Frontrunning: December 31

Firms to Face new Rules Over Pay, Taxes (WSJ)
US to test commercial drones at six sites (CNN)
China’s Local Debt Swells to 17.9 Trillion Yuan in Audit (BBG) – which is about 2 trillion less than where it actually is (Reuters)
Fears after key China debt level soars 70% (FT) and in reality the debt level is saoring far more
Pot Shops in Denver Open Door to $578 Million in Sales (BBG)
China Says It Will Shun Abe After Shrine Visit (WSJ)
De Blasio Taking Office Citing Wealth Gap as Crime Falls (BBG)
China Approves $353 Million of Share Sales as IPOs Resume (BBG)
Obama Seeks Way to Right His Ship (WSJ)
Netflix Tests Subscription Fees Based on Number of Account Users (BBG)
Three big macro questions for 2014 (FT)
Australia cyclone heads inland after battering iron ore ports (Reuters)
Latvia sees joining euro as extra protection against Russia (FT)
Berkshire Swaps $1.4 Billion in Phillips 66 Stock in Deal (BBG)

Overnight Media Digest

WSJ

* In the best year for U.S. stocks since 1995, the smart way to play the markets has been to follow the dumb money.

* Private-equity firms are set to return a record amount of cash to their investors for 2013, after taking advantage of buoyant markets to sell hundreds of billions of dollars of investments.

* Regulators are set to unleash new business rules in 2014 that will push companies to re-examine issues ranging from their taxes and suppliers to auditor relationships and interest-rate hedges.

* Cooper Tire terminated its $2.2 billion merger pact with Indian suitor Apollo Tyres, ending a deal that had unraveled in recent months.

* Prices have tumbled 20 percent this year, capping the biggest two-year plunge in a decade and highlighting commodity markets’ struggle with a supply deluge.

* A feud between Apple and a lawyer appointed by a federal court judge to monitor the company’s e-book pricing reform is getting more acrimonious.

* Hertz Global Holdings Inc enacted a one-year shareholder-rights plan to prevent investors from gaining sizable control of the car-rental firm, a move the company attributed to “unusual and substantial” trading activity.

* Hewlett-Packard Co on Monday said it is in advanced talks with two U.S. regulators to settle investigations concerning allegations of bribery.

Paul Tucker, former deputy governor for financial stability at the Bank of England, is knighted in the new year’s honours list for his services to central banking.

The UK’s financial markets watchdog is on track to receive a record number of pleas for help from overseas authorities in 2013 as cross-border scandals such as Libor-rigging underscore the global nature of regulatory investigations.

The heads of Britain’s electricity networks will be grilled by MPs in the new year amid rising anger over the amount of time it has taken to restore power to tens of thousands of homes affected by last week’s storms.

Local government debt levels in China have soared to almost $3 trillion in less than three years, according to an official audit highlighting one of Beijing’s most daunting challenges as it attempts to sustain economic growth while avoiding a financial crisis.

London Underground is throwing its stations open to greater commercial development as part of an overhaul of the world’s oldest metro system designed to boost the network’s takings.

NYT

* Despite challenges that have stymied even giants like Wal-Mart Stores Inc, some American technology entrepreneurs are seeking to pursue India’s untapped opportunities, and are ready to risk their money on start-ups.

* Banks in 16 countries are using a psychometric test to predict whether someone will pay back a loan. Originally a Harvard doctoral project, the Entrepreneurial Finance Lab’s test has increasingly won the confidence of risk-averse bankers in places where, many economists believe, credit bottlenecks are severely stunting growth. A new partnership with MasterCard Inc has potential to speed the model’s proliferation.

* Parents and advocacy groups have been using websites and social media as powerful megaphones to force titans of the food industry to reconsider the ingredients in their foods and the labeling and processing of their products. In several instances in the last year or so, major food companies and fast-food chains have shifted to coloring derived from spices or other plant-based sources, or changed or omitted certain labels from packaging.

* The number of Americans who signed contracts to buy existing homes in November was nearly unchanged from October, suggesting sales are stabilizing after several months of declines.

* Hertz Global Holding LLC, one of America’s biggest car rental companies, has adopted a one-year shareholder rights plan, commonly known as “poison pill,” to thwart an investor from gaining control of the board.

* Private equity firm Bain Capital said it had agreed to buy a majority stake in Bob’s Discount Furniture, the chain of stores known for its low-tech commercials featuring its founder, Bob Kaufman.

* The restaurant chain Cracker Barrel Old Country Store Inc’s board fired back at Sardar Biglari, the activist investor, on Monday, saying that it plans to continue business as is despite Biglari’s push to put Cracker Barrel on the block.

Canada

THE GLOBE AND MAIL

* Support for Prime Minister Stephen Harper’s government is dropping sharply, according to a new poll showing a majority of Canadians believe the country is headed in the wrong direction.

* The world’s central banks are stashing away Canadian dollars at a faster rate than any other major currency, a vote of confidence at a time when the loonie, the Canadian one dollar coin, has lost some of its shine in foreign exchange markets.

* Canada’s first gold coins had barely been minted before Ottawa yanked them out of circulation a hundred years ago in an effort to stop gold from leaving the country during the First World War. After a century of sitting in cloth bags inside the Bank of Canada
vault, they are among a wide range of assets the Conservative government is liquidating – in this case literally – to save taxpayers a few dollars and help balance the books.

* Toronto City Council will debate asking the Ontario government to help pay for cleanup after an ice storm that left hundreds of thousands of people without power, a bill that may ultimately be shared by Ottawa if costs rise.

Reports in the business section:

* BlackBerry Ltd Chief Executive John Chen continues to swat at critics and competitors, issuing an open letter that takes some direct shots at the company’s rivals as he tries to convince the market the smartphone company can turn itself around.

* Canadian Imperial Bank of Commerce signed a new deal with the Greater Toronto Airports Authority earlier this month, becoming the only bank allowed to advertise in Toronto’s Lester B. Pearson International Airport. Canadian banks are developing new tactics to attract business from immigrants, devoting greater effort to locking down newcomers even before they settle in their new country.

* Bombardier Inc says it received a firm order for 10 Challenger 350 business jets worth $259 million at list price. The Montreal-based plane and train maker did not disclose the customer’s name.

* The province of Ontario has experienced a rash of plant closings recently, and with a lacking currency cost advantage, new investment doesn’t seem to be in the cards.

NATIONAL POST

* Alberta’s opposition leader, Danielle Smith, says she is determined to win the legislature come 2016 against a government posting unbalanced budgets amid a series of petty scandals and outrages.

* Ontario Premier Kathleen Wynne says her vow to set up an Ontario pension plan is no bluff to twist Ottawa’s arm on enhancing the Canada Pension Plan (CPP). She says she’ll forge ahead because the federal government has shut down any discussion about CPP to provide Canadians with a more secure retirement income.

FINANCIAL POST

* Kitsault Energy Ltd has applied to federal regulators to export 20 million tons of chilled natural gas per year from the site of an abandoned mining town on Canada’s West Coast, joining much bigger companies looking to tap British Columbia shale gas for delivery to overseas markets.

* Two directors, Douglas Reeson and Greg Hall, have resigned from Colossus Minerals Inc, a formerly high-flying junior mining company that is now on the verge of financial collapse.

* Canadians may be the heaviest Internet users in the world but their homegrown online retailers have yet to catch up to the performance of U.S. stores with sites in Canada, according to a report by Vancouver-based digital consultancy Chasm Digital Inc.

China

CHINA SECURITIES JOURNAL

– China’s Ministry of Land and Resources is drafting rules to ensure the supply of arable land. China must improve land efficiency to meet a level of at least 120 million hectares for agriculture, ministry vice minister Wang Shiyuan said.

– The scale of China’s outward direct investment is estimated to reach $90 billion this year, said Wang Yiming, a vice president of macroeconomic research under the National Development and Reform Commission (NDRC).

SHANGHAI SECURITIES NEWS

– China will implement five institutional and five functional changes in the Shanghai Free Trade Zone (FTZ) next year, including setting up a separate accounting unit and establishing markets for bulk products, sources told the official paper.

SHANGHAI DAILY

– Authorities in Shanghai have blacklisted 29 hospitals for failing to implement tougher smoking rules as China cracks down on public smoking. The move follows a ban in China on officials smoking in public places.

CHINA DAILY

– China’s urban smog reached a 52-year high in 2013, according to the National Meteorological Center. Cities suffered on average 29.9 days of smog over the course of the year.

PEOPLE’S DAILY

– Revealing China’s government debt to the public will help make the government’s economic work more transparent, so improving debt management and supervision, said a commentary in the paper that acts as the Party’s mouthpiece.

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Haemonetics (HAE) downgraded to Hold from Buy at Benchmark Co.
Blucora (BCOR) initiated with a Hold at Jefferies
Ring Energy (REI) initiated with a Buy at SunTrust
Hertz (HTZ) potential spin-off could spur investor interest, says Wells Fargo
ITT Educational (ESI) CFPB settlement risk manageable, says William Blair
Penn National (PENN) Q4 revenue estimate cut to $651M at FBR Capital

HOT STOCKS

NASDAQ (NDAQ), Borsa Instanbul signed agreement; NASDAQ to take 5% equity stake
Berkshire Hathaway (BRK.A) acquired flow improver business from Phillips 66 (PSX)
Hertz Global (HTZ) board unanimously adopted one-year shareholder rights plan
Maui Land & Pineapple (MLP) doesn’t comment on unusual market activity
Safeguard Scientifics (SFE) partner company ThingWorx acquired by PTC (PTC) for $112M

NEWSPAPERS/WEBSITES

Symantec Corp. (SYMC), which makes anti-virus and data security software sees many opportunities for growth in China. The U.S. remains Symantec’s largest market, accounting for nearly half of its revenue, but its presence in the Asian Pacific region has increased over the past several years, and the region now generates roughly 20% of its revenue, the Wall Street Journal reports
The question being raised by bankers trying to assess the flood of new regulation continuing to wash over their firms is what’s the endgame. While many are resigned to the fact their business will be very different due to the financial crisis, they are unsettled by the lack of an overarching framework for the multitude of regulatory initiatives, the Wall Street Journal reports
Dallas Fed President Fisher said his votes on the central bank’s policy panel in 2014 will reflect his concern that the Fed’s bond-buying risks stoking inflation and exposing the institution politically, Reuters reports
The American Bankers Association dropped its request for a federal judge to temporarily block Volcker Rule restrictions on collateralized debt obligations backed by trust-preferred securities after regulators said they are reviewing challenged aspects of the rule, according to a filing in federal court in Washington, Bloomberg reports
Apple (AAPL) faces opposition from the U.S. in its bid to block an antitrust monitor appointed in a electronic books price-fixing case from interviewing top executives and directors, including CEO Tim Cook and board member Al Gore, Bloomberg reports

SYNDICATE

Air Methods (AIRM) files automatic mixed securities shelf

ACTIVIST/PASSIVE FILINGS

KKR reports 6.8% stake in Marvell (MRVL), says may talk to management