iftttwall

While it remains to be seen if a majority of the Swiss population want their central bank to purchase a whopping 1,500 tons of gold in the coming years, perhaps the most notable event for gold overnight (aside from news that while India exports fell 5% in October, gold and silver imports soared by 280% and 136% Y/Y, respectively), came from ECB Executive Board member Yves Mersch who in a speech in Frankfurt said that the ECB balance-sheet expansion is “neither an end in itself nor a fetish.” As quoted by Bloomberg, the ECB member said that  “the effect on rates that comes along with it is at best a collateral benefit.”

Nothing new here: we have discussed why unlike Japan and the US, the biggest gating factor for Europe is the presence of freely-available, unencumbered collateral that could, at least in theory, be purchased by the ECB. Which brings us to the Mersch punchline: “Theoretically the ECB could purchase other assets such as gold, shares, ETFs to fulfill its promise of adopting further unconventional measures to counter a longer period of low inflation.”

In other words, for the first time ever, the ECB revealed just what the endgame for the Eurozone would looke like: full-blown monetization of virtually everything that is not nailed down. Including gold.

More from Mersch via Bloomberg: “The ECB should allow current stimulus measures to take effect first, then potential new measures must be analyzed in advance for effectiveness and conformity to ECB mandate.” He concluded by saying that “Monetary-policy easing can bring no positive effect if Europe’s economy isn’t structurally well-positioned” through reforms.

Which is ironic because in the same speech the same Mersch also opened a whole new can of worms when he said that he is not sure if the BOJ’s QE has worked.

“I’m not so sure it has worked, considering that this morning we saw that Japan has officially slid into recession again.”

Well, it has if one is long of the Nikkei (in Yen or USD terms). For everyone else: not so much.

But back to gold. Here is the Telegraph’s take:

Gold, shares, and exchange-traded funds (ETFs) – the European Central Bank (ECB) may turn to buying any or all of these in an attempt to boost inflation in the currency bloc.

 

Yves Mersch, a member of the ECB’s executive board, said that the purchase of these assets was “theoretically” an option for the central bank, which earlier this year resolved to “take further unconventional measures to counteract a lengthy period of lower inflation”.

 

His speech, delivered in German, came as official statistics published on Friday showed inflation of just 0.4pc in the year to October.

 

Very low levels of inflation were characterised by Mr Mersch as “abnormally low”, as price growth remained well below the ECB’s target of close to 2pc. 

 

“Every purchase of a security – or precious metal or foreign currency – naturally increases the credit risk of the buyer”, he added, noting that the ECB may lack a mandate to increase the risk of its balance sheet.

 

Mr Mersch, a Luxembourgian, is often seen as leaning towards the position of the ECB’s German members – hesitant to pursue monetary stimulus in an attempt to revive the eurozone.

So yes: in “theory” the ECB can buy pretty much anything, up to and including gold. And before all is said and done it most likely will, especially if one looks at today’s GOFO update, where the 6-Month rate remained at a negative -0.0075%, while the 1 Month rate just dropped to a fresh 13 year low, of -0.22%, a fresh low since 2001.

via Zero Hedge http://ift.tt/1H90PvU Tyler Durden

• Scuttled deals worth $580 billion put hedge funds on back foot (Reuters)
• Mounting Pressure on OPEC Spurs More Wagers on Oil Rally (BBG)
• It’s not just US real estate: Chinese Students at U.S. Universities Jump 75% in Three Years (BBG)
• Frankfurt Open for Yuan Clearing as Liquidity Rises (BBG)
• Obama defends healthcare law after adviser criticism (Reuters)
• Michael Hasenstab Bets Big in Controversial Places (WSJ)
• Facebook seeks foothold in your office (FT)
• Russia Seen as Greatest Threat in Poll as Oil Erodes Putin Power (BBG)
• Falling Oil Prices Test OPEC Unity (WSJ)
• Brent Crude Drops as Japanese Recession May Curb Demand (BBG)
• Shale Boom Helps North Dakota Bank Earn Returns Goldman Would Envy (WSJ)
• Hedge Funds Cut Gold Bets in Fastest Exit This Year (BBG)
• Keystone Pipe Vote Tackles Questions History Answered (BBG)
• Draghi Seen Bypassing QE Qualms to Hit Balance-Sheet Goal (BBG)
• How Michael Jackson Made $150 Million in 2014 (BBG)
• Actavis Said Near $62.5 Billion Deal for Allergan (BBG)
• London Homebuyers Vanish as Peak Prices Outpace Wages (BBG)

 

Overnight Media Digest

WSJ

* A sales tax increase pushed Japan’s economy into a recession in the third quarter, setting the stage for Prime Minister Shinzo Abe to postpone a second increase in the sales tax. (http://on.wsj.com/1tZeV8P)

* Bank of North Dakota, the United State’s state-owned bank which has one branch and no automated teller, is more profitable than Goldman Sachs Group Inc, has a better credit rating than JPMorgan Chase & Co and has not seen profit growth drop since 2003. The bank has been one of the biggest beneficiaries of the boom in Bakken shale-oil production from hydraulic fracturing. (http://on.wsj.com/1EP3J57)

* Sony Corp investors could get a look in the coming week at whether the hard-nosed approach of finance chief Kenichiro Yoshida is producing an impact on the company’s outlook. Sony Chief Executive Kazuo Hirai, Yoshida and other executives are expected to talk up plans to rebuild around Sony’s entertainment businesses, which include the videogame division and Hollywood studio arm. (http://on.wsj.com/1wLmqlG)

* Actavis Plc is nearing a deal to acquire Allergan Inc in a tie-up that would likely be the year’s largest and could help shield Botox maker Allergan from a hostile suitor Valeant Pharmaceuticals International Inc. The boards of Actavis and Allergan are expected to meet in coming days to review a cash-and-stock takeover, sources said. (http://on.wsj.com/11g3e6K)

* Mutual-fund manager Michael Hasenstab has piled up big returns and catapulted Franklin Resources Inc’s Templeton Global Bond Fund into the largest government-bond fund in the world from investments that sometimes align him with regimes criticized by the United States and Europe. (http://on.wsj.com/1xNiZz3)

* The Organization of the Petroleum Exporting Countries knows it must cut production to lift prices. A collective move to cut output could boost prices, but it would also rob OPEC members of revenue. It is unclear how long such vulnerable OPEC economies as Venezuela and Nigeria could afford to limit production without reopening the spigots. (http://on.wsj.com/1xcjoel)

* Prompted by the disappearance of Malaysia Airlines Flight 370, government and aviation-industry officials are set to announce global standards calling for airliners to automatically report their position at least every 15 minutes, sources said. (http://on.wsj.com/11u9IzZ)

* While economic growth in the eurozone is flattening, money managers are keeping the faith that the European Central Bank will succeed in propping up markets and eventually the economy. (http://on.wsj.com/1t18bHx)

* Standard Chartered Plc is paying the price for an aggressive push into lending to commodity-linked firms, as the bank’s soured loans have jumped. A combination of increased competition from local banks and slowing growth in its core markets forced Standard Chartered to make riskier loans to sustain its fast expansion, said Chirantan Barua, an analyst at Sanford Bernstein. (http://on.wsj.com/1BGYuIr)

* United States Federal investigators descended on the coastal city of La Porte, Texas to probe an accident at a E.I. DuPont de Nemours & Co chemical plant that left four workers dead. The plant suffered a leak of a poisonous gas called methyl mercaptan, DuPont said. (http://on.wsj.com/14xhuum)

* The decision to get the “Dumb and Dumber” gang back together helped the screwball buddy comedy opening in first place at the weekend box office with an estimated $38.1 million. That put the sequel distributed by Comcast Corp’s Universal Pictures, ahead of last week’s top films, “Big Hero 6” and “Interstellar”. (http://on.wsj.com/1vgFEF9)

* Nearing the one-year anniversary of Target Corp’s massive and costly data breach, the company is looking to show that it has moved on. The discounter will report its third-quarter earnings on Wednesday. The recent optimism has helped to lift Target shares to 2014 highs. (http://on.wsj.com/11usGXq)

* Republican control of Congress in 2015 could boost the Grand Old Party’s efforts to make the Federal Trade Commission operate more like the Justice Department when it comes to antitrust enforcement. (http://on.wsj.com/1qaPtmd)

* American Airlines Group Inc and its 15,000 pilots continued to negotiate terms for a new, five-year labor agreement, with the pilots asking for big raises to compensate for the profit-sharing deal enjoyed by pilots at Delta Air Lines Inc. (http://on.wsj.com/1ETxdkg)

* The partners at Morgan, Lewis & Bockius LLP voted to hire the majority of partners at Boston law firm Bingham McCutchen LLP. The deal is expected to close by the end of November, Morgan Lewis said. (http://on.wsj.com/1zuWnCK)

* About 100,000 people submitted applications for health insurance on the first day of the relaunch of Healthcare.gov, the online marketplace at the heart of the United States president’s health-care law, Health and Human Services Secretary Sylvia Mathews Burwell said. (http://on.wsj.com/1qNVobn)

* Apple Inc has struck a deal with China’s only domestic bank card provider UnionPay, making it easier for Chinese consumers to buy its apps. The iPhone maker has been facing questions of how it will expand into payment systems in China. Apple’s own payment system Apple Pay is not yet available there. (http://on.wsj.com/1xNwRJz)

 

FT

TalkTalk Telecom Group PLC has struck a mobile services deal with Telefonica UK to launch the services over its network as the group looks to grow the market for so-called “quad play” services bundling TV, broadband and fixed and mobile telecoms.

British Prime Minister David Cameron is expected to donate 650 million pounds ($1.02 billion) to a global “green climate fund” this week, that could risk criticism from some Conservative MPs and the UK Independence party.

David Cameron warned the risk of another global recession at the end of the G20 summit in Brisbane, saying the “red warning lights are once again flashing on the dashboard of the global economy”.

More bankers should be subjected to a tougher pay regime by the regulators, including bonus clawbacks, MPs who sat on the parliamentary commission on banking standards argued in a report published on Monday.

 

NYT

* Allergan Inc is near a deal to sell itself to Actavis Plc for more than $62.5 billion, people briefed on the matter said on Sunday, potentially ending one of the most bitter merger battles in recent memory. (http://nyti.ms/1xNqRk9)

* With a goal of fiber-optic lines reaching to every school and a Wi-Fi connection in every classroom, Tom Wheeler, chairman of the Federal Communications Commission, is expected on Monday to propose a 62 percent increase in the amount of money the agency spends annually to wire schools and libraries with high-speed Internet connections. (http://nyti.ms/1vkhRDv)

* When it comes to insider trading in the United States, government officials have built careers on successful prosecutions. Hedge funds have been shut down, and regulators have ensnared even low-level employees who traded on confidential tips. But in Brazil, no one has ever gone to jail for insider trading. On Tuesday, however, Eike Batista, once one of the Brazil’s richest and most flamboyant men, is scheduled to defend himself in court against accusations of insider trading and stock market manipulation. (http://nyti.ms/1qNTYO9)

* Hasbro Inc has ended talks with DreamWorks Animation, people briefed on the matter said on Friday, ending discussions that would have united the parent companies of the Transformers and Shrek. The breakup of the negotiations followed a sharp slide in Hasbro’s shares after reports of the talks emerged late Wednesday. The toy maker’s shares had fallen nearly 5 percent since then, closing on Friday at $54.02. The fall in Hasbro’s share price was notable because the company had weighed paying both stock and cash, people briefed on the matter have said. (http://nyti.ms/1t1g9jF)

* Vice Media, the news and entertainment group, is expected to announce Monday that it has hired Alyssa Mastromonaco, a former Obama administration official, as its chief operating officer. (http://nyti.ms/1qaSRgE)

 

Canada

THE GLOBE AND MAIL

** China’s state-controlled energy firms are struggling to turn a profit in Canada in part because of the federal government’s immigration laws, said Wang Xinping, China’s consul general based in Calgary. Xinping said his country’s energy companies want to bring in their own employees to reduce costs. But Ottawa has been stingy in issuing work permits. (http://bit.ly/1A6ybJS)

** Liberal Party’s David Bertschi has been told he won’t be allowed to seek the Liberal nomination in Ottawa-Orleans, clearing the path for Andrew Leslie, a retired general and adviser to Justin Trudeau on foreign policy. (http://bit.ly/1uDJGFq)

** Onex Corp, Canada’s largest buyout firm, is leading the bidding for Swiss juice-box maker SIG Combibloc Group AG in what would be one of its biggest European acquisitions, according to people familiar with the matter. Onex may reach an agreement to buy SIG for more than $4 bln as early as this week, the people said. (http://bit.ly/1uDKdXK)

NATIONAL POST

A baby born in Edmonton earlier this year touched off the latest in a string of emotional end-of-life court battles, dying after a judge said removing her from life support was the “kindest” option available, a just-released written ruling reveals. (http://bit.ly/1A6Enla)

** A packed late night Chinese restaurant in downtown Toronto became a scene of carnage just before 4 a.m. Sunday, when someone opened fire with a semi-automatic weapon, injuring two women and killing a man. (http://bit.ly/1A6HKbH)

 

China

SHANGHAI SECURITIES NEWS

– Bad loans at Chinese banks climbed to 766.9 billion yuan ($125.13 billion) by the end of September, an increase of 72.5 billion yuan from a quarter earlier, according to China’s banking regulator. Bad loan ratio stood at 1.16 percent, up 0.09 percentage point.

CHINA SECURITIES JOURNAL

– Shares of Everbright Securities Co Ltd have been suspended from trading starting Monday, pending announcement of plans for the private placement of shares.

SHANGHAI DAILY

– The first intellectual property (IP) bureau on China’s mainland, dealing with all legal issues concerning brands, patents and copyright, opened in the city. So far, these three areas have been handled by different organisations, resulting in complexity in handling IP disputes.

CHINA DAILY

– China will need to rely on capital exports and investment in innovation to drive growth as foreign trade and the domestic property sector, the main engines of the economy, are losing momentum, a leading economist said on Friday. The country is entering a phase where it will use capital exports to drive the overseas growth of its infrastructure-related products and services, such as railways, utilities and machineries.

PEOPLE’S DAILY

– China’s aviation industry has narrowed its gap with developed countries through persistent innovation, and should advance to new heights through cooperation.

Britain

Sunday Telegraph

WAITROSE BOSS SAYS SOME FOOD RETAILERS MAY CLOSE

Supermarkets in Britain could start to close as the industry copes with an unprecedented slide in sales and profits, according to Mark Price, managing director of Waitrose. Price said it was “incredibly hard to call” whether all of Britain’s food retailers would survive.

FACEBOOK PLANS FREE AFRICA INTERNET WITH AVANTI

Facebook is in advanced talks with satellite operator Avanti Communications over a project to provide free Internet access across swathes of Africa.

BT RULES OUT SALE OF IT OUTSOURCING ARM

BT Group has ruled out a spin-off or sale of its Global Services outsourcing arm in the face of pressure from several major shareholders to offload the business.

Sunday Times

QUINDELL SEEKS HEDGE FUND CASH INJECTION

Insurance services group Quindell has opened talks with hedge funds about a potential cash injection. The company is believed to have met at least two hedge funds in recent weeks. Quindell said it regularly held talks with financial institutions but insisted it had no need for additional cash.

FARROW & BALL IN TALKS TO BE BOUGHT BY ARES

Paint maker Farrow & Ball is in talks to be bought by Ares Management, the owner of upmarket U.S. department store Neiman Marcus, in a deal worth up to 300 million pounds ($470 million).

ISRAELI BILLIONAIRE WEIGHS CAMDEN MARKET FLOAT

Israeli gambling and technology billionaire Teddy Sagi is considering plans to float Camden Market, the north London tourist spot. Sagi has spent an estimated 500 million pounds buying up separate parts of the market.

Mail on Sunday

RBS FACES NEW PAY ROW AFTER FOREX SCANDAL

Royal Bank of Scotland faces a political row over a plan to give former chief executive Stephen Hester millions of pounds in share awards, despite its 400 million pounds fine for collusion in the foreign exchange market.

 

Fly On The Wall Pre-market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
Empire State manufacturing survey for November at 8:30–consensus 10.3
Industrial production for October at 9:15–consensus up 0.2%
Capacity utilization rate for October at 9:15–consensus flat at 79.3%

ANALYST RESEARCH

Upgrades

Constellium (CSTM) upgraded to Outperform from Market Perform at Bernstein
CyrusOne (CONE) upgraded to Buy from Hold at Stifel
Hudson Valley (HVB) upgraded to Outperform from Market Perform at Keefe Bruyette
MGIC Investment (MTG) upgraded to Conviction Buy from Buy at Goldman
NuVasive (NUVA) upgraded to Outperform from Market Perform at Wells Fargo
Phillips 66 (PSX) upgraded to Outperform from Neutral at Credit Suisse
Pinnacle Foods (PF) upgraded to Buy from Hold at Deutsche Bank
Rayonier (RYN) upgraded to Outperform from Sector Perform at RBC Capital
Thoratec (THOR) upgraded to Outperform from Market Perform at Wells Fargo
Volcano (VOLC) upgraded to Outperform from Neutral at Credit Suisse

Downgrades

Allstate (ALL) downgraded to Market Perform from Outperform at Keefe Bruyette
Boise Cascade (BCC) downgraded to Market Perform from Outperform at BMO Capital
CarMax (KMX) downgraded to Equal Weight from Overweight at Morgan Stanley
Denbury Resources (DNR) downgraded to Neutral from Buy at Sterne Agee
Denbury Resources (DNR) downgraded to Neutral from Outperform at Credit Suisse
Hecla Mining (HL) downgraded to Neutral from Buy at Roth Capital
Hertz (HTZ) downgraded to Market Perform from Outperform at Wells Fargo
Imperva (IMPV) downgraded to Neutral from Overweight at JPMorgan
JG Wentworth (JGW) downgraded to Market Perform from Outperform at Keefe Bruyette
Joe’s Jeans (JOEZ) downgraded to Neutral from Buy at B. Riley
Marriott (MAR) downgraded to Neutral from Buy at UBS
Nokia (NOK) downgraded to Underperform from Market Perform at Raymond James
Office Depot (ODP) downgraded to Neutral from Buy at Goldman
Procter & Gamble (PG) downgraded to Hold from Buy at Canaccord
Starwood (HOT) downgraded to Neutral from Buy at UBS
TubeMogul (TUBE) downgraded to Neutral from Buy at Citigroup
Wet Seal (WTSL) downgraded to Neutral from Buy at B. Riley

Initiations

Akamai (AKAM) resumed with a Market Perform at JMP Securities
Boston Properties (BXP) initiated with a Buy at Mizuho
DBV Technologies (DBVT) initiated with a Buy at Citigroup
DBV Technologies (DBVT) initiated with an Outperform at Leerink
Eagle Point Credit (ECC) initiated with a Market Perform at Keefe Bruyette
Proteon Therapeutics (PRTO) initiated with a Buy at Stifel
Proteon Therapeutics (PRTO) initiated with an Outperform at JMP Securities
Proteon Therapeutics (PRTO) initiated with an Outperform at RW Baird
Sunoco Logistics (SXL) initiated with a Buy at Jefferies
Transocean Partners (RIGP) initiated with a Buy at Citigroup

COMPANY NEWS

Halliburton (HAL) to acquire Baker Hughes (BHI) for $78.62 per share in cash and stock deal, representing an equity value of $34.6B and enterprise value of $38B
Pfizer (PFE) formed strategic alliance with Merck KGaA (MKGAY) to jointly develop and commercialize MSB0010718C, an investigational anti-PD-L1
antibody currently in development by Merck KGaA as a potential treatment for multiple types of cancer
JPMorgan (JPM) reported October net credit losses 2.26% vs. 2.24% last month
Exterran (EXH) to spin off international, fabrication businesses
Inovio (INO), Roche (RHHBY) terminated collaboration for INO-5150

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
China Mobile Games (CMGE), Sinovac Biotech (SVA), Anthera Pharmaceuticals (ANTH)

Companies that missed consensus earnings expectations include:
JD.com (JD), ContraFact (CFRX), MAG Silver (MVG)

NEWSPAPERS/WEBSITES

Actavis (ACT) close to buying Allergan (AGN) for over $64B, Bloomberg reports (VRX)
Hasbro (HAS) ends DreamWorks (DWA) talks after stock decline, Deadline reports
Facebook (FB) working on ‘Facebook at Work’ website, FT reports (GOOG, LNKD, MSFT)
DuPont (DD) probed on Texas chemical plant accident that left four dead, WSJ reports
Third Point attempts ‘golden leash’ strategy in Dow Chemical (DOW) fight, WSJ reports
Ford (F) could rise 30% in a year, Barron’s says
Cummins (CMI) could rise over 15% in FY15, Barron’s says
Arista Networks (ANET) growth could slow, Barron’s says

SYNDICATE

Core Molding (CMT) files $50M mixed securities shelf
Dyax (DYAX) files automatic mixed securities shelf
Magellan Petroleum (MPET) files $100M mixed securities shelf
PICO Holdings (PICO) files to sell $400M mixed securities shelf

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

While it was already leaked in the past week that oil service giant Halliburton would seek to purchase Baker Hughes, or, if the smaller oilservice company did not accept the proposed terms, make a hostile run at its board of directors, it was unclear how the Houston company would respond. As the Houston Chronicle summarized, BHI had “to make a tough choice: surrender control on a rival’s terms or face months of sunken oil prices and cost pressures alone….Halliburton’s demands come as crude prices have fallen dramatically and as the U.S. oil industry looks to an uncertain future. Much is unclear: how much oil producers will rein in equipment and service spending, whether oil prices will sink or swim, and how much Baker Hughes would be worth in six months after what would likely be a bruising battle for control of its board.” Moments ago we got the answer and Baker Hughes shareholders decided they have had enough of the volatile oil price and are happy to cash out at this point, in a $34.6 billion deal that values BHI shares at $78.62/share.

Then again, judging by the rather substantial M&A arb currently in the price, which was trading at $70.35 pre market, or a 10%+ discount to the proposed price, arbs seem to be a little sceptical if the $3.5 billion termination fee will not be put into play.

Also of note: $2 billion in “synergies” means a whole lot more BLS unemployment “seasonal adjustments” will be used in the coming months.

Full release below:

Halliburton and Baker Hughes Reach Agreement to Combine in Stock and Cash Transaction Valued at $34.6 Billion

• Baker Hughes Stockholders to Receive 1.12 Halliburton Shares Plus $19.00 in Cash for Each Share They Own
• Transaction Values Baker Hughes at $78.62 per Share as of November 12, 2014
• Highly Complementary Product Lines, Global Presence and Cutting-Edge Technologies Will enable Combined Company to Create Added Value for Customers
• Accretive to Halliburton Cash Flow by the End of Year One, with Nearly $2 Billion in Synergies and Significant Cash Flow to Support Future Returns of Capital to Stockholders

Halliburton Company (HAL) and Baker Hughes Incorporated (BHI) today announced a definitive agreement under which Halliburton will acquire all the outstanding shares of Baker Hughes in a stock and cash transaction. The transaction is valued at $78.62 per Baker Hughes share, representing an equity value of $34.6 billion and enterprise value of $38.0 billion, based on Halliburton’s closing price on November 12, 2014, the day prior to public confirmation by Baker Hughes that it was in talks with Halliburton regarding a transaction. Upon the completion of the transaction, Baker Hughes stockholders will own approximately 36 percent of the combined company. The agreement has been unanimously approved by both companies’ Boards of Directors.

 

The transaction combines two highly complementary suites of products and services into a comprehensive offering to oil and natural gas customers. On a pro-forma basis the combined company had 2013 revenues of $51.8 billion, more than 136,000 employees and operations in more than 80 countries around the world.

 

“We are pleased to announce this combination with Baker Hughes, which will create a bellwether global oilfield services company and offer compelling benefits for the stockholders, customers and other stakeholders of Baker Hughes and Halliburton,” said Dave Lesar, Chairman and Chief Executive Officer of Halliburton. “The transaction will combine the companies’ product and service capabilities to deliver an unsurpassed depth and breadth of solutions to our customers, creating a Houston-based global oilfield services champion, manufacturing and exporting technologies, and creating jobs and serving customers around the globe.”

 

Lesar continued, “The stockholders of Baker Hughes will immediately receive a substantial premium and have the opportunity to participate in the significant upside potential of the combined company. Our stockholders know our management team and know we live up to our commitments. We know how to create value, how to execute, and how to integrate in order to make this combination successful. We expect the combination to yield annual cost synergies of nearly $2 billion. As such, we expect that the acquisition will be accretive to Halliburton’s cash flow by the end of the first year after closing and to earnings per share by the end of the second year. We anticipate that the combined company will also generate significant free cash flow, allowing for the return of substantial capital to stockholders.”

 

Martin Craighead, Chairman and Chief Executive Officer of Baker Hughes said, “This brings our stockholders a significant premium and the opportunity to own a meaningful share in a larger, more competitive global company. By combining two great companies that have delivered cutting-edge solutions to customers in the worldwide oil and gas industry for more than a century, we will create a new world of opportunities to advance the development of technologies for our customers. We envision a combined company capable of achieving opportunities that neither company would have realized as well – or as quickly – on its own, all while creating exciting new opportunities for employees.”

 

Lesar concluded, “We believe that the expertise of both companies’ employees and leaders will be a competitive advantage for the combined company. Together with the people of Baker Hughes, we will establish a team to develop a detailed and thoughtful integration plan to make the post-closing transition as seamless, efficient and productive as possible. We look forward to welcoming the talented employees of Baker Hughes and are pleased they will be joining the Halliburton team.”

 

Transaction Terms and Approvals

 

Under the terms of the agreement, stockholders of Baker Hughes will receive, for each Baker Hughes share, a fixed exchange ratio of 1.12 Halliburton shares plus $19.00 in cash. The value of the merger consideration as of November 12, 2014 represents 8.1 times current consensus 2014 EBITDA estimates and 7.2 times current consensus 2015 EBITDA estimates. The transaction value represents a premium of 40.8 percent to the stock price of Baker Hughes on October 10, 2014, the day prior to Halliburton’s initial offer to Baker Hughes. And over longer time periods, based on the consideration, this represents a one year, three year and five year premium of 36.3 percent, 34.5 percent, and 25.9 percent, respectively.

Halliburton intends to finance the cash portion of the acquisition through a combination of cash on hand and fully committed debt financing.

 

The transaction is subject to approvals from each company’s stockholders, regulatory approvals and customary closing conditions. Halliburton’s and Baker Hughes’ internationally recognized advisors have evaluated the likely actions needed to obtain regulatory approval, and Halliburton and Baker Hughes are committed to completing this combination. Halliburton has agreed to divest businesses that generate up to $7.5 billion in revenues, if required by regulators, although Halliburton believes that the divestitures required will be significantly less. Halliburton has agreed to pay a fee of $3.5 billion if the transaction terminates due to a failure to obtain required antitrust approvals. Halliburton is confident that a combination is achievable from a regulatory standpoint.

 

The transaction is expected to close in the second half of 2015.

Then again, in a time when busted M&A has caused even more pain for the hedge fund community (read Scuttled deals worth $580 billion put hedge funds on back foot: “Hedge fund manager John Paulson, who invested 1.44 billion pounds in Shire on Oct. 14, saw his Advantage fund lose 13.6 percent in October, according to an investor, while Elliott Associates said it may take legal action against AbbVie for scuttling the deal and losses”), the last thing the M&A arb community needs is yet another red herring deal, which may well be seeking to force shorts across the oilspace shorts to scramble to cover, to fall apart and lead to even more hedge fund pain with less than 2 months left until year end.

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

Perhaps the biggest shock following last night’s completely expected and very predictable (previewed here over a month ago) Japanese slide into triple- (actually make that quadruple) dip recession, is that it took the BTFTripleDip recession algos as long as they did to recover most of the overnight futures losses. Because after surging to 107 on a confused short squeeze kneejerk reaction, the USDJPY subsequently tumbled 150 pips to 105.50 as rationality briefly emerged, and the market wondered for a few brief hours if rewaring the destruction of one’s economy is actually a prudent thing. Then, however, when European traders started walking into work, the now default USDJPY levitation on no volume came right back, and with that the correlation algo buying of E-mini futures, no doubt helped by the Bank of Japan itself taking advantage of the CME’s ES liquidity rebate program. Because without confidence as expressed by the lowest and only common denominator left – global equities – there is nothing else.

Luckily, there was not if nothing on the plate in one after another Japanese press conference overnight, where we heard such brilliant pearls of Keynesian wisdowm as

• AMARI: ABENOMICS HASN’T FAILED
• HAMADA: CURRENT WEAK YEN IS PLUS OVERALL FOR JAPAN ECONOMY but…
• HAMADA: JAPAN IMPORTERS MAY BE SUFFERING FROM WEAK YEN
• SUGA: INVENTORIES, WEATHER, CONSUMER MINDSET CAUSED GDP FALL.
• HONDA SAYS GOVT SHOULD DISCUSS STEPS TO SUPPORT ECONOMY:REUTERS. Uhm, what was govt discussing in past 2 years?
• SUGA:ABE TO DECIDE ON ANY ECONOMIC MEASURES NEEDED AFTER RETURN. Is “quitting” one of them?
• and HAMADA: NO NEED TO WORRY ABOUT FUTURE OF JAPAN FINANCES. True: the outcome is quite clear

In short: Abenomics has failed miserably, and the only question is if there will be a “shocking” defeat of Abe at the coming impromptu elections (which Goldman believes will take place on December 14), as the re-peat PM just can’t wait to get the hell out, especially since he already used the “diarrhea” defense once…

In other news, the other greatly anticipated event overnight, the launch of the Chinese Stock Connect trading with Hong Kong was a dud: as Macquarie said “China Stock Connect trading volume “disappointing”).

Most H.K. stocks in the connect declined, with China investors taking ~17% of the 10.5b yuan daily quota, according to Bloomberg data after the market close. Keep in mind, 80% of brokers in a survey expected Shanghai quota to be filled; 50% expected H.K. quota to be filled. Another result: Shanghai Composite Index -0.2%; HSCEI -1.9%, down most in 2 mos.; HSI -1.2%, down most in 5 weeks. Because nobody buys stocks as good as central banks.

As while most eyes were on the Nikkei during Asian hours, European equities opened firmly in the red in sympathy with the Nikkei 225 (-2.96%) which saw its largest decline since August. Heading into the North American open, European equities remain in the red albeit off their worst levels, with stocks seeing some reprieve after comments from PM Adviser Honda who said that a sales tax hike is out of the question and the Japanese economy may require a JPY 3 trillion stimulus package. Further negative sentiment has also stemmed from the fallout of the G20 summit over the weekend that saw Russian President Putin leave the meeting earlier due to confrontations with other members, although German Chancellor Merkel has said she will continue to engage in negotiations with the Russian leader. Fixed income products have largely tracked the movements seen in equities with Bunds firmly in the green albeit off their best levels amid the mild recovery in equities. More specifically, the short-sterling strip contract is trading higher by around 1-8 ticks following dovish rhetoric from BoE members Carney and Haldane, with tier 1 investment banks continuing to push back their expectations for a rate-hike by the BoE.

Bulletin Headline Summary from RanSquawk and Bloomberg

• European equities feel the squeeze in-line with their Japanese counterparts as Japanese GDP falls well short of expectations.
• EUR/USD faces further downside after ECB’s Mersch said unconventional measures could theoretically include buying state bonds or other assets such as gold, shares or ETFs, while GBP is also seen lower following increasingly dovish rhetoric from BoE members.
• Looking ahead, attention turns towards US empire manufacturing and industrial production figures, as well as any comments from ECB’s Draghi, Coeure and Fed’s Evans.

FX

In FX markets, EUR/USD has been seen lower throughout the session amid the recovery in the USD, before being placed under further pressure and breaking below 1.2500 following comments from ECB’s Mersch who said unconventional measures could theoretically include buying state bonds or other assets such as gold, shares or ETFs. Elsewhere, GBP continues to get squeezed following further dovish rhetoric over the weekend from BoE’s Carney and Haldane with the latter saying he is watching “like a dove” for signs that expectations of very low inflation in Britain could become entrenched. USD/JPY has naturally been a key focus overnight after initially breaking above 117.00 for the first time since 17th Oct’07, before seeing an aggressive sell-off heading into the European open to break back below 116.00 on profit-taking and safe-haven flows. Thereafter, the pair has recovered off its lows amid continued hopes of further Japanese stimulus.

COMMODITIES

In the commodity complex, price action has largely been swayed by movements in the USD-index with Brent and WTI crude futures seen lower once again as global growth concerns continue to weigh on prices following the Japanese GDP release. More specifically, oil risk manager Nunan at Mitsubishi said the move to the downside has been exacerbated by yet ‘another bearish factor’. Bearish sentiment has also been enhanced by comments from West’s energy watchdog who said a quick return to high prices is unlikely. For precious metals, following the Japanese GDP release, spot gold managed to see some reprieve with prices supported by the subsequent safe-haven bid, while Iron ore futures saw steady overnight trade on expectations that Chinese steel mills will continue to replenish stockpiles after an output halt earlier this month.

* * *

DB’s Jim Reid Concludes the overnight recap

It is a fairly busy week ahead. We’ll review it in full at the end but perhaps the biggest headlines will come out of Japan where Abe may dissolve the lower house this week ahead of snap elections, with the BoJ also meeting one month on from their surprise and narrow 5-4 decision to increase asset purchases. As DB’s James Malcolm pointed out over the weekend there is some evidence that Abe wasn’t privy to the coordinated BoJ/GPIF action and perhaps wasn’t appreciative of the pressure to go ahead with the sales tax that this move might have subtly encouraged. So will the BoJ be disappointed in the ever increasing likelihood of a delay to the sales tax and snap election? The likelihood of which has surely only been further enhanced this morning following a weak Q3 GDP print pushing Japan into a technical recession, the -0.4% qoq reading well below expectations of +0.5% for the quarter (-1.6% annualized versus +2.2% expected). The problems is that the longer the government leaves it to improve the fiscal situation the longer the BoJ’s asset purchases might have to last and the more it’s possible that the market will think the BoJ actions increasingly amount to monetising the debt. So this week’s decisions by Abe could have big implications further down the road and also shorter-term on the relationship between him and the BoJ.

Taking a quick look at price action in Asia this morning, markets are generally mixed with bourses reacting to the Japan data and the opening day of the Shanghai-Hong Kong Connect. This has generally dominated over headlines out of the G20 over the weekend with news that leaders have agreed to raise global growth by 2% over the next five years. With few details around the story, investors appear to be treating the news with caution although it’ll be interesting to see if we get any clarity around structural reforms associated with the plan. In terms of markets, the Nikkei is currently trading -2.7% whilst the Hang Seng and CSI 300 are -0.7% and +0.3% respectively. The latter boosted by a report in Bloomberg that Shanghai stock purchases through the link have exceeded Hong Kong buying by more than ten times over the first hour. This seems to have largely offset a reported increase in bad loans for China this morning, jumping by the most since 2005 in the third quarter to 776.9bn yuan. The JPY has recovered from the earlier weakness post the GDP print to now trade +0.58% stronger versus the Dollar.

Before we look at the rest of the day and week ahead, markets on Friday finished the week fairly subdued in the US with the S&P 500 virtually unchanged (+0.02%) on the day despite better than expected macro data, whilst 10y Treasuries closed 2bp lower and credit markets ended flat. In terms of data, the -1.3% mom import price index reading came ahead of the -1.5% mom expectations and marked the fourth consecutive monthly decline although this was somewhat influenced by lower oil prices and a rising dollar. Meanwhile the University of Michigan consumer confidence (89.4 vs. 87.5 expected) and business inventories (+0.3% mom vs. +0.2% mom) were other notable beats whilst the Dollar rallied following a strong retail sales print. The headline figure and ex. auto component were both a touch above consensus at +0.3% mom. Our US colleagues noted that the latter component was also revised up +0.2% in the previous month which should have the effect of contributing modestly to Q3 real GDP. The more material reading was the retail control figure which rose +0.5% in October along with a cumulative +0.3% revision in the previous month. This is a key input into GDP and our colleagues note that at the current level, retail control is +2.8% annualized compared to its Q3 average. Given low inflation this is consistent with real consumption growth well above last quarter’s +1.8% annualized reading. As mentioned the dollar rallied post the print, with the DXY index touching its highest level since June 2010 at 88.27, only to then settle lower later in trading closing -0.15% on the day. Away from the data releases we also had the usual Fedspeak, this time from Bullard who reiterated his forecast from his last statement of raising interest rates in the first quarter of next year, supported by rebounding inflation and strong jobs data. His comments a month ago about continuing with asset purchases seems to have been forgotten.

Closer to home, the Stoxx 600 was similarly subdued, closing -0.07% at the end of play. This was despite marginally better than expected GDP data out of the region with the overall Eurozone print +0.16% qoq, a tad above the +0.1% consensus. In terms of regions, Germany (+0.1% qoq) and Italy (-0.1% qoq) were in line with expectations whilst France surprised to the upside (+0.3% qoq vs. +0.2% expected). Our European colleagues noted that the print, similar to October PMI’s suggests that the growth outlook is stabilizing somewhat (albeit at low levels) following downward surprises in recent months. Elsewhere the HICP reading for the eurozone turned out to be fairly non-eventful with both the headline and core in line with consensus at +0.4% yoy and +0.7% yoy respectively.

Wrapping up the market moves on Friday, WTI and Brent pared back some of the losses over the week, climbing +2.17% and +2.48% respectively on the day with sentiment improved after Bloomberg reported that the slump in oil prices will force OPEC to act ahead of its meeting at the end of the month. WTI and Brent are currently trading -0.45% and -0.59% respectively this morning.

Looking at the day ahead, this morning looks like it’ll be fairly quiet with just trade data expected out of the Eurozone. This afternoon however, will likely be highlighted by Draghi’s quarterly testimony to the Committee on Economic and Monetary Affairs. Over in the US, industrial production, capacity utilization and empire manufacturing are the key releases for today.

In terms of the rest of the week ahead, we’ve got a fairly packed calendar in the US highlighted by the FOMC minutes on Wednesday and CPI print on Thursday. In terms of the former DB’s Joe LaVorgna notes that the minutes could potentially be a market-moving event given that the statement from that meeting was much more hawkish than what the market expected, whilst the Fed was also upbeat over comments around the economy and labour market. However we note that there was no mention to a stronger dollar or tightening financial conditions so conceivably these items could be mentioned in the minutes. With regards to the CPI reading, our US colleagues are expecting an energy related -0.1% decline in the headline and a housing related +0.2% increase in the core. Elsewhere tomorrow kicks-off with October property price data out of China – this comes after new home prices fell in all but one city in September so it’ll be interesting to see what the reading shows. We then follow this up with the ZEW survey in Germany and CPI and output prices out of the UK. In the US session we will be keeping an eye on the PPI print which we expect to continue to be depressed by lower energy costs whilst our US colleagues note to keep an eye on the healthcare component of the reading given it’s used to estimate the comparable component of the PCE deflator (the Fed’s preferred measure of inflation).

Later on Tuesday we will also get the homebuilders’ sentiment index out of the US. Away from the highlighted FOMC minutes on Wednesday, we will also get housing starts data of the US. Before all this in Asia we will be keeping an eye on developments out of the Japan, particularly with regards to Prime Minister Abe with the possible dissolving of the lower house potentially coming to fruition ahead of the well-publicised potential snap elections. Of course we will also have the results from the BoJ monetary policy statement. In the UK we will be casting a keen eye over the BoE monetary policy minutes. There’s no shortage of highlights on Thursday and we start the day in Asia with the November HSBC flash manufacturing PMI prints in China as well as machine tool orders out of Japan. We then follow this up with the ever important flash PMI’s out of Europe as well as consumer confidence and UK retail sales. Later in the day and on the other side of the pond, as well as the much anticipated CPI we will also be anticipating the Philadelphia Fed survey print, existing home sales and finally leading economic indicators, so certainly a lot for the market to digest.

Following a busy Thursday, the market will be perhaps be happy to hear that Friday is particularly data-light, with the main highlights being potentially comments out of the ECB’s Draghi and Nouy. We will also be getting our usual dose of Fedspeak with Dudley, Plosser, Williams and Mester due to speak at various points so there will certainly be enough to keep the market busy.

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

Great obituary for a Wall Street legend — Chris

James A. Lebenthal (June 22, 1928-November 14, 2014)

November 15, 2014

There are iconic names in nearly every discipline and specialty. The municipal bond world just lost one.

James Lebenthal devoted his long professional career to Munis. He was the center point of a three-generation effort in the Muni corner of the financial markets. The family history started in the days when tax-free municipal bonds were denominated in $1000 units and issued in bearer form, when one had to obtain the interest payments by clipping off a coupon with a pair of scissors and presenting it to a paying agent.

For longer than a half century, everyone in the Muni world knew the name Lebenthal. He was their champion in a highly public way and advertised on behalf of tax-free bonds with great creativity. He explained how the Muni bond paid for the infrastructure of state and local governments. And he defended Munis from political attacks that would have removed their tax-exempt status.

His firm’s national recognition was as a Muni “bond shop.” Their reputation was for fairness in pricing and for honoring their executions. Their service was responsive, whether the transaction involved $50,000 or $5 million. Cumberland Advisors, its principals, and portfolio managers knew the firm’s leaders for decades and still maintain that contact with James’s daughter, Alexandra.

My partner John Mousseau and I were discussing the great personalities in the Muni world. John had this recollection of Jim:

Back in the early 1990s I was giving lectures sponsored by the Bond Market Association to new people in the municipal bond industry. Much to my surprise, my co-lecturer was Jim Lebenthal. He was already a legend and still a major force in the business. Being on a pretty low rung compared to Jim, I was apprehensive. Jim could not have been more gracious. He introduced me as “my friend John from Shearson.” He gave me more than half the presentation time, and he continued to be inclusive later on when we answered questions – he would turn and say, “What do you think, John?” It was a singular act of politeness and kindness that I have never forgotten.

Later, when I met Jim at an industry event, I thanked him for his earlier kindness and remarked how great it was that he had been in the business such a long time and yet retained such a great passion for it. And he said, “John, don’t you love investments that you can drive on, drive over, go to school in, and get well in?” I’ve co-opted Jim’s line many times, and my advice for anyone in the Muni business is, BE LIKE JIM.

Cumberland Advisors, its partners, and associates extend our condolences to Alexandra and all those in the Lebenthal family. Our industry has lost a legacy creator. May he Rest in Peace.

David R. Kotok, Chairman and Chief Investment Officer

via Zero Hedge http://ift.tt/1wLzTdf rcwhalen

Submitted by Llewellyn Rockwell via The Ludwig von Mises Institute,

This talk was delivered at the Costa Mesa Mises Circle on Society Without the State, November 8, 2014.

The term “anarcho-capitalism” has, we might say, rather an arresting quality. But while the term itself may jolt the newcomer, the ideas it embodies are compelling and attractive, and represent the culmination of a long development of thought.

If I had to boil it down to a handful of insights, they would be these:

(1) each human being, to use John Locke’s formulation, “has a property in his own person”;

 

(2) there ought to be a single moral code binding all people, whether they are employed by the State or not; and

 

(3) society can run itself without central direction.

From the original property one enjoys in his own person we can derive individual rights, including property rights. When taken to its proper Rothbardian conclusion, this insight actually invalidates the State, since the State functions and survives on the basis of systematic violation of individual rights. Were it not to do so, it would cease to be the State.

In violating individual rights, the State tries to claim exemption from the moral laws we take for granted in all other areas of life. What would be called theft if carried out by a private individual is taxation for the State. What would be called kidnapping is the military draft for the State. What would be called mass murder for anyone else is war for the State. In each case, the State gets away with moral enormities because the public has been conditioned to believe that the State is a law unto itself, and can’t be held to the same moral standards we apply to ourselves.

But it’s the third of these ideas I’d like to develop at greater length. In those passages of their moral treatises dealing with economics, the Late Scholastics, particularly in the sixteenth and seventeenth centuries, had been groping toward the idea of laws that govern the social order. They discovered necessary cause-and-effect relationships. There was a clear connection, for example, between the flow of precious metals entering Spain from the New World on the one hand, and the phenomenon of price inflation on the other. They began to understand that these social regularities were brute facts that could not be defied by the political authority.

This insight developed into fuller maturity with the classical liberals of the eighteenth century, and the gradual emergence of economics as a full-fledged, independent discipline. This, said Ludwig von Mises, is why dictators hate the economists. True economists tell the ruler that there are limits to what he can accomplish by his sheer force of will, and that he cannot override economic law.

In the nineteenth century, Frédéric Bastiat placed great emphasis on this insight. If these laws exist, then we must study them and understand them, but certainly not be so foolish as to defy them. Conversely, he said, if there are no such laws, then men are merely inert matter upon which the State will be all too glad to impose its imprint. He wrote:

For if there are general laws that act independently of written laws, and whose action needs merely to be regularized by the latter, we must study these general laws; they can be the object of scientific investigation, and therefore there is such a thing as the science of political economy. If, on the contrary, society is a human invention, if men are only inert matter to which a great genius, as Rousseau says, must impart feeling and will, movement and life, then there is no such science as political economy: there is only an indefinite number of possible and contingent arrangements, and the fate of nations depends on the founding father to whom chance has entrusted their destiny.

The next step in the development of what would later become anarcho-capitalism was the radical one taken by Gustave de Molinari, in his essay “The Private Production of Security.” Molinari asked if the production of defense services, which even the classical liberals took for granted had to be carried out by the State, might be accomplished by private firms under market competition. Molinari made express reference to the insight we have been developing thus far, that society operates according to fixed, intelligible laws. If this is so, he said, then the provision of this service ought to be subject to the same laws of free competition that govern the production of all other goods. Wouldn’t the problems of monopoly exist with any monopoly, even the State’s that we have been conditioned to believe is unavoidable and benign?

It offends reason to believe that a well-established natural law can admit of exceptions. A natural law must hold everywhere and always, or be invalid. I cannot believe, for example, that the universal law of gravitation, which governs the physical world, is ever suspended in any instance or at any point of the universe. Now I consider economic laws comparable to natural laws, and I have just as much faith in the principle of the division of labor as I have in the universal law of gravitation. I believe that while these principles can be disturbed, they admit of no exceptions.

 

But, if this is the case, the production of security should not be removed from the jurisdiction of free competition; and if it is removed, society as a whole suffers a loss.

It was Murray N. Rothbard who developed the coherent, consistent, and rigorous system of thought — out of classical liberalism, American individualist anarchism, and Austrian economics — that he called anarcho-capitalism. In a career of dozens of books and thousands of articles, Rothbard subjected the State to an incisive, withering analysis, unlike anything seen before. I dedicated Against the State to this great pioneer, and dear friend.

But can it work? It is all very well to raise moral and philosophical objections to the State, but we are going to need a plausible scenario by which society regulates itself in the absence of the State, even in the areas of law and defense. These are serious and difficult questions, and glib answers will naturally be inadequate, but I want to propose at least a few suggestive ideas.

The conventional wisdom, of course, is that without a monopoly provider of these services, we will revert to the Hobbesian state of nature, in which everyone is at war with everyone else and life is “solitary, poor, nasty, brutish, and short.” A ceaseless series of assaults of one person against another ensues, and society sinks ever deeper into barbarism.

For one thing, it’s not even clear that the logic behind Thomas Hobbes’s fears really makes any sense. As Michael Huemer points out, Hobbes posits a rough equality among human beings in that none of us is totally invulnerable. We are all potential murder victims at the hands of anyone else, he says. He likewise insists that human beings are motivated by, and indeed altogether obsessed with, self-interest.

Now suppose that were true: all we care about is our own self-interest, our own well-being, our own security. Would it make sense for us to rush out and attack other people, if we have a 50 percent chance of being killed ourselves? Even if we happen to be skilled in battle, there is still a significant chance that any attack we launch will end in our death. How does this advance our self-interest?

Hobbes likewise speaks of pre-emptive attacks, that people will attack others out of a fear that those others may first attack them. If this is true, then it’s even more irrational for people to go around attacking others: if their fellows are inclined to preemptively attack people they fear, whom would they fear more than people who go around indiscriminately attacking people? In other words, the more you attack people, the more you open yourself up to preemptive attacks by others. So here we see another reason that it makes no sense, from the point of view of the very self-interest Hobbes insists everyone is motivated by, for people to behave the way he insists they must.

As for law, history affords an abundance of examples of what we might call trickle-up law, in which legal norms develop through the course of normal human interaction and the accumulation of a body of general principles. We are inclined to think of law as by nature a top-down institution, because we confuse law with the modern phenomenon of legislation. Every year the world’s legislative bodies pour forth a staggering number of new rules, regulations, and prohibitions. We have come to accept this as normal, when in fact it is, historically speaking, an anomaly.

It was once common to conceive of law as something discovered rather than made. In other words, the principles that constitute justice and by which people live harmoniously together are derived from a combination of reflection on eternal principles and the practical application of those principles to particular cases. The idea that a legislative body could overturn the laws of contract and declare that, say, a landlord had to limit rents to amounts deemed acceptable by the State, would have seemed incredible.

The English common law, for example, was a bottom-up system. In the Middle Ages, merchant law developed without the State at all. And in the US today, private arbitration services have exploded as people and firms seek out alternatives to a government court system, staffed in many cases by political appointees, that everyone knows to be inefficient, time-consuming, and frequently unjust.

PayPal is an excellent example of how the private, entrepreneurial sector devises creative ways around the State’s incompetence in guaranteeing the inviolability of property and contract. For a long time, PayPal had to deal with anonymous perpetrators of fraud all over the world. The company would track down the wrongdoers and report them to the FBI. And nothing ever happened.

Despairing of any government solution, PayPal came up with an ingenious approach: it devised a system for preemptively determining whether a given transaction was likely to be fraudulent. This way, there would be no bad guys to be tracked down, since their criminal activity would be prevented before it could do any harm.

Small miracles like this take place all the time in the free sector of society, not that we’re encouraged to learn much about them. Recall that as the Centers for Disease Control issued false statements and inadequate protocols for dealing with Ebola, it was a Firestone company town in Liberia that did more than any public authority in Africa to provide safety and health for the local population.

There is a great deal more to be said about law and defense provision in a free society, and I discuss some of this literature at the end of Against the State. But the reason we focus on these issues in the first place is that we realize the State cannot be reformed. The State is a monopolist of aggressive violence and a massive wealth-transfer mechanism, and it is doing precisely what is in its nature to do. The utopian dream of “limited government” cannot be realized, since government has no interest in remaining limited. A smaller version of what we have now, while preferable, cannot be a stable, long-term solution. So we need to conceive of how we could live without the State or its parasitism at all.

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

According to the International Centre for Prison Studies, nearly a third of all female prisoners worldwide are incarcerated in the United States of America. There are 201,200 women in US prisons, representing 8.8% of the total American prison population. As Forbes’ Niall McCarthy reports, China comes a very distant second to the US with 84,600 female prisoners in total or 5.1% of the overall Chinese prison population. Russia is in third position – 59,000 of its prisoners are women and this comes to 7.8% of the total. Either American women are the worst-behaved in the world, or the politically-expedient “prisons-first” culture has gone too far.

 

 

And here is Al-Jazeera’s Heather Schoenfeld explaining five things everyone should know about US incarceration:

Since the late 1980s, the US federal and state governments have sold imprisonment as the solution to myriad problems that have their roots in much more complex social and economic conditions.

 

The criminalisation tendency is politically expedient. This “prisons-first” political culture has one big downside: it has created mass incarceration.

Here are five things that everyone should know about mass incarceration in the United States.

1. The US incarcerates more people per capita than any other nation in the world: Approximately 1 in 100 adults or more than 2.2 million people are behind bars in the US, according to the Pew Center on the States. In addition, another 4.6 million (or a total of almost 7 million) people live under some form of correctional supervision.

Although the US is widely recognised as a “land of liberty”, it could also be described as a nation of prisons. It incarcerates more people per capita than any other nation. Its imprisonment rate (per capita) is almost 50 percent higher than Russia’s and 320 percent higher than China’s.

Within the western hemisphere, the US incarcerates five times as many people per capita as Canada and almost 2.5 times as many as Mexico.

2. Mass incarceration is not a result of higher crime rates: The US has the highest incarceration rate in the world not because it has higher crime rates, but because it imprisons more types of criminal offenders, including non-violent and drug offenders, and keeps them in prison longer.

With the exception of homicide, US crime rates are comparable to other European countries with much lower incarceration rates.

High incarceration rates are the result of “truth in sentencing”, “mandatory minimum” and “three strikes” laws which have limited judicial discretion in sentencing and parole release. As a result, sentences are now mainly determined by what the prosecutor decides to charge. And prosecutors routinely over-charge defendants in order to encourage plea agreements.

An egregious, but not unusual, recent example illustrates this point. In 2012, a Florida woman, who fired a “warning shot” in the direction of her physically abusive ex-husband (who was not hit by the bullet), was charged with aggravated assault with a deadly weapon.

The judge, as a result of mandatory sentencing legislation, was given no discretion in her sentencing. He sentenced her to 20 years in prison.

3. Mass incarceration disproportionately impacts US racial minorities: Mass incarceration has had a devastating effect on blacks and Hispanics in the US. African Americans are six times more likely to be incarcerated than a white person and non-white Latinos are almost three times more likely to be incarcerated, according to the Pew Center on the States.

Incarceration hits hardest at young black and Latino men without high school education. An astounding 11 percent of black men, aged between 20 and 34, are behind bars.

Much of the racial disparity is a result of the US’ war on drugs – started by President Ronald Reagan in the 1980s. By 1988, blacks were arrested on drug charges at five times the rate of whites.

By 1996, the rate of drug admissions to state prison for black men was 13 times greater than the rate for white men. This is despite the fact that African Americans use drugs at roughly the same rate as white Americans.

4. Mass incarceration is expensive: Imprisoning people is not cheap. The average cost of housing an inmate is approximately $20,000 to $30,000 per year. This price tag comes at the direct expense of public money that could be spent on public education, medical care and public assistance. And it is one reason why so many states face fiscal crises today.

To put this in perspective, the state of California spends 2.5 times more money housing and feeding its inmates than it does educating students. California is not alone: five states “spend more on corrections than higher education”, a 2008 Pew Center study revealed.

5. Mass incarceration disguises the US’ real unemployment rate and exacerbates inequality: The current unemployment rate in the US is high. And if we factored in all the people who are not looking for work because they are behind bars, it would be higher – especially among young black Americans and people without a high school diploma.

A recent research by Becky Petit reveals:

“Employment-population rates adjusted to include inmates suggest that only 26 percent of young black, male dropouts were employed in 2008, while over 37 percent were in prison or jail. Over half of the joblessness of young, black, and male dropouts is linked to incarceration.”

Incarceration also negatively impacts former prisoner’s ability to earn a decent living. Several studies suggest that there are at least six million “ex-prisoners” living within society and when they look for a job, they are 50 percent less likely to be hired than job seekers without a criminal record.

Former prisoners are paid less than those who have not been to prison. In addition, incarceration of a parent reduces a child’s prospects for economic mobility.

*  *  *

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