Taper Talk is Back – It's Not Going Away This Time

 

The capital market for new issues and refinancing of corporate debt has been on a tear the past few months – I think that ended yesterday. That's because the dreaded Taper Talk has resurfaced. The Fed minutes yesterday rekindled Fear of Taper.

The Taper On/Taper Off story has been with us for six months now. It started in May with the release of the Fed minutes and the first "whisper' of the Taper. The talk of the Taper reached a zenith in late September as the debt markets were convinced that Bernanke would start the Taper in October. It was a big surprise to players when Good Ole Ben chose to delay the October start and push it to sometime in the future; and now it's back.

 

novembertaper

 

An interesting consequence of Taper Talk is how it affects the Corporate new issue bond calendar. The following chart shows how talk of taper killed the ReFi market in June/July/October, and it also shows how the window for new issues opened right after Big Ben delayed the taper for a few months. Up until yesterday the corporate finance types and bond dealers on Wall Street were having a daily party. As of today, they will be back to struggling to push deals out the door.

 

reuters

 

My read of this is that the debt market does not work well unless there is the perception of QE -4 ever. The capital markets freeze up whenever the threat of a disruption of the $85B of grease the Fed provides every month arises. When the capital markets are working well, the deal flow is there, and this is good for the economy. When there is Taper Talk the refinancing gears get gummed up, and it acts like a drag on the economy.

There is no doubt in my mind that Yellen is going to push off the Taper for as long as she can. But even the Great Dove can't push the Taper off for too long. I think that Yellen will be forced to initiate a Taper by March. That suggests that there is a four month window before the actual event, but I don't think the Taper Talk is going to subside as it did in October/November. The Talk of the Taper will be with us (and the closing of the refinancing window) for months. As a result we are going to see a pause in the up move in equities and a closing of the bond window. This will translate into an economic drag. Whatever your forecast of 4th Q and 1st Q growth were on Tuesday, you should mark them down a bit today.

QE is the lubricant of the system. But when it is ended (or threatened to end) it causes pain. We've had five years of grease, now we are going to have to pay a price. My guess is that this new round of Taper Talk is going to hurt pretty bad. The reason is that there is next to no basis to believe that QE can be continued beyond a few more months. The Taper sign is now on, it will remain on until the talk is turned into action. When the Taper Talk sign is on, beware. The sign is now brightly lit.

 

tapersign

 


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/nYQlPCt_5iE/story01.htm Bruce Krasting

Taper Talk is Back – It’s Not Going Away This Time

 

The capital market for new issues and refinancing of corporate debt has been on a tear the past few months – I think that ended yesterday. That's because the dreaded Taper Talk has resurfaced. The Fed minutes yesterday rekindled Fear of Taper.

The Taper On/Taper Off story has been with us for six months now. It started in May with the release of the Fed minutes and the first "whisper' of the Taper. The talk of the Taper reached a zenith in late September as the debt markets were convinced that Bernanke would start the Taper in October. It was a big surprise to players when Good Ole Ben chose to delay the October start and push it to sometime in the future; and now it's back.

 

novembertaper

 

An interesting consequence of Taper Talk is how it affects the Corporate new issue bond calendar. The following chart shows how talk of taper killed the ReFi market in June/July/October, and it also shows how the window for new issues opened right after Big Ben delayed the taper for a few months. Up until yesterday the corporate finance types and bond dealers on Wall Street were having a daily party. As of today, they will be back to struggling to push deals out the door.

 

reuters

 

My read of this is that the debt market does not work well unless there is the perception of QE -4 ever. The capital markets freeze up whenever the threat of a disruption of the $85B of grease the Fed provides every month arises. When the capital markets are working well, the deal flow is there, and this is good for the economy. When there is Taper Talk the refinancing gears get gummed up, and it acts like a drag on the economy.

There is no doubt in my mind that Yellen is going to push off the Taper for as long as she can. But even the Great Dove can't push the Taper off for too long. I think that Yellen will be forced to initiate a Taper by March. That suggests that there is a four month window before the actual event, but I don't think the Taper Talk is going to subside as it did in October/November. The Talk of the Taper will be with us (and the closing of the refinancing window) for months. As a result we are going to see a pause in the up move in equities and a closing of the bond window. This will translate into an economic drag. Whatever your forecast of 4th Q and 1st Q growth were on Tuesday, you should mark them down a bit today.

QE is the lubricant of the system. But when it is ended (or threatened to end) it causes pain. We've had five years of grease, now we are going to have to pay a price. My guess is that this new round of Taper Talk is going to hurt pretty bad. The reason is that there is next to no basis to believe that QE can be continued beyond a few more months. The Taper sign is now on, it will remain on until the talk is turned into action. When the Taper Talk sign is on, beware. The sign is now brightly lit.

 

tapersign

 


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/nYQlPCt_5iE/story01.htm Bruce Krasting

A.M. Links: Rep. Radel Taking Leave From Office After Pleading Guilty to Cocaine Possession, Drone Strike Kills Senior Member of Taliban-Linked Group in Pakistan, Woodward Wishes Snowden Has Come to Him

  • Rep.
    Trey Radel
     (R-Fla.) is taking a leave of absence after
    pleading guilty to possession of cocaine. He has been sentenced to
    one year supervised probation.
  • The U.S. and Afghanistan have agreed to a
    post-2014 partnership
    . The deal will have to be approved by the
    Afghan parliament, and President Hamid Karzai says he won’t sign
    the agreement without the approval of tribal leaders.

  • Bob Woodward
    has said he wished NSA whistleblower Edward
    Snowden had come to him insteading of other journalists.
  • A suspected
    U.S. drone strike
    on a seminary in Pakistan has killed Maulvi
    Ahmad Jan, a senior member of the Islamist Haqqani network.
  • An 85-year-old American Korean War veteran
    has been detained
    in North Korea while visiting the country as
    a tourist.
  • The fed will require that tour buses and buses that travel
    between cities built from 2016 onwards be
    equipped with seatbelts
    .

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from Hit & Run http://reason.com/blog/2013/11/21/am-links-rep-radel-taking-leave-from-off
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Ronald Bailey Looks Into Who Is Responsible for Damaging the Climate

XieThe U.N. climate change
conference on Wednesday was all about commitments. Of course, the
best way the rich country governments can show that they are
committed to combating climate change is to hand over wads of cash
to poor-country governments. Besides forking over hundreds of
billions of dollars, rich countries are also expected to keep their
promises to make deep cuts in their greenhouse gas emissions by
rapidly phasing out the burning of fossil fuels. Developing
countries insist that rich countries are obligated to do that
because they are historically responsible for the current climate
crisis. Reason Science Correspondent Ronald Bailey delves
into the question of just who is responsible for damaging the
climate?

View this article.

from Hit & Run http://reason.com/blog/2013/11/21/ronald-bailey-looks-into-who-is-responsi
via IFTTT

Regions With High Federal Government Employment Are Not Economically Better, Have An Innovation Deficit

Richard Florida, urban studies theorist and Editor of the
Atlantic
Cities
, examined federal government job levels in U.S.
metro areas and determined that that
there is no correlation
between a region’s share of federal
jobs and economic success. He also found a negative correlation
between federal government job levels and innovation.

The study was part of his
ongoing series documenting the varying characteristics of American
cities. In a
previous article
, Florida mapped out the prevalence of
different employment sectors in the nation’s capitol. In this

study
, he asked labor market data and research firm EMSI to measure which metro
areas have the highest and lowest shares of federal government jobs
across the U.S., and then his colleague ran a simple correlation
analysis to determine the relationship between the job levels with
several economic indicators.

First, Florida found that many of the metro areas with the
highest federal government employment are in the “gunbelt”—those
regions heavily reliant on military bases. For instance, when
accounting for both direct and indirect federal employment,
Honolulu, Hawaii and the Virginia-North Carolina region actually
surpass Washington D.C. with 43% and 42% of the population working
for the federal government versus a relatively small 36%. Maps of
the data can be found
here
.

When Florida’s colleague measured how well these federal
government-heavy regions compare to the rest of the country’s metro
areas, she came away with two major findings:

Strikingly, there was no correlation at all between share of
federal jobs and a wide range of economic indicators, including
economic output per capita, the share of professional, knowledge
and creative workers, or the share of college grads. Even more
remarkably, we found a negative correlation between federal
government job levels and innovation (-.26, as measured by patents
per capita).

She also found that “America’s leading high-tech centers, in
Silicon Valley and the San Francisco Bay area, Boston-Cambridge,
and the Research Triangle, have relatively low shares of direct
federal employment.”  

What does this mean? Keeping in mind that the data just measures
correlations, not causation, and that Florida does not offer any
theories to explain the data, one could postulate that federal
employment does not stimulate the economy any more so than the
private sector. Additionally, given that data shows federal
employees
get paid more
for the same work than their private sector
counterparts, the effect may move in the opposite direction.

In regards to innovation, the implications seem clearer;
particularly in light of the fact that the regions responsible for
driving the new knowledge economy have the least federal
employment. Some social scientists however, have
criticized
Florida’s use of patents per capita as an
ineffective way to measure the elusive concept. It is not
unprecendented though: the OECD
also uses patents per capita to measure innovation levels among
member countries. 

from Hit & Run http://reason.com/blog/2013/11/21/regions-with-high-federal-government-emp
via IFTTT

China Fires Shot Across Petrodollar Bow: Shanghai Futures Exchange May Price Crude Oil Futures In Yuan

With the US shale revolution set to make America the largest exporter of crude, however briefly, the influence of Saudi oil is rapidly declining. This has been felt most recently in the cold shoulder the US gave Saudi Arabia and Qatar first over the Syrian debacle, and subsequently in its overtures to break the ice with Iran over the stern objections of Israel and the Saudi lobby (for a good example of this the most recent soundbites by Prince bin Talal ). But despite the shifting commodity winds and the superficial political jawboning, the reality is that nothing threatens the US dollar’s hegemony in what many claim is the biggest pillar of the currency’s reserve status – the petrodollar, which literally makes the USD the only currency in which energy-strapped countries can transact in to purchase energy. This may be changing soon following news that the Shanghai Futures Exchange could price its crude oil futures contract in yuan, its chairman said on Thursday, adding that the bourse is speeding up preparatory work to secure regulatory approvals.

 In doing so China is effectively lobbing the first shot across the bow of the Petrodollar system, and more importantly, the key support of the USD in the international arena.

This would be in keeping with China’s strategy to import about 100 tons of gross gold each and every month, in addition to however much gold it produces internally, in what many have also seen as a preparation for a gold-backed currency, which however would require a far broader acceptance of the renminbi in the international arena and most importantly, its intermediation in a crude pricing loop. It is precisely the latter that China is starting to focus on.

Reuters reports:

China, which overtook the United States as the world’s top oil importer in September, hopes the contract will become a benchmark in Asia and has said it would allow foreign investors to trade in the contract without setting up a local subsidiary.

 

“China is the only country in the world that is a major crude producer, consumer and a big importer. It has all the necessary conditions to establish a successful crude oil futures contract,” Yang Maijun, SHFE chairman, said at an industry conference.

 

Yang’s presentation slides at the conference stated that the draft proposal is for the contract to be denominated in yuan and use the type of medium sour crude that China most commonly imports.

It is hardly panic time yet: Reuters adds that industry participants with direct knowledge of the plan have said the contract would be priced in the yuan, otherwise known as the Renminbi, and the U.S. dollar. However, one can argue that the CNY-pricing is for now a test to gauge acceptance of the Chinese currency, and will take on increasingly more prominence as more and more countries, first in Asia and then everywhere else, opt for the CNY-denomination and in the process boost the Renminbi to ever greater parity with the USD.

Here are the punchlines:

“The yuan has become more international and more recognised by the financial market,” Chen Bo, Chinese trading firm Unipec’s executive general manager, told Reuters.

 

“I don’t think it would be unacceptable for the world to use the renminbi for commodities trading.”

Certainly not, although it would also entail a depegging the CNY from the USD, something which China is for now unable and unwilling to do. Because once the Yuan is freely priced, kiss all those Wal-Mart “99 cent” deals goodbye. 

Which in retrospect may be just what the US wants: a very gradual and controlled dephasing of the USD’s reserve currency status. Recall that what the Fed wants at any cost is inflation which has so far failed to materialize at the level demanded by the Chair(wo)man thanks in part to cheap Chinese goods and ongoing US exporting of inflation to China. So if that means a spike in the prices of China imports – so key to keeping US inflation in check – so be it. Because we can already see the Fed’s thinking on the matter – certainly it will be able to always restore the USD’s supreme status in “15 minutes” or less when it so chooses.

Of course, by then China, and the Petroyuan, may have a very different view on the world.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/FF5-qCF-J9U/story01.htm Tyler Durden

Deflation Is Crushing QE Right Now

Investors are focused on the possible tapering of U.S. stimulus and starting to take some money off the table after a strong equities rally year-to-date. Less attention is being paid to the biggest source of risk at present: deflation in the developed world. All of the past week’s data point to heightened deflationary risks. Paltry U.S. consumer price index (CPI) figures, German producer prices undershooting and another bout of weakness in commodity prices, particularly oil, suggest deflation is winning the battle over central bank stimulus. Which is something that Asia Confidential has been forecasting for some time.

It’s no coincidence that at the same time, the Japanese yen has reached four month lows versus the U.S. dollar. Japan is printing an enormous amount of money in a bid to end its 20-year affair with deflation. It wants inflation at all costs and the yen is collateral damage. Lowering the yen increases the competitiveness of Japanese exporters, resulting in more cars, robots and flat-panel TVs being shipped abroad. And that means Japan is exporting deflation, and resultant lower prices in these goods, to the rest of the world. Key competitors in China and South Korea are starting to fight back but are being hampered by their strong currencies versus the yen.

There’s increasing talk that Europe will resort to more stimulus soon to wade off deflation. The euro has been remarkably strong compared to other currencies, making the region’s exporters increasingly un-competitive. Across the Atlantic, Bernanke and co. have been further hinting at QE tapering, but with rising deflation risks, any tapering seems unlikely. If Japan succeeds in weakening the yen further, you can be sure that other countries will start to complain and print money to lower their own currencies. The phrase “currency wars” may come back in vogue soon enough.

What does all this mean for markets? Well, it increases the odds of a further stock market correction before year-end. And a bond rally would seem overdue. But more broadly, it means the tussle between deflation and central bank stimulus should continue. That means more money printing and low interest rates for the foreseeable future. Which could push asset prices higher from already elevated levels, raising the odds of a major correction down the track.

Disinflation reigns

I’ve spoken of deflation so far, but it’s really disinflation (falling inflation) that’s occurring. A host of recent data suggests that this remains the primary threat to global economies, including:

1) The U.S. inflation rate fell to 1% annualised in October, the lowest figure in almost 50 years, excluding the 2008 financial crisis. Inflation in America peaked in 2011 and remains way below the Fed’s 2% target rate. The chart below is courtesy of Business Insider.

US CPI

2) U.S. bank loan growth is showing a similar slowdown. Stimulus isn’t resulting in increased lending and therefore isn’t filtering through to the real economy. There’s just not enough end-demand for loans as businesses and consumers remain cautious about taking on debt.

US bank loan growth

3) The German producer price index (PPI) fell 0.2% month-on-month in October, more than expected. On an annualised basis, the PPI fell 0.7%. It points to slower inflation ahead.

German PPI

4) The trend of slowing inflation is a Europe-wide issue. No wonder the European Central Bank cited falling inflation as a factor in its decision to cut rates earlier this month.

euro-area-inflation-cpi

5) It’s not data as such, but softening commodity prices also point to falling inflation. The correction in oil prices is particularly pertinent.

commodity-crude-oil

These are just a few of the signs that deflation remains firmly in charge.

Why Japan’s largely to blame

Japan is back on the radar of investors given a breakout in its stock market and the yen reaching a four-month low. There’s a larger story brewing though. And that’s growing evidence that the grand experiment of Abenomics has been a complete and utter failure.

Recent third quarter GDP of 1.9% was half the level of the second quarter. More importantly, personal incomes
have barely budged while the cost of living has soared, thanks to the falling yen. This week’s trade figures showed imports surging 26% year-on-year (YoY) in October, versus 19% expected, due to soaring fuel imports. This overshadowed exports rising 19% YoY, more than analyst forecasts. Consequently, Japan’s trade balance (difference between exports and imports) fell to the third lowest level on record.

japan-balance-of-trade

Why does this matter? Well, Japan runs a budget deficit of close to 10%. It used to run a major trade surplus, which has now turned into a trade deficit. If you run budget and trade deficits, you need to plug the gap either via private savings or the central bank printing massive amounts of money. The problem with the former is that using private savings to finance the gap means there’ll be less savings for private investment, a key growth driver for the economy. This means that you can expect Japan to print increasing amounts of money and for the yen to weaken further.

Besides the yen, the other point of interest will be Japanese government bonds. If Japan accelerates the monetisation of debt (central bank buying bonds to finance government), that’ll crowd out private players in the bond market. In fact, this is already happening. The so-called crowding out effect will almost certainly lead to increased volatility as private players are marginalised.

This is important because Japan desperately needs bond yields to stay low. The government’s enormous debt load (nearing 245% of GDP) means that just a small increase in bond yields and interest rates would lead to interest expenses on government debt reaching intolerable levels (a 2% rate would have interest expenses covering 80% of government revenues).

As Asia Confidential has highlighted on several occasions, Japan is in a desperate situation where there are no happy endings. There are only bad and worse outcomes. The government has chosen an extraordinary experiment which could well pave the way for the worst outcome to occur.

But this isn’t just a Japan issue. Other countries aren’t going to sit idly by and watch Japan steal market share due to the softening yen. At some point, they’re going to hit back with currency devaluations of their own. And then the real currency wars will begin in earnest. History shows these wars never end well as global trade suffers from the tit-for-tat between countries.

Are bonds set to come back?

Markets have largely ignored deflationary risks thus far. Stocks have surged, with few corrections, while bonds have spluttered. Given stagnant to falling GDP in the developed world and declining inflation, the bond market action has been particularly puzzling. Usually, government bond yields closely correlate with nominal (real plus inflation) GDP. If nominal GDP is falling, then so too should government bond yields.

This is why you should expect government bond yields in the developed world to head lower given the current deflationary threats. And it should also mean stocks have a further correction in the near future.

Short-term market action is always difficult to call though. Long-term trends are easier to distinguish. And on this front, little has changed. You have an ongoing battle between deflation and central bank government efforts to prevent it via QE. Deflation is winning right now, which is why you should expect more QE, not less, going forward.

If that’s right, stimulus and low interest rates could be with us for some time yet. Asset prices may be bid up further. And the market bears may have to wait before a more serious correction happens. The catalyst for that is likely to be a loss of faith in central bank stimulus.

This post was originally published at Asia Confidential:
http://asiaconf.com/2013/11/21/deflation-is-crushing-qe/


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/tQ-QejYwITk/story01.htm Asia Confidential

The Death Of The European Bond Market

As we recently noted, thanks to the overwhelming dominance of the BoJ, the Japanese government bond market is “for all intent and purpose” dead. As the chart below shows, that is the lesson that Europe has learned also. Since the Greek bailout, bond trading volumes (and thus liquidity) has collapsed to practically zero. Of course, this is ignored by the mainstream media, instead focusing on the ‘low’ yields of that nation’s debt as indicative of ‘recovery’ around the corner and a market that knows better. Instead it is simply a measure of the domestic banks meager pricing at the margin of a bond market that reflects nothing but a shell of its former self. The pattern is similar (though not so terrible) for Spanish and Italian debt as the entire European bond market devolves into OMT-driven farce.

 

 

(h/t @fmirw)


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/9OqLONmqjKM/story01.htm Tyler Durden

Frontrunning: November 21

  • When it fails, do more of it – Bank of Japan hints at extending ultra-loose monetary policy (FT)
  • PBOC Says No Longer in China’s Interest to Increase Reserves (BBG)
  • Fed casts about for endgame on easy-money policy  (Hilsenrath)
  • Big trucks still rule Detroit in energy-conscious era (Reuters)
  • Debt Limit Rise May Not Be Needed Until June, CBO Says (BBG)
  • Some Insurance Regulators Turn Down White House Invitation (WSJ)
  • Say Goodbye to the Car Salesman (WSJ)
  • U.S. drone kills senior militant in Pakistani seminary (Reuters)
  • French business sector contracts sharply (FT)
  • How Germany’s taxman used stolen data to squeeze Switzerland (Reuters)
  • Fed casts about for endgame on easy-money policy (WSJ)
  • France, Italy call for full-time Eurogroup chief (Reuters)
  • Bank of England stresses it in no rush to raise interest rates (Reuters)
  • ECB Board Considering Publishing Minutes of Policy Meetings (WSJ)
  • Drop in Traffic Takes Toll on Investors in Private Roads (WSJ)
  • US budget talks generate cautious optimism (FT)

 

Overnight Media Digest

WSJ

* Investigators looking into how a government funding decision got to investors early are struggling over how to distinguish between illegal insider tips and accurate predictions based on research and analysis.

* The U.S. and Afghanistan said they ironed out the final disputes over the agreement on long-term American presence, just hours before the Loya Jirga assembly was convening to consider the deal.

* Federal Reserve officials, mindful of a still-fragile economy, are laboring to devise a strategy to avoid another round of market turmoil when they pull back on one of their signature easy-money programs in the months ahead.

* A complex bet in the foreign-exchange market backfired on Goldman Sachs Group Inc during the third quarter, contributing to a revenue slump that prompted senior executives to defend the firm’s trading strategy.

* Blackstone Group is about to unleash a seasoned turnaround specialist on some of the private equity giant’s 77 companies.

* A complex bet in the foreign exchange market backfired on Goldman Sachs during the third quarter, contributing to a revenue slump that prompted senior executives to defend the firm’s trading strategy.

* A preliminary gauge of China’s manufacturing activity showed a mild weakening of growth momentum in November, weighed down by sluggish new export orders, and suggesting the third-quarter rebound in the world’s second-largest economy may be losing steam.

* The White House won’t support plans to recapitalize Fannie Mae and Freddie Mac because they don’t address core concerns over having two large entities dominate the nation’s $10 trillion mortgage market, said the president’s top economic adviser.

* One morning this month, agents from the Federal Bureau of Investigation showed up unannounced at the home of a New York-based currencies trader for Deutsche Bank AG.

The agents showed him transcripts of an electronic chat in which the trader appeared to boast about trying to manipulate foreign exchange markets, according to people familiar with the incident.

 

FT

Chancellor George Osborne pressed Brussels last year to spare the Co-operative Bank from tougher rules applied to big listed banks.

France’s socialist government has promised reforms in the country’s onerous tax system but has stopped short of pledging tax cuts.

Shale gas fracking is unlikely to succeed in Europe because the continent lacks the right mix of land rights and infrastructure, according to the head of trading at power company Eon .

Authorities in France have placed the French unit of Swedish furniture retailer Ikea and its two top executives under formal investigation over allegations of illegally gathering data on employees and clients.

Coal miner Bumi’s plan to overhaul its ownership end boardroom conflicts hit a hurdle after the company’s chairman missed a deadline to show he had lined up financing for a key part of the restructuring deal.

Private equity firm KKR & Co LP has taken control of Winoa in a debt restructuring deal after the French steel abrasives maker’s previous private equity owner refused to inject cash.

 

NYT

* The Federal Reserve Open Market Committee wrestled at its most recent meeting with ways of supporting an economy that still needs help.

* Shareholders are putting AT&T and Verizon Wireless on notice: Tell the public more about the companies’ role in government surveillance efforts or risk a ding to the bottom line.

* State insurance commissioners met with President Obama and said insurers and states would have to decide to extend non-compliant health plans for one more year.

* Opposing portrayals of Michael Steinberg, a former trader at SAC Capital Advisors, emerged during opening statements at his criminal insider trading trial in Federal District Court.

* Rupert Murdoch, chairman of News Corporation and 21st Century Fox, and Wendi Deng Murdoch agreed to end their 14-year marriage.

* Neil MacBride, the former U.S. attorney in Alexandria, Virginia, will join Davis Polk & Wardwell as a partner, the firm will announce on Thursday.

* The Tribune Company, owner of The Chicago Tribune and The Los Angeles Times, will lay off 700 employees at those newspapers and the six others it owns, it said in memos to the staff on Wednesday.

* An ambitious plan to revise the system for taxing multinational corporations, released on Tuesday by the Senate Finance Committee chairman, Max Baucus, would hit technology companies and large pharmaceutical companies especially hard.

* A measure of consumer spending rose more than expected in October as households bought a range of goods, suggesting positive momentum in the economy early in the fourth quarter.

* The New York Times on Wednesday announced a reorganization of its Washington bureau, including the elevation of Carolyn Ryan to bureau chief and the start of two new
ventures.

 

Canada

THE GLOBE AND MAIL

* The Royal Canadian Mounted Police is alleging that Nigel Wright, Canadian Prime Minister Stephen Harper’s former chief of staff, breached the Criminal Code for his part in an extensive Conservative operation to contain the Senate expenses scandal.

* The British Columbia government has announced a new action plan for patients with mental-health challenges, a response to a declaration by Vancouver’s mayor and police chief that the city faces a crisis in handling people with severe, untreated mental illness.

Reports in the business section:

* Suncor Energy Inc, which last month approved a new multi-billion-dollar oil sands mine, plans to spend over $1 billion more in 2014 than it expects in 2013.

* Cliffs Natural Resources Inc announced on Wednesday that it would stop developing the Ring of Fire mineral deposit in Northern Ontario, dealing a blow to the provincial government’s plans to tap the resource-rich area and grow the local economy.

NATIONAL POST

* Toronto Mayor Rob Ford’s new, smaller office will have nine members in it, his fifth chief of staff in three years confirmed Wednesday. The office does not include David Price, his former director of logistics and operations and friend of Doug Ford who has had a controversial run at city hall.

* The Canadian prime minister’s senior staff worked with top Tory senators to whitewash a Senate report into Mike Duffy’s contested expenses after unsuccessfully trying to shape an independent audit, new Royal Canadian Mounted Police documents allege.

FINANCIAL POST

* Alberta pocketed just $26 million in its biggest land auction in two years, diffusing hype that a forgotten corner of the province holds the next big oil and gas play.

* The long-delayed rotation away from a reliance on consumer spending as Canada’s economic engine to stronger exports and business investment just isn’t happening – much to the chagrin of Stephen Poloz, the Bank of Canada governor who previously ran Export Development Canada.

 

China

CHINA SECURITIES JOURNAL

– The timely introduction of crude oil futures will boost China’s capital market liberalization, said a commentary in the paper.

SECURITIES TIMES

– China’s State Council plans to consolidate the registration of all immovable property under one department to ease the bureaucratic burden for enterprises, said Li Keqiang, the country’s premier at a meeting on Wednesday. Currently, registration of immovable property is overseen by many different departments.

SHANGHAI SECURITIES NEWS

– China’s National Development and Reform Commission plans to introduce ecological conservation indicators to better assess the interplay of economic development and damage to the environment, said Xu Shaoshi, director of the commission, recently. Relevant government departments will be instructed.

CHINA DAILY

– China appointed spokesmen for its seven military branches on Wednesday to increase operational transparency. The spokesmen are mainly drawn from the public relations departments in related branches and will release information about key activities and respond to public concerns, said sources with knowledge of the matter.

PEOPLE’S DAILY

– If tangible benefits are not felt by Chinese people and if a more equitable social environment is not created, then reform will lose its significance, 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

Advance Auto Parts (AAP) upgraded to Outperform from Neutral at Credit Suisse
BreitBurn Energy (BBEP) upgraded to Outperform from Neutral at RW Baird
Crestwood Midstream (CMLP) upgraded to Outperform from Neutral at RW Baird
Green Mountain (GMCR) upgraded to Buy from Neutral at Janney Capital
Hillshire Brands (HSH) upgraded to Outperform from Market Perform at BMO Capital
Leap Wireless (LEAP) upgraded to Hold from Sell at Deutsche Bank
Mechel (MTL) upgraded to Buy from Sell at Citigroup
Plains All American (PAA) upgraded to Outperform from Neutral at RW Baird
Rayonier (RYN) upgraded to Hold from Sell at Deutsche Bank
Summit Midstream (SMLP) upgraded to Outperform from Neutral at RW Baird
Westar Energy (WR) upgraded to Buy from Neutral at UBS

Downgrades

Allianz SE (AZSEY) downgraded to Neutral from Buy at Citigroup
Amicus Therapeutics (FOLD) downgraded to Neutral from Buy at Janney Capital
Amicus Therapeutics (FOLD) downgraded to Neutral from Overweight at JPMorgan
Consolidated Edison (ED) downgraded to Underperform from Hold at Jefferies
J.M. Smucker (SJM) downgraded to Neutral from Overweight at JPMorgan
Philip Morris (PM) downgraded to Neutral from Conviction Buy at Goldman
Pioneer Natural (PXD) downgraded to Perform from Outperform at Oppenheimer
Qualcomm (QCOM) downgraded to Outperform from Strong Buy at Raymond James
Quintiles (Q) downgraded to Hold from Buy at Deutsche Bank
Republic Services (RSG) downgraded to Neutral from Buy at Goldman

Initiations

Agrium (AGU) initiated with an Outperform at Raymond James
Allscripts (MDRX) initiated with a Buy at Deutsche Bank
AmerisourceBergen (ABC) initiated with a Hold at Deutsche Bank
athenahealth (ATHN) initiated with a Buy at Deutsche Bank
CVS Caremark (CVS) initiated with a Hold at Deutsche Bank
Cardinal Health (CAH) initiated with a Hold at Deutsche Bank
Catamaran (CTRX) initiated with a Hold at Deutsche Bank
Cerner (CERN) initiated with a Buy at Deutsche Bank
Charles River Labs (CRL) initiated with a Hold at Deutsche Bank
Check Point (CHKP) initiated with an Overweight at Barclays
Computer Programs (CPSI) initiated with a Hold at Deutsche Bank
Covance (CVD) initiated with a Hold at Deutsche Bank
EverBank Financial (EVER) initiated with an Overweight at Barclays
Express Scripts (ESRX) initiated with a Hold at Deutsche Bank
Facebook (FB) initiated with an Outperform at FBR Capital
Fortinet (FTNT) initiated with an Equal Weight at Barclays
Gartner (IT) initiated with a Market Perform at FBR Capital
Honda (HMC) initiated with a Buy at Jefferies
Imperva (IMPV) initiated with an Overweight at Barclays
LinkedIn (LNKD) initiated with a Market Perform at FBR Capital
McKesson (MCK) initiated with a Buy at Deutsche Bank
MedAssets (MDAS) initiated with a Buy at Deutsche Bank
Medidata Solutions (MDSO) initiated with a Buy at Deutsche Bank
Monster Worldwide (MWW) initiated with an Outperform at FBR Capital
Quality Systems (QSII) initiated with a Sell at Deutsche Bank
Radware (RDWR) initiated with an Outperform at Imperial Capital
Rite Aid (RAD) initiated with a Buy at Deutsche Bank
Sorrento Therapeutics (SRNE) initiated with a Buy at CRT Capital
Thomson Reuters (TRI) initiated with an Outperform at FBR Capital
Walgreens (WAG) initiated with a Buy at Deutsche Bank

HOT STOCKS

Johnson Controls (JCI) announced 3-year, $3.65B share repurchase program, $800M ASR
Green Mountain (GMCR) authorized additional $1B share repurchase plan
KKR (KKR) to acquire Winoa Group from LBO France, terms not disclosed

EARNINGS

Companies that beat consensus earnings expectations last night and today include: Spectrum Brands (SPB), Pactera (PACT), Taomee (TAOM), Jiayuan.com (DATE), China Distance Education (DL), L Brands (LTD), Jack in the Box (JACK), Williams-Sonoma (WSM), ValueVision (VVTV), Bazaarvoice (BV), Green Mountain (GMCR)

Companies that missed consensus earnings expectations include:
Sears Holdings (SHLD), Post Holdings (POST), Planar Systems (PLNR)

Companies that mat
ched consensus earnings expectations include:
Stage Stores (SSI)

NEWSPAPERS/WEBSITES

  • Credit Suisse Group (CS) said it had begun a program to ring-fence its Swiss banking business from riskier investment banking operations in the U.S. and U.K., part of a plan to address concerns about institutions that are deemed too big to fail, the Wall Street Journal reports
  • China Mobile (CHL) plans to introduce a new brand for mobile services on December 18, raising expectations of an imminent start to its iPhone (AAPL) sales in the country, the Wall Street Journal reports
  • Janet Yellen will take an important step today toward becoming the first woman to lead the Federal Reserve, with the Senate Banking Committee expected to back the nomination and clear her path to lead the central bank, Reuters reports
  • U.S. regulators are considering whether to give banks more time to comply with the Volcker rule, which bans them from gambling with their own money, Reuters reports
  • Vodafone Group (VOD), set to receive $130B for exiting the U.S., will focus on expanding wireless networks even as potential buyers may be sizing up the company for a bid, said CEO Vittorio Colao, Bloomberg reports
  • Bank of America (BAC) told a judge in federal court in Manhattan it shouldn’t pay any penalty in a U.S. lawsuit accusing it of selling defective loans to Fannie Mae (FNMA) and Freddie Mac (FMCC). The government argued that the bank should pay the maximum penalty of $863M. The bank said it should pay $1.1M at the most, Bloomberg reports

SYNDICATE

Air Lease (AL) files to sell 10.14M common shares for holders
Arthur J. Gallagher (AJG) announces $200M at-the-market equity program
Attunity Ltd (ATTU) files to sell common stock
Broadway Financial (BYFC) files to offer 17.96M common shares for holders
Cardiovascular Systems (CSII) 2.61M share Secondary priced at $30.00
Ceragon Networks (CRNT) 14M share Secondary priced at $2.40
Cinedigm Digital (CIDM) files to sell 2.9M common shares for holders
Evogene (EVGN) 5M share Secondary priced at $14.75
Forestar Group (FOR) files to sell 5.4M tangible equity units
FreeSeas (FREE) files to sell 75M shares of common stock for holders
Navigator Holdings (NVGS) 12M share IPO priced at $19.00
Sequans (SQNS) 12.5M share Spot Secondary priced at $1.80


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/_7q1Z5TZhrs/story01.htm Tyler Durden