Category: zerohedge

Just as we warned last night was indicated by the Japanese market’s Brazil ETFs, so the IBOVESPA has opened down over 6% this morning on very heavy volume following the ‘disappointing for the bulls’ electionvictory of Dilma Rousseff. Despite her associations with Petrobras (which may have suggested it bounced), the favorite Jim Chanos short is being crushed, down 14% at the open. The Real is tumbling too, breaking above 2.54 to its weakest against the USD since Dec 2008.

Brazilian stocks…

 

and The real is tumbling…

 

Charts: Bloomberg

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

Following a weekend in which the condition of the Ebola-diagnosed doctor currently being treated at Bellevue hospital, Craig Spencer, reportedly deteriorated, the NY Post which first broke news of Spencer’s condition last week reported seveeral hours ago that NY may have its second possible Ebola case after a 5-year-old boy who just returned from West Africa was transported to Bellevue Hospital Sunday with possible Ebola symptoms, according to law-enforcement sources.

According to the Post, the child was vomiting and had a 103-degree fever when he was carried from his Bronx home by EMS workers wearing hazmat suits, neighbors said. “He looked weak,” said a neighbor.

“He was really, really out of it.”

And while under ordinary circumstances this most likely would have been just extraordinary precautions due to a bad case of the flu, in this case the risk factor is that the boy returned with his family from Guinea Saturday night. As a result, five members of the family were being quarantined inside their apartment, sources said.

And while we await to learn if NYC has its second confirmed Ebola patient, the algos’ attention next turn to Japan, where moments ago NHK reported that a man who visited Liberia for 2 months and traveled to Japan via Belgium and U.K., and exhibiting a low-grade fever was undergoing tests for Ebola after entering Japan via Haneda airport.

NHK added that the man appears not to have had any contact with Ebola patients, according to Japan’s health ministry, but then again this is Japan: the country that lied about everything related to the Fukushima disaster, so one is best advised to ignore, and in fact assume the opposite of whatever government officials state.

via Zero Hedge http://ift.tt/1xvjM5d Tyler Durden

• White House questions new Ebola rules, nurse plans to sue (Reuters)
• States stand firm on Ebola quarantines despite White House pressure (Reuters)
• Rousseff Naming Brazil Finance Minister Key to Regain Trust (BBG)
• Ukraine leader wins pro-West mandate but wary of Russia (Reuters)
• Single Firm Holds More Than 50% of Copper in LME Warehouses (WSJ)
• Treasury Liquidity Squeeze Seen as Dealer Shut Off Machine (BBG)
• CVS follows Rite-Aid, shuts off Apple Pay (USAToday)
• Oil Speculators Bet Wrong as Rebound Proves Fleeting (BBG)
• Draghi Sets Stimulus Pace as ECB Reveals Covered-Bond Purchases (BBG)
• German Ifo Business Confidence Drops for Sixth Month (BBG)
• Eurozone loans to private sector still contracting (AFP)
• Darker Global Outlook Has Bond Bears Hibernating (WSJ)
• U.S. Gains From Good Deflation as Europe Faces the Bad  (BBG)
• Troubles in China rattle western banks (Business Specator)
• Belka Surprises Revealing Worst-Kept Polish Zloty Secret (BBG)

 

Overnight Media Digest

WSJ

* The White House pushed back against the governors of New York, New Jersey, Illinois and other states that instituted procedures to forcibly quarantine medical workers returning from West Africa, deepening a debate brought on by recent Ebola cases in the United States. (http://on.wsj.com/1pPdgSG)

* New York City’s top counter-terrorism official went to Florida last week to warn a group of police chiefs about the growing threat of self-radicalized terrorists. (http://on.wsj.com/10uE2tT)

* European regulators said that all but 13 of the continent’s leading banks have enough capital to weather a financial storm, an attempt to put to rest years of anxiety about the industry’s health. (http://on.wsj.com/1yEoxuz)

* Weaker economic indicators have led many investors to reverse their recent opinion that a bond-market downturn was near. (http://on.wsj.com/12NwHGO)

* China plans to slash compensation for top executives at the largest state-owned firms, a move that conflicts with Beijing’s goal of making the companies more market-driven. (http://on.wsj.com/1w7UPyJ)

* Banamex, Citigroup Inc’s once-prized Mexico subsidiary, is cleaning house. In addition to the departure of the unit’s CEO earlier this month, high-ranking employees of the bank’s Banamex division, including the head of administration, general counsel and head of internal investigations, also have left this year. (http://on.wsj.com/1FPpo0n)

* Williams Companies Inc sweetened the terms of its deal to merge two master limited partnerships it controls to create one giant natural-gas pipeline system. (http://on.wsj.com/1tzZnNe)

* Big banks are demanding that their law firms do more to protect sensitive information to ensure that they do not become back doors for hackers. (http://on.wsj.com/1yErhbe)

 

FT

China, the world’s second-biggest economy, is expected to invest 105 billion pounds (168.93 billion US dollars) in British infrastructure by 2025, with energy, property and transport being the biggest recipients, according to a report by the London-based Centre for Economics and Business Research and the law firm Pinsent Masons.

The towns of Britain are being “swamped” by immigrants, and the residents of these towns are “under siege”, the UK defence secretary, Michael Fallon, said on Sunday.

Marks & Spencer Group, Waitrose and easyJet are among some of Britain’s largest companies who have joined a government-backed campaign to train employees in how to deal with Alzheimer’s disease among customers and family members in a sign that big businesses are adapting to the demands of an ageing population.

Regional businesses of Britain are choosing sides in the fight over airport expansion between Heathrow and Gatwick in southeast England.

 

NYT

* Rite Aid Corp and CVS Health Corp disabled Apple Pay from working in their stores nationwide. The reason was not immediately clear. (http://nyti.ms/1Di1o1N)

* The bulk of Europe’s biggest banks would be able to survive a financial crisis or severe economic downturn, the European Central Bank said on Sunday, concluding a yearlong audit of eurozone lenders that is potentially a turning point for the region’s battered economy (http://nyti.ms/1FPoe4T)

* This summer, as Allergan Inc, the maker of Botox, was coming under increased pressure to sell itself to Valeant Pharmaceuticals Inc and the hedge fund Pershing Square Capital Management, its executives grew tired of playing defense. They wanted their advisers at Goldman Sachs Group Inc to take the fight to Valeant. (http://nyti.ms/1wAElz9)

* Deutsche Bank AG said on Friday it would record 894 million euros ($1.13 billion) in litigation costs for the third quarter as it set aside yet more money to cover the cost of lawsuits and official investigations related to accusations of past wrongdoing. (http://nyti.ms/1wugGzk)

* Chiquita Brands International Inc shareholders voted down the company’s proposed acquisition of Fyffes Plc , an Irish produce distributor. In doing so, the Chiquita shareholders tacitly endorsed a roughly $680 million takeover bid by an unusual consortium made up of the Cutrale Group, a Brazilian wholesale orange juice producer, and the Safra Group, a holding company in Brazil. (http://nyti.ms/10uCZu3)

* Roku, the popular video streaming device maker, is preparing a potential filing for an initial public offering, people briefed on the matter said Friday. (http://nyti.ms/ZSOg6p)

 

Canada

THE GLOBE AND MAIL

** More than a year into unproductive negotiations, Canada’s banks and credit-card companies are bracing for Ottawa’s final verdict on interchange fees which could come as early as Monday. According to people involved in the discussions, the Finance Department – frustrated with the pace of negotiations – asked the credit-card companies to submit their final proposals last Monday. (http://bit.ly/1xuFoil)

** With the Conservative government set to table expanded powers for Canada’s spies as early as Monday, the watchdog overseeing the Canadian Security Intelligence Service (CSIS) has identified flaws in how the agency operates with tools already at its disposal. A report tabled on Friday by the Security Intelligence Review Committee suggests the CSIS is operating without sufficient controls or scrutiny by its overseers. (http://bit.ly/1tcdHMc)

** The man who committed the attack on Parliament Hill that left a Canadian soldier dead was driven by a political and ideological motives, the Royal Canadian Mounted Police said, as it provided new details that shed light on the assault that shook Ottawa last week. (http://bit.ly/1wuun15)

NATIONAL POST

** Alberta is going to the polls on Monday. Heralded as a ‘mini-election,’ the results will predict just how well new premier Jim Prentice has been received in the wake of the Alison Redford era. (http://bit.ly/1wASX2S)

** After a traumatizing week in which federal leaders embraced each other in sympathy in the House of Commons, last week’s attacks in Quebec and Ottawa remain free of political spin. But already contrasting narratives are emerging on how these events might influence next year’s federal election, according to political observers. (http://bit.ly/1wuCDhH)

 

China

CHINA SECURITIES JOURNAL

– About half of China’s more than 2,000 listed companies have reported third-quarter earnings which showed profit growth slowed in line with a slowdown in the local economy. All firms have to report their quarterly earnings by the end of October.

 
– China will make fresh efforts to expand its agricultural product futures market to support the development of the country’s agricultural sector, China Securities Regulatory Commission Vice Chairman Jiang Yang said at a forum over the weekend.

SHANGHAI SECURITIES NEWS

– A total of 2,131 Chinese mutual funds posted a combined net profit of 211 billion yuan ($34.5 billion) in the third quarter, their best quarterly earnings since 2010, thanks to a 15 percent rebound in the country’s stock market during the period.

– Steel and iron prices in China started falling again last week following a short-lived rebound, pointing to a continued weakness in the country’s steel sector which has been plagued by overcapacity.

PEOPLE’S DAILY

– The ruling Communist Party of China must keep the leadership firm while the country is conducting legal reforms, the newspaper, which is also the party’s mouthpiece, said in a commentary after the plenary session of the party’s central committee last week.

CHINA DAILY

– China’s current fight against corruption is one that the Communist Party cannot afford to lose as the country promotes the rule of law, the newspaper said in an editorial

 

Britain

The Times

ONE IN FIVE EUROPEAN BANKS FAILS ECB STRESS TESTS Fourteen of Europe’s largest banks have failed “stress tests” designed to assess the ability of big lenders to withstand a financial crisis and have been ordered to raise nearly 10 billion euros ($12.68 billion) to plug a shortfall in their balance sheets. (http://thetim.es/1t6T7Lu) UPSTART TSB PINCHES ITS PARENT’S CUSTOMERS

TSB Banking Group Plc has grabbed customers from its larger rivals, including its own parent Lloyds Banking Group Plc , attracting one out of every ten savers who switched accounts in the past three months. (http://thetim.es/1pOttYr)

The Guardian

ENERGY SECRETARY REASSURES HOUSEHOLDS AFTER POWER STATION FIRES The energy secretary, Ed Davey, has sought to reassure households that there will be no energy shortage this winter, after a series of fires at power stations raised fears about Britain’s lights going out. (http://bit.ly/1tXcUAH)

The Telegraph RECKITT BENCKISER TO DETAIL SPIN-OFF PLAN NEXT MONTH Reckitt Benckiser Group Plc, the maker of Cillit Bang, Vanish and Nurofen, is to reveal to shareholders details of its plans to spin off its pharmaceutical division into a separate stock listing. (http://bit.ly/1v16sTI) OFFICE TO EXPAND AS OWNERS EXAMINE SALE Silverfleet, the private equity firm which owns Office, is understood to be considering selling the business four years after taking control, and has hired bankers at JPMorgan Chase & Co to provide advice on which route to take. (http://bit.ly/1xtjjAC) GULF KEYSTONE PETROLEUM WINS COSTS RULING

A Greek shipping tycoon and two New York hedge funds have been found liable to pay the final costs in Gulf Keystone Petroleum Ltd’s billion-dollar dispute over its oilfields in Iraqi Kurdistan. Gulf Keystone has already recovered 17.5 million pounds ($28.15 million) in legal costs, after Rex and Eric Wempen’s Excalibur Ventures lost its “opportunistic” attempt to claim a $1.65bn share of oilfields owned by Gulf Keystone and its sister company, Texas Keystone. Now Lord Justice Christopher Clarke has ordered the nine parties who funded Excalibur’s lawsuit to pay Gulf Keystone’s outstanding legal costs, estimated at between 4 million pounds and 5 million pounds. (http://bit.ly/1wytPtx)

Sky News

LLOYDS BANK: MORE THAN 200 BRANCHES TO CLOSE

Lloyds Banking Group will set out plans next week to close more than 200 branches under a blueprint that will also see 9,000 jobs disappear. (http://bit.ly/1w7CFNB)

 

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
Pending home sales index for September at 10:00–consensus up 0.8%
Dallas Fed manufacturing survey for October at 10:30–consensus 7.5

ANALYST RESEARCH

Upgrades

ARAMARK (ARMK) upgraded to Buy from Neutral at Goldman
Aaron’s (AAN) upgraded to Outperform from Market Perform at Raymond James
Accuride (ACW) upgraded to Buy from Neutral at B. Riley
Acuity Brands (AYI) upgraded to Conviction Buy from Buy at Goldman
Alcoa (AA) upgraded to Buy from Hold at Deutsche Bank
BB&T (BBT) upgraded to Buy from Neutral at Sterne Agee
Core Laboratories (CLB) upgraded to Overweight from Neutral at HSBC
DineEquity (DIN) upgraded to Buy from Neutral at Longbow
FLIR Systems (FLIR) upgraded to Outperform from In-Line at Imperial Capital
First Niagara (FNFG) upgraded to Outperform from Market Perform at Wells Fargo
Flowserve (FLS) upgraded to Buy from Hold at Stifel
Garmin (GRMN) upgraded to Buy from Neutral at Goldman
L Brands (LB) upgraded to Neutral from Underperform at BofA/Merrill
Mondelez (MDLZ) upgraded to Outperform from Sector Perform at RBC Capital
Newmont Mining (NEM) upgraded to Overweight from Neutral at HSBC
ONEOK (OKE) upgraded to Buy from Neutral at Goldman
Oceaneering (OII) upgraded to Conviction Buy from Buy at Goldman
Rackspace (RAX) upgraded to Buy from Neutral at BofA/Merrill
Shire (SHPG) upgraded to Outperform from Market Perform at William Blair
Targa Resources Partners (NGLS) upgraded to Buy from Neutral at Goldman

Downgrades

Abraxas Petroleum (AXAS) downgraded to Hold from Buy at Stifel
Anadarko (APC) downgraded to Neutral from Buy at Goldman
Basic Energy (BAS) downgraded to Sell from Buy at Goldman
CommScope (COMM) downgraded to Underperform from Buy at BofA/Merrill
Concho Resources (CXO) downgraded to Hold from Buy at Stifel
Consolidated Communications (CNSL) downgraded to Market Perform at Raymond James
Continental Resources (CLR) downgraded to Neutral from Buy at Goldman
Corporate Executive downgraded to Equal Weight from Overweight at Barclays
Covanta (CVA) assumed with a Neutral from Outperform at Macquarie
DCP Midstream (DPM) downgraded to Neutral from Buy at Goldman
Denbury Resources (DNR) downgraded to Hold from Buy at Stifel
Diamond Offshore (DO) downgraded to Sell from Neutral at Goldman
Diana Shipping (DSX) downgraded to Hold from Buy at Deutsche Bank
EP Energy (EPE) downgraded to Neutral from Buy at Goldman
Emerge Energy (EMES) downgraded to Neutral from Buy at Goldman
Enduro Royalty Trust (NDRO) downgraded to Neutral from Buy at Goldman
GOL Linhas (GOL) downgraded to Neutral from Buy at BofA/Merrill
Goodrich Petroleum (GDP) downgraded to Hold from Buy at Stifel
Halliburton (HAL) downgraded to Buy from Conviction Buy at Goldman
Home Loan Servicing (HLSS) downgraded to Neutral from Buy at Citigroup
ICON plc (ICLR) downgraded to Equal Weight from Overweight at Barclays
IHS Inc. (IHS) downgraded to Equal Weight from Overweight at Barclays
Jones Energy (JONE) downgraded to Hold from Buy at Stifel
Laredo Petroleum (LPI) downgraded to Sell from Neutral at Goldman
Lloyds Banking (LYG) downgraded to Underperform from Hold at Jefferies
Midcoast Energy (MEP) downgraded to Neutral from Buy at Goldman
PDC Energy (PDCE) downgraded to Hold from Buy at Stifel
PNC Financial (PNC) downgraded to Neutral from Buy at Sterne Agee
Parsley Energy (PE) downgraded to Sell from Neutral at Goldman
Patterson-UTI (PTEN) downgraded to Neutral from Conviction Buy at Goldman
Pioneer Energy (PES) downgraded to Neutral from Buy at Goldman
Precision Castparts (PCP) downgraded to Neutral from Overweight at JPMorgan
Precision Castparts (PCP) downgraded to Outperform from Top Pick at RBC Capital
Royal Gold (RGLD) downgraded to Neutral from Overweight at HSBC
SM Energy (SM) downgraded to Hold from Buy at Stifel
Sanchez Energy (SN) downgraded to Hold from Buy at Stifel
Scorpio Bulkers (SALT) downgraded to Hold from Buy at Deutsche Bank
Synergy Resources (SYRG) downgraded to Hold from Buy at Stifel
Ventas (VTR) downgraded to Neutral from Buy at UBS
Whiting Petroleum (WLL) downgraded to Hold from Buy at Stifel

Initiations

Calithera Biosciences (CALA) initiated with a Buy at Citigroup
Calithera Biosciences (CALA) initiated with an Outperform at JMP Securities
Calithera Biosciences (CALA) initiated with an Outperform at Leerink
Calithera Biosciences (CALA) initiated with an Outperform at Wells Fargo
Castlight Health (CSLT) initiated with an Outperform at Leerink
Civitas Solutions (CIVI) initiated with a Buy at BofA/Merrill
Civitas Solutions (CIVI) initiated with a Buy at UBS
Civitas Solutions (CIVI) initiated with an Overweight at Barclays
Everyday Health (EVDY) initiated with an Outperform at Leerink
FMSA Holdings (FMSA) initiated with a Neutral at RW Baird
Flowers Foods (FLO) initiated with a Sell at Pivotal Research
Imprivata (IMPR) initiated with an Outperform at Leerink
Omega Protein (OME) initiated with a Buy at Pivotal Research
Vascular Biogenics (VBLT) initiated with an Outperform at JMP Securities
Veeva (VEEV) initiated with a Market Perform at Leerink
Vivint Solar (VSLR) initiated with a Buy at Deutsche Bank
Vivint Solar (VSLR) initiated with a Buy at Goldman
Vivint Solar (VSLR) initiated with a Neutral at Citigroup
Vivint Solar (VSLR) initiated with an Outperform at Credit Suisse
WageWorks (WAGE) initiated with an Outperform at Leerink
Wayfair (W) initiated with a Buy at Canaccord
Wayfair (W) initiated with a Buy at Citigroup
Wayfair (W) initiated with a Buy at Goldman
Wayfair (W) initiated with an Outperform at Pacific Crest
Wayfair (W) initiated with an Outperform at Wells Fargo
Wayfair (W) initiated with an Overweight at Piper Jaffray
WebMD (WBMD) initiated with an Outperform at Leerink

COMPANY NEWS

Williams (WMB), Williams Partners (WPZ) and Access Midstream (ACMP) announced merger agreement with an approximately $50B total transaction value. Williams also affirmed dividend-growth guidance of approximately 15% annually and said it would complete the drop-down of its remaining NGL & Petchem Services assets and projects by late 2014 or early 2015
Tesla (TSLA) CEO Musk announced ‘improved’ leasing with U.S. Bank (USB)
Google’s (GOOG) Nest acquired Revolv, terms not disclosed
Twitter (TWTR) acquired Twitpic domain and photo archive
FCC cleared Level 3’s (LVLT) pending acquisition of tw telecom (TWTC)

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Investar Holding (ISTR), Huntsman (HUN), Precision Drilling (PDS), Stonegate Bank (SGBK)

Companies that missed consensus earnings expectations include:
Southside Bancshares (SBSI)

CBIZ, Inc. (CBZ) sees FY14 EPS up 15%-18%
CBIZ, Inc. (CBZ) reports Q3 EPS 14c, one estimate 12c
Education Realty (EDR) backs FY14 core FFO 61c-64c, consensus 62c
Education Realty (EDR) reports Q3 FFO 11c, consensus 11c
Siliconware Precision (SPIL) reports Q3 EPS 17c, one estimate 15c
Emclaire Financial  (EMCF) reports Q3 EPS 56c vs. 54c a year ago
Waterstone Financial (WSBF) reports Q3 EPS 14c vs. 9c last year

NEWSPAPERS/WEBSITES

Apple (AAPL) plans to relaunch Beats Music next year under iTunes brand, WSJ reports
CVS (CVS) may be disabling NFC to shut down Apple Pay (AAPL), Google Wallet (GOOG), MacRumors reports (RAD)
AT&T (T) to lock Apple’s (AAPL) SIM cards to its network on new iPads, WSJ reports
Shire (SHPG) CEO ‘dumbfounded’ by AbbVie’s (ABBV) decision, Bloomberg says
HP (HPQ) seeks buyer for Chinese networking business, DJ reports
Amazon.com (AMZN) doesn’t look like a bargain, Barron’s says
MasterCard (MA) looks reasonable, Barron’s says
Coca-Cola (KO) looks likely to underperform, Barron’s says

SYNDICATE

Covanta (CVA) files automatic mixed securities shelf
Oncolytics Biotech (ONCY) enters $20M ‘at-the-market’ equity distribution agreement
Rose Rock Midstream (RRMS) files to sell $150M of common units
Summit Financial Group (SMMF) files $15M mixed securities shelf

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

It started off so well: the day after the ECB said that despite a gargantuan €879 billion in bad loans, of which €136 billion were previously undisclosed, only 25 European banks had failed its stress test and had to raised capital, 17 of which had already remedied their capital deficiency confirming that absolutely nothing would change (conveniently the ECB reported that private sector loan issuance declined once again by 1.2% Y/Y), Europe started off with a bang as stocks across the Atlantic jumped, which in turn pushed US equity futures to fresh multi-week highs putting the early October market drubbing well into the rear view mirror. Then things turned sour.

Whether as a result of the re-election of incumbent Brazilian president Dilma Russeff, which is expected to lead to a greater than 10% plunge in the Bovespa when it opens later, or the latest disappointment out of Germany, when the October IFO confidence declined again from 104.5 to 103.2, or because “failing” Italian bank Monte Paschi was not only repeatedly halted after crashing 20% but which saw yet another “transitory” short-selling ban by the Italian regulator, and the mood in Europe suddenly turned quite sour, which in turn dragged both the EURUSD and the USDJPY lower, and with it US equity futures which at last check were red.

So here is where we are now in the markets: European shares fluctuate, currently down having just touched session lows with the travel & leisure and food & beverage sectors outperforming and banks, autos underperforming. Banks index falls having risen earlier on results of ECB stress tests yesterday. Brazilian stocks fall after Rousseff wins election. The Dutch and Swiss markets are the best-performing larger bourses, Italian the worst. The euro is stronger against the dollar. Irish 10yr bond yields fall; Spanish yields decline. Commodities decline, with nickel, corn underperforming and natural gas outperforming. U.S. Dallas Fed index, pending home sales, Markit U.S. composite PMI, Markit U.S. services PMI due later.

And while today attention turns towards the US pending home sales release and a host of tier 1 US earnings including Merck at 1100GMT and Twitter after-market, the biggest event by far takes place at 11:00 am when the Fed monetizes some $0.85 – $1.05 billion in 2036-2044 bonds, after which POMO, and QE3, are officially over!

Market wrap

• S&P 500 futures down 0.1% to 1959.1
• Stoxx 600 down 0.5% to 327.3
• US 10Yr yield down 1bps to 2.27%
• German 10Yr yield down 0bps to 0.89%
• MSCI Asia Pacific up 0.6% to 138.4
• Gold spot down 0% to $1230.5/oz

Bulletin Headline Summary from Bloomberg and RanSquawk

• European equities pare their initial gains as participant’s book profits and a disappointing German IFO survey returns focus back towards the dreary outlook for the Eurozone economy
• EUR/USD trades higher albeit off its best levels alongside the turnaround in Eurozone sentiment with large expires at 1.2680-90 (2.25bln) and 1.2700 (1.3bln) also said to be anchoring price action
• Looking ahead, attention turns towards the US pending home sales release and a host of tier 1 US earnings including Merck at 1100GMT and Twitter after-market.
• Treasuries decline amid expectations Fed will end bond-buying program at two-day meeting starting tomorrow; week’s auction cycle also begins tomorrow with $29b 2Y notes.
• Fed to buy $850m to $1.05b in 2036-2044 sector today, last purchase scheduled for October
• Ifo institute’s index of German business confidence fell to 103.2 in October from 104.7 in September, lowest since December 2012 and below 104.5 median estimate in Bloomberg survey
• Twenty-five banks including Italy’s Banca Monte dei Paschi di Siena SpA failed a stress test led by the ECB, which said almost half of them must act to raise more capital
• Most of the lenders that failed have been let off for good behavior; only eight banks out of the 25 found with shortfall haven’t already plugged capital gaps or satisfied the ECB with plans to shrink
• China’s economic growth will slow to 7.2% in 4Q as domestic demand weakens, said Song Guoqing, an academic member of the People’s Bank of China monetary policy advisory committee
• Pro-European parties are set to control Ukraine’s parliament and form a coalition government after trouncing the Russian- leaning political forces popular in the nation’s war-torn east
• The Obama administration is concerned that required quarantines of health workers returning from West Africa to New York and New Jersey may have unintended consequences and is preparing new directives, a senior administration official said
• ETFs tracking Brazilian shares slid as President Dilma Rousseff’s re-election damped speculation for a change in policies that wiped out $553b of stock market value and left the economy in recession
• Sovereign yields mostly higher. Asian stocks mixed, with Nikkei higher, Shanghai lower; European stocks mostly lower, U.S. equity-index futures decline. Brent  crude falls 0.2%; copper, gold little changed

US Event Calendar

• 9:45am: Markit US Services PMI, Oct. preliminary, 57.8 (prior 58.9); Markit US Composite PMI, Oct. preliminary (prior 59)
• 10:00am: Pending Home Sales m/m, Sept., est. 1% (prior -1%)
• Pending Home Sales y/y, Sept., est. 2.2% (prior -4.1%)
• 10:30am: Dallas Fed Manufacturing Activity, Oct., est. 11 (prior 10.8)
• Last Ever POMO: 11:00am: Fed to buy $0.85 – $1.05 billion in bonds due 02/15/2036 – 08/15/2044

ASIA

JGBs traded up 4 ticks at 146.50 underpinned by the BoJ who unexpectedly increased their purchasing operation in the 10yr-25yr sector by JPY 10bln. Asian equity markets kicked-off the week mostly higher with the exception of Hk and Chinese bourses, weighed on by reports of a delay in the HK-Shanghai cross border trading link. Consequently, the Shanghai Comp traded down 0.5% while the Hang Seng index trades lower by 0.7%. The Nikkei 225 traded up 0.6%, supported by improved risk appetite from Friday’s positive Wall Street close and news that most European banks passed the ECB/EBA stress tests.

FIXED INCOME & EQUITIES

European equities traded in the green from the get-go as participants digested the ECB stress test results with outperformance in the periphery as despite the disappointing findings for Banca Carige/Monte Paschi, the stress tests painted a better than expected picture for Spain and Italy. The main takeaway from the release was that the EUR 25bln capital hole was towards the lower end of analyst expectations and when capital raising exercises that are already underway are taken into account, this figure falls to EUR 9.5bln. Elsewhere, Commerzbank were one of the major outperformers in Europe (up as much as 9%) after any potential concerns regarding the German lender were alleviated.

However, following the open, participants then began to book profits with attention returning back to the current outlook for the Eurozone economy. This sentiment was further buoyed by the German IFO survey which was expected to reveal a 6th consecutive monthly decline, an outcome which was confirmed by the release (Business Climate 103.2 vs. Exp. 104.5). This subsequently saw European equities move into the red, with notable underperformance in the periphery, with Banca Monte dei Paschi (-17%) who initially failed to set an opening price, weighing on the FTSE MIB. This investor caution subsequently saw a flight to quality with Bunds then moving into relatively neutral territory, with the European spreads against the German benchmark unwinding their initial tightness.

FX

In FX markets, EUR/USD is currently trading with modest gains after coming off its highs in-line with the turnaround in European equities, with large option expires in EUR/USD at 1.2680-90 and 1.2700 said to be anchoring the pair’s price action. Furthermore, sentiment for EUR was also buoyed by the disappointing IFO release, with IFO economist Wohlrabe saying he sees no growth in Q4 for Germany. Elsewhere, USD-index (-0.15%) remains on the back foot after breaking below support seen at Friday’s lows, spurring leveraged hedge funds to reduce JPY short positions and in-turn send USD/JPY back below the 108.00
handle.

Brazilian President Dilma Rousseff was re-elected by a narrow margin, after securing 51.6% of the valid votes cast, having fought off a strong challenge by pro-business challenger Aécio Neves who finished with 48.5%. (Guardian)

COMMODITIES

Heading into the North American open, WTI and Brent crude futures trade in the red, with further negative sentiment stemming from Goldman Sachs cutting their forecasts for Brent and WTI prices for 2015. GS also said OPEC was losing its pricing power as US shale output increases and forecast Brent to avg. USD 85/bbl (Prev. USD 100/bbl), and WTI USD 75/bbl (Prev. USD 90/bbl). Elsewhere, precious metals trade with little overall direction with markets looking ahead to the prospect of the Fed ending QE at their meeting on Wednesday.

* * *

DB’s Jim Reid concludes the overnight recap

In terms of nail biting events this week, the FOMC probably doesn’t look as likely to be a cliff hanger that it perhaps looked 10 days ago when markets were spiralling lower and the ECB comprehensive assessment (stress tests) was broadly in line with expectations although most people’s first reactions have generally been positive towards the exercise. Before we preview the FOMC, lets review some of the key details of the stress test results released yesterday. 25 of the 130 euro-area banks covered in the assessment ‘failed’ with a total gross capital shortfall amounting to €24.6bn as of the end of 2013. However if we take into account for capital already raised this year, the actual capital shortfall amounts to just €9.5bn. The capital needs are concentrated in a few countries (Italy, Greece, Austria, Portugal and Ireland) with these five countries accounting for EUR8.9bn of the above net EUR9.5bn. Overall the results are largely in line with DB economists’ expectations of €8-25bn. As they pointed out, it is also worth noting that the aggregate capital shortfall is fairly small relative to either the total CET1 capital of banks included in the stress test (nearly EUR1trillion) or euro-area GDP (nearly EUR10trillion). The banks included in this exercise have raised over EUR200bn between 2008 and 2013 and an additional EUR57bn has also been raised in the first 9 months of 2014.

One of the key things to look out for was how the market would perceive the credibility of the tests after earlier worries that the tests would largely be a wash. Most reports have been favourable of this front with some citing the Bank of Italy’s reaction that the tests were harsh on Italian banks as evidence that it wasn’t too easy to pass. However an early criticism has already come from the President of Germany’s IFO Institute, Hans-Werner Sinn who was quoted in Bloomberg overnight saying that the exercise lost credibility given the lack of a deflation stress scenario and that ‚with its assumptions, the ECB has set an inflationary scenario on average for the euro area so that not too many banks would fall under the red line?. Perhaps the ECB feel that they have the ability to avert deflation and therefore didn’t stress this as aggressively as other variables. The implied adverse inflation rates put through the stress test looks to be 1.0% in 2014, 0.6% in 2015 and 0.3% in 2016 – not particularly stressful, especially in light of recent numbers. However notwithstanding this DB’s economists and equity strategists believe the latest stress test is more credible than previous exercises in the past and most reports over the weekend expect a positive performance today from European financials.

Markets have reacted with a slightly positive bias overnight with most Asian equity bourses in the green as we type. The Nikkei, the KOSPI, and the ASX 200 are +0.8%, +0.3% and +0.8%, respectively. The S&P 500 Futures are also marginally higher (+0.09%) whilst the EUR is now 1.2705 against the Dollar (up from 1.2671 last Friday). The Hang Seng is down though on concerns that the HK-Shanghai Stock Connect programme will be delayed. Credit spreads are also tighter in Asia although in reality some of that also reflects a solid US session on Friday. The Asia and Australia iTraxx indices are around 3bp and 2bp tighter, respectively. Treasuries are a little softer with the 10yr yield around nearly 2bps higher at 2.29%.

Moving our focus to emerging markets the latest from Brazil’s weekend elections is that Dilma Rousseff has been re-elected following victory over rival Aecio Neves by just an incredibly marrow margin of around 3ppt – supposedly the tightest margin in an election race since at least 1945. Given Friday’s market action reflected a Neves turnaround (CDS: -10bp; BRL: +1.5%; Jan-21: -30bp), our EM strategists expect the market to move in the opposite direction today. With the re-election of President Rousseff, our EM colleagues also think that the market will immediately focus on to a possible announcement on the president’s new economic team, especially the finance minister appointment, although it is far from clear how long it would take her to make the announcement (the longer it takes, the more jittery markets will be). Indeed a Brazilian stock ETF plunged by nearly 8% overnight in Tokyo on what is supposedly its biggest decline in 3 years.

Previewing the FOMC meeting this week, we won’t have a press conference this time round when the 2 day meeting ends on Wednesday. Joe Lavorgna expects little changes in the committee’s assessment of the economy and as indicated at the September meeting the Fed will likely conclude its asset purchase program and will continue to reinvest maturing securities on its balance sheet. Importantly he expects the Fed to maintain the current forward guidance on the fed funds rate by keeping the ‘considerable time’ language in the meeting statement. Whilst we won’t hear from Yellen at the FOMC press briefing, she will speak in Washington on Thursday on Diversity in the Economics Profession but as she will be speaking from her prepared remarks with no Q&A we can perhaps expect less fireworks from that. In terms of other Fed speakers, San Francisco Fed President Williams will be giving a keynote speech to the South African Reserve Bank’s 5th biennial conference on Friday although the event seems to be closed to the media.

Besides the FOMC and looking at the other data/events for rest of the week we kick off today with September’s pending home sales, the Dallas Fed  Manufacturing Survey and a round off of the Markit Services/Composite PMIs. Euro M3 data for September is also due today alongside the German IFO survey for October. On Tuesday durable goods orders will be the key release in the US along with the Richmond Fed survey and the Case-Shiller home price index. The durable goods headline is expected to get a boost from Boeing aircraft orders (+1.5% v -18.4% last month) although this is an extremely volatile series. Our US economists expect ex-transportation orders to improve as well. Wednesday’s main event will be the FOMC statement although we also have the ECB’s Bank Lending Survey (Q3) from the other side of the pond. Thursday’s highlights will include the first reading of the US Q3 real GDP from the BEA, the usual weekly jobless claims, as well as CPI readings from both Spain and Germany. As for the US Q3 GDP, market consensus is currently looking for +3.0% growth for Q3, down from 4.6% in Q2. Data aside we also note that Bank of Spain’s Governor Linde will speak in Madrid on Thursday as part of a debate on the role of central banks in the euro region. Friday will see the release of US personal income and spending stats but the focus will likely be on the latest Chicago PMI ahead of next week’s ISM report. Friday’s core PCE inflation data will also be interesting in light of the recent declines in breakeven inflation rates. Speaking of which we also  have the Euro area inflation report for October due on Friday.

If that wasn’t enough company analysts will be busy covering the 160 S&P 500 earnings reports this week with European earnings also picking up with 85 Stoxx600 results due over the same period. Pfizer, Facebook, Exxon Mobile and Berkshire Hathaway are just some of the big US names this week whilst in Europe we do have the major financials such as UBS, BBVA, Barclays, BNP Paribas, and RBS lined up. Before we wrap up for today we’ll quickly take a look at how US and European companies are faring in Q3 relative to street estimates. In the US we have seen a total of 188 companies reported so far and as it has been the case for many years quarterly earnings beat:miss ratios (79%:20%, 1% in line) are performing much better than sales beat:miss ratios (60%:40%). Both look decent relative to recent quarters though. The beat/miss ratios between earnings and sales are more balanced in Europe with about 62% and 61% of those reported so far coming above analysts’ EPS and revenue estimates, respectively. Our usual earnings tracker table updated in today’s PDF.

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Submitted by Ron Holland via The Daily Bell,

I recently was in Vietnam and spent some time in prosperous, capitalist Saigon, now called Ho Chi Minh City, and toured the American War Museum. I believe there are a number of parallels between the Vietnam and Iraq War and that history could repeat itself now in Baghdad. Who can forget the former Vietnamese supporters of America being left behind as the last helicopter left the roof of the US embassy?

Today, America still has the strongest military in the world but our manufacturing capacity and financial situation shows the US is on a downhill slide like earlier over-extended and bankrupt empires throughout world history.

We've already watched the frightening incompetence of the Obama Administration and the CDC in dealing with the Ebola virus. One would have to be blind not to see the petrodollar deathwatch as Russia, China and the BRIC countries build new trading alternatives to avoid using the dollar world reserve currency when trading energy and other financial dealings.

This is simple payback for Washington's threats, banking fines and penalties against institutions and nations de jure that fail to march to the US tune of dictating trade and financial arrangements. The world is now ganging up on the United States because Washington has terrorized smaller nations around the world for decades as the big bully on the block.

We've had the misfortune of watching ISIS – originally funded and equipped by the US, Saudi Arabia and other Persian Gulf allies, as was Bin Laden – turn on their benefactors out to destroy Assad in Syria because of a pipeline deal and take over much of Iraq. My point is just as the pro-US South Vietnamese government could not survive without major US forces, neither will the present government in Baghdad. So what could happen to the massive, fortified Baghdad US Embassy in the Green Zone that rivals the Vatican in size? What are the possible military objectives of the Islamic State fighters (ISIS) in regard to the Iraqi capitol?

While the US media elites and the Air Force concentrates on a meaningless ISIS backwater diversionary attack on Kobane on the northern Syrian border with Turkey, their real target is Baghdad and this will likely become very apparent between now and the end of the year. Our military experts confidently state that ISIS does not have enough troops to take and hold Baghdad, a city of 7 to 9 million people. They are correct unless ISIS wants to destroy its forces like the German Wehrmacht squandered its strength fighting in Leningrad or Stalingrad.

But they can win major PR victories without getting bogged down in street-to-street fighting in the Shiite areas in the north and east. Baghdad has been a city in transition since the Bush invasion created a power vacuum and endless violence in the capitol. Historically full of neighborhoods with a mix of Sunni and Shia, the population division is now almost complete with most Shia concentrated in the north and east of the river and most Sunni in the area stretching from the airport to the American Green Zone. Here lies the problem: The western Sunni neighborhoods are perfect cover for the Islamic fighters to slowly infiltrate the area around the Green Zone and embassy compound and mix in with the population. After all, this is a Sunni insurrection against the majority Shia government.

Hence the ISIS advance in Anbar province to just outside the airport is a direct threat to the Green Zone because their forces will be moving through predominantly Sunni neighborhoods all the way east to the American embassy. They could but surprisingly have not attempted to shut down the airport and here is where the situation gets interesting. Late this week, the Iraq army leadership basically said that unless US forces arrive to help them defend the western approaches to the city, they will throw down their weapons and go home – and I believe they will.

The scenario I see is the first attack will likely be against the most heavily defended target, the US embassy and the Green Zone. The ISIS fighters are not strong enough to take the heavily fortified green zone by direct assault and so it will probably fail.

The US will then attempt to fly in reinforcements to the airport and this will be when ISIS will start mortar fire and attempt to close the Baghdad airport as well as attack any convoys through the Sunni neighborhoods heading to the Green Zone. They will likely be able to shut down the airport, thus forcing reinforcements and embassy staff leaving to use helicopters for transportation to airfields further south in Iraq or maybe even to Kuwait. Closing the airport will be a major public relations victory for ISIS.

A siege of the Green Zone and American embassy will likely then take place and the US will be forced to destroy by air the Sunni neighborhoods surrounding the area from the zone west to the airport at a minimum resulting in heavy Sunni civilian causalities. Once again, more bad PR for the United States.

Eventually, the US may well be forced to close the embassy and withdraw from the Green Zone, which will result in videos that remind the American public of the Saigon collapse back on April 30, 1975. This would be a tremendous PR victory for the extremists, resulting in more fighter recruits.

Finally, if the US is forced to withdraw from their fortified embassy then, of course, ISIS will take over America's largest embassy in the world. Note, this embassy compound can hold 35,000 American personnel and is basically a small city-state within Baghdad that is massively defended.

This, again, is another victory for ISIS. Finally, the US may well decide to destroy the entire Green Zone and embassy by air to prevent its occupation by the terrorists. This will provide yet more videos – the US destroying its biggest embassy in addition to our earlier air attacks directed at our own tanks and trucks taken by ISIS troops when the Iraq army ran away from Mosul and northern Iraq.

Although the Bush invasion of Iraq has been a costly tragic mistake for all involved, we would do well to never again put US troops back on the ground there. Otherwise, our other economic and financial weaknesses and major threats to our national interests, including the end of the dollar as the world reserve currency, could happen far sooner when combined with a major military defeat and loss of prestige that does not have to take place.

I will be writing more about what happens on the home front to private wealth, prosperity and property when empires collapse and why American investors should look now at possible safe haven opportunities and global investment alternatives to survive and prosper in the future. Remember, all empires die but – although seldom covered in the history books – it is never a pleasant experience for the citizenry.

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

Willem Middlekoop, author of The Big Reset – The War On Gold And The Financial Endgame, believes the current international monetary system has entered its last term and is up for a reset. Having predicted the collapse of the real estate market in 2006, (while Ben Bernanke didn't), Middlekoop asks (rhetorically) – can the global credit expansion 'experiment' from 2002 – 2008, which Bernanke completely underestimated, be compared to the global QE 'experiment' from 2008 – present? – the answer is worrisome. In the following presentation he shares his thoughts on the future of the global monetary system; and how gold, the US and China are paramount for its outcome.

 

Middlekoop predicts the real estate crash in 2006… (ensure English Subtitles – Closed Captions – are enabled)

 

Bernanke did not… (stunning!!)

 

So just how big an underestimation are central bankers making this time with their 'experimentation'…

Willem Middelkoop On The Big Reset… (ensure English Subtitles – Closed Captions – are enabled)

Source: Koos Jansen via BullionStar

*  *  *

And here is an in-depth interview with Middelkoop (in English) that summarizes "how the house of cards will come tumbling down"

 

FULL TRANSCRIPT OF THE INTERVIEW available at the website above.

02:11 – Live video of Willem Middelkoop from Amsterdam.

03:52 – The Next Reset

05:45 – Christine LaGarde – Reset, notes at Davos

07:37 – Asset backed currencies, SDR

09:03 – Bretton Woods – Gold backed dollar

09:41 – Germany gold repatriation – Fort Knox Gold

10:38 – Germany Bundesbank

12:15 – Central bankers and gold

12:26 – IMF double counting gold of member countries.

13:36 – Gold Certificates – Gold on Federal Reserve and Treasury balance sheets.

14:35 – Which countries have the most gold reserves

15:32 – Interest Rates – Negative Rates – Japan example for U.S. and E.U.

17:26 – Debt to GDP – Japan – Why we need a monetary reset – Debt restructurings

19:20 – Financial Reforms versus sovereign Debt Restructuring

20:05 – Debt Cancellation – Removing $2 trillion from Federal Reserve Balance Sheet – If the Federal Reserve and the U.S. Treasury reevaluate gold's price to $4,200 or $8,400 an ounce instead of $42 an ounce as it is currently.

22:08 – The Euro and the Global Currency Reset – Currency Devaluation, gold. Financial Reset – World Championship of Money Debasement

23:17 – Investing in paper currencies, what do you recommend?

24:29 – Other investments, real estate, tangible assets. Where and when to buy.

25:47 – Gold and Silver rising over the next few years? $2,000 gold by 2015, $3,000-4000 by 2020. Silver – $50-75 2015/2016. $100 or more per ounce before 2020.

27:04 Gold/Silver Ratio and $100 an ounce silver. Gold is reused, silver is used up, silver shortages coming.

29:11 Already a silver shortage here in the United States.

29:47 London Silver Fix Ending

30:50 China Official Gold Holdings, not updated since 2008.

31:46 – Koos Jansen http://ingoldwetrust.ch

32:44 – What kinds of gold should people get into, physical, mining, etf? What is the ideal portfolio?

34:08 – Pullback in precious metals, trading close to 2010 levels, how long can it last?

35:14 – Willem's fund CDFUND (Commodity Discovery Fund) performance.

35:53 – Quantative easing, can the U.S. stop or just taper? Russia and China stopped buying U.S. Treasuries

37:41 – How much can interest rates be raised? National debt of the U.S. why we need a reset of the system. It's in the interest of the U.S. to take the lead.

39:29 – How close are we to the reset? Will it be overnight like it's been historically or gradual?

41:14 – Now is the time to prepare for the reset – gold and silver correction

42:34 – War on Gold and the Financial Endgame – Gold is the natural enemy for the dollar, the U.S. and the system. European countries help the U.S.

43:52 – http://gata.org – They have done great research for the last 10 years.

44:19 – Contacting Willem Middelkoop – Commodity Discovery Fund

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When stock prices go all wonky, as they have in recent days, it pays to think a little about what really moves asset prices and determines long term business success.  For ConvergEx's Nick Colas, the key driver has been – and always will be – return on capital.  What investment analysts know as the DuPont model is now 100 years old, but its lessons and applications still drive innovation today. Want to know why Airbnb or Uber are successful?

They leverage existing assets to create higher returns – right out of the DuPont playbook. And consider that time is the scarcest and most valuable asset of all; every successful mobile app or social network tries to give you more choices about how to spend it. Optimizing return on capital – defined as maximizing any scarce resource – is always the compass that points to success.

Via ConvergEx's Nick Colas,

In 1920, General Motors had less than 12% of the U.S. car market; by the 1950s it held more than 50%. During World War II it was a critical part of the “Arsenal of Democracy”, and without it the war would have certainly lasted longer and cost many more lives. Even in the 1990s, when other carmakers struggled – Chrysler almost went bankrupt in 1991 – GM rolled along with an “A” credit rating and a +30% share of the U.S. automobile market.  And while we all know the GM of today, it pays to remember that it was once the Apple/Google/Facebook of an earlier era.
 
That GM’s success lasted as long as it did is more the function of one man and one financial discipline than most people realize today. Alfred Sloan, who ran the company from 1923 to 1956 as Chief Executive Officer and then Chairman of the Board, was the epitome of the 20th century focused and dedicated manager. He centralized administrative functions and left everything else to operating heads. He regularly traveled the country, visiting 5-10 dealers a day to hear their concerns.  He never shouted – his nickname was “Silent Sloan” – preferring to lead with quiet consensus building. He was on the wrong side of history as the industry unionized, to be sure, but afterwards he certainly ran a company that delivered a huge slice of the American dream to millions of workers and their families.
 
The core of the financial system he used to run the company actually came from outside, in the form of a former DuPont executive named Frank (F.) Donaldson Brown. The approach Brown took from his prior employer – and large GM shareholder – was to analyze all the activities of the company along two lines: the assets it took to run the business and the return on those assets in the form of income. We know this approach today, aptly enough, as the DuPont model and every aspiring stock analyst commits it to memory either in the classroom or from their CFA Level One textbook.
 
While the DuPont model may seem like an archaic approach, soiled in the grease of the manufacturing-oriented 20th century, it is just as relevant in today’s online “Virtual” economy. Consider a few examples:

The hottest venture-backed company at the moment is Uber, the online car service, with a recent $17 billion valuation. Its value proposition to drivers/car owners is an automated and location-optimizing dispatch service that promises more fares than standard human operators can deliver.  The driver already has the car – a fixed asset – and Uber offers a better return on that investment than the traditional car service company may be able to provide.  For the Uber user, the geolocating feature (in the Uber app) offers potentially shorter wait times and the facility to see how close your ride is to your location. Time is the user’s asset, and less time waiting means more time for everything else. In areas where driver licensing allows it, part time/non professional drivers can more efficiently choose which hours they wish to work, giving them better utilization of their vehicle/fixed asset and their time.

 

Airbnb, the house/apartment-sharing business, allows a homeowner or renter to use their capital to earn a return above the utility of simply providing shelter. What was once simply a spare bedroom becomes an income-generating property. F. Donaldson Brown and Alfred Sloan would have given that kind of project a big thumbs up at the old General Motors.

 

Less well known on this side of the Atlantic is the amusingly named BlaBlaCar, a U.K. company that offers ride sharing services. Want to go from London to Edinburgh for the Fringe Festival?  Log on and see who is driving the same way on the same day and determine how much of a contribution you’ll need to make to share in expenses. Better asset utilization for the car owner (cheaper trip) and more affordable for the rider than public transport.

The DuPont model isn’t just for new business analysis – it also explains a lot of mergers and acquisitions/new business activity as well. A key here is an often-overlooked part of M&A analysis – how long can the acquirer really keep their business going in the face of new competition or opportunities?  Advances in technology create a constant stream of disruptive threats to existing businesses, and sometimes it is better to buy your new competitor than try to fight it out with them. Unless you can develop something on your own…   A few examples of popular M&A/business development themes:

Mobile. Consumers generally use smartphone-enabled technology for one simple reason: it is more time efficient than waiting until you are in front of a computer.  Businesses like it because they can determine your location – just look on your own smartphone to see how many apps automatically update your location even when you aren’t using them. (Why does the Flashlight app on my iPhone need to know where I am?) In both cases “Time” is the asset in question, and mobile technology leverages that asset in a manner entirely consistent with what the DuPont model instructs: make the most of it.  Always.

 

Money and Payments.  Investors always want new and profitable places to invest their financial capital, and peer-to-peer lending is one growth area that addresses this market. These businesses match lenders with borrowers, based on credit scores and other factors, essentially allowing owners of capital to act as a bank and earn the interest on such loans.  And bear the risk, of course…

• Vendors and merchants would prefer faster payments than the existing banking system affords – assets now are always preferable to assets later – and new payment systems offer the chance to get paid for that skinny latte in seconds rather than days.  Alfred Sloan built the General Motors Acceptance Corporation into a lending juggernaut for precisely this reason – getting paid from the dealers immediately, and earning the interest from consumer loans – is a more efficient use of capital. And yes, he would have probably taken bitcoin for car purchases, but only because it is cheaper and faster than GMAC could ever be.

Buying customers and their attention. Some of the more head-scratching tech industry acquisitions of the past year or two (no names here, but you know who we mean) seem to revolve around buying businesses with a customer list and a popular technology.  No profits, mind you, and none easily visible in the near future. But lots of users.

• I can’t help but think that the acquiring companies feel the heat of “Time as an asset” as they sign on the dotted line for their expensive purchases. It’s not the financial intrinsic value they are buying. Rather, they are buying the time it would take to compete with the business they are purchasing. Time better spent, apparently, doing other things. Especially fighting a competitor who beat them to the punch and bought the same asset.

Taken as a whole, these examples point to two conclusions. First, the nature of capital has changed from the days of Sloan and Brown and the GM of the 1930s-1950s. Valuable assets – time, for example – don’t appear on a balance sheet but that omission is irrelevant to modern business practices. Business owners still have to manage and optimize them just as they did when owning a tool and die machine was the starting point for a new venture. Second, the essential challenge of managing a successful enterprise has not actually changed all that much from when Alfred Sloan used to take his morning walk to work at the GM Building in New York.  Manage what it scarce – physical capital, time, talent, opportunity, whatever – and make the most of it.

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So far US equity futures are flat to modestly higher on the ‘disappointing’ news that Rousseff was re-elected in Brazil. USDJPY has given up its hope-based gains and is lower (implying a 4-5 point drop in S&P Futures that is not there yet). Brazilian stocks (trading in Japanese ETFs) are down almost 6% in early trading on heavy volume as the pro-business hope-driven rally has been almost entirely given back.

 

NEXT FUNDS IBOVESPA ETF (Japan)

 

On heavy volume…

 

and USDJPY has faded – though S&P Futures are stable for now…

 

Charts: Bloomberg

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Submitted by The Dissident Dad via Mike Krieger’s Liberty Blitzkrieg blog,

In great empires the people who live in the capital, and in the provinces remote from the scene of action, feel, many of them, scarce any inconveniency from the war; but enjoy, at their ease, the amusement of reading in the newspapers the exploits of their own fleets and armies. To them this amusement compensates the small difference between the taxes which they pay on account of the war, and those which they had been accustomed to pay in time of peace.They are commonly dissatisfied with the return of peace, which puts an end to their amusement, and to a thousand visionary hopes of conquest and national glory from a longer continuance of the war.

 

– Adam Smith in The Wealth of Nations

Let’s face it, your child’s mind is fertile ground for oligarchs, corrupt politicians and any other thieving member of the so-called “ruling elite” who aim to enslave the masses both mentally and monetarily. Unfortunately, the propaganda that comes from the government and our largest corporations is perceived as being absolute truth by most people. If you’re like me, at one point in time you had to wake up to it all and accept that you had been completely brainwashed for the first few decades for your life.

On a parental level, defending my child’s mind against blatant lies and deceit from the media, military industrial complex and corporatism is really not that difficult. But what about their grandparents, cousins or the kids next door?

I truly believe that most Americans suffer from Stockholm Syndrome, a psychological phenomenon where the victim identifies with the attacker to the point they will even defend their captor and even treat certain forms of abuse as a form of compassion.

We see this everywhere; especially around election time, where the voters defend all kinds of atrocities and criminal actions by our elected officials.

The mobs, of course, love the abuse and crimes against humanity. They probably even feel patriotic if the guy committing the crimes is of the same political affiliation they identify with.

When I am home with the kids, observing this type of behavior is easy to discuss – right and wrong is sort of natural for the kids. It’s the adults in their lives who inject a lot of bad philosophy into their lives and unfortunately for most of us reading this blog, the adults have some influence in our children’s lives.

I feel like I have to tread carefully. I mean I am talking about people I love very much: grandparents, neighbors, cousins, uncles…pretty much everyone in our lives. You would think that a non-violent philosophy focused on respecting other people and not forcing your will against others would be universally accepted, but in reality it’s not.

There’s a certain program that pretty much everyone follows. We nearly all accept the lie that every American soldier’s death was to defend our freedoms; that drugs, prostitution and other consensual acts are bad and should be outlawed. That Muslims are violent, that war is good for the economy and America has a free market system. Our society idolizes some of our biggest criminals. In fact, the bigger the crime, the more you are treated as a legend in many circles.

I often get frowns from my friends and family when I openly teach my children about the immoral aspects of government, or how we should be kind to others, even Iranians!

Sometimes the philosophy of respect can make you the oddball, and as a parent the last thing I want to do is make my kids feel weird or be treated like outcasts.

Ultimately, my children will have to make their own choices. I can’t expect them to go against the crowd like I have, but in the meantime I will defend their minds. Not by shutting out the people we love or the millions of Americans who suffer from Stockholm Syndrome. Rather, as a father I will give them real choices: the choice between violence and volunteerism, and the choice between discriminating against other people because of imaginary borders and superficial differences and respecting others.

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As we previously reported, the ECB’s latest stress test was once again patently flawed from the start. Why? Because as we noted earlier, in its most draconian, “adverse” scenario, the ECB simply refused to contemplate the possibility of deflation. And here’s why. Buried deep in the report, on page 75 of 178, is the following revelation which contains in it the scariest number presented to the public today.

Due to the fact that on average banks’ internal definitions were less conservative than the simplified EBA approach, the application of the simplified approach led to an increase in NPE stock of €54.6 billion from €743.1 billion to €797.7 billion. The CFR and the projection of findings led to an additional increase in NPE of €81.3 billion, resulting in a total increase €135.9 billion to €879.1 billion of post-CFR NPEs across the participating banks as a result of the AQR. The impact of the application of the EBA simplified approach and the credit file review on the stock of NPEs varied amongst debtor geographies, with overall increases among SSM debtor geographies ranging from 7% to 116%.

 

Translated: due to a lotta ins, lotta outs, lotta what-have-you’s, and the now traditional “fluidity” when it comes to European term definitions (recall that as of this year, in Europe hookers and blow contribute to (estimated) GDP otherwise the Eurozone would be in deep triple-dip recession, if not outright depression by now) the stress test, while concluding that Europe’s banks are “safe”, also uncovered some €136 billion in previously undisclosed NPE or “Non-Performing Exposure”, aka Bad Loans – loans which will never be repaid.

Which in turn leads to the new bad loan total amount (that will also in the coming quarters be revised sharply higher) among Eurozone banks: a whopping €879 billion, or some $1.114 trillion at today’s exchange rate. This amount to a stunning 9% of the the Eurozone’s GDP and is precisely the reason why the ECB can’t possibly even conceive of deflation, as without the much needed rising prices to inflate away this NPL debt tumor, Europe’s banks are all insolvent, regardless of what today’s stress test may have revealed about just a paltry 25 of them.

And then there is the question of what is the real NPLs number. If the ECB, which clearly is happy to goalseek data to fit the optimistic, “confidence-building” narrative was willing to admit that there was a massive 18% delta in European bank NPLs based just on what definition one uses to define these, as it concluded that banks are largely safe, one wonders: is the real bad debt number €2 trillion, €3 trillion, or even more, and is the ECB’s sudden attention shift to the total outstanding NPLs what should be the take home message from toda, and also explains why Mario Draghi is suddenly rushing to inflate bank reserves by another €1 trillion: a number which would almost perfectly offset the negative impact of some €880 billion in bad debt.

Finally, the €64 trillion question: how long until the ECB begins monetizing secured debt on European bank balance sheets. After all, for everyone in Germany the ECB is already Europe’s “bad bank.” Why not end the pretense, and do away with the facade of prudent monetary policy, and admit what everyone knows: before all is said and done, and Europe implodes in a bad debt singularity, the ECB will, with 100% certainty, monetize the Eurozone’s bad loans?

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