Month: September 2014

Things are rapidly shifting from bad to worse for PIMCO. In a triple whammy this morning, Bloomberg reports the Total Return Fund ETF (managed previously by Bill Gross) has suffered $446 million outflows (or over 12.5% of assets) so far; Morningstar downgrades the fund from ‘gold’ to ‘bronze’ citing “uncertainty regarding outflows and the reshuffling of management responsibilities”; and perhaps most concerning – given our previous warnings over bond market illiquidity – The FT reports, US regulators are monitoring trading and fund flows surrounding PIMCO’s Total Return Bond fund warning investors they should contemplate the unintended consequences of pulling their money and the possibility of systemic risk disruptions, fearful of “runs.”

 

First outflows are accelerating…

• *PIMCO ETF GROSS MANAGED SEES RECORD $446 MILLION OUTFLOW
• *PIMCO TOTAL RETURN ETF OUTFLOW REPRESENTS 12.5% OF SHARES

And Then…

Morningstar, the influential mutual fund research group, stripped the Total Return fund of its “gold” analyst rating late on Monday, downgrading it to “bronze” because of the “uncertainty regarding outflows and the reshuffling of management responsibilities”.

And on top of that, as The FT reports,

US regulators are monitoring trading and fund flows surrounding Pimco’s $223bn Total Return Bond fund and other products, in what could prove a test case in the debate over whether asset management groups contribute to systemic risk.

 

Officials at the Securities and Exchange Commission, the Federal Reserve and the US Treasury, among other bodies, have been talking to industry executives and other investors and warning they should contemplate unintended consequences of pulling their money from Pimco.

 

…

 

It also warned that large funds might be subject to “runs” if investors believe there is an advantage to pulling their money first, and it suggested regulators gather more data to test the concerns.

*  *  *

Who could have seen that coming?

via Zero Hedge http://ift.tt/1rq5TXe Tyler Durden

Back in June 2011, Zero Hedge first posted:

• “Exclusive: The Fed’s $600 Billion Stealth Bailout Of Foreign Banks Continues At The Expense Of The Domestic Economy, Or Explaining Where All The QE2 Money Went“

which we followed up on various occasions, most notably with

• “How The Fed’s Latest QE Is Just Another European Bailout” and
• “The Fed’s Bailout Of Europe Continues With Record $237 Billion Injected Into Foreign Banks In Past Month.”

With the following key chart:

Of course, the conformist counter-contrarian punditry, for example the FT’s Alphaville, promptly said this was a non-issue and was purely due to some completely irrelevant microarbing of a few basis points in FDIC penalty surcharges, which as we explained extensively over the past 3 years, has nothing at all to do with the actual motive of hoarding Fed reserves by offshore (or onshore) banks, and which has everything to do with accumulating billions in “dry powder” reserves to use for risk-purchasing purposes (alas understanding that would require grasping that reserves are perfectly valid collateral to use as margin against purchase of such market moving products as e-mini futures, which in turn explains why traders usually don’t end up as journos).

Fast, or rather slow, forward to today when none other than the WSJ’s Jon Hilsenrath debunks yet another “conspiracy theory” and reveals it as “unconspiracy fact” with “Fed Rate Policies Aid Foreign Banks: Lenders Pocket a Spread by Borrowing Cheaply, Parking Funds at Central Bank“

Wait… the Wall Street Journal said that? Yup.

Banks based outside the U.S. have been unlikely beneficiaries of the Federal Reserve’s interest-rate policies, and they are likely to keep profiting as the Fed changes the way it controls borrowing costs.

 

 

Foreign firms have received nearly half of the $9.8 billion in interest the Fed has paid banks since the beginning of last year for the money, called reserves, they deposit at the U.S. central bankaccording to an analysis of Fed data by The Wall Street Journal. Those lenders control only about 17% of all bank assets in the U.S.

 

Moreover, the Fed’s plans for raising interest rates make it likely banks will see those payments grow in coming years.

Hmm, we almost feel like we should bring up the dreaded “P” word considering the bolded sentence is a recap of what we said in February of 2013 in “How The Fed Is Handing Over Billions In “Profits” To Foreign Banks Each Year.” That’s ok, though: imitation, flattery and all that…

So here is Hilsy “figuring out” what we have been explaining for over 3 years!

Though small in relation to their overall revenues, interest payments from the Fed have been a source of virtually risk-free returns for foreign banks. Large holders of Fed reserves include Deutsche Bank, UBS AG, Bank of China and Bank of Tokyo-Mitsubishi UFJ, according to bank regulatory filings. U.S. banks including J.P. Morgan Chase, Wells Fargo and Bank of America Corp. are also big recipients of Fed interest payments, according to the filings.

 

“It is a small transfer from U.S. taxpayers to foreign taxpayers,” said Joseph Gagnon, a former Fed economist at the Peterson Institute for International Economics. The transfer, he added, was a side effect of Fed policy, not a goal.

Actually it is a goal, but that would lead to a whole lot of embarrassing congressional hearings which the Fed would rather avoid, plus nobody really “gets” it. The reason why? Apparently things are so “complex” that anyone who figured it out years ago was clearly a conspiracy theorist:

Behind the payments is a complex interplay between new government regulatory policies and new methods the Fed has developed to control short-term interest rates.

 

The Fed has pumped nearly $3 trillion into the banking system since the 2008 financial crisis, increasing banks’ reserves, in efforts to stabilize markets and boost economic growth.

 

Since 2008, it has paid banks interest of 0.25% on those reserves. The Fed affirmed this month that the rate it pays on reserves will be the primary tool it uses to raise short-term borrowing costs from near zero when the time comes, likely next year.

 

In part because regulatory requirements discourage domestic banks from holding more cash reserves than they need, many of the reserves created by the Fed are held by foreign banks.

In other words, the Fed-funded risk-free carry trade finally goes mainstream. Of course, all those who read ZH in 2011 will know all of this by now:

The interest payments totaled $4.7 billion so far this year and $5.1 billion last year, and will increase over time as the Fed raises rates. The Fed remits most of its profits to the U.S. Treasury, and the rising cost of the interest payments could put downward pressure on the amount the central bank sends to taxpayers each year, the Fed has said.

 

Some observers say this could become a political challenge for the Fed, especially the payments it makes to foreign banks.

 

“The fact is that the Fed is going to be paying very large amounts of interest to banks,” said William Poole, a senior fellow at the Cato Institute and former president of the Federal Reserve Bank of St. Louis. “It’s highly likely that some politicians will notice that and given the proclivity of some politicians anyway to demagogue issues, the Fed is going to have some political explaining to do.”

 

Some Fed officials also have expressed concern about how these payments will look. “I think the optics are very difficult to defend and might get us into trouble,” James Bullard, president of the Federal Reserve Bank of St. Louis, said in an August interview with MarketWatch.

 

Since 2009, foreign banks have earned roughly $5 billion by borrowing dollars cheaply, often at less than 0.10%, in short-term funding markets and depositing those funds at the Fed for 0.25%, according to the Journal analysis. That estimate doesn’t take into account the costs of raising money through other means, overhead and taxes, which affect net income.

But don’t blame the banks – they are merely doing what the Fed is encouraging them to do. And after all who wouldn’t collect billions in risk free cash?

A spokeswoman for one bank engaged in the trade, Bank of Tokyo Mitsubishi, said that the growth of excess reserves parked at the central banks is a natural consequence of the Fed’s policy. “The share of excess reserve balances held by BTMU has been in alignment with its business footprint in the U.S.,” she said.

 

Deutsche Bank, which had one of the largest reserve balances at the Fed as of June 30, declined to comment. UBS didn’t respond to requests for comment. A Chinese official close to Bank of China said it has been parking funds at the Fed in order to help it comply with liquidity requirements in its home market.

 

The foreign banks’ activity is “entirely legitimate because they are providing a financial service and they are taking a spread,” said Lou Crandall, chief economist at research firm Wrightson ICAP.

Sadly, the WSJ ends just before it gets good. So without further ado, here is what happens if and when one extrapolates a rising rate environment in terms of Fed handouts to foreign banks, from what we said in February of 2013:

We show the surge in the foreign bank cash level, as well as the cumulative cash interest paid to these banks assuming a weekly cash interest payment. What the chart shows is that from December 2008 through the last week of January, the Fed has paid out some $6 billion in cash (red line) to European banks simply as interest on excess reserves.

 

 

But that’s just the beginning. If we are correct in assuming that QE3 will be a replica of QE2 when all the new reserves created ended up as cash on foreign bank balance sheets, it means that we can quite accurately forecast what the total foreign bank cash position will be on December 31, 2013 (as the Fed will certainly not end its open ended monetization of the US deficit before then, or likely, ever). The result: just under $2 trillion in cash held be foreign banks operating in the US, which also means that in calendar 2013, the Fed will fund and subsidize foreign banks a blended interest payment of $3.5 billion! This is entirely separate from the $2 trillion liquidity subsidy that Bernanke will also have handed out to keep these banks afloat, and is $3.5 billion that will flow right through the P&L and end up in the pockets of offshore shareholders who otherwise would very likely be wiped out had it not been for the Fed’s relentless efforts to bailout foreign banks.

 

 

And since it is improbable that excess reserves held by any banks will decline at all in the coming years, one can also assume that the annualized interest paid to foreign banks, which would amount to at least $5 billion pear year, every year, will continue indefinitely as a direct Fed subsidy to the bottom line of Foreign banks.

 

All of this, of course, ignores what happens should the Fed hike interest rates across the board, which will also mean rising the rates on IOER, once inflation finally strikes: simple math means a 1% IOER means some $20 billion in interest paid to foreign banks, 2% – $40 billion, 5% – $100 billion paid to foreign banks, and so on. Putting these numbers in perspective, let’s recall that Italy’s third largest bank just got a €3.9 billion bailout (its third), and has a market cap of some €2.9 billion.

 

We can only hope someone in Congress asks Ben Bernanke in two weeks just under which Fed charter it is that the Fed is more focused on generating profits (not just trillions in excess liquidity) for European banks, than on opening up consumer lending which has been stuck in “petrified” mode for the past 4 years, with the total amount of loans outstanding currently at all US banks – foreign and domestic – at levels last seen the week Lehman filed for bankruptcy.

Obviously, nobody asked Bernanke and nobody has asked Yellen this simple question, because until last night apparently nobody aside from the Zero Hedge community had any grasp of what is going on.

That said, we doubt that anyone in control will ask any related questions in the near of not so near future even with Hilsenrath’s “How The Fed Is Bailing Out Foreign Banks For Dummies” primer, because let’s not forget – the same banks that control the Fed are also the same banks that purchase politicians at every possible opportunity (see for example: With Cantor Down, Which Other Politicians Has Goldman Invested In?).

In fact, the only good news from Hilsenrath’s report is that yet another conspiracy theory has been documented as unconspiracy fact. Then again, Zero Hedge readers knew all of this over three years ago, for free.

via Zero Hedge http://ift.tt/1rq5QKY Tyler Durden

Back in June 2011, Zero Hedge first posted:

• “Exclusive: The Fed’s $600 Billion Stealth Bailout Of Foreign Banks Continues At The Expense Of The Domestic Economy, Or Explaining Where All The QE2 Money Went“

which we followed up on various occasions, most notably with

• “How The Fed’s Latest QE Is Just Another European Bailout” and
• “The Fed’s Bailout Of Europe Continues With Record $237 Billion Injected Into Foreign Banks In Past Month.”

With the following key chart:

Of course, the conformist counter-contrarian punditry, for example the FT’s Alphaville, promptly said this was a non-issue and was purely due to some completely irrelevant microarbing of a few basis points in FDIC penalty surcharges, which as we explained extensively over the past 3 years, has nothing at all to do with the actual motive of hoarding Fed reserves by offshore (or onshore) banks, and which has everything to do with accumulating billions in “dry powder” reserves to use for risk-purchasing purposes (alas understanding that would require grasping that reserves are perfectly valid collateral to use as margin against purchase of such market moving products as e-mini futures, which in turn explains why traders usually don’t end up as journos).

Fast, or rather slow, forward to today when none other than the WSJ’s Jon Hilsenrath debunks yet another “conspiracy theory” and reveals it as “unconspiracy fact” with “Fed Rate Policies Aid Foreign Banks: Lenders Pocket a Spread by Borrowing Cheaply, Parking Funds at Central Bank“

Wait… the Wall Street Journal said that? Yup.

Banks based outside the U.S. have been unlikely beneficiaries of the Federal Reserve’s interest-rate policies, and they are likely to keep profiting as the Fed changes the way it controls borrowing costs.

 

 

Foreign firms have received nearly half of the $9.8 billion in interest the Fed has paid banks since the beginning of last year for the money, called reserves, they deposit at the U.S. central bankaccording to an analysis of Fed data by The Wall Street Journal. Those lenders control only about 17% of all bank assets in the U.S.

 

Moreover, the Fed’s plans for raising interest rates make it likely banks will see those payments grow in coming years.

Hmm, we almost feel like we should bring up the dreaded “P” word considering the bolded sentence is a recap of what we said in February of 2013 in “How The Fed Is Handing Over Billions In “Profits” To Foreign Banks Each Year.” That’s ok, though: imitation, flattery and all that…

So here is Hilsy “figuring out” what we have been explaining for over 3 years!

Though small in relation to their overall revenues, interest payments from the Fed have been a source of virtually risk-free returns for foreign banks. Large holders of Fed reserves include Deutsche Bank, UBS AG, Bank of China and Bank of Tokyo-Mitsubishi UFJ, according to bank regulatory filings. U.S. banks including J.P. Morgan Chase, Wells Fargo and Bank of America Corp. are also big recipients of Fed interest payments, according to the filings.

 

“It is a small transfer from U.S. taxpayers to foreign taxpayers,” said Joseph Gagnon, a former Fed economist at the Peterson Institute for International Economics. The transfer, he added, was a side effect of Fed policy, not a goal.

Actually it is a goal, but that would lead to a whole lot of embarrassing congressional hearings which the Fed would rather avoid, plus nobody really “gets” it. The reason why? Apparently things are so “complex” that anyone who figured it out years ago was clearly a conspiracy theorist:

Behind the payments is a complex interplay between new government regulatory policies and new methods the Fed has developed to control short-term interest rates.

 

The Fed has pumped nearly $3 trillion into the banking system since the 2008 financial crisis, increasing banks’ reserves, in efforts to stabilize markets and boost economic growth.

 

Since 2008, it has paid banks interest of 0.25% on those reserves. The Fed affirmed this month that the rate it pays on reserves will be the primary tool it uses to raise short-term borrowing costs from near zero when the time comes, likely next year.

 

In part because regulatory requirements discourage domestic banks from holding more cash reserves than they need, many of the reserves created by the Fed are held by foreign banks.

In other words, the Fed-funded risk-free carry trade finally goes mainstream. Of course, all those who read ZH in 2011 will know all of this by now:

The interest payments totaled $4.7 billion so far this year and $5.1 billion last year, and will increase over time as the Fed raises rates. The Fed remits most of its profits to the U.S. Treasury, and the rising cost of the interest payments could put downward pressure on the amount the central bank sends to taxpayers each year, the Fed has said.

 

Some observers say this could become a political challenge for the Fed, especially the payments it makes to foreign banks.

 

“The fact is that the Fed is going to be paying very large amounts of interest to banks,” said William Poole, a senior fellow at the Cato Institute and former president of the Federal Reserve Bank of St. Louis. “It’s highly likely that some politicians will notice that and given the proclivity of some politicians anyway to demagogue issues, the Fed is going to have some political explaining to do.”

 

Some Fed officials also have expressed concern about how these payments will look. “I think the optics are very difficult to defend and might get us into trouble,” James Bullard, president of the Federal Reserve Bank of St. Louis, said in an August interview with MarketWatch.

 

Since 2009, foreign banks have earned roughly $5 billion by borrowing dollars cheaply, often at less than 0.10%, in short-term funding markets and depositing those funds at the Fed for 0.25%, according to the Journal analysis. That estimate doesn’t take into account the costs of raising money through other means, overhead and taxes, which affect net income.

But don’t blame the banks – they are merely doing what the Fed is encouraging them to do. And after all who wouldn’t collect billions in risk free cash?

A spokeswoman for one bank engaged in the trade, Bank of Tokyo Mitsubishi, said that the growth of excess reserves parked at the central banks is a natural consequence of the Fed’s policy. “The share
of excess reserve balances held by BTMU has been in alignment with its business footprint in the U.S.,” she said.

 

Deutsche Bank, which had one of the largest reserve balances at the Fed as of June 30, declined to comment. UBS didn’t respond to requests for comment. A Chinese official close to Bank of China said it has been parking funds at the Fed in order to help it comply with liquidity requirements in its home market.

 

The foreign banks’ activity is “entirely legitimate because they are providing a financial service and they are taking a spread,” said Lou Crandall, chief economist at research firm Wrightson ICAP.

Sadly, the WSJ ends just before it gets good. So without further ado, here is what happens if and when one extrapolates a rising rate environment in terms of Fed handouts to foreign banks, from what we said in February of 2013:

We show the surge in the foreign bank cash level, as well as the cumulative cash interest paid to these banks assuming a weekly cash interest payment. What the chart shows is that from December 2008 through the last week of January, the Fed has paid out some $6 billion in cash (red line) to European banks simply as interest on excess reserves.

 

 

But that’s just the beginning. If we are correct in assuming that QE3 will be a replica of QE2 when all the new reserves created ended up as cash on foreign bank balance sheets, it means that we can quite accurately forecast what the total foreign bank cash position will be on December 31, 2013 (as the Fed will certainly not end its open ended monetization of the US deficit before then, or likely, ever). The result: just under $2 trillion in cash held be foreign banks operating in the US, which also means that in calendar 2013, the Fed will fund and subsidize foreign banks a blended interest payment of $3.5 billion! This is entirely separate from the $2 trillion liquidity subsidy that Bernanke will also have handed out to keep these banks afloat, and is $3.5 billion that will flow right through the P&L and end up in the pockets of offshore shareholders who otherwise would very likely be wiped out had it not been for the Fed’s relentless efforts to bailout foreign banks.

 

 

And since it is improbable that excess reserves held by any banks will decline at all in the coming years, one can also assume that the annualized interest paid to foreign banks, which would amount to at least $5 billion pear year, every year, will continue indefinitely as a direct Fed subsidy to the bottom line of Foreign banks.

 

All of this, of course, ignores what happens should the Fed hike interest rates across the board, which will also mean rising the rates on IOER, once inflation finally strikes: simple math means a 1% IOER means some $20 billion in interest paid to foreign banks, 2% – $40 billion, 5% – $100 billion paid to foreign banks, and so on. Putting these numbers in perspective, let’s recall that Italy’s third largest bank just got a €3.9 billion bailout (its third), and has a market cap of some €2.9 billion.

 

We can only hope someone in Congress asks Ben Bernanke in two weeks just under which Fed charter it is that the Fed is more focused on generating profits (not just trillions in excess liquidity) for European banks, than on opening up consumer lending which has been stuck in “petrified” mode for the past 4 years, with the total amount of loans outstanding currently at all US banks – foreign and domestic – at levels last seen the week Lehman filed for bankruptcy.

Obviously, nobody asked Bernanke and nobody has asked Yellen this simple question, because until last night apparently nobody aside from the Zero Hedge community had any grasp of what is going on.

That said, we doubt that anyone in control will ask any related questions in the near of not so near future even with Hilsenrath’s “How The Fed Is Bailing Out Foreign Banks For Dummies” primer, because let’s not forget – the same banks that control the Fed are also the same banks that purchase politicians at every possible opportunity (see for example: With Cantor Down, Which Other Politicians Has Goldman Invested In?).

In fact, the only good news from Hilsenrath’s report is that yet another conspiracy theory has been documented as unconspiracy fact. Then again, Zero Hedge readers knew all of this over three years ago, for free.

via Zero Hedge http://ift.tt/1rq5QKY Tyler Durden

• Hong Kong protesters stockpile supplies, fear fresh police advance (Reuters)
• Protesters stay out on Hong Kong streets, defying Beijing (Reuters)
• Traders Turn Up Grilling Sausages at Hong Kong Protests (BBG)
• Ukraine Army Sees Worst Day Since Truce as Battles Flare (BBG)
• Islamic State uses grain to tighten grip in Iraq (Reuters)
• For Putin Ally, U.S. Sanctions Only Add to Anti-Russia Conspiracy Theory (WSJ)
• Coinbase Leads Move to Bring Bitcoin to Masses (BBG) – good luck
• Austria Cracks Down on Spies — and Jihadis (BBG)
• EU Believes Apple, Fiat Tax Deals Broke Rules (WSJ); Apple’s Irish Tax Deal ‘Engineered’ to Boost Employment, EU Says (BBG)
• IPO Markets Don’t Need Alibaba for Best Quarter Since 2010 (BBG)
• From Africa to Ukraine, Deal Police Proliferate (WSJ)
• U.S.-led air strikes pose problem for Assad’s moderate foes (Reuters)
• North Korea’s Kim Said Hospitalized After Ankle Surgery (BBG)
• Europe Ticking All the Wrong Boxes Starts Mirroring Japan (BBG)
• Death on the Highway Leaves Dozing Trucker Angry at Widower and God (BBG)
• Russian Billionaire Rybolovlev Must Face Ex-Wife’s Suit (BBG)
• U.K. Risks Return to 1974 as Splintered Politics Hurts Stability (BBG)

Overnight Media Digest

WSJ

* The intruder who scaled a White House fence earlier this month and darted across the lawn got much farther into the executive mansion than previously disclosed, according to a congressman. (http://on.wsj.com/1mJbV3K)

* As the United States gears up for deeper military involvement in the Middle East, many Chaldeans are in a wrenching debate: Either get as many people out of Iraq as possible, or stay and fight a militant ISIL. (http://on.wsj.com/1u7AIQb)

* Personality tests in the hiring process have sparked scrutiny, with some companies scaling back and civil-rights groups claiming the tests could constitute workplace discrimination. (http://on.wsj.com/1rAml60)

* Ford Motor Co warned operating profit this year would be sharply below its earlier estimate, citing higher than expected costs of auto-safety recalls in the United States and economic weakness in Europe. (http://on.wsj.com/1pD6Sg3)

* Banks outside the Unites States have been unlikely beneficiaries of the Federal Reserve’s interest-rate policies, and they are likely to do even better as the Fed changes the way it controls interest rates. (http://on.wsj.com/1rymeXd)

* Executives at Pacific Investment Management Co hit the phones Monday in a campaign to persuade clients to stick with the firm, even as Wall Street traders placed bets against its holdings, seeking to exploit the sudden departure of co-founder Bill Gross. (http://on.wsj.com/1uxV46J)

* The SEC’s tally of cases is the first year-over-year increase since 2011. But some say the heightened activity masks a scarcity of the blockbuster actions that should be a feature of an effective Wall Street cop. (http://on.wsj.com/1nCMAt3)

* A closely watched gauge of China’s manufacturing activities showed sluggish growth for a second straight month, indicating that the world’s second-largest economy still faces downward pressure. (http://on.wsj.com/1wSWZAP)

* SoftBank Corp’s discussions to acquire DreamWorks Animation SKG Inc have cooled, according to people familiar with the matter, less than two days after word first emerged of the talks. (http://on.wsj.com/1mJjZRT)

* Supervalu Inc said Monday it discovered a second data breach into its customer payment system, just weeks after catching one that hit its grocery stores earlier in the summer. (http://on.wsj.com/1DTRAyf)

 

FT

* Lloyds Banking Group said on Monday it had dismissed eight of its staff and recouped 3 million pounds ($4.87 million) of their bonuses after finding them responsible for attempting to manipulate benchmark interest rates between 2006 and 2009.

* The UK government’s plan to get rid off tax levied on pension funds at death would lead to potential opportunities for the wealthy to protect their assets from inheritance tax, wealth planners said on Monday.

* UBS AG on Monday said that it could face “material” fines as authorities around the globe go ahead with their probe into alleged manipulation of the foreign exchange market.

* Two of the world’s largest securities depositories, Belgium’s Euroclear and U.S. based Depository Trust and Clearing Corporation, confirmed they had agreed on a joint venture which would be called DTCC-Euroclear Global Collateral Ltd.

* BAE Systems Plc cautioned of some trading disruption in the United States in the next three months because of government spending constraints but said this would be “limited.”

* The incoming EU digital commissioner Guenther Oettinger warned that any settlement with Google Inc over the antitrust case could “cement its strength in the market rather than diluting it”.

* Italian luxury fashion group Prada SpA said on Monday its co-chief executives Miuccia Prada and Patrizio Bertelli, are being investigated by Italian authorities over past taxes.

* Santander UK appointed Nathan Bostock, a former Royal Bank of Scotland finance director, as its chief executive officer. Bostock replaces Ana Patricia Botin, who was appointed executive chairman of the bank’s Spanish parent Santander Group following the death of her father Emilio Botin earlier this month.

 

NYT

* In a first deal of its kind, Netflix Inc and the Weinstein Company said Monday that they planned to release next year’s sequel to the movie “Crouching Tiger, Hidden Dragon” simultaneously across the globe on Netflix and a select number of Imax theaters. (http://nyti.ms/1pn3ua3)

* As the Obama administration tries to stop companies from avoiding taxes by moving their headquarters overseas, pharmaceutical companies such as Gilead Sciences Inc, Pfizer Inc and AbbVie Inc are using another tactic to reduce their payments to the government. (http://nyti.ms/1sLpzWG)

* Qatar Petroleum, along with its partner Exxon Mobil Corp , is now requesting permission to export American gas from the Golden Pass terminal to Asian and European markets. The additional estimated cost: $10 billion, if not more. (http://nyti.ms/1DTNar0)

* The number of deaths linked to General Motors Co’s defective ignition switch has risen again – to 23, according to new figures posted on Monday by the program set up to compensate victims. (http://nyti.ms/1xvJE4w)

* The troubled retailer American Apparel named a new interim chief executive, Scott Brubaker, on Monday in a bid to move on from a public battle with its founder and former chief, Dov Charney. (http://nyti.ms/1pD6nTd)

* Bank of America Corp has agreed to pay $7.65 million to settle federal charges that it violated record keeping and internal rules in overstating its capital levels. (http://nyti.ms/1DTNTIS)

* Maurice Greenberg, the former American International Group chief executive who through his company Starr International continues to hold a major stake in the insurance company and who sued the government on behalf of fellow shareholders, is seeking more than $40 billion in compensation. (http://nyti.ms/1pD6CxK)

* The Encana Corporation, one of Canada’s biggest producers of natural gas and oil, agreed on Monday to buy Athlon Energy Inc for $5.9 billion in a move to gain a foothold in one of North America’s most oil-rich regions. (http://nyti.ms/1pD6Qos)

* Banco Santander SA has named a new head for its business in Britain. Nathan Bostock will follow Ana Patricia Botín, who succeeded her father as the Spanish bank’s executive chairwoman after his death this month. (http://nyti.ms/1rGRmWm)

* Tibco Software Inc, an enterprise software company based in Silicon Valley, has agreed to sell itself to Vista Equity Partners for $4.3 billion in the largest buyout in the technology industry this year. (http://nyti.ms/1BycwXn)

 

Canada

THE GLOBE AND MAIL ** Ottawa’s apparent refusal to grant visas to the most senior Russian and Chinese delegates at a prestigious international astronautical conference on Monday blindsided the head of Canada’s space agency, who was left struggling to come up with an explanation. (http://bit.ly/1BydUcA)

** The Canadian government will pay for maintenance and upgrades to extend the life of the country’s aging CF-18 fighters so they last until about 2025, sources say – a strong sign that Ottawa is far from ready to pick a new warplane. (http://bit.ly/1uykO2O)

** Faced with a challenge to its authority from Netflix Inc and Google Inc, Canada’s broadcast regulator CRTC has reacted by striking the two companies’ evidence from a major public hearing, seeking to reassert its powers over companies that broadcast in the country. (http://bit.ly/1uZlLxr)

NATIONAL POST ** Albertans will go to the polls in four byelections on Oct. 27, after two more Calgary MLAs announced on Monday they are resigning. Calgary-Foothills MLA Len Webber said he is stepping down to focus on his looming campaign for federal office, clearing the way for a byelection run by Premier Jim Prentice. A short time later, Calgary-West MLA Ken Hughes also announced he would also step down to help with the renewal of the Progressive Conservative party. (http://bit.ly/1rpNNEO) ** Quebec’s premier says Parti Quebecois heavyweight Pierre Karl Peladeau should get a grip on reality after he compared the repatriation of the Constitution to the imposition of communist rule in East Germany. (http://bit.ly/1qQWuS7)

** Canada’s Big Three incumbent wireless providers Rogers Communications Inc, BCE Inc and Telus Corp are cashing in by muscling out new entrants with prohibitively high rates to use their infrastructure, the Competition Bureau charged on Monday. (http://bit.ly/1vtjFaB)

 

China

CHINA SECURITIES JOURNAL

– The vice chairman of the China Banking Regulatory Commission said joint-stock banks have to make an effort to defuse credit risks from sensitive industries to reduce bad loans.

SHANGHAI SECURITIES NEWS

– The China Insurance Regulatory Commission (CIRC) said in an announcement on Monday that it will raise the hurdle for insurance firms to invest in trust funds amid concerns over venture capital trusts.

CHINA DAILY

– The “Occupy Central” movement does not promote democratic development as it distorts the political reform for the 2017 election of Hong Kong’s top official while hurting people’s livelihoods, China Daily said in an editorial.

PEOPLE DAILY

– The Shanghai Free Trade Zone differentiates itself from other economic development zones in that it has specific policies to lure investors, the paper said in a commentary.

 

Britain

The Times

** Benefits will be frozen for two years should the Conservatives win the May general election, George Osborne announced today. The chancellor said that the move will save 3 billion pounds and make a “serious contribution to reducing the deficit”. (http://thetim.es/1uXnZNP)

** Fee rises at leading independent schools will continue to outpace inflation for years to come to fund improvements aimed at attracting overseas pupils, headmasters said yesterday. Top private schools will continue to push up fees but also put more money aside to fund means-tested places for children from lower-income families, they said. (http://thetim.es/1xuZDjo)

The Guardian

** Fresh waves of pro-democracy protesters have swept into the heart of Hong Kong, as a leader of the civil disobedience movement urged them to keep the momentum going until Wednesday’s national holiday. Crowds blocked one of the city’s main roads on Monday from the financial area of Central to the bar district of Wanchai in what appeared to be the largest demonstration yet. (http://bit.ly/1pmPg8Z)

** Hundreds of young women and girls are leaving their homes in western countries to join Islamic fighters in the Middle East, causing increasing concern among counter-terrorism investigators. Girls as young as 14 or 15 are travelling mainly to Syria to marry jihadis, bear their children and join communities of fighters, with a small number taking up arms. Many are recruited via social media. (http://bit.ly/1uWZvo3)

The Telegraph

** Islamist terrorists have released a third video of John Cantlie, a British journalist held prisoner for two years, in which he delivers a scripted propaganda attack against Barack Obama’s strategy in Iraq and Syria. Cantlie, wearing an orange Guantanamo-style jumpsuit, delivers the words directly to the camera using a sing-song tone as if to undermine the message. (http://bit.ly/1BxpkgR)

** Children as young as 11 are becoming victims of an alarming rise in so-called revenge pornography, new figures have revealed. The sinister practice, in which highly personal a
nd sometimes explicit images are posted on the Internet, often by disgruntled ex-lovers, has become increasingly widespread in recent years. (http://bit.ly/1vqq717)

Sky News

** The UK Foreign Office said it was “concerned” by the heavy response in its former colony Hong Kong, but China has warned the international community not to “interfere.” Chinese Foreign Ministry spokesman Hua Chunying said: “Hong Kong is China’s Hong Kong. Hong Kong is purely our internal affair.” (http://bit.ly/1orLM4W)

** There is “immense fear among everybody” in Baghdad with some too frightened to leave their homes due to the threat from Islamic State, according to a vicar in the city. Canon Andrew White spoke to Sky News as IS militants were reportedly only a mile away from the capital amid clashes with Iraqi soldiers. (http://bit.ly/YDXkLP)

The Independent

** The world’s wildlife population is less than half the size it was just four decades ago, with unsustainable human consumption and damage from climate change destroying valuable habitats at a faster rate than previously thought, a new report has warned. (http://ind.pn/1xuY5py)

** Police were called to investigate an EU flag flying in a Northern Irish town, after a resident reportedly mistook the well-known emblem for an “Arabic flag.” The flag was flying in celebration of the Ryder Cup outside a house in Holywood – the hometown of golfer Rory McIlrory who went on to help Europe win the trophy. (http://ind.pn/YI7hYl)

 

 

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
S&P Case-Shiller home price index for July at 9:00–consensus flat m/m
Chicago PMI for September at 9:45–consensus 62.0
Consumer confidence for September at 10:00–consensus 92.5

ANALYST RESEARCH

Upgrades

AMAG Pharmaceuticals (AMAG) upgraded to Outperform from Market Perform at FBR Capital
Addus HomeCare (ADUS) upgraded to Outperform from Perform at Oppenheimer
Alcoa (AA) upgraded to Buy from Neutral at BofA/Merrill
Associated British Foods (ASBFY) upgraded to Outperform from Neutral at Credit Suisse
CSC (CSC) upgraded to Outperform from Market Perform at Raymond James
Century Aluminum (CENX) upgraded to Buy from Neutral at BofA/Merrill
Flagstar Bancorp (FBC) upgraded to Neutral from Sell at BTIG
Lockheed Martin (LMT) upgraded to Buy from Hold at Stifel
Mellanox (MLNX) upgraded to Overweight from Neutral at Piper Jaffray
NiSource (NI) upgraded to Outperform from Neutral at Credit Suisse
NuVasive (NUVA) upgraded to Buy from Hold at Brean Capital
Patterson-UTI Energy (PTEN) upgraded to Equal Weight at Morgan Stanley
Raytheon (RTN) upgraded to Buy from Hold at Stifel
Seventy Seven Energy (SSE) upgraded to Buy from Hold at Jefferies
TIBCO (TIBX) upgraded to Equal Weight from Underweight at Barclays
Teekay (TK) upgraded to Buy from Hold at Deutsche Bank
Toyota (TM) upgraded to Overweight from Neutral at JPMorgan

Downgrades

CARBO Ceramics (CRR) downgraded to Underweight from Equal Weight at Morgan Stanley
Einstein Noah (BAGL) downgraded to Hold from Buy at Jefferies
Endocyte (ECYT) downgraded to Hold from Buy at Brean Capital
Kellogg (K) downgraded to Underweight from Equal Weight at Morgan Stanley
Seattle Genetics (SGEN) downgraded to Underperform from Neutral at BofA/Merrill
Vitamin Shoppe (VSI) downgraded to Neutral from Overweight at Piper Jaffray

Initiations

Apple (AAPL) initiated with a Hold at Jefferies
CDW Corporation (CDW) initiated with an Outperform at RBC Capital
EPAM Systems (EPAM) initiated with a Positive at Susquehanna
Kirby (KEX) initiated with a Neutral at Goldman
Nxt-ID (NXTD) initiated with an Outperform at Northland
ORBCOMM (ORBC) initiated with a Buy at CRT Capital
Range Resources (RRC) initiated with an Outperform at Imperial Capital
US Ecology (ECOL) initiated with an In-Line at Imperial Capital

COMPANY NEWS

EU says Apple (AAPL) tax deal with Ireland not at arm’s length
News Corp (NWSA) to acquire Move, Inc. (MOVE) for $21 per share, or approximately $950M
Ford (F) announced that it won’t achieve FY14 profit goals
Apple (AAPL) iPhone 6, iPhone 6 Plus to be available in China on Friday, Oct. 17
Alibaba (BABA) subsidiary invested RMB 2.81B in Beijing Shiji Information Technology 
Catalyst Pharmaceutical (CPRX) said results from Phase 3 trial of Firdapse met co-endpoints
Ballard Power (BLDP) received ElectraGen fuel cell system order
Energy XXI (EXXI) forecast Q1 production at mid-point of guidance

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Cintas (CTAS), Cintas (CTAS), SYNNEX (SNX)

Companies that missed consensus earnings expectations include:
S&W Seed (SANW)

NEWSPAPERS/WEBSITES

Softbank (SFTBF), DreamWorks (DWA) discussions may have slowed, WSJ reports
As DreamWorks (DWA) talks slow, Softbank (SFTBF) mulls investment in Legendary, Hollywood Reporter says
GM (GM) CEO to unveil strategy to deliver profit, quality goals, WSJ reports
AstraZeneca (AZN) shifting focus to cancer, diabetes, Nikkei reports
AMC Networks (AMCX) in talks to buy 50% stake in BBC America, Bloomberg reports

SYNDICATE

Fidus Investment (FDUS) files automatic common stock shelf
Lentuo International (LAS) files $300M mixed securities shelf
RCS Capital (RCAP) files to sell 464K shares for holders
Sabra Health Care (SBRA) 6M share Secondary priced at $24.25
Trina Solar (TSL) announces offering of 7M American depositary shares

via Zero Hedge http://ift.tt/1rBKXve Tyler Durden