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Submitted by Charles Hugh Smith from Of Two Minds

The Critical Difference Between Rentier Wealth and Wealth Creation

If you want to understand why our economy is stagnating and wealth inequality is rising, look at the rise of rentier skims and the resulting decline in wealth creation.

To understand why the real economy is stagnating, we have to understand the critical difference between rentier wealth and wealth creation. Rentier wealth is skimmed by fees that provide little to no value to the to the person paying the fee.

The classic example is a fee collected to pass from one fiefdom’s border to the next: no value is provided to the person paying the border fee; it is a rentier skim that transfers wealth from serfs to the fiefdom’s landowning nobility.

 In the modern economy, rentier skims take a variety of forms. The government is adept at levying rentier skims. Harsh penalty fees piled on top of minor traffic violations are one example; another is extra fees to “expedite” services government is supposed to provide in a timely manner.

A California architect recently recounted the new fee structure in a Northern California municipality: the fee to have the city planning department review your building permit application leaped to $6,000. Since the department warned applicants it will take at least six months for the agency to process the application, they kindly offer an alternative: for a mere $4,000 more (an “expedited fee”), the applicant can get his application reviewed in a mere four months rather than six months.

This is pure rentier skim.

Planned obsolescence provides many other examples of rentier skims. Microsoft’s operating systems and hardware makers both operate a form of rentier skim, in that each new OS and device offers marginal benefits (if any) in terms of productivity. The rare printer that doesn’t break down in a few years is obsoleted as software drivers are no longer available on the new OS.

Cartels and quasi-monopolies offer a wealth (ahem) of rentier skims. Monopolies can raise prices and degrade services at will. Cartels maintain price controls while denying they do any such thing.

Compare the monthly healthcare insurance fees offered by the handful of providers in your area–the differences are either cosmetic or result from differences in benefits.

Finance offers the richest opportunities for rentier skim. Load up college students with tens of thousands of dollars in high-interest student loans for marginal educations that could be provided at a fraction of the cost (see The Nearly Free University and The Emerging Economy: The Revolution in Higher Education) and what do you get? A nearly lifelong rentier skim off the student debt-serfs.

Higher Education’s Aristocrats: Over five years, administrators enjoyed pay increases of between 40 percent and 135 percent, and as a result each received $450,000 to $3.3 million from cumulative increases by the end of 2012-2013, the most recent year for which tax data is available.

Higher education is basically a multilayered rentier skim.

The net result of an economy of endless rentier skims is stagnation and rising wealth inequality. Money that could be saved and invested in productive enterprises and infrastructure is skimmed off by financial and political Elites.

Simply put, the rich get richer and the poor get poorer. This is the teleology of every rentier economy: the built-in consequence of rentier skims is increasing wealth inequality and economic stagnation.

This reality is easily visible in the data. Note how the wealth of the bottom 90% declined since 2003, while the wealth of the top 5% rebounded smartly.

Real median income declined from 2000 to 2014, while net worth (wealth) skyrocketed in the same time frame:

Rentier skims are naturally owned by the wealthy, so their wealth increases as the earned income of the bottom 90% declines due to the ever-rising costs of multiple rentier skims.

But this rising tide of wealth is concentrated in the accounts of those who own the rentier skims and the Upper Caste (Clerisy class) that serves them (for example, college administrators). Protecting Elites and the Clerisy Class That Serves Them.

The resulting wealth disparity is made visible in this inverted pyramid of wealth:

If you want to understand why our economy is stagnating and wealth inequality is rising, look at the rise of rentier skims and the resulting decline in wealth creation from productive investment.

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

In the new normal, companies can one second trade with a market cap of hundreds of millions (or over a billion in the case of negative cash flow GTAT) and the next unexpectedly report they are bankrupt, or, as SODA just did, report guidance that is just about as bad.

From the just release press release that explains why the company stock is being halted:

• Revenue to be approximately $125.0 million; expected: $154.4 million
• Operating income to be approximately $8.5 million; expected: $17.6 million

Translated: the SodaStream fad is officially over. From the release:

“We are very disappointed in our recent performance,” said Daniel Birnbaum, Chief Executive Officer of SodaStream. “Our U.S. business underperformed due to lower than expected demand for our soda makers and flavors which was the primary driver of the overall shortfall in the third quarter. While we were successful over the last few years in establishing a solid base of repeat users in the U.S., we have not succeeded in attracting new consumers to our home carbonation system at the rate we believe should be achieved.  The third quarter results are a clear indication that we must alter our course and improve our execution across the board. We have already begun a strategic shift of the SodaStream brand towards health & wellness, primarily in the U.S., where we believe this message will resonate more strongly with consumers. In addition, we are developing a comprehensive growth plan for the Company that will encompass Marketing, Product and Innovation, Distribution, Operations and Organization. We intend to share more specifics around our growth plan when we report third quarter results later this month.”

Because, frankly, right now we have no idea how to turn around the Titanic after it has hit the Iceberg.

And the punchline:

Mr. Birnbaum concluded, “We have a strong balance sheet and are well positioned with ample liquidity to invest in the areas of our business that we believe will fuel profitable growth in the years ahead. Despite our current challenges, we continue to be very confident in our business model and the global prospects for SodaStream. We firmly believe that our actions to shift the brand and improve execution will strengthen our leadership position in the home carbonation category and deliver enhanced shareholder value.”

Translation: see GTAT about the whole “strong balance sheet” thing. Also: why not blame the weather, snow, Easter, school holidays, seasonal or Bush. Everyone else is doing it.

At this point all we can advise SODA is to do more Scarlett ads as nothing else is working. May as well go out with a, er, fizz.

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

• Liberian Rubber Farm Becomes Sanctuary Against Ebola (WSJ)
• The World’s Most Powerful Central Banker: Janet Who? (BBG)
• Islamic State moves into south west of Syrian Kurdish town (Reuters)
• Waldorf to Be Biggest Chinese Property Purchase in U.S. (BBG)
• Spain Seeks People in Contact With Ebola-Infected Nurse (BBG)
• Hong Kong protests at crossroads as traffic, frustration pile up (Reuters)
• Immigration: Grim Caseload at the Border (WSJ)
• China Cuts Thousands of ‘Phantom’ Workers From State Payroll (BBG)
• U.S., U.K. Regulators Push to Settle Deutsche Bank Libor Case This Year (WSJ)
• Wall Street Moles Go to NY’s Top Cop, Spurning SEC Cash (BBG)
• Pimco’s outflow headaches only just beginning (Reuters)
• Japan Lawmakers Flag Need for Exit Strategy as Yen Falls (BBG)
• At 78, Former Executive Still Flips Burgers for $7.98 (BBG)
• Marc Andreessen on Finance: ‘We Can Reinvent the Entire Thing’ (BBG)
• Russia Spends $1.68 Billion Reserves in 2 Days to Buoy Ruble (BBG)
• AT&T Says Employee Gained Unauthorized Access to Data (BBG)
• Samsung Electronics heads for annual profit fall after weak third-quarter guidance (Reuters)
• Rio Tinto rejects Glencore merger approach amid iron ore slump (Reuters)
• Millennials Spurring Canadian Condo Boom Bet on Rates (BBG)
• A Trader Nicknamed ‘BearWhale’ Is Freaking Out the Bitcoin Markets (NYMag)

 

Overnight Media Digest

WSJ

* The U.S. Supreme Court effectively expanded the right of gay marriage to more than half the nation Monday as it let stand lower-court rulings that struck down bans in five states. (http://on.wsj.com/1ttRDsc)

* After months bemoaning Democrats’ financial advantage, the National Republican Senatorial Committee collected a record $15.5 million in September – more than doubling its August haul of $6 million. (http://on.wsj.com/1BKTNrG)

* A group of volunteer scientists and immigrant-rights activists are helping officials in Texas identify unknown migrants who die each year trying to sneak across the U.S.-Mexico border. (http://on.wsj.com/ZPAl1x)

* Latin America is on track this year to post its slowest rate of annual growth since 2009, when the global financial crisis began to be felt in the region, the World Bank said Tuesday. The bank cut its growth forecast for the region by nearly half to 1.2 percent, following expansions of 2.4 percent and 3 percent in the previous two years. (http://on.wsj.com/1q7y7j8)

* Samsung Electronics Co estimated its third-quarter operating profit more than halved from a year earlier, hit by weak smartphone sales, forcing the company to rely more on its chip business to drive future earnings growth. As stiff competition from Chinese vendors continues to pressure its mobile division profit, investors have sold off Samsung shares on concerns about its outlook. (http://on.wsj.com/1CQzpI0)

* Hackers who breached JP Morgan’s computer network earlier this year also tried to infiltrate a number of other financial institutions, but the companies believe they were unsuccessful. (http://on.wsj.com/1q7AJxp)

* Glencore approached Rio Tinto in July about a takeover that would have been among the biggest deals in mining history, but its proposal was rejected. (http://on.wsj.com/1s75Fnb)

* U.S. regulators on Monday said they would review the overall process for deciding whether big financial firms are “systemically important.” The move, announced at a meeting of the Financial Stability Oversight Council, showed how the group of top U.S. regulators is trying to fend off criticism from the financial industry and members of Congress while also establishing itself as the prime U.S. watchdog for spotting financial-system risks. (http://on.wsj.com/1nXV6D8)

* Hilton Worldwide Holdings Inc is selling its flagship hotel, the historic Waldorf Astoria in Manhattan, for $1.95 billion, illustrating the heated competition – particularly among foreigners – for famous luxury properties that only a few years ago struggled to fill their rooms. (http://on.wsj.com/10HOMVs)

* Regulators are in talks with Deutsche Bank over a possible settlement of hundreds of millions of dollars to resolve rate-rigging allegations. (http://on.wsj.com/1uvmd8Z)

* Blackstone Group LP and Carlyle Group LP are exploring new ways to buy global companies in partnership with major investors, including potentially making acquisitions outside their existing funds, according to people familiar with the firms’ thinking. (http://on.wsj.com/1q3XRgr)

* Apple Inc last year said it would invest $700 million to build the world’s biggest artificial-sapphire factory. On Monday, the company running that factory – GT Advanced Technologies Inc – filed for bankruptcy protection. The bankruptcy filing comes less than a month after Apple unveiled new iPhones with glass screens, rather than sapphire. (http://on.wsj.com/ZaB7oC)

* Live Nation Entertainment Inc is in talks to buy a majority of C3 Presents, the promotion company behind festivals such as Lollapalooza and Austin City Limits, according to a person familiar with the matter. (http://on.wsj.com/1xjOO0x)

* After spending seven years persuading companies to go public, Duncan Niederauer is switching sides. The former chief executive of the New York Stock Exchange’s parent is taking a part-time role at Battery East Group LLC, a small firm that helps private companies raise money from big investors. (http://on.wsj.com/1nXUJsj)

 

FT

The European Commission is set to begin a formal probe into allegations that Luxembourg allowed Amazon.com Inc to benefit illegally from state subsidies for its European operations for almost 10 years, the Financial Times reported on Monday.

Volkswagen AG said it will use robots to cope with the shortage of workers caused by Germany’s retiring baby boomers, to ensure that the car manufacturing is not affected.

Former Deutsche Bank AG CEO Josef Ackermann has been nominated as chairman of Bank of Cyprus, its U.S. based investors Wilbur Ross and Tyrus Capital said on Monday.

Euro Disney said on Monday it had agreed a 1 billion euro funding deal backed by its largest shareholder, the Walt Disney Co, which includes a share sale and a debt restructuring, to allow it to invest in the business.

 

NYT

* The Justice Department is preparing a fresh round of attacks on the world’s biggest banks, again questioning Wall Street’s role in a broad array of financial markets. The Justice Department has widened its focus to include a criminal investigation into banks that set an important benchmark for interest rate derivatives, a previously unreported development that coincides with international regulators proposing overhauls to the rate-setting process. (http://nyti.ms/1uuZHNz)

* Henry Paulson, who was Treasury secretary when the government rescued the American International Group, said on Monday that a bankruptcy of the insurance giant would have been “catastrophic” for the economy, but acknowledged that the terms of the government’s bailout were “punitive.” (http://nyti.ms/1EmVyzs)

* In the latest move, Blockchain, a Bitcoin wallet provider and software developer, is expected to announce on Tuesday that it has closed a roughly $30.5 million fund-raising round, led by Lightspeed Venture Partners and Wicklow Capital. The investment, raised from Blockchain’s first round of outside financing, is one of the biggest in the digital currency industry to date.(http://nyti.ms/1xYMPlx)

* Postmedia Network Canada Corp will buy Quebecor Inc’s Sun Media newspaper assets for C$301 million ($269.62 million) for the group, which includes The Toronto Sun and The London Free Press. (http://nyti.ms/1nbk41b)

* Electra Private Equity said on Monday that its shareholders had rejected a bid by activist investor Edward Bramson for two seats on the firm’s board. The rejection came after a spirited back-and-forth between Electra, a British private equity firm, and Sherborne Investors Management, Mr. Bramson’s New York-based investment vehicle, in the weeks ahead of Monday’s shareholder meeting. (http://nyti.ms/1uvugmh)

* Thrive, which has invested in popular start-ups like Instagram and Warby Parker, plans to announce on Monday that it has raised a new $400 million fund, its third since its founding four years ago. Money for the new fund came from existing investors like Princeton University and the Wellcome Trust, as well as new mostly not-for-profit institutional investors. (http://nyti.ms/1rewoJ4)

* Late Monday in New York, Rio Tinto, the British-Australian mining giant, said it had been approached by its smaller rival Glencore Plc about a $150 billion merger, but declined to pursue a deal. (http://nyti.ms/1pJWLac)

* A week after California enacted a landmark law restricting the ways education technology companies can use the information they collect about elementary through high school students, a group of leading industry players is pledging to adopt similar data protections nationwide. The 14 companies include Microsoft Corp ; Houghton Mifflin Harcourt, the educational publishing house; Amplify, a developer of digital curriculums; and Edmodo, an online network for schools that allows teachers to assign homework and measure students’ progress. (http://nyti.ms/1yIX52s)

 

Canada

THE GLOBE AND MAIL

** Prime Minister Stephen Harper invited the front-runner for Toronto’s mayor election John Tory to meet with him in Ottawa, The Globe and Mail has learned. Harper – a public supporter of the Ford family before the drug and police scandals of the past year – sought a meeting with Tory at which the pair discussed a wide range of topics, including the mayoral race and the future of Canada’s largest city. (http://bit.ly/1oLVC1J)

** The number of Canadian military advisers deployed to Iraq is rising as the Harper government defends its plan to send CF-18 fighters to strike Islamic State militants by telling Parliament that humanitarian aid alone is an insufficient response to the Mideast crisis. (http://bit.ly/1xkIaaj)

** Cpl. Ron Francis, the New Brunswick Mountie who garnered national attention for smoking medical marijuana while in uniform, has been found dead of an apparent suicide. Francis made national headlines last year after he complained he wasn’t allowed to smoke medicinal marijuana for post-traumatic stress disorder while in uniform. (http://bit.ly/1vJAZrd)

NATIONAL POST

** In an attempt to shelter himself from accusations of anti-Semitism following a Toronto mayoral debate, Doug Ford declared on Monday that his wife is Jewish. (http://bit.ly/1s7em1O)

** State-owned Kuwait Foreign Petroleum Exploration Co. (Kufpec) is investing $1.5-billion in Chevron Corp’s liquids-rich shale resources in about 330,000 net acres in the Kaybob area of the Duvernay in west-central Alberta, the companies said. Chevron will remain the operator and has commenced a full appraisal drilling program that ends in 2017. (http://bit.ly/ZPNhV9)

** Air Canada and its pilots’ union have reached a tentative 10-year labour deal, a full year and a half before the current contract expires, in a signal that once-icy labour relations are beginning to thaw. (http://bit.ly/1yJthTy)

 

Britain

The Times

Bank to ring-fence balances up to 1 million pounds

Bank customers who place large temporary sums in their accounts after selling their home or inheriting money will qualify for special protection under new Bank of England proposals. Under the financial regulator’s plans, “temporary high balances” of as much as 1 million pounds (1.61 million US dollar) will qualify for the full deposit protection that applies only to the first 85,000 pounds of money in a bank.(http://thetim.es/ZPrRY8)

Recession looms over eurozone amid German factory slowdown

German factory orders collapsed in August at the fastest rate in five years as investor confidence in the eurozone took another beating. Amid fears that the currency bloc is slipping back into recession, economists said that the shock slump in Germany made the prospect of full-scale quantitative easing more likely. (http://thetim.es/1uuuz0s)

The Guardian

Virgin Atlantic scraps Little Red domestic services

Virgin Atlantic has announced plans to scrap its domestic airline, Little Red, after just 18 months. The carrier has struggled to fill seats on its flights linking London Heathrow with Edinburgh, Aberdeen and Manchester and finally admitted defeat after weeks of speculation that the operation would be axed. (http://bit.ly/1nb9OWz)

Tesco turns to Ikea and Compass to beef up board

Tesco Plc has bolstered its board with the appointment of the former Ikea chief and the chief executive of Compass as non-executive directors. The composition of the supermarket’s board has been criticised after a series of profit warnings and last month’s revelation that expected first-half profits had been overstated by 250 million pounds. (http://bit.ly/1EmqVtU)

The Telegraph

BSkyB shareholders wave through Sky Europe takeover

British Sky Broadcasting Group Plc shareholders have overwhelmingly approved the company’s plan to buy Sky Deutschland and Sky Italia from Rupert Murdoch’s Twenty-First Century Fox Inc. (http://bit.ly/ZPsgd8)

France cautions Germany not to push Europe too far on austerity

France has denounced the Eurozone’ s austerity regime as deeply misguided and issued a blunt warning to Germany and the EU institutions that demands for further belt-tightening may set off a political backlash, endangering European stability. (http://bit.ly/1vIIDSC)

Sky News

TPG Eyes 2 billion pounds bid for Tesco Clubcard arm

Sky News has learned that TPG, one of the world’s biggest buyout firms, made an approach several months ago to Tesco Plc about acquiring Dunnhumby, a wholly owned subsidiary that bankers say is worth well over 2 billion pounds. (http://bit.ly/10Geyto)

Banks face shake-up at payments firm Vocalink

Sky News has learned that Andrea Leadsom, the city minister, and Mark Garnier, an influential member of the Treasury Select Committee, recently met bank executives and the boss of Vocalink to discuss the company’s future ahead of the launch of the independent payments industry regulator next spring. (http://bit.ly/1vGPs7k)

The Independent

Walt Disney in 1 billion euros bail-out for loss-making Euro Disney theme park

Walt Disney Co has come to the rescue of its loss-making French theme park with plans for a 1 billion euros (1.26 billion US dollar) bail-out. The funding deal for Euro Disney could see the suburban Paris-based theme park removed from its French stock market listing. (http://ind.pn/1s3lsEC)

Conde Nast moves beyond print in profit squeeze

Even magazines giant Conde Nast is feeling the squeeze as the publisher of Vogue and GQ diversifies beyond print by investing more in technology, ecommerce and education. Pre-tax profits at UK arm Conde Nast Publications tumbled 16 per cent to 8.8 million pounds last year, with revenues dipping 6.3 per cent to 110 million pounds.(http://ind.pn/1vIMZcw)

Corporate Finance

* Private-equity firm TPG has approached troubled British grocer Tesco PLC to buy its data gathering and analysis subsidiary Dunnhumby, which is worth well over 2 billion pounds ($3.21 billion), the Sky News reported on Monday.

* Occidental Petroleum Corp, the fourth-largest U.S. oil and gas producer by market capitalization, is looking to sell its North Dakota oil assets for as much as $3 billion as the company seeks to focus on profitable regions, Bloomberg reported on Monday.

* Live Nation Entertainment Inc, the concert and ticketing giant, is in advanced talks to buy a majority stake in C3 Presents, an independent concert promoter, whose portfolio includes the popular Lollapalooza and Austin City Limits festivals. The prospective deal that has been in negotiations for months but still not completed, would give Live Nation a stake of 51 percent in C3 Presents and value C3 at around $250 million, the New York Times reported, citing two people with knowledge of the talks. (nyti.ms/1s5OvXT)

* Blockchain, a Bitcoin wallet provider and software developer, is expected to announce on Tuesday that it has closed a roughly $30.5 million fund-raising round, led by Lightspeed Venture Partners and Wicklow Capital. The investment, raised from Blockchain’s first round of outside financing, is one of the biggest in the digital currency industry to date, the New York Times reported. (nyti.ms/1xYMPlx)

* Billionaire Patrick Drahi’s cable and telecoms company Altice SA is looking to acquire the Portuguese assets of Brazilian carrier Oi SA, a source familiar with the matter told Reuters.

* Apollo Global Management LLC and Riverstone Holdings LLC are preparing Talos Energy LLC for an initial public offering that could value the oil and gas company at over $2 billion, including debt, according to people familiar with the matter.

* Spanish power firm Iberdrola has hired JPMorgan Chase & Co to sell some foreign renewable assets which could raise up to 2 billion euros ($2.52 billion) to help fund an acquisition in the fast-growing U.S. market, three sources with knowledge of the matter said.

* Thailand’s Bangkok Airways Co Ltd launched on Monday an up to $604 million initial public offering that people familiar with the deal said was priced lower than previous plans as prospects for a pick-up in tourism remain weak.

 

 

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
JOLTS job openings for August at 10:00–consensus 4.71M
Consumer credit will for August at 15:00–consensus up $20.0B

ANALYST RESEARCH

Upgrades

Air France-KLM (AFLYY) upgraded to Overweight from Underweight at JPMorgan
Alcobra (ADHD) upgraded to Outperform from Market Perform at FBR Capital
Becton Dickinson (BDX) upgraded to Buy from Hold at Stifel
CNOOC (CEO) upgraded to Outperform from Market Perform at Bernstein
China Unicom (CHU) upgraded to Overweight from Equal Weight at Barclays
Crown Holdings (CCK) upgraded to Outperform from Neutral at Macquarie
Dick’s Sporting (DKS) upgraded to Buy from Neutral at Goldman
Fortuna Silver Mines (FSM) upgraded to Outperformer from Sector Performer at CIBC
Horsehead Holding (ZINC) upgraded to Outperform from Market Perform at FBR Capital
Ingersoll-Rand (IR) upgraded to Buy from Neutral at Goldman
IntercontinentalExchange (ICE) upgraded to Buy from Neutral at Citigroup
Leidos (LDOS) upgraded to Neutral from Underperform at Credit Suisse
MGM Resorts (MGM) upgraded to Buy from Hold at Deutsche Bank
Natus Medical (BABY) upgraded to Outperform from Market Perform at William Blair
Noodles & Company (ndls) upgraded to Buy from Hold at Jefferies
RockTenn (RKT) upgraded to Buy from Neutral at BofA/Merrill
Sun Life Financial (SLF) upgraded to Overweight from Equal Weight at Barclays
WellCare (WCG) upgraded to Buy from Neutral at Sterne Agee
Yamana Gold (AUY) upgraded to Neutral from Underweight at HSBC

Downgrades

Alcobra (ADHD) downgraded to Hold from Buy at Canaccord
BAE Systems (BAESY) downgraded to Hold from Buy at Cantor
CareFusion (CFN) downgraded to Neutral from Overweight at JPMorgan
Commerce Bancshares (CBSH) downgraded to Underperform at Raymond James
Dunkin’ Brands (DNKN) downgraded to Hold from Buy at Jefferies
Great-West Lifeco (GWLIF) downgraded to Equal Weight from Overweight at Barclays
Hibbett Sports (HIBB) downgraded to Neutral from Buy at BofA/Merrill
Las Vegas Sands (LVS) downgraded to Hold from Buy at Deutsche Bank
PG&E (PCG) downgraded to Fair Value from Buy at CRT Capital
Ryanair (RYAAY) downgraded to Neutral from Overweight at JPMorgan
Sunesis (SNSS) downgraded to Hold from Buy at Cantor
Sunesis (SNSS) downgraded to Neutral from Buy at Roth Capital
Total System (TSS) downgraded to Equal-Weight from Overweight at Evercore
U.S. Bancorp (USB) downgraded to Market Perform from Outperform at Raymond James

Initiations

Apple (AAPL) reinstated with a Buy at BofA/Merrill
Aratana Therapeutics (PETX) initiated with an Overweight at Piper Jaffray
BioMed Realty (BMR) initiated with a Buy at Mizuho
BlackBerry (BBRY) initiated with an In-Line at Imperial Capital
CBOE Holdings (CBOE) initiated with a Neutral at Citigroup
Hibbett Sports (HIBB) initiated with a Neutral at Goldman
Karyopharm (KPTI) initiated with an Outperform at Wedbush
Keurig Green Mountain (GMCR) initiated with a Buy at Goldman
Materialise (MTLS) initiated with a Buy at Canaccord
NRG Yield (NYLD) resumed with a Neutral at Citigroup
Navios Acquisition (NNA) initiated with a Buy at GMP Securities
Paylocity (PCTY) initiated with an Outperform at Northland
ReWalk Robotics (RWLK) initiated with a Buy at Jefferies
ReWalk Robotics (RWLK) initiated with a Hold at Canaccord
ReWalk Robotics (RWLK) initiated with an Equal Weight at Barclays
Salem Communications (SALM) initiated with a Buy at Noble Financial
TESARO (TSRO) initiated with a Buy at Jefferies
UnitedHealth (UNH) initiated with an Overweight at Piper Jaffray
Vantiv (VNTV) initiated with an Outperform at Pacific Crest
Vectrus (VEC) initiated with a Buy at CRT Capital
VeriFone (PAY) initiated with an Outperform at Pacific Crest

COMPANY NEWS

The European Commission opened an in-depth investigation to examine whether the decision by Luxembourg’s tax authorities with regard to the corporate income tax to be paid by Amazon (AMZN) in Luxembourg comply with the EU rules on state aid
Rio Tinto (RIO) confirmed no discussions taking place with Glencore
Yara International (YARIY) CEO Jørgen Ole Haslestad resigned amid CF (CF) merger talks
Turner Broadcasting System, a subsidiary or Time Warner (TWX), will reduce its global workforce of some 14,000 full-time employees by approximately 10%
Zillow (Z) reported 82.81M monthly unique users in September

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
CalAmp (CAMP)

Companies that matched consensus earnings expectations include:
Container Store (TCS), Team (TISI)

Samsung (SSNLF) reports Q3 operating profit guidance 4.1T won vs. 10.20T won last year
Aegion (AEGN) reduces FY14 EPS guidance to $1.27-$1.37, consensus $1.54
Adobe (ADBE) targets FY15 adjusted EPS approximately $2.00, consensus $2.07
IDT Corp (IDT) reports Q4 adjusted EPS 39c, one estimate 37c
Container Store (TCS) sees FY14 adjusted EPS 41c-46c, consensus 49c
Container Store (TCS) raises FY14 EPS view to 52c-57c with gains, from 49c-54c

NEWSPAPERS/WEBSITES

Justice Department set to attack more large banks by year end, NY Times reports (BAC, C, GS, UBS, DB, BCS, JPM;MS, USB, WFC)
Deutsche Bank (DB) in talks to settle rate-rigging allegations, WSJ reports
Live Nation (LYV) in talks to acquire majority stake in C3 Presents, NY Times reports
Visa’s (V) CIO leaves company to join Charles Schwab (SCHW), Re/code reports
Becton Dickinson (BDX) acquisition of CareFusion (CFN) will benefit investors, Barron’s says

SYNDICATE

BreitBurn Energy (BBEP) files to sell 14M common units representing limited partners
Burlington Stores (BURL) files to sell 8M shares for holders
KCAP Financial (KCAP) files to sell 3M shares of common stock
Kosmos (KOS) files to sell 15M shares for holders
Natural Resource Partners (NRP) 8.5M share Secondary priced at $12.02
iBio (IBIO) files to sell 23.42M shares for holders

via Zero Hedge http://ift.tt/1s8IokP Tyler Durden

While the economic data, especially out of Europe, just keeps getting worse by the day, with the latest confirmation that Europe is now officially in a triple-dip recession coming out of Germany and the previously observed collapse in Industrial Production which tumbled the most since February 2009, it was once again the Dollar and especially the New Normal favorite currency, the Yen, that was in everyone’s sights overnight, when it first jumped to 109.20 only to slide shortly after midnight eastern, when Abe repeated once again that a plunging Yen is hurting small companies and consumers – and to think it only took him 2 years to read what we said would happen in late 2012 – but also the BOJ minutes which did not reveal any addition easing, which apparently disappointed algos and triggered USDJPY slel programs, pushing the USDJPY 80 pips lower to 108.40.

The last nail in the overnight USDJPY trading range coffin was the statement by Japan Toshihiro Nikai, chairman of ruling Liberal Democratic Party of Japan’s general council, who said after meeting other LDP lawmakers, representatives of Ministry of Finance and Bank of Japan today, that the Japan government should consider a monetary policy exit strategy. Quotes Bloomberg “It could be important to get involved in this issue and the government should thoroughly examine it,” lawmaker Toshihiro Nikai said after a meeting of the ruling Liberal Democratic Party’s general council. An exit strategy should be considered was an opinion that came up at the council meeting. Nikai, the council chairman, cited fellow LDP lawmaker Seiichiro Murakami as telling the council meeting that it may be necessary to change the direction of the central bank’s policy. The council is responsible for reviewing and approving bills from LDP members before they are put to parliament.

It appears that the weak Yen, which is leading to the highest Japanese Misery Index in Japan in 4 decades, is finally manifesting itself in political disconent and is about to end Abenomics for good. At least Abe has a trusty old scapegoat friend, in the face of diarrhea, when he once again, has to exit stage left.

The overnight Asian session the tone is, on balance, firmer. The Hang Seng (+0.46%) is up for their third consecutive day. Crowds at key protest sites continue to dwindle whilst representatives from HK’s Occupy Central movement have agreed to hold formal discussions with the government. Both sides hope to start formal talks before 12 October. Chinese markets remain shut. The KOSPI is up by a modest 0.2% whilst the Nikkei is sliding. Asian IG credit spreads opened tighter overnight whilst HY benchmarks are also firmer across the board. The Asia iTraxx roll markets are currently being quoted at 22/23bp with flows broadly skewed towards sellers of protection. Broader EM sentiment is also benefiting from the sharp rally in the overall Brazilian risk complex yesterday. The Bovespa rallied 4.7% to post its biggest daily performance in two years. 5yr Brazil CDS narrowed 16bp and the BRLUSD is now about 2% higher from its Friday’s close.  MSCI Asia Pacific up 0.2% to 139.53. Nikkei 225 down 0.67%, Hang Seng up 0.46%, Kospi up 0.23%, Shanghai Composite up 0.26%, ASX down 0.16%, Sensex down 0.65%.

European equities trade in a sea of red alongside the lacklustre German industrial production data which came in at its lowest level since 2009. On a sector specific basis, materials is the only sector in the green across Europe with support provided by reports that Glencore (up as much as 1.5%) is said to be laying the groundwork for potential merger with Rio Tinto (+5%) in 2015 after reaching out to Rio Tinto’s biggest investor (Aluminium Corp. of China) to gauge its interest in a potential deal, according to people familiar with the matter. To the downside, healthcare names are seeing notable outperformance with GSK (-1.7%) trading lower following a negative broker move at Kepler Chevreux. Furthermore, airlines names are also being weighed on this morning following an amalgamation of profit-taking and negative news stories including reports that a Spanish nurse has tested positive for the ebola disease, which could potentially have the scope to hamper travel across Europe. 18/19 sectors decline, led by travel and leisure, health care and financial services. Eurostoxx 50 -0.93%, FTSE 100 -0.67%, CAC 40 -0.91%, DAX -0.91%, IBEX -0.89%, FTSEMIB -0.25%, SMI -1.06%.

We’ll get more data flow today with the IBD/TIPP economic optimism (Oct) and JOLTS job openings (August) being the notable ones from the US. Fed’s Dudley and Kocherlakota are also scheduled to speak at some point today. In Europe, Industrial production data from the UK and Germany will probably be the key. We should also get the latest World Economic Outlook from the IMF today.

Market Wrap

• S&P 500 futures down 0.3% to 1949.4
• Stoxx Europe 600 down 0.7% to 333.64
• US 10Y yield down 1bps to 2.41%
• German 10Y yield little changed at 0.91%
• MSCI Asia Pacific up 0.2% to 139.53
• Gold spot up 0.1% to $1208.84/oz

Bulletin Headline Summary

• European equities trade lower across the board from the get-go amid Eurozone recession fears after German industrial production printed its lowest level since 2009.
• USD/JPY has been dragged lower following signals from Japanese officials that the JPY weakness may have reached its conclusion, with lower US yields also adding to the downside.
• Looking ahead, attention turns towards the host of central bank speakers due to comment with ECB’s Costa, Fed’s Kocherlakota and Dudley all on the speaker slate.

ASIA

JGBs traded higher by 8 ticks at 146.05 underpinned by spill-over buying in USTs during yesterday’s session and some weakness in Japanese stocks. The Nikkei 225 (-0.67%) recovered some of the earlier losses as the USD gained back lost ground on the JPY. Markets paid little attention to the Bank of Japan rate decision, unanimously unchanged as attention remained on the USD/JPY rate. The Hang Seng (+0.46%) continued to extend on the recent 2-day gains, as participants await the outcome of talks between the government and protesters.

FIXED INCOME

Bunds continue to underperform USTs with the German benchmark subject to profit-taking after printing contract-highs earlier in the session. This level was touched following the concerning German industrial production figures (M/M -4.0% vs. Exp. -1.5% (Prev. 1.9%, Rev. 1.6%)) which has triggered further concerns over the possibility of Germany entering into recession with analysts at ING saying that the drop in IP is too strong to explain by one-off factors. Nonetheless, Bunds have since pulled away from these levels after meeting technical resistance amid a lack of notable economic commentary to further drive price action.

EQUITIES

European equities trade in a sea of red alongside the lacklustre German industrial production data which came in at its lowest level since 2009. On a sector specific basis, materials is the only sector in the green across Europe with support provided by reports that Glencore (up as much as 1.5%) is said to be laying the groundwork for potential merger with Rio Tinto (+5%) in 2015 after reaching out to Rio Tinto’s biggest investor (Aluminium Corp. of China) to gauge its interest in a potential deal, according to people familiar with the matter. To the downside, healthcare names are seeing notable outperformance with GSK (-1.7%) trading lower following a negative broker move at Kepler Chevreux. Furthermore, airlines names are also being weighed on this morning following an amalgamation of profit-taking and negative news stories including reports that a Spanish nurse has tested positive for the ebola disease, which could potentially have the scope to hamper travel across Europe.

FX

USD/JPY is one of the notable movers in FX markets with JPY gaining at the expense of USD following comments from Japanese PM Abe who said JPY strength is hurting small Co.’s and households, thus signalling that Japanese authorities believe JPY weakness may have reached its conclusion. This move to the downside for the pair has also been exacerbated by unfavourable interest differential flows alongside the move lower in US yields. Elsewhere, AUD fell 40 pips overnight as the RBA once again highlighted the over-valued currency, however the weakness was quickly erased as the market saw nothing new in the policy statement, with AUD/USD now residing in positive territory. GBP/USD trades relatively flat after failing to sustain the move above the 1.6100 level with the pair relatively unreactive to the in-line UK industrial and manufacturing report

COMMODITIES

Once again both Brent and WTI crude futures trade in negative territory with the move to the downside exacerbated by WTI slipping back USD 90.00bbl ahead of tomorrow’s DoE inventory report which is expected to reveal a build of 2mln bbls. Nonetheless, WTI crude futures still reside above yesterday’s low print of USD 88.76bbl. In the metals complex, spot gold trades above the key USD 1,200 albeit of its highs, with support overnight stemming from the weakness observed in the USD index and short-covering.

* * *

DB’s Jim Reid Concludes the overnight recap

Its been a mixed start to the week for markets with US equities trimming back some of its post-payrolls gains while European equities edged ahead for the second consecutive day. The S&P 500 (-0.16%) paused after a two-day rally although sentiment was also weighed by the weakness in small caps. The Russell 2000 fell -0.91% yesterday to extend further its underperformance this year. Indeed whilst the S&P 500 and the Dow are now around 6.3% and 2.5% ahead for the year the Russell is nearly -6% YTD. In the absence of major data flow the market is perhaps happy to ‘wait-and-see’ before Alcoa kicks off the earnings season on Wednesday. Credit markets broadly moved in lockstep with equities with CDS index rolls being a key focus on the day. Roll markets for the CDX IG S22/23, Main S21/22 and Xover S21/22 closed at around 8bps, 8bps and 100bps, respectively. In the FX space, the USD reversed most of Friday’s gains (DXY -0.88%) even though we are seeing a slight rebound into the Asian session overnight.

With FX on the move and very much in the headlines lately, we’ve seen two interesting research pieces from DB on this subject over the last few days. First over the weekend DB strategist Alan Ruskin published a note entitled, ‚What the world looks like in large USD cycles.? In it he writes how, ‚Since 1973, the big USD up cycles are associated with surprisingly strong equity performance, less surprisingly weak commodity prices; some widening in BAA spreads versus Treasuries; weaker not strong manufacturing ISM, with soft ISM prices; and weaker developing country growth notably in Latam and Asia.? The piece has lots of interesting charts looking at how different assets have performed during the varying USD cycles back to 1973. See here for full report: http://ift.tt/1s8qTRM…

We also have a short but dramatic piece from DB strategist George Saravelos which attracted a lot of attention yesterday. The report is called “Euroglut: a new phase of global imbalances.” In it George argues that, “both ‘secular stagnation’ and ‘normalization’ are incomplete frameworks for understanding the post-crisis world. Instead, “Euroglut” – the global imbalance created by Europe’s massive current account surplus will be the defining variable for the rest of this decade. Euroglut implies three things: a significantly weaker euro (forecast 0.95 in EUR/USD by end-2017), low long-end yields and exceptionally flat global yield curves, and ongoing inflows into “good” EM assets. In other words, he expects Europe’s huge excess savings combined with aggressive ECB easing to lead to some of the largest capital outflows in the history of financial markets.? It’s an interesting big picture view of the financial world we live in and is well worth a read. Although we can’t help wondering what the response from other countries will be if the Euro drops to 0.95 vs USD. More QE from Japan, the Fed returning to QE? A response from China? Anyway they’re just a few thoughts of ours after a first read of the note.

Turning to the overnight Asian session the tone is, on balance, firmer. The Hang Seng (+0.35%) and the HSCEI (+0.24%) are up for their third consecutive day. Crowds at key protest sites continue to dwindle whilst representatives from HK’s Occupy Central movement have agreed to hold formal discussions with the government. Both sides hope to start formal talks before 12 October. Chinese markets remain shut. The KOSPI is up by a modest 0.2% whilst the Nikkei is just slipping into negative territory now as we go to print. Asian IG credit spreads opened tighter overnight whilst HY benchmarks are also firmer across the board. The Asia iTraxx roll markets are currently being quoted at 22/23bp with flows broadly skewed towards sellers of protection. Broader EM sentiment is also benefiting from the sharp rally in the overall Brazilian risk complex yesterday. The Bovespa rallied 4.7% to post its biggest daily performance in two years. 5yr Brazil CDS narrowed 16bp and the BRLUSD is now about 2% higher from its Friday’s close.

There was limited data flow for markets to digest yesterday. A notable release was perhaps the disappointing factory orders from Germany which declined by a larger than expected 5.7% mom in August. Core orders also fell 2.5% mom to reverse the gains over the previous two months. All of which are not inconsistent with the recent softening trend in German data. Moving on to central bank activities, in a widely expected decision by the market, the RBA overnight left its cash rate unchanged at 2.5% for the 14th month. Ahead of the BoJ meeting conclusions, Bloomberg news noted that a majority of BoJ’s board members think it should drop the two-year timeframe for meeting its inflation target on concerns that investors may view April 2015 as a binding deadline which may fuel talks of more stimulus to meet the target. Back in Europe there’s also reports that the EU is preparing to reject France’s 2015 budget with the country preparing to run a budget deficit that is wider than EU compliance rules (4.3% of GDP vs 3.0%) as government cost cuts would be just 0.2% GDP (short of 0.8% previously agreed) (WSJ). Although we think ECB QE is highly likely in 2015, these stories are likely to lead to heated debate and disagreements on the ECB council.

We’ll get more data flow today with the IBD/TIPP economic optimism (Oct) and JOLTS job openings (August) being the notable ones from the US. Fed’s Dudley and Kocherlakota are also scheduled to speak at some point today. In Europe, Industrial production data from the UK and Germany will probably be the key. We should also get the latest World Economic Outlook from the IMF today.

via Zero Hedge http://ift.tt/1y0jpmW Tyler Durden

Yesterday it was German manufacturing orders which cratered 5.7% in August following a freak, 4.9% rebound in July, prompting Goldman to warn that “the underlying dynamic has weakened further at the end of Q3” …

 

… And then a few hours ago we finally got undeniable confirmation that Europe is once again in recession, its third since Lehman, only this one is worse: it is led by the “core” countries, with Germany in the forefront, a Germany which just reported industrial output which suffered its biggest monthly decline in more than five years in August. Specifically, German IP tumbled 4%, led by capital goods which crashed 8.8%; consumer goods sliding 0.4%, and basic goods dropping 1.9%, with the headline plunge far below the consensus of -1.5%, and below even the worst forecast of -3.0%, the biggest drop since February 2009, a result which according to the FT rose “fears that Europe’s biggest economy might be heading for recession and prompting renewed concern about the economic health of the eurozone.”

Oh, don’t be afraid: the world’s largest economic block is now without doubt in a triple-dip recession, which will in turn drag both the US and China down with it.

From the FT:

Output plunged 4.0 per cent from July, data published on Tuesday show, far more than the average 1.5 per cent drop forecast by economists and the largest decrease since February 2009, when the global financial crisis first hit Europe’s factories.

 

Coming on top of poor August data for industrial orders earlier this week, the numbers indicate that Germany is starting to suffer from a global weakening in demand for its exports due to geopolitical upheavals and slower growth in China.

 

With the figures influenced by plants closing for later than usual summer holidays, economists hedged their bets about the outlook for the rest of the year.

 

But they are no longer ruling out Germany falling into recession – with a possible decline in gross domestic product coming in the third quarter on top of the 0.2 per cent drop recorded in the three months to June.

 

Carsten Brzeski of ING bank wrote that a strong labour market and robust domestic consumption should “at least partly” offset weaker industrial output. “Whether this will be enough to avoid a technical recession, ie another contraction in the third quarter, is with today’s industrial production numbers too early to tell.”

 

Ralph Solveen, economist at Commerzbank, took a more optimistic view, saying that the late timing of summer holidays was “key”. But he too now expects GDP to fall growth to fall towards zero. “The trend is pointing down, with the German economy in the third quarter likely to have stagnated at best.”

 

And finally from Goldman: “Bottom line: Industrial production declined sharply in August partly owing to seasonal factors. The underlying trend, however, is also pointing downwards.”

Well, at least the Eurozone, and the artificial “political capital” currency was bailed out at all costs, and since the “chairman got to work” nobody else had to, and thus there was zero reform in any of Europe’s broken economies. Enjoy your hard-earned, and third in the past 6 years recession, Europe. Don’t worry though, the rest of the world is coming right behind you.

via Zero Hedge http://ift.tt/1s8kPZf Tyler Durden