Frontrunning: August 8

  • Fukushima: "300 metric tons of contaminated water were likely leaking into the ocean daily" (WSJ)
  • Unexpected strength in China trade data eases some gloom (Reuters) - actually, perfectly expected data fakery
  • Pimco, BlackRock Seek to Bar California Mortgage Seizures (BBG)
  • How will Amazon's Bezos change The Washington Post? (Reuters)
  • Montreal Maine Railway Files for Bankruptcy After Crash (BBG)
  • Fed Belongs to Everybody as Public Says It’s Our Money in Crisis (BBG)
  • Local Russian TV channel broadcasts rare critical segment about Putin (Reuters)
  • Loeb’s Reinsurer With No U.S. Staff Gains From Obama’s Jobs Act (BBG)
  • As Berlusconi star fades, daughter Marina tipped as new leader (Reuters)
  • Detroit Rattles Muni Market (WSJ)
  • Assad shown unharmed after Syria rebels report attack (Reuters)
  • Probe Turns Up Heat on Banks (WSJ)


Overnight Media Digest


* The Justice Department is targeting banks that service a broad range of what it considers questionable financial ventures, including online payday lenders. The government has issued subpoenas to banks and other companies that handle payments for an array of financial offerings, ramping up an investigation that has been under way for several months.

* Google Inc's Android software continues to steamroll the competition in smartphones, posing bigger problems for companies like Apple Inc and BlackBerry Ltd . According to research firm IDC, Apple's share of the global market slid to 13.2 percent in the second quarter from 16.6 percent in the year earlier period.

* Groupon Inc on Wednesday named co-founder and interim co-chief executive Eric Lefkofsky as its permanent CEO. It also said second-quarter revenue rose 7 percent on the back of surging North American sales.

* Hotel chain Hilton Worldwide Inc is preparing for a return to the public markets, choosing four banks to manage a share sale as the hotel group's private equity owner looks to capitalize on a rebounding real estate market and strong investor demand for initial public offerings.

* A year and a half after being spun off by Expedia Inc , TripAdvisor Inc redesigned its website to show shoppers more hotel options right there among its traveler reviews, rather than referring them to sites like Expedia's via pop-up windows. Expedia relies on bookings. TripAdvisor depends on ads. But both are vying to be travelers' first stop online.

* The Ochs-Sulzberger family that owns the New York Times Co declared the newspaper was "not for sale," making clear it wouldn't follow the decision of the Washington Post's family owners to exit the newspaper industry.

* Energy companies have been selling billions of dollars of aging oil-and-gas fields to partnerships that are flush with cash from individual investors. Critics are raising questions about the soundness of these partnerships, saying that they use accounting maneuvers to understate their costs, and warn that this source of easy money for energy companies could soon dry up.

* A federal appeals court in Washington handed Apple Inc another significant patent victory, reviving the iPhone maker's claims against Google Inc's Motorola Mobility unit over two significant patents for smartphone touchscreens



The U.S. Department of Justice is scrutinising JPMorgan Chase & Co's sale of mortgage-backed securities in a new side to the government's probe of the bank that lost $6 billion in a trading debacle last year.

U.S. agribusiness giant Cargill is expanding its trading operation to move more oil, coal, natural gas and power, despite the banking industry's retreat from physical energy markets.

Mondelez International, the packaged food company spun out of Kraft Foods, gave the go-ahead to a $4.8 billion boost to its share buyback programme.

Blackstone-controlled hotel conglomerate Hilton Worldwide is considering a U.S. float that could mean a listing as soon as early 2014, people familiar with the matter said.

Insurer Old Mutual's Chief Executive Julian Roberts warned European rivals that they would find it difficult follow its quick move into Sub-Saharan Africa.

Groupon on Wednesday appointed Eric Lefkofsky its new chief executive, five months after the company ousted its founder, Andrew Mason and named Lefkofsky its interim CEO.



* JPMorgan Chase & Co disclosed on Wednesday that it faced a criminal and civil investigation in Philadelphia and California, into whether it sold shoddy mortgage securities to investors in the run up to the financial crisis, the latest legal threat to the nation's biggest bank.

* As private equity firms rush to cash in on their investments, the Blackstone Group LP is moving to sell Hilton Worldwide Inc, one of the biggest companies to go private in recent years. An offering for Hilton would probably be in the first half of next year, people briefed on the matter said.

* With his purchase of four million shares of Dell Inc and a lawsuit to halt changes on a shareholder vote on the company's proposed takeover, Carl Icahn is doing his best to bolster his assault on Dell, as the odds mount against him.

* AOL Inc agreed on Wednesday to buy, a video advertising platform, for about $405 million in cash and stock, in its biggest acquisition since becoming an independent company.

* The Zhongshe mine and two others, in Shanxi Province in northern China, are at the center of unusually public accusations of mismanagement and corruption afflicting one of the nation's flagship state conglomerates, China Resources.

* A heated Chinese business and political dispute that has stopped about $200 million in box office payments to Hollywood studios appears near a resolution. The dispute, which has persisted for months, centers on the imposition of a 2 percent value added tax on movie ticket sales in China.




* Locals in Lac-Megantic, Quebec, expressed anger as they learned that the Montreal, Maine & Atlantic Railway (MM&A), the rail company at the center of their ordeal, filed for creditor protection. The request came one month and one day after the devastating disaster caused by a runaway MM&A oil train.

* Real Women of Canada, a right wing women's group, is attacking Foreign Affairs Minister John Baird for defending the civil rights of gays abroad, suggesting the Conservative Party member of parliament is out of step with "conservative values" and the grassroots within his own party.

Reports in the business section:

* Ken Lewenza, president of the Canadian Auto Workers union, and Dave Coles, president of the Communications, Energy and Paperworkers Union of Canada, will step down when the planned merger of the two unions takes effect in September.

* The announcement last week that the Russian potash producer OAO Uralkali is striking out on its own and breaking up one of the world's two potash cartels sent shock waves through the fertilizer industry and prompted bearish predictions of a 20 to 25 percent fall in potash prices. However, Potash Corp of Saskatchewan Inc Chief Executive Bill Doyle told frazzled investors on Wednesday the industry would persevere and there's no reason for panic.

* BlackBerry Ltd, which once controlled the smartphone market, now finds itself knocked back to fourth place. The latest report on worldwide smartphone market share shows the Waterloo-based company slipping behind the Windows Phone brand, Microsoft Corp's line of mobile devices.


* The Stephen Harper government says it has further tightened the rules governing its controversial temporary foreign worker program, confirming it will charge employers $275 for each application they make.

* Canadian Auto Workers (CAW) President Ken Lewenza will reportedly announce that he's stepping down in September. Media reports late Wednesday also said Dave Coles, the president of the Communications, Energy and Paperworkers Union of Canada, will also resign. Reports say Lewenza and Coles are expected to endorse senior CAW official Jerry Dias as president of the new combined union, called Unifor.


* Montreal, Maine & Atlantic Railway has filed for bankruptcy protection in both Canada and the United States, setting the stage for a massive legal battle as lawyers for Quebec victims of one of North America's deadliest rail crashes target the railway's parent and the oil companies involved.

* Air Canada's shares soared nearly 24 percent on Wednesday after the airline surprised analysts by recording its best second-quarter revenue in its history and dramatically improved its operating income by successfully trimming costs.

* Three more senior BlackBerry Ltd executives "are leaving, or have already left" the struggling smartphone manufacturer this month, according to a spokesperson. These come as the latest in a string of departures, resignations and layoffs that have struck the Waterloo, Ontario-based company with increasing regularity.




- Shanghai's free trade zone is currently still in its developmental stage, but formal examination and approval should now not take long, Shen Danyang, spokesman for the Ministry of Commerce, said at a press conference on Wednesday.


- A new stock index futures contract tracking a group of mainland companies listed in Shanghai, Shenzhen, and Hong Kong firms will start trading on the Hong Kong Stock Exchange on Aug. 12, Hong Kong Exchanges and Clearing revealed on Wednesday.


- The Chinese government must allow market forces to play a part in resolving overcapacity in the market. Although it will be painful, the results will make it worth it, said an editorial.


- Boeing Co is in the midst of deciding where in China to build its aircraft assembly line and is inclined towards Shanghai, Tianjin, Zhengzhou and Zhoushan among others, according to industry experts.

Fly On The Wall 7:00 AM Market Snapshot



Groupon (GRPN) upgraded to Neutral from Sell at UBS
Lowe's (LOW) upgraded to Overweight from Neutral at JPMorgan
Microsoft (MSFT) upgraded to Overweight from Equal Weight at Evercore
Panera Bread (PNRA) upgraded to Buy from Hold at Wunderlich
Quad/Graphics (QUAD) upgraded to Sector Perform from Underperform at RBC Capital
RealD (RLD) upgraded to Buy from Neutral at B. Riley
SunEdison (SUNE) upgraded to Buy from Neutral at BofA/Merrill
Total (TOT) upgraded to Overweight from Equal Weight at Morgan Stanley
Whiting USA Trust (WHZ) upgraded to Neutral from Underperform at RW Baird


Ametek (AME) downgraded to Neutral from Outperform at RW Baird
AngloGold (AU) downgraded to Underweight from Neutral at HSBC
Calumet Specialty Products (CLMT) downgraded to Neutral from Outperform at Credit Suisse
Carlyle Group (CG) downgraded to Neutral from Buy at Citigroup
CenterPoint Energy (CNP) downgraded to Neutral from Buy at UBS
Crocs (CROX) downgraded to Underperform from Neutral at Sterne Agee
EVERTEC (EVTC) downgraded to Equal Weight from Overweight at Morgan Stanley
Fusion-io (FIO) downgraded to Hold from Buy at Benchmark Co.
Harmony Gold (HMY) downgraded to Underweight from Neutral at HSBC
Horizon Technology (HRZN) downgraded to Underperform at Raymond James
Iron Mountain (IRM) downgraded to Equal Weight from Overweight at Barclays
Nanosphere (NSPH) downgraded to Neutral from Buy at Roth Capital
Oasis Petroleum (OAS) downgraded to Hold from Buy at Canaccord
Piedmont Office Realty (PDM) downgraded to Neutral from Outperform at RW Baird
Ralph Lauren (RL) downgraded to Buy from Strong Buy at ISI Group
Royal Dutch Shell (RDS.A) downgraded to Equal Weight from Overweight at Morgan Stanley
Stanley Black & Decker (SWK) downgraded to Hold from Buy at KeyBanc
Target (TGT) downgraded to Neutral from Overweight at JPMorgan
Tesla (TSLA) downgraded to Equal Weight from Overweight at Barclays


Coty (COTY) initiated with a Neutral at Citigroup
Endo Health (ENDP) initiated with a Buy at Citigroup
MAKO Surgical (MAKO) initiated with a Hold at Needham
Netflix (NFLX) initiated with a Neutral at RW Baird
Netflix (NFLX) initiated with a Neutral at RW Baird
Nike (NKE) initiated with an Outperform at Wells Fargo
NuVasive (NUVA) initiated with a Buy at Needham
Stryker (SYK) initiated with a Hold at Needham
Under Armour (UA) initiated with a Market Perform at Wells Fargo
Valeant (VRX) coverage resumed with an Overweight at JPMorgan
Wright Medical (WMGI) initiated with a Buy at Needham
Zimmer (ZMH) initiated with a Buy at Needham


Fairfax increased offer for American Safety Insurance (ASI) to $30.25 p/s
MetLife (MET) disclosed DOJ subpoena related to foreclosure-related expenses
JPMorgan (JPM) said responding to parallel investigations related to MBS offerings
Hilton said to plan $13B debt restructuring before IPO (BX), Bloomberg reports
Nestle (NSRGY) sees full year organic growth of about 5%
Jack in the Box (JACK) raised FY13 ex-items EPS to $1.72-$1.78, consensus $1.65
Tesla (TSLA) expects to be non-GAAP profitable in every quarter this year
Mondelez (MSLZ) said accelerating 2014 emerging market investments into 2013
Increased share repurchase authorization to $6B


Companies that beat consensus earnings expectations last night and today include:

Visteon (VC), AES Corp. (AES), Continental Resources (CLR), Neenah Paper (NP), Babcock & Wilcox (BWC), DryShips (DRYS), Rosetta Stone (RST), Sunoco Logistics (SXL), Saint Joe Co. (JOE), PharmAthene (PIP), Prudential (PRU), Tesla (TSLA), Green Mountain (GMCR)

Companies that missed consensus earnings expectations include:

Walker & Dunlop (WD), Fairway Group (FWM), Energy Transfer Equity (ETE), Brookdale Senior Living (BKD), Delek US (DK), Vale (VALE), Natural Resource Partners (NRP), Kronos Worldwide (KRO), Concho Resources (CXO), Flotek (FTK), Cenveo (CVO), American Water (AWK)

Companies that matched consensus earnings expectations include:

BioScrip (BIOS), TransAtlantic Petroleum (TAT), Transocean (RIG), MELA Sciences (MELA), Fusion-io (FIO), Frontier Communications (FTR)


  • Google’s (GOOG) Android software continues to steamroll the competition in smartphones, posing bigger problems for companies like Apple (AAPL) and BlackBerry (BBRY), the Wall Street Journal reports
  • Energy companies (LINE, BRY) eager for cash to fuel their increasingly costly operations have been selling billions of dollars of aging oil-and-gas fields to partnerships whose growth has been fueled by individual investors. But critics are raising questions about the soundness of these partnerships, the Wall Street Journal reports
  • Canada's wireless industry (RCI, BCE, TU) is bracing for its biggest shakeup in decades as the government appears impervious to pleas that it block Verizon Communications (VZ) from the lucrative market, Reuters reports
  • Some seven bidders are lining up for Telediffusion de France's  domestic business and lenders are preparing debt packages of over $2.7B for a deal worth about EUR 4B, sources say. Interested parties include American Tower (AMT) and Crown Castle (CCI), and Macquarie (MIC), sources add, Reuters reports
  • Apple (AAPL) is trying to force Samsung Electronics Co.’s (SSNLF) mobile devices off U.S. store shelves a week after dodging an iPhone 4 ban by a rare White House veto. The company will ask a U.S. appeals court to block sales of Samsung models a California jury found violated patents for the iPhone’s look and features, Bloomberg reports

NTT DoCoMo (DCM) will order more Sony (SNE) smartphones as Japan’s largest wireless carrier keeps Apple’s (AAPL) iPhone off its shelves because the iTunes Store competes with its own e-commerce business, Bloomberg reports


Advent Software (ADVS) 7.261M share Secondary priced at $27.00
DCP Midstream (DPM) 9M share Secondary priced at $50.04
DCT Industrial (DCT) files to sell 20M shares of common stock
Diamondback Energy (FANG) files to sell 4M shares of common stock
Fox Factory (FOXF) 8.571M share IPO priced at $15.00
Graphic Packaging (GPK) files to sell 15M shares of common stock for holders
Halcon Resources (HK) files to sell 38M shares of common stock
Highwoods Properties (HIW) files to sell 3.75M shares of common stock
Intrexon (XON) 9.9M share IPO priced at $16.00
KAR Auction (KAR) 15M share Secondary priced at $25.00
Norwegian Cruise Line (NCLH) files to sell 20M ordinary shares for holders
Regional Management (RM) files to sell 7.3M shares of common stock for holders
Wesco Aircraft (WAIR) files to sell 6M shares of common stock for holders
XPO Logistics (XPO) 9.69M share Secondary priced at $22.75