Tag: finance

Chairman Of Joint Chiefs: US Ready For “Military Response” In Ukraine

With diplomacy having failed miserably to resolve the Russian annexation of Crimea, and soon East Ukraine (and with John Kerry in charge of it, was there ever any doubt), the US is moving to the heavy artillery. First, moments ago, the US DOE announced in a shocking announcement that it would proceed with the first draw down and sale of crude from the US strategic petroleum reserve, the first since June 2011, in what it said was a “test sale to check the operational capabilities of system infrastructure”, but is really just a shot across the bow at Putin for whom high commodity prices are orders of magnitude more important than how the Russian stock market performs. And now, as Bloomberg just reported, the US has escalated even further, citing the Chairman of the Joint Chiefs of Staff, General Martin Dempsey, who “has claimed that in the case of an escalation of unrest in Crimea, the U.S. Army is ready to back up Ukraine and its allies in Europe with military actions.“

So much for those peaceful hour long phone calls between Obama and Putin.

From Bloomberg:

According to the Web site of the Atlantic Council, Dempsey said that “he’s been talking to his military counterparts in Russia, but he’s also sending a clear message to Ukraine and members of NATO that the U.S. military will respond militarily if necessary.”

 

“We’re trying to tell [Russia] not to escalate this thing further into Eastern Ukraine, and allow the conditions to be set for some kind of resolution in Crimea. We do have treaty obligations with our NATO allies. And I have assured them that if that treaty obligation is triggered [in Europe], we would respond,” Dempsey said.

 

According to the General, the incursion of Russian troops into the Crimea creates risks for all the countries of Europe and NATO allies.

 

“If Russia is allowed to do this, which is to say move into a sovereign country under the guise of protecting ethnic Russians in Ukraine, it exposes Eastern Europe to some significant risk, because there are ethnic enclaves all over Eastern Europe and the Balkans,” Dempsey said.

And with that, the USDJPY ramp takes the pair to overnight highs, and futures are set to go green. BTFWWIIID!

More seriously, the real question is how Putin will react to this quantum escalation in verbal hostilities: wild guess here, but somehow we doubt he will pick up and leave.


    



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Take That Putin: US To Release 5 Million Barrels From Strategic Petroleum Reserve In “Test”

WTI crude prices are faling rapidly as Reuters reports that the US is set to ‘unleash’ its Strategic Petroelum Reserves in a “test-sale”…

  • *U.S. TO RELEASE CRUDE FROM STRATEGIC PETROLEUM RESERVE: REUTERS

Of course, this is a direct aim at Putin’s pocket-book as his stumbling economy needs high prices to sustain itself. However, the 5 million barrell release is less than a third of the US daily consumption rate (though does sound some alarms we are sure).

 

 

Via Bloomberg,

U.S. to release up to 5 million bbls of crude from Strategic Petroleum Reserve (SPR), Reuters reports, citing govt “source.”

SPR to be test sale, check operational capabilities of system infrastructure; timing unclear

 

By way of reference, this 5 million barrel release compares to average US consumption of around 18 million barrels per day.



    



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Building Explosion And Collapse Reported On Park Avenue In Harlem, People Trapped

Moments ago a building in the Harlem part of New York appears to have i) exploded and ii) collapsed, with people trapped inside.

  • EXPLOSION REPORTED ON 116TH AND PARK IN NYC

From NY1:

Emergency crews are reportedly on the scene of a possible building explosion in East Harlem.

 

Details are limited but the incident reportedly happened this morning in the area of East 116th Street and Park Avenue.

 

NY1 has a crew heading to the scene and will have more information as it becomes available.

Photos from the scene:


    



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Mark Hanson: “Why We Could Be In A Housing Bubble Right Now”

From Mark Hanson of Hanson Advisors

Why We Could Be In A Housing Bubble Right Now

Let me preface this note by saying “I am a raging bull over houses”. I love real estate. On any given Sunday you can find me and my family touring open resale houses or new builder communities. My grammar school-aged kids love it too; especially the free cookies and peering into the beautifully staged rooms and really believing that some lucky kid has every gadget or musical instrument ever made and with utter amazement on how clean he keeps his room. Of course, my wife and I fully propagate the lie by saying “did you two see how clean the Lennar boy and Pulte girl keep their rooms? Why can’t you do the same?”

I think it’s safe to say that America — especially the American media and Wall Street firms — has fallen in love with real estate again. But, this time around it’s not ‘all of America’ like the last time; when the most exotic mortgage loans known to mankind turned every ma and pa end-user homeowner into a raging speculator. One has to look no further than the generationally low level of purchase loan applications — with rates at generational lows — to realize something isn’t ‘normal’ about this housing market. Rather, controlling this housing market over the past three years has been a small, unorthodox slice of the population that “invests” in real estate using tractor-trailer trucks full of cash-money slopping around the financial system put into play specifically for this purpose. Over the past few years so much cash-money has been deployed into the housing sector by unorthodox parties, that in many regions ma and pa end-user hasn’t stood a chance to buy. Especially, if they need a mortgage loan, which of course presents numerous risks to the seller vs the all-cash buyer.

In part, this is why I believe we could be back in a house-price bubble right now and not even realize it. And also because everybody is looking at the wrong thing…house prices. Sound confusing? It’s not, really.

A brief history of the “mortgage-loan, house-price governor”.

 

1) In a normal housing market, in which at least 80% of all house purchases are done with “fully documented” mortgage loans, house prices are solidly rooted to contemporary “end-user fundamentals”. That is, the mortgage loan with it’s LTV, appraisal, DTI etc guidelines is the “house-price governor“.

Bottom line, when the majority of houses are purchased with mortgage loans it is virtually impossible for house prices to wildly detach from end-user fundamentals unless credit goes haywire like from 2003 to 2007. Sure, there have been exceptions to this over the decades. But, for the most part housing is a pretty simple asset class that for decades leading into the change of the millennium remained mostly in-check to fundamentals and a great inflation hedge.

People will say that this is an unfair analysis because post-crash “mortgage lending is too restrictive”. I say “compared to what?” The mostly thoughtful mortgage laws enacted by the Government post the great mortgage collapse still leave mortgages today — through the GSE’s and FHA — easier than most periods in history. Sure, non-GSE/FHA, bank portfolio lending (loans that the banks make to keep on the books) has suffered because of the lack of a robust securitization market and much tighter capital requirements. But, if a borrower has a downpayment, documented income, and good credit — three things that always should be present when buying a house anyway — mortgage lending is back. It simply isn’t as easy as from 2003 to 2007, which astoundingly is what everybody points to when saying “mortgage lending is too tight”. This is so radical to me, as they also point to bubble-years peak house prices as a benchmark to where prices should go. However, they fail to realize that if prices did return to 2006 levels — and 2006 was in fact a “bubble” — then housing would be in an even larger bubble than back then! Those looking/hoping/lobbying for a return to 2003 to 2007 mortgage lending will not only be disappointed, but if it somehow happened, would end up very sorry it did. Be careful what you wish for.

 

2) Enter 2003 to 2007, when the “mortgage-loan, house-price governor” was removed by the introduction and wide acceptance of exotic loans; in particular stated income, interest only, pay option arms, and HELOCs. Through the power of exotic lending, the ‘incremental buyer’ always earned $200k a year and had more-than-enough dollars in the bank when it came to qualifying for a loan to buy a house…credit went ‘haywire’. This allowed house prices to completely detach from fundamentals. Then, when the mortgage loan governor was strapped back on in 2008 — on the sudden loss of all the exotic loans over a short period of time — house prices quickly “reset to end-user fundamentals“. House prices quit plunging in 2009, as affordability using new-era 30-year fixed rate, fully-documented loans recoupled with real income and asset levels. This “bottom” should have set the stage for housing to once again be rooted to fundamentals / governed by contemporary mortgage lending guidelines. But, they couldn’t leave well enough alone.

 

3) Enter, the 2010 to 2013 “all-cash”, new-era “investor” era, which was almost identical to the 2003 to 2007 era in the effect it had on house prices . That is, during this period the incremental (the ‘majority’ in many markets) all-cash buyers work without a ‘house price governor‘, instead base their purchase and pricing decisions on individual, random, emotional, uneducated, or hopeful models or guesses. Some buy for appreciation, some for rental income, some to flip and some because they have to in order to get paid at their fund. In any case, without a mortgage loan governor the price they pay for a house is more often than not, subjective vs objective.

House prices being up 25%, 50%, or more in the past two years should have everybody sounding loud warning signals, as this is a tell-tale sign housing is being led around by the nose by something ‘other than’ end-user fundamentals. It’s not like employment or income gains in the past two years in the regions that experienced the greatest price gains — not coincidentally the same regions that were the ‘bubbliest’ in 2006; crashed the hardest in 2009; had the greatest institutional investor interest from 2011-13; and that were first to experience significant demand destruction beginning mid last year — grew at levels to support such gains. Rather, they simply assume this is the new-normal — in an era when anything in any financial market is possible — and point to the 2006 peak as proof housing is not overpriced yet.

In short, it’s very easy for an all-cash individual or institutional buyer to overpay for a house by 10%, 20% or even 30% in the heat of the deal, when competing against a dozen other all-cash buyers, and using flawed assumptions and return “models”. Overpaying for a house to this degree is impossible if mortgage loans and appraisals are required. As the bubble blows and prices become detached from reality there are always greater fools that can and will chase the market keeping it elevated for a period of time. But, outside of the all-cash cohort the number is finite unlike the 2003 to 2007 era when everybody could always overpay using exotic loans. Some will say “all-cash purchases for rental investment are rooted to fundamentals…that’s rents”. I say “hogwash”. I have seen many single family rental assumption models from some of the largest investors, and they are beyond rosy. I can easily change a few numbers in their Excel spreadsheet models and turn a 6% annual return into an 6% loss. Most all-cash, buy to rent or flip, flop, flap or frolic investor assumptions and models I have reviewed make the most bullish Wall Street sell side stock analysts look downright pessimistic.
Bottom line: It’s very easy for a demand cohort — as flush with easy liquidity as this era’s all-cash cohort — to push national house prices well above what the average end-user can pay. And that’s exactly what’s happened over the past two years and why in leading indicating regions, in which new-era investors flocked first, demand is plunging and supply surging. Just like in 2007.

 

4) All-Cash buyer demand

This chart from Black Knight (formerly LPS) says it all…the all cash cohort — without a “mortgage-loan, house-price governor” — has been fully in control of the US housing market for a long time. It’s very easy for a demand cohort — as large as this era’s all-cash cohort — to push national house prices well above what the average end-user can pay.

Housing market history is littered with instances of investors and first-time buyers flooding into the housing market all at once on some sort of catalyst, only to leave all at once, over a very short period of time. In ‘this’ housing market, however, first-time buyers are not a presence. This in itself, should be a huge red flag to anybody analyzing this sector. But, if the all-cash buyer cohort has finally eaten it’s fill and it’s demand drops back to historical levels, there is not another demand cohort to pick up the ball and run with it. In other words, if the all-cash speculators leave — or even downshift a bit — I am worried that certain housing market regions all over the nation — particularly the ones that have experienced a parabola in house prices over the past two years — could have substantial house price downside ahead.

Why we are in a housing bubble1

 

5) House prices are more expensive today than in 2006 on a monthly payment basis using the popular loans of each era… a true apples to apples comparison

Those looking at “house prices” — especially relative to 2006 — for signs of a “bubble” are looking at the wrong thing. That’s because to the end-user, the monthly payment is generally more important than the price. As such, when comparing the ‘cost’ of houses today vs 2006 one has to normalize the data for a true apples to apples comparison.

On an absolute basis, investors have significantly lightened up their purchases in all of the leading indicating regions I track so closely. This paradigm shift from an “investor-driven market” to an “end-user driven market” is causing considerable consternation.

That’s because when all cash investors, without a “mortgage-loan, house-price governor”, hand the market off to the end-user cohort with a fully functioning mortgage-loan, house price governor a “demand void” can appear. Not necessarily because the demand isn’t there. Rather, because average house prices are too high for the average, fundamentally-driven end-user to afford. This is what’s happening now. And based on how expensive houses are today relative to 2006, this should prevent any further upside this spring and summer, especially with rates up 100bps from a year ago. In fact, we are seeing seasonal weakness in offer prices much further into the year than typical meaning house prices have a strong chance of going negative YoY in the summer.

The Bubble Data

The chart below compare the ‘cost to own‘ the average priced house today vs 2006 using the popular mortgage loan financing of each era. When normalizing the data in this manner — vs simply assuming everybody always used market rate 30-year fixed loans, which clearly wasn’t the case from 2003 to 2007 — one can see clearly just how expensive houses are today.

Bottom line, in the first ‘results’ column, house prices in 2013 were 11% lower than in 2006 yet the monthly payment was 35% higher and the monthly payment needed to qualify was 29% greater. Taken one step further, see the second “results’ column to the far right. That is, to buy the 2006 bubble priced house using today’s mortgage finance vs the popular loans of the 2006 era, the monthly payment is 54% higher and the monthly income needed to qualify 44% greater.

Every time I review these data after updating prices in our database each month, I am amazed. I ask myself, “if 2006 was a bubble then based on the data below if if costs more per month to buy today’s average house why isn’t the sector in a bubble again?”

‘Affordability Comps 2

 

In closing, I do think higher house prices are mostly always good. That’s of course unless the reason for the rise is “unfundamental”.

General consensus has once again returned to the overwhelming belief that “house prices always go up and 2007 to 2009 was a fluke”. That’s plain wrong and dangerous.

I am not calling for another house price crash even though I think that housing is back in a bubble based on the monthly payment comparisons between now and 2006. What I am saying is that housing runs a real risk of price downside if the new-era investors — that have largely supported the entire sector and run up house prices beyond the reach of the average end-user through cheap and easy liquidity over the past three years — take their balls and bats and go home.

On the other hand, bubbles can deflate while house prices remain flat if the underlying fundamentals improve rapidly…strong employment, income gains etc. But fundamentally-driven housing markets take a lot time to develop, especially after so many years of running on unfundamental stimulus. Perhaps our economy can “grow into” today’s house prices over the next few years. Perhaps not.

As we saw in 2007 nobody can predict what house prices will do and the general consensus is usually the wrong one. Be careful out there. Buy a house because you need shelter and buy what you can truly afford using a 30-year fixed mortgage. Don’t buy because everybody else is unless you can clearly afford it — both financially and psychologically — especially if next chapter for this housing market is a consolidation of the past few years of gains.


    



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Russian Neighbor Belarus Asks To Host Another 15 Russian Fighter Jets In Response To NATO Escalation

With NATO actively building up its airforce support in Poland and the Baltic states in recent days in a flashback to cold war military escalation and deterrence, and even launching AWACS planes over Poland and Romania to monitor the Ukraine crisis and “enhance the alliance’s situational awareness,” the inevitable has finally happened, and other Russian neighbor states, ones not alligned with the military treaty, have escalated in turn only this time the are showing their allegiance not to the west but to Russia.

Moments ago RIA reported that Minsk will “adequately react to the strengthening of NATO forces near the borders of Belarus, and will offer to host up to an additional 15 Russian aircraft, according to the President of Belarus Alexander Lukashenko on Wednesday at a meeting of the Security Council of Belarus.

“Belarus is adequately reacting to the strengthen the forces of NATO near the borders of Belarus” – the president said. He added that “Belarus will offer to host up to an additional 15 Russian Federation aircraft in connection with the activity of NATO.”

Which, it goes without saying, plays precisely into Putin’s intentions all along: force all of Russia’s neighbors to reveal their allegiance, and since virtually all would have to pick Moscow (see what happened in Ukraine), set the stage for the grand reincarnation of the Soviet Union.

In the meantime, while the G-7 and everyone with a microphone, continues to warn Russia not to annex Crimea, which now seems a done deal, Ukraine’s PM Arseniy Yatsenyuk, whose cash-strapped nation needs as much as $15 billion in loans, will meet President Barack Obama later today. And as if to aid Putin’s plans even further, First Deputy Premier Vitaliy Yarema told the government in Kiev that Russian forces continue to be deployed along Ukraine’s eastern border and are “constantly increasing their presence,”

Logically, the western response will be to beef up NATO forces even more, which in turn will force nations like Belarus to self-annex themselves to Russia by demanding even more Russian troops in their nations, allowing Putin to serially, and peacefully, to takeover the former USSR nations one by one until the empire rebuilding effort is complete.


    



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G-7 Warns Russia Of “Grave Consequences” If Crimea Annexed

The G-8(-1) is clearly concerned about the fall-out from this weekend's referendum in Crimea and in its strngest language yet is condemning (and threatening) Russia:

  • *G-7 CALLS ON RUSSIA TO 'DE-ESCALATE THE CONFLICT IN CRIMEA'
  • *RUSSIA ANNEXATION OF CRIMEA WOULD VIOLATE UN CHARTER: G-7
  • *G-7 CALLS ON RUSSIA TO HALT SUPPORT FOR CRIMEA REFERENDUM
  • *G-7 SAYS WILL NOT RECOGNIZE RESULT OF CRIMEA REFERENDUM
  • *'CEASE EFFORTS TO CHANGE' STATUS OF CRIMEA, G-7 TELLS RUSSIA
  • *G-7 SAYS ANNEXATION OF CRIMEA WOULD HAVE 'GRAVE CONSEQUENCES'

Then, after the threats, calls on Russia to let observers into the country and enter into talks with the Ukrainian government (which has already appeared to give up on Crimea). This comes as Ukraine's PM visits Obama in D.C.

 

Via PTI:

The Group of Seven most developed economies is calling on Russia to stop all efforts to "annex" Ukraine's Crimea region, European Commission President Jose Manuel Barroso said today.

 

G7 leaders, European Council head Hermann Van Rompuy "and I will in a new declaration call on Russia to cease all efforts to annex Ukraine's autonomous republic of Crimea," Barroso said in a tweeted message.

 

"Together with other G7 leaders, Van Rompuy and myself have strongly and unequivocally condemned this action on behalf of the EU," Barroso said.

 

…

 

Pro-Russian leaders there have organised a referendum for Sunday on whether Crimea should join with Russia, with most expecting the vote, if it goes ahead, to produce a large majority in favour.

 

Barroso said the referendum was illegal and called for immediate steps to de-escalate the situation.

 

"Any attempt to legitimise a referendum in Crimea is contrary to the Ukrainian constitution and international law and quite clearly illegal," he said

 

"If meaningful negotiations do not begin within the next few days and produce results within a limited timeframe, this will trigger additional measures," he added.

 

The G7 announcement will be made as Ukraine interim prime minister Arseniy Yatsenyuk heads for talks with US President Barack Obama, with the pressure for more sanctions against  Moscow mounting.

Germany's DAX continues to fall as tensions escalate and EURUSD hits EURUSD hits 1.39 as it appears China continues to diversify its FX reserves away from the USD and foereign capital flows are repatrated to the safety of Swiss 2Y rates

 


    



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Gold Surges To 6-Month Highs

Angst in Asia overnight sparked another round of demand for the precious metal pushing gold up over $10 as copper crumbles and Chinese corporate bond markets drop. At $1,363.97, gold is at its highest since September and breaking above its 1-year moving-average.

 

Intraday gold surged in Asian trading and is now well above the pre-Putin levels…

 

 

Gold breaks above its 1-year average…

 

Charts: Bloomberg


    



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Turkey 10Y Yield Hits Record As Instability Rises

The Turkish yield curve has inverted once again as the 10Y bond yield in the troubled nation crosses 11% and hits record highs for that maturity. 2Y at 11.2% has broken to almost 5 year high yields as the Lira also presses back lower to six-week lows. This comes as the nation mourns the death of a teenager from last year’s riots and Erdogan remains defiant ahead of March 30 elections in the face of rising calls from the EU to let the law run its course:

  • *TURKEY 10-YR BOND YIELD RISES TO 11.34% RECORD ON CLOSING BASIS
  • *ERDOGAN: MAR 30 VOTE MOST IMPORTANT IN TURKEY DEMOCRACY HISTORY
  • *ERDOGAN SAYS VIOLENT PROTESTS WON’T BRING DEMOCRACY TO TURKEY
  • *EU PARLIAMENT URGES TURKEY NOT TO INTERFERE WITH LEGAL PROBES
  • *ERDOGAN RECITES ISLAMIC POEM FOR WHICH HE’D BEEN JAILED IN 1997

So once again political instability is soaring and with it capital outflows and bond yields. No, EM is not fixed!

 

 

Chart: Bloomberg


    



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Obama Approval Rating Drops To Fresh Record Low

Poor Obama – the president can’t get anything right these days.

Just when the faithful reader of the TOTUS was certain he deserved a boost in his ratings after he literally bought popularity with the recent push to hike the minimum wage, the last thing he expected was yet another plunge in his job approval rating. Sadly for him, as the latest WSJ/NBC News poll reveals, even with the “ten ten” initiative to appease the lowest common denominator, his job-approval rating just dropped to the lowest ever.

 Perhaps the people are finally seeing beyond the perpetual scapegoating, the endless platitudes, the endless-er teleprompted speeches, and have realized that beyond all the talk, there is nothing more substantial to Obama – a president under whose rule the rich have gotten richer at the fastest pace in history, while the living standards of everyone else, that would be some 99% of the population – have declined precipitoulsy. That and the whole deteriorating economy thing, which will be in all out collapse once the Fed’s artificial life support systems – the very reason why there is no recovery except to those who hold financial assets – are finally yanked.

Or maybe the people simply demand a new minimum wage plan: call it a “twenty twenty”?

From the WSJ:

The results suggest Mr. Obama could weigh on fellow Democrats in midterm elections this fall, particularly in the conservative states that will play a large role in deciding whether his party retains its Senate majority.

 

Mr. Obama’s job approval ticked down to 41% in March from 43% in January, marking a new low. Some 54% disapproved of the job he is doing, matching a previous high from December, when the botched rollout of his signature health law played prominently in the news. The latest survey also showed the lowest-ever approval in Journal/NBC polling for Mr. Obama’s handling of foreign policy.

 

The findings come amid dissatisfaction with all elected leaders in Washington and low regard for the Republican Party. Roughly a quarter of those polled view the GOP positively, with 45% harboring negative views, weaker numbers than for the Democratic Party.

 

While fortunes could change in the months before November, Mr. Obama’s power to help his party’s candidates appear limited, said Republican pollster Bill McInturff, who directs the Journal/NBC poll with Democrat Fred Yang.

 

“The president is being taken off the field as a Democratic positive,” Mr. McInturff said. “These numbers would suggest that, beyond his behind-the-scenes fundraising, it’s hard to imagine the president on the road and hard to imagine where he would campaign.”

 

Americans surveyed in the poll said they were less inclined to support a candidate if the person had been endorsed by Mr. Obama or was a “solid supporter” of his administration. Approval of Mr. Obama is particularly weak in the South and Midwest, regions where Democrats could have a tough time defending Senate seats.

Apparently the Russell 200,000 is not the economy:

Unease over the economy continues to drive these concerns. Sixty-five percent of those polled said the country is on the wrong track, compared with the 26% who said it was on the right one, a wider spread than in the midterm-election years of 2006 and 2010. Roughly one-quarter of the respondents think the economy will improve over the next year, while 57% believe the U.S. is still in a recession, despite years of modest economic growth and robust stock-market gains.

The only silver lining in all of this: Obama is not quite Dubya. Yet (thank white women).

Despite those signs of erosion for the president, Mr. Obama still doesn’t engender the same levels of disapproval that his predecessor, George W. Bush, garnered at this point in his presidency. And Mr. Obama’s support among women, particularly white women, as of now is strong enough to create a bulwark against GOP gains in the midterms.

Obama’s slide charted:


    



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Frontrunning: March 12

  • China worries chill markets, copper slumps (Reuters)
  • Peak dot com dot two idiocy: Candy Crush Saga maker King seeks $7.56 bln valuation from IPO (BBG)
  • Obama Meeting With Yatsenyuk Raises Stakes in Ukraine (BBG)
  • Federal prosecutors open criminal probe of GM recall (Reuters)
  • Missing Malaysian Jetliner Confuses World That’s Online 24/7 (BBG)
  • Mortgage Giants Face Endgame (WSJ)
  • Russia Calls U.S. Aid to Ukraine Illegal Amid Standoff (BBG)
  • U.S. judge freezes assets of Mt. Gox bitcoin exchange boss (Reuters)
  • Ousted Libyan PM flees country after tanker escapes rebel-held port (Reuters)
  • Senate-CIA Dispute Erupts Into a Public Brawl (WSJ)
  • Wilbur Ross Suspends Diamond S Shipping IPO on Low Price  (BBG)
  • Toddler found with heroin at New Jersey daycare center (Reuters)
  • Singapore Broker Exodus Seen Quickening (BBG)

 

Overnight Media Digest

WSJ

* President Obama notched the lowest approval ratings of his presidency in the latest Wall Street Journal/NBC News poll, amid wide pessimism about the economy and deep frustration with Washington.

* Nearly six years after the government rescued Fannie Mae and Freddie Mac, top members in the Senate and the White House agreed on a framework to wind down the mortgage giants and overhaul the nation’s $10 trillion mortgage market.

* A senior Malaysia air force official rejected media reports that military radar had picked up signals from the jet over the Strait of Malacca, hundreds of miles from its intended course.
 
* Comcast Corp’s proposed takeover of Time Warner Cable Inc has sparked media-industry fears that the combined giant would have too much influence over everything from cable industry pricing to broadband-related services.

* General Motors Co’s shares tumbled as the automaker faced new investigations on multiple fronts into why it took nearly a decade to recall cars with defects tied to 12 deaths.

* China’s top central banker put the country on course to free up interest rates on bank deposits within two years, an unprecedented move that would force the nation’s lenders to compete for customers by offering the best terms.

* Some property owners in Pennsylvania, a state caught up in a natural-gas drilling boom, are accusing Chesapeake Energy Corp of shortchanging them on royalty payments for pumping oil and gas from their land.

* Jos. A. Bank Clothiers Inc agreed to be bought by Men’s Wearhouse Inc for roughly $1.8 billion, in an agreement that ends a colorful takeover battle between the rival suit retailers.

* Tesla Motors Inc will stop selling its luxury electric cars in New Jersey on April 1, after the state said Tuesday it would not license the company to sell vehicles directly to consumers, bypassing franchised dealers.

* Walt Disney Co is in talks to acquire popular online-video producer Maker Studios for about $500 million, said people with knowledge of the discussions, a deal that could give the entertainment giant better access to a young teen audience whose tastes are shifting to Web-based video.

* SoftBank Corp CEO Masayoshi Son characterized U.S. wireless service as dismal while reaffirming that his company wants a bigger part of the market.

* Amazon.com Inc is hoping to offer an on-demand music-streaming service to customers of its Amazon Prime program, but it may limit how much a person can listen to any given song, according to people familiar with the matter.

 

FT

Labour party leader Ed Miliband says he will not hold an in-out referendum on Britain’s membership of the European Union in 2017 if his party comes to power and will focus on its economic agenda.

The British government has spent 63 million pounds buying up 106 homes blighted by the proposed HS2 high speed rail link between London and Birmingham.

Bank of England Governor Mark Carney said he would overhaul the central bank’s dealings with the City and would create a new deputy governor post to oversee markets and banking.

Shares of Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corp (Freddie Mac) plunged on Tuesday after Senate leaders released a bipartisan plan to unwind the U.S. mortgage finance companies, but did not appear to provide an outlet for investors to share in their profits.

Entertainment company Walt Disney is close to acquiring online video producer Maker Studios in a deal worth $500 million which could rise to as much as $900 million if certain financial conditions are met, according to people familiar with the situation.

 

NYT

* The Justice Department has begun a criminal investigation into General Motors’ decade-long failure to address deadly safety problems before announcing a huge vehicle recall last month, according to people briefed on the matter.

* Private equity firm Blackstone announced on Tuesday that it had agreed to buy a majority stake in Accuvant, a 12-year-old company that offers cyber security software and consulting services to companies and governments.

* The Bitcoin Foundation announced on Tuesday that it had hired Jim Harper, director of information policy studies at the libertarian research group the Cato Institute, as global policy counsel.

* Faced with strong demand from hedge funds and wealthy individuals, Puerto Rico sold 17 percent more debt on Tuesday than it had originally planned, a sign that the commonwealth still has ample access to the capital markets. Puerto Rico sold $3.5 billion of debt at an 8.72 percent yield.

* Anne Sweeney, the president of Walt Disney Co’s Disney-ABC Television Group, said on Tuesday that she would step down as president of the company to become a TV director.

* Hedge fund manager William Ackman accused Herbalife , which sells vitamins, shakes and other supplements, of “operating illegally” in China. Ackman, the billionaire founder of Pershing Square Capital Management, called the company’s accounting of its Chinese business “highly misleading.”

* Greek Yogurt maker Chobani is in talks with six potential investors for a deal that could value it at $5 billion, a person with direct knowledge of the discussions said Tuesday. The company is looking to finalize an investment in the first half of the year, with an eye toward expanding internationally.

* U.S. President Barack Obama this week will seek to force American businesses to pay more overtime to millions of workers, the latest move by his administration to confront corporations that have had soaring profits even as wages have stagnated.

 

Canada

THE GLOBE AND MAIL

* Olivia Chow, former councillor and wife of the late New Democrat leader Jack Layton, will jump into the Toronto mayoral race on Thursday. She will be the first serious left-wing candidate to challenge scandal-plagued Mayor Rob Ford.

* With two confirmed cases of measles in British Columbia’s Fraser Valley and about 100 other suspected cases, provincial health officials are gearing up for another outbreak of the easily transmitted, highly contagious virus.

Reports in the business section:

* Ontario is calling for the creation of a new group to monitor how the South Korea trade deal affects the province’s auto sector, amid concern that the pact will cause production cuts and job losses at Canadian factories.

NATIONAL POST

* The head of the U.S. Senate Intelligence Committee accused the CIA on Tuesday of criminal activity in improperly searching a computer network set up for lawmakers investigating allegations that the agency used torture in terror investigations during the Bush administration.

* Ukraine’s fugitive president Viktor Yanukovych called his country’s new government a “band of ultra-nationalists” as he accused the “neo-fascists” of fomenting a civil war, and criticized the West for supporting it.

FINANCIAL POST

* Apple Inc has brought its iPhone trade-in program to retail stores in Canada, allowing users to sell older handsets back to the tech giant in exchange for credit toward a new model.

* Canada’s main exchange TMX Group said on Tuesday that it wanted to focus on building and expanding business opportunities in the Asia-Pacific region for the Toronto Stock Exchange, TSX Venture Exchange and Montreal Exchange. The company plans to expand its international footprint with an office in Singapore later this year.

 

China

CHINA SECURITIES JOURNAL

– CITIC Bank will partner with Alibaba Group Holding Ltd and Tencent Holdings Ltd to launch a “virtual” credit card for use in online purchases.

– The city of Nanjing in east China’s Jiangsu province has launched new measures to control land and real estate prices, including a mechanism to adjust rules on a quarterly basis in line with price trends.

CHINA BUSINESS NEWS

– Huang Guangyu, founder and former chairman of GOME Electrical Appliances Holding Ltd, who is now in prison, and his wife have reached an agreement with the Hong Kong Securities and Futures Commission to pay HK$420 million ($54 million) in compensation to the company.

SHANGHAI SECURITIES NEWS

– Many companies have suspended applications for initial public offerings, as they are waiting for possible changes to IPO rules, especially for China’s small-cap ChiNext board.

SECURITIES TIMES

– Annual growth in net profits in China’s food industry dropped 11.6 percentage points to 13.6 percent in 2013 due to an slowdown in economic growth and increase in raw material costs, data from the National Development and Reform Commission showed.

21ST CENTURY BUSINESS HERALD

The Shanghai Stock Exchange has submitted a plan to the China Securities Regulatory Commission (CSRC) to allow options trading on individual stocks, Gui Minjie, chairman of the exchange, told the paper. The plan is now awaiting CSRC approval.

PEOPLE’S DAILY

– China should ensure the judicial system’s ability to enforce justice in order to safeguard social fairness and improve protection for the people, a commentary in the paper said.

 

Britain

The Telegraph

INTEREST RATES COULD RISE SIX-FOLD IN THREE YEARS

Interest rates will rise six-fold by 2017 as Britain’s economy becomes one of the fastest growing in the developed world, the Bank of England governor said on Tuesday.

CO-OP OVERHAULS GOVERNANCE AFTER CHIEF QUITS

An overhaul of the Co-operative Group’s controversial governance is set to be put to the vote after a dramatic 48-hours that culminated in the abrupt resignation of Chief Executive Officer Euan Sutherland.
 
The Guardian

SPORTS DIRECT URGES SHAREHOLDERS TO APPROVE 65 MLN STG BONUS FOR MIKE ASHLEY

Sports Direct has called a special shareholders’ meeting to approve a plan to pay its founder a share bonus worth about 65 million pounds.

OECD PREDICTS UK RECOVERY WILL BE STRONGEST IN G7 OVER FIRST HALF OF 2014

Britain’s recovery will be the strongest among G7 economies over the first half of 2014, according to the latest predictions from the Organisation for Economic Co-operation and Development (OECD).

The Times

WATCHDOG CRACKS DOWN ON USED-CAR INSURANCE

Add-on insurance bought by more than a million car buyers has been branded poor value by regulators, who unveiled a crackdown on Tuesday on the new and used car salesmen who push it.

The Independent

TESCO LOSES MARKET SHARE AS SHOPPERS GO BARGAIN HUNTING

Tesco’s high-street dominance continues to be eroded, with the latest data showing that the retailer’s market share has slipped to a 10-year low as shoppers desert it for discounters Aldi and Lidl.

UK MANUFACTURING BEATS ESTIMATES AS IT NEARS THREE-YEAR HIGH

Britain’s manufacturers reported their strongest annual growth for nearly three years, official figures showed.

 

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
Treasury budget for February at 14:00–consensus deficit $218B

ANALYST RESEARCH

Upgrades

AngioDynamics (ANGO) upgraded to Outperform from Market Perform at Raymond James
Brandywine Realty (BDN) upgraded to Equal Weight from Underweight at Barclays
Calix (CALX) upgraded to Neutral from Sell at Goldman
Euronet (EEFT) upgraded to Outperform from Market Perform at Avondale
General Growth (GGP) upgraded to Overweight from Equal Weight at Barclays
Hercules Technology (HTGC) upgraded to Outperform at Keefe Bruyette
Infinera (INFN) upgraded to Buy from Neutral at Goldman
MRC Global (MRC) upgraded to Buy from Neutral at Longbow
McKesson (MCK) upgraded to Conviction Buy from Buy at Goldman
PharMerica (PMC) upgraded to Outperform from Neutral at Credit Suisse
Rite Aid (RAD) upgraded to Buy from Neutral at Goldman
Summit Midstream (SMLP) upgraded to Outperform from Neutral at RW Baird
VeriFone (PAY) upgraded to Hold from Sell at Deutsche Bank

Downgrades

AIG (AIG) downgraded to Hold from Buy at Deutsche Bank
AmREIT (AMRE) downgraded to Hold from Buy at Jefferies
American Eagle (AEO) downgraded to Underweight from Equal Weight at Morgan Stanley
AmerisourceBergen (ABC) downgraded to Neutral from Buy at Goldman
Church & Dwight (CHD) downgraded to Neutral from Outperform at Credit Suisse
Clean Harbors (CLH) downgraded to Outperform from Top Pick at RBC Capital
DiamondRock (DRH) downgraded to Underperform from Neutral at BofA/Merrill
Forest Labs (FRX) downgraded to Neutral from Overweight at Piper Jaffray
Horizon Technology (HRZN) downgraded to Underperform at Keefe Bruyette
Liberty Ventures (LVNTA) downgraded to Neutral from Buy at Citigroup
Motorola Solutions (MSI) downgraded to Sell from Neutral at Goldman
Northwest Biotherapeutics (NWBO) downgraded to Perform from Outperform at Oppenheimer
PulteGroup (PHM) downgraded to Neutral from Outperform at Credit Suisse
Synta Pharmaceuticals (SNTA) downgraded to Sell from Hold at Stifel
Synta Pharmaceuticals (SNTA) downgraded to Underperform from Market Perform at BMO Capital
Toll Brothers (TOL) downgraded to Neutral from Outperform at Credit Suisse
Urban Outfitters (URBN) downgraded to Equal Weight from Overweight at Barclays
William Lyon Homes (WLH) downgraded to Neutral from Outperform at Credit Suisse

Initiations

Cypress Energy (CELP) initiated with a Buy at Janney Capital
ICG Group (ICGE) initiated with an Overweight at Evercore
Intersil (ISIL) assumed with an Overweight at Piper Jaffray
InvenSense (INVN) assumed with an Overweight at Piper Jaffray
Silicon Laboratories (SLAB) assumed with an Overweight at Piper Jaffray

COMPANY NEWS

Energy XXI (EXXI) agreed to acquire all of EPL’s (EPL) shares for $2.3B
IATA cut its global airline profit forecast for 2014 to $18.7B
OXiGENE (OXGN) reported positive top-line results from a Phase 2 trial of its Avastin with or without Zybrestat in patients with recurrent ovarian cancer
Magnachip Semiconductor (MX) said it will restate prior results, withdrew prior Q4 guidance and naming Jonathan Kim as its Chief Accounting Officer. The company also said it concluded that one or more material weaknesses exist in the company’s internal controls over financial reporting
Seadrill Partners (SDLP) said it will acquire the entities that own and operate an ultra-deepwater drillship, the West Auriga, from Seadrill (SDRL)
VimpelCom (VIP) said it is being investigated by SEC, Dutch authorities regarding Uzbekistan operations
Boeing (BA), SpiceJet announced order for 42 737 MAX 8s

EARNINGS
Companies that beat consensus earnings expectations last night and today include:
QIWI (QIWI), Midstates Petroleum (MPO), Furiex (FURX), Men’s Wearhouse (MW), NewLink Genetics (NLNK), Fox Factory (FOXF), GenMark (GNMK), GSI Group (GSIG), Diamond Foods (DMND), Inter Parfums (IPAR), OncoGenex (OGXI), Summer Infant (SUMR), VeriFone (PAY)

Companies that missed consensus earnings expectations include:
Abraxas Petroleum (AXAS), Dresser-Rand (DRC), Horizon Technology (HRZN), Enzo Biochem (ENZ), Compass Diversified (CODI), Evolving Systems (EVOL), Caesar’s (CZR)

Companies that matched consensus earnings expectations include:
Chelsea Therapeutics (CHTP), Kratos Defense (KTOS)

NEWSPAPERS/WEBSITES

Lawyers in the U.S. Attorney’s office in Southern District of NY leading DOJ investigation into GM (GM) recall, Bloomberg reports
Vornado (VNO) weighs spin-off, merger for suburban centers, WSJ says
Banamex fraud exposes challenges for Citigroup (C) in Mexico, NY Times reports
Disney/ABC (DIS) television chief Anne Sweeney exiting in 2015, LA Times says
Sandberg (FB) won’t become Disney’s (DIS) new CEO, source says, Business Insider reports
Amazon (AMZN) working to offer Prime streaming music service, WSJ says
Barclays (BCS) faces shareholder backlash regarding upped bonuses, Reuters says
Tesla (TSLA) stores in New Jersey may close after vote, Bloomberg says

SYNDICATE

Achaogen (AKAO) 6M share IPO priced at $12.00
CommScope (COMM) files to sell 17.5M shares of stock for holders
Noranda Aluminum (NOR) files to sell 10M shares for Apollo funds
Pointer Telocation (PNTR) files to sell 994,357 ordinary shares for holders
Seadrill Partners (SDLP) files to sell 10.4M common units
Summit Midstream (SMLP) 9M share Secondary priced at $38.75
TG Therapeutics (TGTX) 2.7M share Spot Secondary priced at $6.71


    



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