Frontrunning: November 14

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


Overnight Media Digest


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

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

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

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

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

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

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

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

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

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



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

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

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

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

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

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



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

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

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

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

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

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

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

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

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

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




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

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

Reports in the business section:

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

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


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

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


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

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




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


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

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


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


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


Fly On The Wall 7:00 AM Market Snapshot



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


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


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


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


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

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

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


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


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


via Zero Hedge Tyler Durden

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