about the baseline performance of the economy, and assumptions about the Fed’s objectives. But eve
n with these caveats, it is striking that the optimal control solutions imply a period of near-zero interest rates that lasts until the unemployment rate has fallen to a level that is somewhere around the structural rate. This finding reflects the usual optimal control logic, namely that the central bank’s objectives over the simulation period as a whole are best served by allowing for a period of modest overheating and overshooting of inflation in the more distant future in order to frontload a greater amount of monetary stimulus early on in the simulation period. But this logic is now enhanced by the hysteresis effects from weakness in aggregate demand on the supply side of the economy, which further increase the longer-term costs of failing to return to full employment.

The implications of the results strengthen further under an alternative assumption about the Fed’s objectives. This is that Fed officials interpret the employment side of their mandate in terms of what we have called the total employment gap. As the authors note, “…optimal policy should become even more accommodative if the central bank did not target the unemployment gap but instead aimed at keeping the employment-to-population ratio near the trend level that would prevail in the absence of hysteresis effects and exogenous (but ultimately transitory) shocks to the natural rate.” In fact, their simulations show that under this alternative assumption the funds rate remains at its current near-zero level until the unemployment rate has fallen about 1 percentage point below its structural rate.

Taking the two studies together, our preliminary takeaways are as follows:

First, the studies suggest that some of the most senior Fed staffers see strong arguments for a significantly greater amount of monetary stimulus than implied by either a Taylor rule or the current 6.5%/2.5% threshold guidance. To be clear, both studies contain a significant amount of caveats and offsetting considerations, as well as a disclaimer that they only reflect the views of the authors. But given the structure of the Federal Reserve Board, we believe it is likely that the most senior officials–in particular, Ben Bernanke and Janet Yellen–agree with the basic thrust of the analysis.

 

Second, the studies provide two complementary reasons for why additional easing is warranted, which correspond closely to our own recent analysis: (a) optimal control considerations that argue for “credibly promising to be irresponsible” and (b) the possibility that the economy is underperforming its “deep” structural potential–that is, the level of potential output that would have obtained in the absence of the demand weakness of the past five years–by much more than suggested by the current unemployment gap alone. These two reasons are additive in the sense that each provides a separate rationale for further easing, and taken together they provide a very strong rationale for such a move.

 

Third, the studies suggest that the most likely form of this additional easing would be a reduction in the 6.5% unemployment threshold, i.e. a further ramping-up of the primary form of forward guidance that the committee has already chosen. The discussion of QE–the other key form of unconventional policy currently in place–is quite scant; however, the English et al. paper notes that “uncertainty about the level of costs and efficacy…would lead to a reduced level of purchases.” This discussion admittedly does not give us much to go on, but we would view it as broadly consistent with the idea that a reduction in the unemployment threshold might be accompanied by a tapering of QE.

The upshot from our perspective is that the probability of an outright reduction in the unemployment threshold has increased by enough to make this our baseline expectation. Admittedly, the uncertainty around what the committee will do to strengthen the guidance remains considerable. On the one hand, the discussion in the minutes of the September 17-18 FOMC meeting seemed to reveal more sympathy for an inflation lower bound–an option that does not receive any attention in the staff studies–than for a reduction in the unemployment threshold. On the other hand, both the English et al. study and at least parts of the Wilcox et al. study seem to make a fairly strong case for an even bigger reduction in the threshold, perhaps to as low as 5.5%. But our central case is now that the FOMC will reduce the threshold from 6.5% to 6% at the March 2014 FOMC meeting, alongside the first tapering of QE; however, a move as early as the December 2013 meeting is possible, and if so, this might also increase the probability of an earlier tapering of QE.

 

In other words… Goldman is expecting Taper to be announced at the December FOMC and believs the Fed need to cut its threshold on rate hikes to as low as 5.5% to balance the potential ‘tightening’ implicit in the Taper announcement that the market is likely be unhappy about… because – it would seem – Goldman (like many others) still do not understand that it is all about the “flow” not the stock.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/Rwr3s5dUs3k/story01.htm Tyler Durden

While the Obamacare website rollout may be a huge slap in the face of government efficiency and organization (and healthcare.gov has now joined the ranks of all other New Normal “full-time” workers by working part-time following a daily maintenance shutdown from 1 am to 5 am), the reality is that sooner (unlikely) or much later it will be fixed. And while the realization that the Unaffordable Care Act is just that, and will soak up far more cash from the majority of the population will be a slap in the face of most who never understood that socialist Ponzi schemes always cost more in the end, it is nothing that America’s favorite pastime can’t resolve – paying on credit. Which means that the biggest threat to Americans as a result of Obamacare is neither the healthcare.gov site, nor the question of who foots the bil, but the actual impact on services and as CBS reports, the next shock to brace for is the sudden drop off in healthcare providers as an imminent “explosion of demand for doctors and services” mean a looming doctor shortage is just around the corner.

From CBS:

At Current Rate, As Many As 52,000 Primary Care Physicians Needed By 2025. Even doctors who support Obamacare say there could be delays due to more patients and fewer doctors, CBS 2’s Dick Brennan reported Monday.

 

“It’s like shopping during Christmas time. I mean, you’re going to have a tough time if you have all of these people demanding services at the same time,” said Dr. Steven Lamm of the NYU School of Medicine.

 

Lamm said the Affordable Care Act could mean an explosion of demand for doctors and services, but will the system be able to handle it?

 

“I think the concern would be that the system will be overwhelmed, that there will be a greater demand that we can meet in a quality fashion and that we will have to delay services for a lot of individuals,” Lamm said.

Wait, did someone just ask if the “system” would be able to handle an unforeseen consequence? The same system that couldn’t even maintain the most foreseen event such as website traffic on the main Obamacare portal into day one? Yes, they did!

In the meantime, doctors are preparing to just say to hell with it all.

Right now, there is already a shortage of 20,000 doctors nationwide, and with healthcare expansion, plus increasing population, there will be a need for about 52,000 primary care doctors by 2025.

 

This while only 20 percent of new doctors become primary care physicians and the new landscape has older doctors bailing, Brennan reported.

 

“Doctors are planning to retire. Anybody who is anywhere near retirement age is talking about retirement. … There’s just too much going on,” said Dr. Sam Unterricht of the New York State Medical Society.

 

Others fear that centralizing medical care will squeeze out small independent doctor groups, groups that insurers claim are more expensive, in favor of large centralized care.

 

“It will be inferior care. They will end up going to clinics, to situations where they don’t have their own private physician. When they go to hospitals they are not going to know any of doctors who are taking care of them,” cardiologist Dr. David Hess said.

…

Just by sheer numbers, doctor retirements will increase. Nearly half right now are over the age of 50, and the American Medical Association says nurses will also be in short supply, Brennan reported.

The makeshift solution: promote unqualified doctors

Doctors say one solution could be a quick infusion of residents. “They are not training enough residents. The number of medical students has increased a little bit, but the number of residency spots has not. They’ve kept the number of residency spots frozen for, I think, 13 years now,” Unterricht said.

In short: less qualified doctors, as those who know what they are doing, and know what is coming choose simply to retire, offset by a surge in veritable “Dr. Nicks.”

 Yet another unqualified success for central-planning.

The above in video format:

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/kPXivxaU5II/story01.htm Tyler Durden

• China premier warns against loose money policies (Reuters)
• Brussels forecasts tepid Eurozone growth (FT)
• SAC Case Began With Informant’s Tips on Cohen, Rajaratnam (BBG)
• Dirty Munich Home’s Nazi Loot Estimated at $1.35 Billion (BBG)
• Mortar hits Vatican embassy in Damascus, no casualties (Reuters)
• India Launches Mars Mission (WSJ)
• Lael Brainard to leave Treasury, heading to Fed (FT)
• U.S. Takes Aim at ‘Forced’ Insurance (WSJ)
• Wife of Jeff Bezos attacks book about Amazon (FT)
• Fall of Brazil’s Batista embarrasses President Dilma Rousseff (FT)
• The One Thing People Still Really Like About BlackBerry (BusinessWeek)
• Twitter IPO More Expensive Than Facebook Without Profits (BBG)
• Cash floods into property as investors seek alternative or safety (Reuters)
• Fired Deutsche Bank Rates Traders Said to Return to Work (BBG)
• Italy eyes ‘Google Tax’ to help fix public finances (RTRS)

 

Overnight Media Digest

WSJ

* SolarCity said Monday that it intends to privately place $54 million of securities backed by a pool of solar-power systems, leases and electricity contracts.

* Investment in the medical-device and equipment industry is on pace to fall to $2.14 billion this year, down more than 40 percent from 2007 and the sharpest drop among the top five industry recipients of venture funding, according to an analysis of data compiled by PricewaterhouseCoopers and the National Venture Capital Association.

* Twitter Inc, riding a wave of strong demand for initial public offerings, sharply increased the price range of its shares three days before its stock is expected to begin trading. San Francisco-based Twitter increased its proposed share-price range to between $23 and $25 a share, up from between $17 and $20 a share.

* Tencent Holdings Ltd is vying to lead a $200 million fundraising in Snapchat, the latest effort by one of China’s Internet giants to gain a foothold in the United States.

* BlackBerry has abandoned a plan to sell itself and instead will sell $1 billion of convertible debt to its major shareholder and other investors, and said it would replace CEO Thorsten Heins.

* Kellogg plans to cut its workforce by 7 percent as part of a four-year cost-cutting campaign, as the cereal maker posted higher earnings on flat sales.

* Allen Edmonds Corp, a maker of high-end men’s shoes that generated some takeover interest from Men’s Wearhouse Inc , itself a takeover target, has revealed it has agreed to be sold to another buyer.

* U.S. Attorney General Eric Holder said the government is willing to settle its antitrust lawsuit against the merger of AMR and US Airways if the airlines agree to broad concessions.

* Network-gear maker Alcatel-Lucent said Monday that it plans to raise about $2.7 billion to cut its debt and finance its turnaround plan, taking advantage of a rebound in shares to unveil a capital increase.

* TRI Pointe Homes has clinched a $2.7 billion deal to merge with timber conglomerate Weyerhaeuser’s home-building division.

 

FT

Twitter Inc IPO-TWTR.N increased its IPO price range by 25 percent after strong investor demand, putting the microblogging network on course to secure a valuation of over $17 billion at its stock market debut later this week.

Johnson & Johnson will pay $2.2 billion in fines to U.S. federal and state authorities for kickbacks to pharmacists and the marketing of pharmaceuticals for diseases beyond their approved uses over more than a decade.

BlackBerry Ltd abandoned its plan to sell itself and removed its chief executive on Monday, sending the share price of the one-time market leader down 16.4 percent to its lowest in a decade.

Britain’s Co-operative Group has detailed a rescue plan for its banking arm, under which it will hand control of 70 percent of the unit to a group of bondholders, and warned it would take up to five years to fix the troubled lender.

Budget airline Ryanair Holdings Plc issued its second profit warning in two months on Monday, citing aggressive fare cuts in response to increased competition and weak economic conditions.

Loss-making telecom equipment maker Alcatel-Lucent said on Monday it plans to raise 955 million euros ($1.3 billion) from shareholders and $750 million from a high-yield bond to shore up its balance sheet.

 

NYT

* While the hedge fund SAC Capital has put the government’s criminal case behind it, Steven Cohen remains the focus of a criminal investigation and a SEC administrative complaint.

* Federal officials said Johnson & Johnson promoted the anti-psychotic drug as a way to treat dementia patients for many ailments, when it was only approved for schizophrenia.

* Twitter has raised the price range for its initial public offering to $23 to $25, signaling the company’s bullish outlook ahead of its trading debut on Thursday.

* Netflix said on Monday that starting early next year it will be the exclusive streaming distributor for “The Square,” an Arabic documentary about the Egyptian protest centered in Tahrir Square, which is considered a leading contender for an Oscar nomination.

* A tentative takeover bid for BlackBerry Ltd from its largest shareholder collapsed on Monday, clouding the immediate future of the company. Fairfax Financial Holdings of Toronto, the insurance and investment company, had made a conditional, non-binding offer to buy the 90 percent of BlackBerry shares it does not own for $9 each, valuing the company at about $4.7 billion.

* Tom Wheeler was sworn in on Monday as chairman of the Federal Communications Commission and promptly named to his senior staff Gigi Sohn, one of the agency’s most outspoken critics but a supporter of the new leader.

* A measure that would outlaw workplace discrimination against gay men, lesbians and transgender people overcame a significant obstacle in the Senate as seven Republicans voted to begin debate on the bill.

* The Carlyle Group has hired Kewsong Lee away from his post as managing director at
Warburg Pincus, an unusually high-level transition within private equity’s executive ranks.

* Tri Pointe Homes, the West Coast builder controlled by Barry Sternlicht’s Starwood Capital, is merging with the home-building subsidiary of Weyerhaeuser, a large owner of timberlands.

* Two activist hedge funds, the Clinton Group and Cannell Capital, have joined forces to mount a proxy battle for control of the Internet and television shopping network ValueVision Media.

 

Canada

THE GLOBE AND MAIL

* A meeting between British Columbia Premier Christy Clark and her Alberta counterpart Alison Redford scheduled for Tuesday has been canceled as talks between the two provinces on pipeline development in British Columbia have reached a tense stalemate.

* The number of Canadians using food banks fell 4.5 percent this year from 2012, reflecting improvement in some regions, particularly the Prairies.

Reports in the business section:

* Beijing-based computer manufacturer Lenovo Group Ltd actively considered a bid for BlackBerry Ltd, but the Canadian government told the smartphone company it would not accept a Chinese takeover because of national security concerns, according to sources familiar with the situation.

* Canadian manufacturers and steel producers are urging Ottawa to channel tens of billions of dollars in planned federal spending their way over the next decade.

NATIONAL POST

* Liberal leader Justin Trudeau is walking an intentionally fine line following two high-profile expressions of support in recent weeks for the oilsands and the controversial Keystone XL pipeline.

* Transport Canada has told its minister, Lisa Raitt, that it is gathering evidence that could lead to federal prosecution against Montreal, Maine and Atlantic Railway Inc, the company involved in the Lac-Megantic disaster, for allegedly failing to comply with safety regulations.

FINANCIAL POST

* Bankers still have a lot of work to do to sell all of Barrick Gold Corp’s $3 billion equity offering, but sources maintained on Monday that there is no talk of re-pricing the deal.

* The Ontario government is considering the introduction of new tax incentives in hopes of boosting the level of investment in research and development within the province.

 

China

CHINA SECURITIES JOURNAL

– China may allow private banks to be launched early next year under a pilot scheme, the newspaper reported without citing sources.

– Egg futures will be listed on Nov. 8 on the Dalian Commodity Exchange, according to a notice published by the exchange on Monday.

– China’s National Energy Administration said in a notice it plans to increase the country’s photovoltaic capacity by 20 percent to 12GW in 2014, under certain circumstances.

SECURITIES TIMES

– China should expand the testing areas for property tax as soon as possible, said Ren Xingzhou, leader of the economics institute in the State Council’s Development Research Center, a government think tank.

PEOPLE’S DAILY

– China is experiencing severe overcapacity in crude steel, electrolytic aluminium, cement and flat glass, which will lead to vicious competition and a waste of resources, said a commentary in the paper that acts as the government’s mouthpiece.

CHINA DAILY

– China will increase efforts to tackle the overcapacity problem in the cement, electrolytic aluminium, sheet glass, shipping and steel industries, the newspaper said in an editorial. Shang Fulin, chairman of the China Banking Regulatory Commission, called for green loans to curb overcapacity, it added.

 

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

BlackBerry (BBRY) upgraded to Hold from Sell at Deutsche Bank
BlackBerry (BBRY) upgraded to Hold from Sell at Societe Generale
Energen (EGN) upgraded to Buy from Neutral at ISI Group
GT Advanced (GTAT) upgraded to Buy from Neutral at BofA/Merrill
GT Advanced (GTAT) upgraded to Overweight from Neutral at Piper Jaffray
HSBC (HBC) upgraded to Buy from Neutral at Mizuho
Holly Energy (HEP) upgraded to Neutral from Sell at Goldman
MGIC Investment (MTG) upgraded to Outperform from Market Perform at Keefe Bruyette
Safe Bulkers (SB) upgraded to Buy from Neutral at Citigroup
SunEdison (SUNE) upgraded to Overweight from Neutral at Piper Jaffray
TTM Technologies (TTMI) upgraded to Overweight from Neutral at JPMorgan

Downgrades

BlackBerry (BBRY) downgraded to Underperformer from Sector Performer at CIBC
ExlService (EXLS) downgraded to Market Perform from Outperform at Wells Fargo
ExlService (EXLS) downgraded to Perform from Outperform at Oppenheimer
Halcon Resources (HK) downgraded to Market Perform from Outperform at Wells Fargo
Kellogg (K) downgraded to Hold from Buy at Deutsche Bank
LINN Energy (LINE) downgraded to Neutral from Buy at Goldman
LinnCo (LNCO) downgraded to Neutral from Buy at Goldman
Ocwen Financial (OCN) downgraded to Market Perform from Outperform at Keefe Bruyette
Pearson (PSO) downgraded to Neutral from Buy at Goldman
RBS (RBS) downgraded to Underperform from Neutral at Exane BNP Paribas
Rovi (ROVI) downgraded to Sell from Neutral at Goldman
Siemens (SI) downgraded to Neutral from Buy at UBS
St. Jude Medical (STJ) downgraded to Market Perform from Outperform at Bernstein

Initiations

AmBev (ABV) initiated with an Overweight at Barclays
Antero Resources (AR) initiated with a Buy at Citigroup
BancorpSouth (BXS) initiated with an Overweight at Evercore
Cinemark (CNK) initiated with an Outperform at FBR Capital
Duke Energy (DUK) initiated with a Buy at CRT Capital
FactSet (FDS) initiated with an Equal Weight at Barclays
Forum Energy (FET) initiated with an Overweight at Morgan Stanley
Gannett (GCI) initiated with an Outperform at FBR Capital
HSN, Inc. (HSNI) initiated with a Market Perform at FBR Capital
Lamar Advertising (LAMR) initiated with an Outperform at FBR Capital
Liberty Interactive (LINTA) initiated with an Outperform at FBR Capital
Liberty Ventures (LVNTA) initiated with an Outperform at FBR Capital
New York Times (NYT) initiated with a Market Perform at FBR Capital
News Corp. (NWSA) initiated with a Market Perform at FBR Capital
QTS Realty Trust (QTS) initiated with a Hold at Deutsche Bank
Regal Entertainment (RGC) initiated with a Market Perform at FBR Capital
SCANA (SCG) initiated with a Fair Value at CRT Capital
Southern Company (SO) initiated with a Fair Value at CRT Capital
Spectral Diagnostics (SDI) initiated with an Outperform at Wedbush
Stonegate Mortgage (SGM) initiated with an Outperform at Keefe Bruyette
Superior Energy (SPN) initiated with a Buy at Deutsche Bank
TECO Energy (TE) initiated with a Fair Value at CRT Capital
Thomson Reuters (TRI) coverage assumed with an Equal Weight at Barclays
Twitter (TWTR) initiated with a Buy at CRT Capital
Valassis (VCI) initiated with a Market Perform at FBR Capital
Wisconsin Energy (WEC) initiated with a Buy at CRT Capital

HOT STOCKS

Endo Health (ENDP) to acquire Paladin Labs for $1.6B in stock, cash
Ford (F) to launch 17 vehicles to accelerate growth in Middle East, Africa
AIG (AIG) may file lawsuit against Morgan Stanley (MS) over mortgage securities
Monsanto (MON) announced $1B debt issuance
Becton Dickinson (BDX) announced plan to repurchase about $450M of stock in FY14

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
R.R. Donnelley (RRD), Vitamin Shoppe (VSI), Becton Dickinson (BDX), Ashland (ASH), Regis (RGS), Hertz (HTZ), Consolidated Edison (ED), Tidewater (TDW), Ea
rthLink (ELNK), Plains All American (PAA), XPO Logistics (XPO), Dun & Bradstreet (DNB), Marathon Oil (MRO), U.S. Auto Parts (PRTS), LeapFrog (LF), Hill International (HIL), Newfield Exploration (NFX)

Companies that missed consensus earnings expectations include:
NYSE Euronext (NYX), McDermott (MDR), Owens & Minor (OMI), Atlas Pipeline Partners (APL), Jamba (JMBA), Skilled Healthcare (SKH), Luminex (LMNX), Halcon Resources (HK), Tutor Perini (TPC), Polypore (PPO), BroadSoft (BSFT)

Companies that matched consensus earnings expectations include:
PAA Natural Gas Storage (PNG), Acura Pharma (ACUR), Tenet Healthcare (THC), Synchronoss (SNCR), Chemtura  (CHMT), Pioneer Southwest (PSE), Nautilus (NLS)

NEWSPAPERS/WEBSITES

• The Federal Housing Finance Agency is moving ahead with a ban on fees for “force-placed” insurance policies, expensive coverage that is thrust upon borrowers whose regular homeowners’ policy has lapsed, despite industry objections that such a move encroaches on state regulators (FNMA, FMCC, AIZ), the Wall Street Journal reports
• Attorney General Eric Holder said the government is willing to settle its antitrust lawsuit against the merger of AMR Corp. (AAMRQ) and US Airways (LCC) if the airlines agree to broad concessions that would preserve competition, the Wall Street Journal reports
• Apple (AAPL) will open a manufacturing facility in Mesa, AZ in partnership with mineral crystal specialist GT Advanced technologies (GTAT) to make sapphire materials for Apple’s popular electronic devices, Reuters reports
• Lael Brainard, the Treasury Department’s top international official, is likely to be nominated to the Federal Reserve Board, sources say, Bloomberg reports
• Cooper Tire & Rubber’s (CTB) dispute with India’s Apollo Tyres over a $2.5B buyout goes before a judge in a non-jury trial set to begin today in Delaware Chancery Court with no compromise in sight, Bloomberg reports

SYNDICATE

Boise Cascade (BCC) files to sell 8M shares of common stock for holder
CST Brands (CST) files to sell 13.1M shares of common stock for Valero Energy
Carrizo Oil & Gas (CRZO) files to sell 3.75M shares of common stock
Constellium (CSTM) files to sell 17.5M shares of common stock
Enterprise Products (EPD) files to sell 7.5M units for limited partners
Extra Space Storage (EXR) files to sell 4.5M shares of common stock
Integra LifeSciences (IART) files to sell 3.5M shares of common stock
InterMune (ITMN) files to sell 6.5M shares of common stock
PS Business Parks (PSB) files to sell 1.3M shares of common stock
Tableau Software (DATA) files to sell 6.5M shares of common stock for holders
Vantiv (VNTV) files to sell 15M shares of common stock for holder

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/5xlEhcnUpoo/story01.htm Tyler Durden