Frontrunning: October 17

Tyler Durden's picture
  • Congress Vote Ends Impasse to Be Revisited in January (BBG); Congress Passes Debt, Budget Deal (WSJ)
  • House GOP extracts no concessions (Politico)
  • Washington becomes the biggest risk to the U.S. economy (Reuters)
  • Debt Deal Seen Boosting U.S. Consumers as Holidays Approach (BBG) - only thing missing: disposable income
  • Federal Employees Head Back to Work (WSJ)
  • Regulator Suggested Shift for Dimon at J.P. Morgan Unit (WSJ)
  • Twitter hires Google ad exec ahead of IPO (CNET)
  • Teens can now post publicly, but posts are friends-only by default (WaPo)
  • Germany Moves to Finalize Coalition Deal (WSJ)
  • Draghi Turns Judge on EU Banks as ECB Studies Accounts (BBG)
  • UK nuclear deal with China a ‘new dawn’ (FT)
  • Honk Kong Stands Firm Behind US Dollar Peg (FT)


Overnight Media Digest


* A potentially crippling U.S. debt default was averted late Wednesday, as Congress passed legislation to end a two-week political battle that had rattled financial markets, splintered the Republican Party and showcased Washington dysfunction.

* As Senate leaders announced a deal to reopen the government and extend the country's borrowing authority, some GOP lawmakers were looking ahead to the next budget fights - and they weren't optimistic.

* Stockbrokers are being routinely allowed to scrub some customer complaints from their public records, leaving investors in the dark about potentially troubled advisers, according to a study of more than 1,600 arbitration cases.

* James Dimon gave up his chairmanship of JPMorgan Chase & Co's main banking subsidiary after a regulator said it preferred that he no longer hold those duties, said a person familiar with the discussions.

* Five former employees of Bernard Madoff's former firm generated "millions of pages of lies" that allowed the convicted financier's Ponzi scheme to continue, prosecutors told a jury on the first day of a criminal trial. The trial, expected to last five months, could represent prosecutors' last and best chance to undermine Madoff's insistence that he carried out the fraud essentially alone. It is also the first time prosecutors provided details of the inner workings of the Ponzi scheme to a jury.

* A federal jury ruled in favor of Mark Cuban, handing the billionaire a resounding victory in his five-year quest to defend himself against the government's charges of insider trading.

* Apple hoped to broaden its appeal with a cheaper version of the iPhone, but that effort appears to be faltering after a few weeks. The tech giant has reduced orders to assemblers for its lower-end iPhone, the 5C, at the same time, retailers and telecom operators report tepid demand for the device, prompting some to cut prices.

* Federal Reserve officials are considering imposing a new capital surcharge on Wall Street banks that own oil pipelines, metals warehouses and other lucrative physical-commodities assets, according to people familiar with the matter.



Senate leaders in the U.S. have struck a bipartisan deal ending weeks of negotiations to reopen the government and approve new sovereign borrowings that pushed the country to the edge of a debt default.

América Móvil, which is controlled by the Mexican tycoon Carlos Slim, has admitted defeat in a gruelling 7.2 billion Euro takeover battle for the Dutch telecoms group KPN after the intervention of an independent foundation linked to KPN.

Plans to part-privatise British defence procurement ran into rough weather after doubts over the eligibility of one of the companies hoping to run the programme threatened to end the process because of lack of competition.

A sixth consecutive quarter revenue fall at IBM led to a 6 percent tumble in its share value in after-market trading.

The U.S. will have to endure the consequences of the debt showdown for a long time to come, with companies starting to tie corporate profit warnings to the shutdown.

One commissioner at Commodity Futures Trading Commission wanted to prove that JPMorgan intentionally manipulated a key index.

The owner of the Dallas Mavericks basketball team, Mark Cuban, did not violate any insider trading laws when he sold his stake in, a jury said on Wednesday, dealing a blow to the Securities and Exchange Commission.

Civil and criminal charges will be brought against ConvergEx by the U.S. authorities. ConvergEx, a leading transaction services provider to pension funds and institutional investors, has been accused overcharging its clients



* With the federal government on the brink of a default, a House Republican effort to end the shutdown and extend the Treasury's borrowing authority collapsed Tuesday night as a major credit agency warned that the United States was on the verge of a costly ratings downgrade. After the House postponed any action, the Senate majority leader, Harry Reid, and Senator Mitch McConnell said that they had resumed talks on a deal to reopen the government and raise the debt limit.

* On Tuesday, Apple Inc said it had hired Angela Ahrendts, who transformed Burberry Group LLC from a faded British icon into a symbol of global luxury. Ahrendts will be senior vice president overseeing the strategy and operation of Apple's retail and online stores.

* Citigroup Inc, the nation's third-largest bank by assets, said its profit rose to $3.23 billion, or $1 a share, from a year earlier, but its results were hurt by weakness in its fixed-income unit. At the center of the earnings disappointment was Citi's fixed-income unit - a closely watched division that has helped in past quarters to buoy the bank's overall earnings.

* JPMorgan Chase & Co has reached a preliminary agreement with the Commodity Futures Trading Commission to settle accusations that a trading blowup in London last year represented reckless behavior. Aside from admitting some wrongdoing, the bank is expected to pay about $100 million to resolve the case, a trading debacle last year that has come to be known as the London Whale episode.

* The continuing sell-off in Treasuries, a by-product of the impasse in Congress, could disrupt the so-called repo market, making it hard for investment banks to operate. Treasuries back one-third of all transactions done in the $2 trillion repo market that brokers use the most. A violent sell-off in Treasuries could reduce the value of the collateral that brokerage firms use in repo, making it difficult for them to do business.

* Twitter Inc reported in an amended prospectus for its initial public offering that its revenue surged in the third quarter and that the number of its users had increased. Twitter plans to price its IPO on the night of Nov. 14, and begin trading the next day, according to people briefed on the matter. Twitter also said it had picked the New York Stock Exchange as the home for its listing.

* According to a Yahoo earnings presentation, its Chinese partner Alibaba Group Holdings Ltd reported $707 million in profit attributable to ordinary shareholders, up 159 percent from the same time a year ago. Yahoo also disclosed that a new agreement has reduced the number of shares that it must sell in an Alibaba initial public offering to 208 million, down from 261.5 million.

* Litigation against companies for disclosure violations of the federal securities laws has been a big business, and opponents are fighting to end it. From 1997 to 2012, more than 3,050 securities litigation cases were brought, according to Cornerstone Research. Companies and their insurers paid $73.1 billion in judgments and settlements, and plaintiffs' lawyers alone collected almost $17 billion in fees, research shows.

* Apollo Tyres Ltd indicated on Tuesday that it still wanted to acquire Cooper Tire & Rubber Co, but not necessarily at the agreed-on $2.5 billion price. Apollo said it had tried to complete the merger on time, but that Cooper had not held up its end of the merger agreement. Apollo also said it was unable to close the deal because of labor negotiations with the United Steelworkers union




* Canada and the European Union are preparing to seal a far-reaching trade agreement, a deal that would give beef farmers and other Canadian businesses greater access to a market of 500 million consumers but is drawing the ire of the vocal dairy lobby.

* The Conservative government plans to require companies shipping goods on railways to carry extra insurance - a law that would drive up the price of moving oil products. Stephen Harper's Speech from the Throne, delivered on Wednesday, also said Ottawa will tighten safety standards for companies operating offshore, running pipelines, and increase their required liability insurance.

Reports in the business section:

* Chevron's plans for a Kitimat liquefied natural gas terminal will only be finalized if the company finds tax certainty in British Columbia, and workable Asian contracts for the C$4.5 billion ($4.4 billion) project, Chevron Canada Ltd president Jeff Lehrmann said on Wednesday.

* Grocery giant Loblaw Cos Ltd is reducing its staff of about 134,000 full-time and part-time employees by 275 people, mostly management and administration positions, spokesman Bob Chant confirmed on Wednesday morning. Just over 200 of the cuts are from Loblaw's Brampton, Ontario, head office with "minimal impact at the store level".


* Canada is not yet ready to lift its visa requirement on Mexican travelers, an official said on Wednesday as the government signaled visitors from the Czech Republic would no longer need visas. The official said that while Canada hoped to agree on a roadmap for tackling the dispute, Ottawa's security concerns would have to be satisfied before it allowed visa-free travel for Mexicans.


* While Ottawa is touting its role in bringing down wireless rates for Canadian consumers, its biggest ongoing effort to bring in new competitors is finding few takers and the man who financed the country's biggest wireless upstart is saying he is "finished with Canada". Toronto-based private equity firm Birch Hill Equity Partners has withdrawn its application to take part in the January wireless spectrum auction.

* Private equity firms have quietly grown into key players in the mining industry. And with mining valuations in the gutter, their role could soon get bigger. In a presentation in Toronto on Wednesday, private equity insiders noted that the firms are raising huge dollars for mining investments. They argued that it is a potential source of financing for many distressed companies.




- China Securities Regulatory Commission aims to push reform in mergers and acquisitions among listed firms by reducing costs and scrapping administrative permission for some projects.


- Chinese online retailer Jingdong Mall aims to achieve 110 billion yuan ($18.03 billion) of sales revenue from its electrical appliance business by 2016.


- A new subway route that connects Shanghai and Jiangsu province will boost economic integration in the region and encourage more people to take the metro, experts said. The route opened on Wednesday for a trial run linking the country's commercial hub and Jiangsu's Kunshan, a booming county-level administration.

- After weathering more than two years of weak domestic sales and struggling with excess capacity, China's construction machinery market is set for recovery in 2014, fuelled by increasing overseas demand, said the secretary-general of the China Construction Machinery Association.


- China's shipbuilding sector, which had been hit by over capacity and a slump in orders, may be seeing a nascent recovery as some of the large industry players reported a rise in orders in recent months.


- China's State Council, the cabinet, has announced regulations on wastewater treatment in urban areas effective from Jan. 1, 2014.


Fly On The Wall 7:00 AM Market Snapshot



ATK (ATK) upgraded to Outperform from Sector Perform at RBC Capital
Akamai (AKAM) upgraded to Buy from Neutral at DA Davidson
Best Buy (BBY) upgraded to Outperform from Perform at Oppenheimer
Cliffs Natural (CLF) upgraded to Market Perform from Underperform at Cowen
Enerplus (ERF) upgraded to Outperform from Sector Perform at RBC Capital
Equity Residential (EQR) upgraded to Outperform from Market Perform at Raymond James
JinkoSolar (JKS) upgraded to Outperform from Neutral at Credit Suisse
Scotts Miracle-Gro (SMG) upgraded to Overweight from Neutral at JPMorgan
Woodside Petroleum (WOPEY) upgraded to Buy from Neutral at Citigroup
Xilinx (XLNX) upgraded to Outperform from Neutral at RW Baird


ASML (ASML) downgraded to Equal Weight from Overweight at Morgan Stanley
ASML (ASML) downgraded to Neutral from Overweight at HSBC
Amarin (AMRN) downgraded to Hold from Buy at Aegis
Amarin (AMRN) downgraded to Hold from Buy at Canaccord
Amarin (AMRN) downgraded to Neutral from Buy at SunTrust
Amarin (AMRN) downgraded to Neutral from Overweight at JPMorgan
Atlas Energy (ATLS) downgraded to Neutral from Outperform at RW Baird
Atlas Resource Partners (ARP) downgraded to Neutral from Outperform at RW Baird
Aviv REIT (AVIV) downgraded to Underperform from Neutral at BofA/Merrill
BreitBurn Energy (BBEP) downgraded to Neutral from Outperform at RW Baird
CSX (CSX) downgraded to Sector Perform from Outperform at RBC Capital
Clorox (CLX) downgraded to Underweight from Equal Weight at Morgan Stanley
Danone (DANOY) downgraded to Neutral from Buy at Citigroup
IBM (IBM) downgraded to Neutral from Buy at UBS
Norfolk Southern (NSC) downgraded to Sector Perform from Outperform at RBC Capital
Pinnacle (PNFP) downgraded to Market Perform from Outperform at Raymond James
Select Comfort (SCSS) downgraded to Hold from Buy at KeyBanc
Select Comfort (SCSS) downgraded to Neutral from Overweight at Piper Jaffray
Stanley Black & Decker (SWK) downgraded to Equal Weight at Morgan Stanley
Stanley Black & Decker (SWK) downgraded to Underweight from Equal Weight at Barclays
Targa Resources (TRGP) downgraded to Neutral from Outperform at RW Baird
Xilinx (XLNX) downgraded to Market Perform from Outperform at Raymond James
Xilinx (XLNX) downgraded to Neutral from Overweight at Piper Jaffray


CGI Group (GIB) initiated with a Hold at Jefferies
DCT Industrial (DCT) initiated with a Neutral at Citigroup
Insmed (INSM) initiated with a Market Perform at JMP Securities
Internap (INAP) initiated with a Buy at DA Davidson
Leidos (LDOS) initiated with a Hold at Jefferies
Qualys (QLYS) initiated with a Hold at Topeka
SAIC (SAIC) initiated with a Hold at Jefferies
Sigma-Aldrich (SIAL) initiated with an Underweight at Morgan Stanley
SolarCity (SCTY) initiated with an Overweight at JPMorgan
Tenaris (TS) initiated with a Buy at Citigroup


JoS. A. Bank (JOSB) chairman said he won't rule out hostile bid for Men's Wearhouse (MW), Bloomberg reports
Costco (COST) disclosed receipt of subpoenas from DEA related to controlled substances
Noble Corp. (NE) said offshore drilling business remains positive
Core Laboratories (CLB) said outlook for 2014 remains positive
Harley-Davidson (HOG) voluntarily recalled certain 2014 motorcycles
USG (USG), Boral (BOALY) in 50-50 plasterboard joint venture


Companies that beat consensus earnings expectations last night and today include:
Orbital Sciences (ORB), Danaher (DHR), Cohen & Steers (CNS), SanDisk (SNDK), Sallie Mae (SLM), eBay (EBAY), Core Laboratories (CLB), IBM (IBM), RLI Corp. (RLI), American Express (AXP)

Companies that missed consensus earnings expectations include:
Kinder Morgan (KMI), Kinder Morgan Energy (KMP), El Paso Pipeline (EPB), East West Bancorp (EWBC), Xilinx (XLNX), Select Comfort (SCSS)

Companies that matched consensus earnings expectations include:
UnitedHealth (UNH), BankMutual (BKMU), Guaranty Bancorp (GBNK)


  • Jamie Dimon gave up his chairmanship of J.P.Morgan Chase's (JPM) main banking subsidiary in July after the Office of the Comptroller of the Currency said it preferred that he no longer hold those duties as a way to improve governance at the bank, sources say, the Wall Street Journal reports
  • Apple (AAPL) hoped to broaden its appeal with a cheaper version of the iPhone but the company has reduced orders to assemblers for its lower-end 5C iPhone, sources say. Retailers and telecom operators report tepid demand for the device, prompting some to cut prices, the Wall Street Journal reports
  • Dutch telecoms group KPN doesn’t rule out resuming talks with American Movil (AMX) after the Mexican group controlled by Carlos Slim withdrew a 2.40 euros per share offer  yesterday, Reuters reports
  • State oil company PDVSA and Spain's Repsol (REPYY) are discussing a $1.2B financing deal for a joint venture in Venezuela, according to Petroleum Minister Ramirez. The funds would go to the Petroquiriquire JV, Reuters reports
  • BlackRock (BLK) is reducing its investment in Hong Kong, betting the city’s equity and property markets will trail other Asian countries as growth slows in the world’s two biggest economies, Bloomberg reports
  • Twitter (TWTR) hired J.J. Hirschle, a Google (GOOG) ad executive to be head of retail, as the company ramps up hiring and works to expand its business ahead of an IPO, Bloomberg reports


ADMA Biologics (ADMA) 3.353M share IPO priced at $8.50
Advaxis (ADXS) 5.75M share Secondary priced at $4.00
CST Brands (CST) files to sell 13.1M shares of common stock for Valero Energy
Mirati Therapeutics (MRTX) files to sell 3M shares of common stock
Tekmira (TKMR) files to sell common stock

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Cdad's picture

Time for the Revolution of the Closed Wallet.  In the event that you are sick of these fascists in DC, just refuse to Christmas shop this year.  Instead, and perhaps for the first time, make the holiday about Christ instead.

No shopping!  Refuse to be a useless idiot buying crap no one needs, and send a message to the criminal syndicate known as Wall Street.

Protokletos's picture

Make it about Christ.  That'll solve all our problems.  

overmedicatedundersexed's picture

cdad, thank you, time for the revolution of the closed wallet..refuse your economic power to be used in what is so clearly a corrupt economony run for the ruling elite..see 3 billions for our dear senator mich..stomach turning, house leadership boehner and cantor voting with the dems, don't dream of a rifle in your hands, do real damage with a closed wallet stopping the fiat economy of banks is needed.

Never One Roach's picture
10 States Where Credit Card Debts Are Going Unpaid


Rising credit card debt levels have been on the mind of economists and ordinary Americans alike over the course of the past few years. Not only does credit card debt carry some of the highest interest rates of any obligations found in the United States — loan sharks aside — it also carries a relatively high default rate.

When credit card companies consider a debt to be irretrievable, it is “charged off,” or placed into a separate book. This is bad for the companies, which fail to collect money off the debt, as well as for individuals,....

Catullus's picture

So in this debt ceiling can kicking, they created a provision that allows the Treasury to propose a debt ceiling and then Congress has to reject it, to which the president can veto.  Effectively this will never happen again, because a sitting president is not going to allow a bill to go through that rejects what his secretary proposed. 

This was McConnell amendment.  A republican.  Because the worthless breed of neocons only knows one thing: power worship.  And this is further creating the imperial presidency. 

Let's just drop this charade altogether on the debt ceiling.  It's never going to be this dramatic ever again.

Cdad's picture

If you think the fascists can forever manipulate the market, then you may be right.  However, I think what is about to happen is that the rest of the world is about to 'splain it to DC.  It should not take long for rates to do the work that Congress refused to do.

And when that happens, it should become crystal clear to all...that Ben Bernanke is nothing short of a national security risk.

The first shot has already been

The second shot, as what are they talking about this morning per DC?  Raising taxes.  So you'll soon be lookinig at econmic strangulation via rising taxes combined with higher base material prices.

Next up...the dollar.

What a mess. 

Catullus's picture

I think someone already broke the buck on a money market fund and that caused a panic in Washington. Some people in the know realize there's no margin for error anymore.

Catullus's picture

* Federal Reserve officials are considering imposing a new capital surcharge on Wall Street banks that own oil pipelines, metals warehouses and other lucrative physical-commodities assets, according to people familiar with the matter.

What?! Why? Charge them a surcharge for owning assets? Someone in Washington must be thinking they're not getting the full tax benefit from these things and wouldn't want the money printers to be sending less tax revenue their way by parking it in long-term, high depreciation assets.

Protokletos's picture

As someone in the pipeline business, I have zero problem with making it difficult for Banks to own these physical assets.  It would be ridiculous to think that a pipeline explosion or the like could put a bank in jeopardy.  JP Morgan is already moving out and they are a big player.  

GMadScientist's picture

You're an idiot who approves of only big players being able to afford to amass those particular types of physical assets (as if paying a slight vig is 'difficult') while other players of reasonable scale are locked out.



Protokletos's picture

You have no idea what you're talking about.  I work for a small, private pipeline with less than $25mm in assets.  The industry has plenty of small companies like mine and the barriers to entry are only misunderstanding of markets and capital.  Nothing more.  Don't be a fucktard.  

krispkritter's picture
McConnell-Reid Deal Includes $3 Billion Earmark for Kentucky Project

Mitch McConnell Renews Crusade Against Campaign Gift Limits in 'Citizens United II' Case

kralizec's picture

May he choke on his blood money!

Fuck the GOP!  Idiots cannot go the way of the Whigs fast enough!

GMadScientist's picture

Hey, whaddaya know, the Senator from Tokyo Prefecture actually did something for his own state for a change.

And we wouldn't want to have any rules in place about taking campaign money from foreign parties ruin his chances for re-election.

SIOP's picture

"...Federal Employees Head Back to Work"


Gonna be interesting to see how long it takes to remove the "This web site is closed..." messages on the thousands of web sites they shut down. I never saw so many web gov web sites get updated as fast as they did when they shut them down, most could have stayed up and remained simply dormant (no updates) rather that being shut down for politial reasons.

I work in health care software and I can tell you there are a whole lot of people/health clinics/Dr offices currently trying to get up to speed and meet the mandated requirements for Obama care (sending your health records to Obama) but couldnt continure during the shut down because the CDC and the NIST gov web sites were down. Will they get an allowance for this delay? I doubt it, that would require making changes and that takes time! lol.

krispkritter's picture

It was also pointed out that there was a sudden appearance of 1000's of perfect signs posted at parks and .gov installations the morning after the midnight shutdown.  Given the previous shutdown was nearly two decades prior, seems a bit staged to magically throw the switch and 'voila', a shutdown...

kralizec's picture

I think the stenographer might be the only one qualified to speak in either chamber of Congress!

Yup...damn conspiracy-spouting bible-thumper...can't have shit that crazy in government!  Escort that loon outta here!  LOL!

dizzyfingers's picture

I agree with "revolution of the closed wallet", but also we need revolution against using credit.  Everything charged on the card gives banksters a few more more dollars, even if we pay up every month and accrue no interest.