• One-Ship Ukraine Navy Defies Russia to the End (WSJ)
• Crimea-Induced Trading Surge Stokes Moscow Exchange Rally (BBG)
• Moscow says Ukraine stops Russian crews disembarking in Kiev (Reuters)
• New images show more than 100 objects that could be plane debris (Reuters)
• Anger of Flight 370 Families Explodes in Beijing (BBG)
• Murdoch Promotes Son Lachlan in Succession Plan for Empire (BBG)
• Facebook to buy virtual reality goggles maker for $2 billion (Reuters)
• Syrian Regime Exploits Rebel Despair (WSJ)
• King Digital IPO price may not bode well for stock (Reuters)
• Rothschild in Twitter Spat as Bakries Cut Ties With Miner (BBG)
• Spooked by defaults, China banks begin retreat from risk (Reuters)
• Mt. Gox Cooperating With Police (WSJ)
• New York Times to Introduce New Digital Subscriptions (WSJ)

Overnight Media Digest

WSJ

* Facebook Inc made its second big acquisition of the year, agreeing Tuesday to acquire Oculus VR Inc, a 20-month-old maker of virtual-reality goggles, for $2 billion in cash and stock. The deal highlights the intense competition among big technology companies for promising startups, even when those startups, like Oculus and WhatsApp, have little revenue. (http://link.reuters.com/ras87v)

* BlackRock Inc Chief Executive Laurence Fink has privately warned big companies that dividends and buybacks that activists favor may create quick returns at the expense of long-term investment. In doing so, the head of the world's largest money manager by assets lent his voice to a popular criticism of activist investors, even as his firm sometimes aligns with and may benefit from their efforts. (http://link.reuters.com/tas87v)

* One of JPMorgan Chase & Co's top executives quit suddenly to take a top job in private equity firm Carlyle Group , a departure that raises new questions about who will eventually succeed Chief Executive James Dimon. Michael Cavanagh's decision to leave his job as co-head of J.P. Morgan's Wall Street operations marks the latest in a long line of departures from Dimon's inner circle. (http://link.reuters.com/xas87v)

* The Securities and Exchange Commission, under pressure from the asset-management industry, is preparing to exempt a majority of money-market mutual funds from a central plank of rules intended to curb risks in the $2.6 trillion market, according to people familiar with the agency's discussions. (http://link.reuters.com/wyr87v)

* Activist investor Dan Loeb sued auction house Sotheby's to remove its so-called poison pill, setting up a crucial first test for a new generation of corporate defenses aimed at thwarting activist hedge funds. (http://link.reuters.com/fes87v)

* America's moviegoing audience shrank yet again in 2013, and theater owners are considering a radical idea to turn the tide: cutting ticket prices. A report from the Motion Picture Association of America released Tuesday said that domestic movie box-office sales rose to $10.9 billion last year, from $10.8 billion in 2012, but the number of tickets sold slipped yet again, this time 1.5 percent to 1.34 billion. (http://link.reuters.com/kes87v)

* Rescue crews continued to search through the night after a devastating weekend mudslide killed at least 16 people. Crews recovered two more bodies Tuesday but believe they located eight more, possibly bringing the death toll to 24. (http://link.reuters.com/pes87v)

FT

Mobile game maker King Digital Entertainment raised $500 million from its stock market float late on Tuesday, valuing the company's equity at $8 billion on a fully diluted basis and making it one of the most valuable.

Britain's government announced plans to sell more than 4 billion pounds worth of its shares in Lloyds Banking Group , moving a step closer to returning the lender to the private sector before next year's election.

Facebook said it would buy Oculus VR, a maker of virtual-reality glasses for gaming, placing a $2 billion bet that virtual reality headsets will be the next big social platform after computers and smartphones.

Banks have shelled out $100 billion in U.S. legal settlements since the financial crisis, according to Financial Times research, reflecting a substantial shift in political attitudes towards the financial sector.

Santander UK is to be slapped with a 12.5 million-pound fine by Britain's Financial Conduct Authority on Wednesday for providing unsuitable investment advice to customers in its branches.

NYT

* Facebook Inc on Tuesday said it had reached a $2 billion agreement to buy Oculus VR, maker of a virtual reality headset. The acqusition reflects the Facebook founder's belief that virtual reality could be the next big computing platform after mobile and social networking could become an immersive, 3-D experience. (http://r.reuters.com/qas87v)

* Michael Cavanagh, considered to be one of the likely candidates to replace JP Morgan Chase's CEO Jamie Dimon, said on Tuesday that he would resign as JPMorgan's co-head of investment banking to take on the role of co-chief operating officer of the Carlyle Group. (http://r.reuters.com/vas87v)

* Candy Crush Saga-maker King Digital Entertainment priced its IPO at $22.50 per share. The company, valued at $7 billion post the IPO, will start trading on the New York Stock Exchange under the ticker symbol KING from Wednesday. (http://r.reuters.com/zas87v)

* The IRS announced on Tuesday that it would treat bitcoin, the computer-driven online money system, as property rather than currency for tax purposes, a move that forces users who have grown accustomed to operating under the government's radar to deal with new tax issues and reporting requirements. (http://r.reuters.com/bes87v)

* Baxter International, the country's only manufacturer of injectable nitroglycerin, recently told hospitals that it was sharply cutting shipments of the drug. The shortage of nitroglycerin, a critical drug for heart patients, is the latest example of how patchy the supply of some of the nation's most critical drugs has become in recent years. (http://r.reuters.com/ges87v)

* Senate Democrats dropped reforms of International Monetary Fund governance from a Ukraine aid package on Tuesday, handing President Obama an embarrassing defeat. (http://r.reuters.com/nes87v)

* Democrat senators Edward Markey of Massachusetts and Richard Blumenthal of Connecticut introduced a Senate bill on Tuesday that would make auto companies give the National Highway Traffic Safety Administration copies of insurance claims made against them and lawsuits about fatal crashes in which they were defendants. This comes as investigators begin to pour over internal General Motors documents seeking to understand the failure by regulators and the company to act on reports of a defect in Chevrolet Cobalts and other cars. (http://r.reuters.com/res87v)

* Walmart is recalling 174,000 dolls because they could overheat and burn consumers. The Consumer Product Safety Commission said on Tuesday that the My Sweet Love/My Sweet Baby Cuddle Care Baby Doll has a circuit board in its chest that can overheat. Walmart had reports of 12 incidents including two burns or blisters to the thumb. (http://r.reuters.com/ses87v)

* A start-up, Junction Investments, plans to open for business on Wednesday, allowing wealthy individuals to invest in movies alongside veteran film financiers. (http://r.reuters.com/tes87v)

Canada

THE GLOBE AND MAIL

* Quebec Premier Pauline Marois struggled to regain control of a floundering Parti Quebecois election campaign amid signs the Quebec Liberal Party is widening its lead among voters in the final weeks of the election race and could be on track to form a majority government. (http://link.reuters.com/zys87v)

* Prime Minister Stephen Harper said the country must begin to "assess the pain" of increasing pressure on the Putin government over Russia's seizure of the Crimean peninsula, after the Group of Seven countries said it is prepared to impose economic sanctions if Moscow escalates the crisis further. The Prime Minister has singled out the prospect of sanctions against Russia's energy industry, which would in all likelihood curtail the ability of Canadians, and those in other G7 countries, from doing petroleum-related business with Russians. (http://link.reuters.com/bat87v)

Reports in the business section:

* Goldcorp Inc Chairman Ian Telfer dared Osisko Mining Corp to find an alternative to his company's $3-billion hostile offer, saying the smaller miner has had more than enough time. It has been more than two months since Vancouver-based Goldcorp announced the unsolicited bid, and time is running out for Osisko. (http://link.reuters.com/cat87v)

NATIONAL POST

* Quebec Premier Pauline Marois rejected Quebec Liberal Party leader Philippe Couillard's call to make public the extent of her considerable personal wealth. Couillard announced that he would be publishing his 2012 tax return as well as an accounting of all assets held by him and his wife, Suzanne Pilote on his party's website before Thursday's leaders' debate. (http://link.reuters.com/jat87v)

* Conservative senator Don Meredith's spending is under special scrutiny from the Senate itself after he made a trip to Washington that the Senate's leadership didn't approve. Meredith, a pastor from Toronto, spent five days in Washington for the National Prayer Breakfast, a gathering of some 3,000 international politicians and diplomats that included U.S. President Barack Obama and members of the United States Congress. (http://link.reuters.com/vat87v)

FINANCIAL POST

* BlackBerry Ltd's plan to transform BlackBerry Messenger into a money maker will begin in earnest sometime in the next week with the launch of a new virtual storefront within the popular instant messaging application. BlackBerry plans to roll out a new virtual goods storefront known as BBM Shop sometime in the next week as part of a broader previously announced strategy to begin generating revenue from the company's most popular piece of software. (http://link.reuters.com/pet87v)

* An official at Canada's top banking regulator said the country's biggest financial institutions need to do a better job managing risks within their individual retail business lines, and communicating these risks to the board of directors. (http://link.reuters.com/ret87v)

Britain

The Telegraph

TREASURY TO SELL LLOYDS SHARES WORTH 4 BLN STG, REDUCING STAKE TO 25 PERCENT

The Government has launched the largest sale yet of shares in Lloyds Banking Group in a deal that could raise more than 4 billion pounds ($6.60 billion) for the taxpayer. (http://link.reuters.com/tur87v)

ONLINE TAKEAWAY SERVICE JUST EAT TO BE VALUED AT OVER 1 BLN STG IN IPO

Online food takeaway service Just Eat is expected to be valued at more than 1 billion pounds on Wednesday as it reveals the price of its initial public offering in London. (http://link.reuters.com/war87v)

The Guardian

ROYAL MAIL FACES STRIKES OVER PLAN TO SHED 1,600 STAFF

Postal unions have reacted angrily and raised the prospect of industrial action after Royal Mail announced plans to cut 1,600 jobs in the postal group's first big round of redundancies since it was privatised in October. (http://link.reuters.com/rur87v)

KINGFISHER ANNOUNCES SHAREHOLDER PAYOUT AFTER SURGE IN PROFITS

Kingfisher, the DIY group that owns B&Q, will pay out about 200 million pounds to shareholders this year after its financial performance experienced a revival along with the British housing market. (http://link.reuters.com/sur87v)

HONDA TO CUT SWINDON CAR PRODUCTION, THREATENING 340 JOBS

Honda Motor is to cut production at its Swindon factory from three shifts to two, threatening 340 jobs at the car manufacturer. (http://link.reuters.com/qur87v)

The Times

CENTRICA SEEKS ENERGY BOOST WITH FIRST FORAY INTO IRELAND

A consortium led by Centrica has bought the supply division of Bord Gais for 1.1 billion euros ($1.52 billion). The owner of British Gas intends to replicate its integrated model of owning power stations and a supply business in the Republic of Ireland, which offers better growth prospects than Britain. (http://link.reuters.com/nur87v)

RSA RESPONDS TO CRISIS WITH SHARE DISCOUNT

Shareholders have been invited into a deeply discounted 773 million pound cash call from RSA as the insurer attempts to restore its reputation after financial problems and a scandal in Ireland. (http://link.reuters.com/pur87v)

SCOTS INDEPENDENCE PLAN 'DOES NOT ADD UP'

The Scottish Government' plan to leave Britain simply does not make sense even after its prized oil and gas revenues are taken into account, the country's biggest business lobby group has warned. (http://link.reuters.com/mur87v)

The Independent

NAT ROTHSCHILD'S BUST-UP WITH WEALTHY BAKRIE FAMILY TURNS INTO TWITTER STORM

Financier Nat Rothschild and a prominent Indonesian businessman, Aga Bakrie, engaged in a spectacular and very public bust-up on Twitter after the wealthy Bakrie family agreed to cut ties with London-based investors and buy back their stake in the mining firm Bumi, now known as Asia Mineral Resources . (http://link.reuters.com/hur87v)

TULLOW OIL DISCLOSES TAX IN TRANSPARENCY DRIVE

Tullow Oil has broken ranks with the rest of the industry to disclose for the first time how much tax and royalties it pays governments in the mainly poor countries in which it operates, on a project-by-project basis. (http://link.reuters.com/jur87v)

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS

Domestic economic reports scheduled today include:
Durable goods orders for February at 8:30--consensus up 1.0%

ANALYST RESEARCH

Upgrades

Carlyle Group (CG) upgraded to Buy from Neutral at UBS
Covanta (CVA) upgraded to Outperform from Neutral at RW Baird
Garmin (GRMN) upgraded to Buy from Neutral at Citigroup
Penn National (PENN) upgraded to Outperform from Market Perform at FBR Capital
Sirius XM (SIRI) upgraded to Overweight from Equalweight at Barclays

Downgrades

Abraxas Petroleum (AXAS) downgraded to Hold from Buy at Canaccord
Alpha Natural (ANR) downgraded to Neutral from Buy at UBS
Arch Coal (ACI) downgraded to Neutral from Buy at UBS
CONSOL (CNX) downgraded to Neutral from Buy at UBS
EPL Oil & Gas (EPL) downgraded to Market Perform from Outperform at Cowen
Eni SpA (E) downgraded to Underweight from Neutral at HSBC
Equity Lifestyle (ELS) downgraded to Neutral from Buy at Citigroup
Home Properties (HME) downgraded to Neutral from Buy at Citigroup
Peabody (BTU) downgraded to Neutral from Buy at UBS
Telefonica (TEF) downgraded to Underperform from Neutral at BofA/Merrill
WPX Energy (WPX) downgraded to Market Perform from Outperform at Cowen
Walter Energy (WLT) downgraded to Neutral from Buy at UBS
Yadkin Financial (YDKN) downgraded to Market Perform from Outperform at Keefe Bruyette

Initiations

athenahealth (ATHN) initiated with a Neutral at SunTrust
Glimcher Realty Trust (GRT) initiated with a Buy at MLV & Co.
Macerich (MAC) initiated with a Buy at MLV & Co.
Manning & Napier (MN) initiated with a Strong Buy at Raymond James
Medidata Solutions (MDSO) initiated with a Buy at SunTrust
PFSweb (PFSW) initiated with a Buy at B. Riley
Rouse Properties (RSE) initiated with a Hold at MLV & Co.
Simon Property (SPG) initiated with a Hold at MLV & Co.
Tesla (TSLA) initiated with a Neutral at UBS
WebMD (WBMD) initiated with a Buy at SunTrust

COMPANY NEWS

Facebook (FB) announced a deal to acquire virtual reality technology company Oculus in a cash and stock deal worth about $2B
News Corp (NWS, NWSA) named Lachlan Murdoch non-executive co-chairman
21st Century Fox (FOX, FOXA) promoted James Murdoch to Co-COO
New York Times (NYT) launched new subscription plans
Insmed (INSM) said it will announce results from its Phase 2 clinical trial of Arikayce to treat lung infections this morning
International Game (IGT) cut its FY14 earnings outlook, gave a Q2 earnings view that was well below expectations and announced plans to cut 7% of its global workforce
Body Central (BODY) said its losses and negative cash flows "raise substantial doubt about [the company's] ability to continue as a going concern"
Global Cash Access (GCA) said its cash access deals with Caesar's (CZR) were not renewed, and added that it was not willing to accept the business and financial terms proposed by Caesar's

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Alexco Resource (AXU), Steelcase (SCS), Landec (LNDC), Five Below (FIVE), Cherry Hill Mortgage (CHMI), Cyclacel Pharmaceuticals (CYCC), Sungy Mobile (GOMO), PVH Corp. (PVH), Intra-Cellular (ITCI)

Companies that missed consensus earnings expectations include:
EXFO Inc. (EXFO), Evoke Pharma (EVOK), Five Prime (FPRX), Gevo (GEVO)

NEWSPAPERS/WEBSITES

Amazon (AMZN) dropping some programming from Scipps (SNI), Discovery (DISCA), WSJ reports
Target (TGT) looking again at why security team missed signs of hackers, WSJ reports
Coca-Cola (KO) defends executive pay proposal, FT reports
Honda (HMC), Toyota (TM) to introduce fuel cell cars next year, Nikkei reports
Obamacare enrollment deadline to be extended, NY Times says
Blackstone (BX) near $5.5B plus deal for Gates Global, Reuters reports
Carlyle's (CG) PQ holdings said to receive offers from several firms (BX, KKR), Bloomberg says 

SYNDICATE

Bright Horizons (BFAM) files to sell 7M shares of common stock for holders
Cache (CACH) files $15M mixed securities shelf
Endocyte (ECYT) files to sell 4.5M shares of common stock
Essex Property Trust (ESS) announces 450k shares equity distribution agreement
Inuvo (INUV) files 15M mixed securities shelf
King Digital (KING) 22.2M share IPO priced at $22.50
Nord Anglia (NORD) 19M share IPO priced at $16.00
Regency Energy Partners (RGP) files to sell 4.04M common units for holders
Solazyme (SZYM) files to sell 5M common shares
Veeva (VEEV) 12M share Secondary priced at $26.35
William Lyon Homes (WLH) files to sell 2M shares of Class A common for holders

• Crimea Resolution Backed by U.S. Barely Gets UN Majority (BBG)
• Russian Buildup Stokes Worries (WSJ)
• As reported here first: China’s Developers Face Shakeout as Easy Money Ends (BBG)
• U.S. House Poised to Clear Sanctions Called Putin Warning (BBG)
• Bitcoin Prices Plunge on Report PBOC Orders Accounts Shut (BBG)
• Search for lost Malaysian jet shifts significantly after new lead (Reuters)
• Russian fund taps China and Middle East (FT)
• Long battle looms between U.S. college, athletes seeking to unionize (Reuters)
• Official warns EU-US trade deal at risk over investor cases (FT)
• New iPhone likely out in September, Nikkei daily says (AFP)
• Ukraine's Tymoshenko to Run for President (WSJ)
• Deutsche Boerse, Bank of China agree closer cooperation (Reuters)
• Japan to Front-Load Spending in FY14 Budget as Tax-Bump Looms (BBG)
• Fed feels backlash over stress tests (FT)

Overnight Media Digest

WSJ

* Lehman Brothers Holdings Inc said on Thursday it would repay creditors an additional $17.9 billion next week, its fifth distribution since a bankruptcy judge approved its liquidation plan in December 2011. After that money is returned, Lehman's creditors will have been paid more than $80 billion - $15 billion more than the bank's initial estimate of how much would be returned to creditors. (http://link.reuters.com/syj97v)

* PG&E Corp said it expects to face federal criminal charges over the 2010 natural-gas pipeline explosion that killed eight in San Bruno, California. The utility said on Thursday it expects to be charged with violating the federal Pipeline Safety Act, which dates back to 1968. (http://link.reuters.com/tyj97v)

* Some lawmakers and others are calling on the Securities and Exchange Commission to cut the time that large investors can secretly amass shares in a company. Investors who own 5 percent of a stock get 10 days to announce their holdings, according to a 1968 regulatory. (http://link.reuters.com/xyj97v)

* Wal-Mart Stores Inc has sued Visa Inc for more than $5 billion, claiming the card network charged unreasonably high fees when the retailer's customers paid with plastic. (http://link.reuters.com/bak97v)

* Private-equity firm TPG is in advanced discussions to take a roughly 15 percent stake in Chobani Inc, said a person familiar with the matter, as the maker of Greek yogurt seeks to raise capital that could value it at up to $5 billion. (http://link.reuters.com/cak97v)

FT

Russia's state-backed fund has tapped money from sovereign wealth funds in China and the Middle East, hoping to show it can attract foreign capital into the country even if the United States and European investors turn away following the annexation of Crimea.

French oil giant Total is in talks to partner with Russia's Lukoil on its shale oil projects in Russia, as Moscow targets unconventional resources to replace falling production at ageing fields in Siberia.

Satya Nadella, Microsoft's new chief executive, announced the company's long-awaited Office suite on Apple Inc's iPad at his first public appearance, signalling that he is prepared to unbundle Windows to catch up on mobile and the cloud.

Brazilian public prosecutors have asked that courts block the restructuring plan of former billionaire Eike Batista's oil group and force him to inject $1 billion of his own money into the company.

Graeme Shelley, a former broker at Novum Securities received a two-year suspended sentence after pleading guilty to insider-trading charges, admitting to trading 14 stocks using inside information between 2008 and 2010.

NYT

* A day after Citigroup Inc's capital plan failed the Fed's stress test for the second time in three years, bank executives were still struggling to understand the decision and how best to respond. (http://r.reuters.com/dak97v)

* As the United States seeks to strengthen sanctions on Moscow for its occupation of Crimea, energy experts say the powerful Russian oil industry would make a robust target. But any penalties on energy investments, technology transfers and financial transactions would most likely also punish Western oil companies like Exxon Mobil that are investing heavily in Russia. (http://r.reuters.com/gak97v)

* Microsoft Corp on Thursday introduced its long-awaited suite of applications for Apple Inc's iPad tablets. The suite includes Word, PowerPoint and Excel. (http://r.reuters.com/jak97v)

* When CBS Outdoor Americas Inc begins trading on the New York Stock Exchange on Friday, it will represent not only the dawn of a new publicly traded advertising company in a hot market for IPOs, but also the latest step in the evolution of its parent company, CBS Corp. (http://r.reuters.com/mak97v)

* Italian fashion house Versace said it started 2014 on a strong footing thanks to a double-digit rise in sales from its own shops in the first quarter. The luxury brand may seek stock market listing in the future after the recent sale of a 20 percent stake to the private equity group Blackstone. (http://r.reuters.com/pak97v)

* Walmart Stores Inc sued Visa Inc for $5 billion, accusing the credit and debit card network of excessively high card swipe fees, several months after the retailer opted out of a class-action settlement between merchants and Visa and MasterCard. (http://r.reuters.com/rak97v)

* New York State and federal inspectors have completed a second round of safety checks of train tracks and oil tanker cars in an effort to prevent disastrous derailments and spills of volatile crude from North Dakota's Bakken region. The inspection effort, which generally found only minor and easily correctable defects, is part of a proactive safety effort started in January after several severe accidents. (http://r.reuters.com/tak97v)

* PG&E said it would probably face federal criminal charges for its role in a fatal gas pipeline explosion in the San Francisco Bay Area in September 2010. The company said it had been in discussions with federal prosecutors to reach a resolution, but it now expects prosecutors will say that PG&E's past operating practices violated the federal Pipeline Safety Act(http://r.reuters.com/vak97v)

Canada

THE GLOBE AND MAIL

* Former Ontario Premier Dalton McGuinty's former chief of staff has been accused of orchestrating a plan to purge government records after Ontario's controversial cancellation of two gas-fired power plants, according to police documents. (http://link.reuters.com/fyk97v)

* Canada's new Finance Minister Joe Oliver is taking a hands-off approach to the mortgage market, signal ling that unlike his predecessor he does not want to interfere in the rate-setting decisions of the banks. (http://link.reuters.com/jyk97v)

Reports in the business section:

* Lululemon Athletica Inc is paving the way for an accelerated international expansion as its new leader looks to pump up the business and patch up its merchandise and image problems. (http://link.reuters.com/myk97v)

NATIONAL POST

* Confirming his status as the front-runner in the Quebec election, Liberal leader Philippe Couillard came under heavy fire from the three other leaders during the campaign's final televised debate Thursday. (http://link.reuters.com/pyk97v)

* Toronto Mayor Rob Ford was unable to avoid questions about his crack cocaine scandal during the second mayoral election debate, which saw other candidates take jabs at his personal problems, and audience members heckle him when he resorted to familiar slogans. (http://link.reuters.com/ryk97v)

FINANCIAL POST

* Banks in Canada may finally be ready to battle over mortgage rates but the war for customers has been raging for months now. Falling bond yields, which long-term fixed rate loans are priced off of, had already allowed discounters to cut rates well below the 3 percent threshold that makes finance officials in Ottawa nervous. (http://link.reuters.com/syk97v)

* Canada's largest securities regulator, the Ontario Securities Commission, is attempting to rehabilitate its long-standing image as a toothless tiger by adding new potent weapons to its arsenal of powers it hopes will result in successful prosecutions of market miscreants. (http://link.reuters.com/vyk97v)

China

CHINA SECURITIES JOURNAL

- China's securities regulator encouraged companies to list on the National Equities Exchange and Quotations Co, also known as the "New Third Board", or on overseas stock markets. The regulator is currently dealing with a backlog of firms waiting to list on the country's main boards.

SECURITIES TIMES

- The Ministry of Environmental Protection will spend 1,747 billion yuan ($281.18 billion) to curb air pollution, an engineer from the ministry said in an environmental industry conference. The money will be mainly spent on developing clean energy, car pollution controls and stepping up central heating, he added.

CHINA BUSINESS NEWS

- China will establish a national real estate ownership registration system over the next three years, the head of the Ministry of Land and Resources said at a conference. The real estate ownership registration system has been widely expected to pave the way for implementing a property tax in China.

CHINA DAILY

- Lenovo Group says it is aiming to sell 1 million smart TVs in China in 2014.

SHANGHAI DAILY

- Nikon will give Chinese owners of D600 cameras a free replacement after being targeted by state media in a consumer rights probe.

- Eighty percent of Shanghai's college students set to graduate in June have not found jobs, nor enrolled for further study or plan to travel abroad. Job competition remains fierce for college graduates even as the wider industrial workforce shrinks.

Britain

The Telegraph

ENERGY BOSS WARNS OF BLACKOUTS AS COMPETITION PROBE 'STOPS INVESTMENT IN POWER PLANTS'

The boss of Britain's biggest energy company has warned households they face an "increasing risk" of blackouts because of an investigation into whether the industry is ripping off consumers. (http://link.reuters.com/fah97v)

ROLLS-ROYCE AWARDED $1.1 BLN ENGINE DEAL

Rolls-Royce has been awarded a $1.1 billion deal from All Nippon Airways to provide engines for the troubled Boeing 787 Dreamliner aircraft. (http://link.reuters.com/gah97v)

GATWICK AGREES SEVEN-YEAR PRICING DEAL WITH EASYJET

Gatwick has agreed a seven-year pricing deal with its biggest customer, easyJet, after being freed up by the UK's airports regulator to strike agreements directly with airlines. (http://link.reuters.com/hah97v)

PENSIONS CRISIS WARNING IF SCOTLAND VOTES YES

A new directive from the European Commission has confirmed that the private pensions of hard-working Scots will become "much more expensive" unless Scotland remains part of the UK, according to experts. (http://link.reuters.com/vaj97v)

The Guardian

SCOTTISH BANKS WARNED ON INDEPENDENCE

Scotland's financial services and banking industry would face a long and costly period of disruption if there were a 'yes' vote for independence, the sector's Scottish trade body has warned. (http://link.reuters.com/xyh97v)

LONDON CITY AIRPORT RUNWAY CLOSED AFTER PLANE ENGINE 'BLEW UP'

An engine blew up on an airliner seconds before it was due to leave London City airport, a passenger has said. Four people needed treatment for minor injuries after Geneva-bound LX437 with 74 passengers and four crew on board suffered an engine problem, airport authorities added. (http://link.reuters.com/dyh97v)

EC APPROVES TAX BREAKS FOR VIDEO GAMES INDUSTRY

The video game industry has won a seven-year battle to claim government tax breaks. The European Commission has agreed to extend the credits, which are already available to film and theatre productions, allowing games makers to claim back 25 percent of their qualifying production costs. (http://link.reuters.com/cej97v)

The Times

BANK RAISES ALARM OVER NEW HOUSE PRICE BUBBLE

The number of borrowers being offered dangerously large mortgages is at an all-time high, the Bank of England has warned. (http://link.reuters.com/waj97v)

AMERICANS CONSIDER SELLING THAMES SITE

One of London's best development sites, a stretch of the Thames between Tate Modern and Blackfriars Bridge, could be put up for sale by U.S. private equity firm Carlyle Group.(http://link.reuters.com/kaj97v)

MORRISONS BOSS GIVES UP BONUS AS PROFITS CRASH

Morrisons's chief executive has waived his bonus for a second year running and become the latest blue-chip boss to renounce a pay reward after the supermarket chain suffered torrid trading. (http://link.reuters.com/xaj97v)

The Independent

ED MILIBAND PLEDGES TO SUPPORT SMALL BUSINESSES WITH RAFT OF NEW MEASURES

Ed Miliband is to answer critics who claim that Labour is "anti-business" by promising that his party would give new rights to small companies and the self-employed if it wins power. (http://link.reuters.com/bej97v)

INSURERS WARN OVER GOVERNMENT CAP ON PENSION PLAN CHARGES

The planned cap on charges on workplace pensions will drive small schemes out of business and give workers less financial freedom, insurers warned on Thursday. (http://link.reuters.com/zaj97v)

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS

Domestic economic reports scheduled today include:
Personal income for February at 8:30--consensus up 0.3%
Personal spending for February at 8:30--consensus up 0.3%
Core PCE prices for February at 8:30--consensus up 0.1%
U. of Michigan consumer sentiment index for March  at 9:55--consensus 80.5

ANALYST RESEARCH

Upgrades

Agnico-Eagle (AEM) upgraded to Buy from Hold at Canaccord
Alcoa (AA) upgraded to Neutral from Underperform at Macquarie
Bofi Holding (BOFI) upgraded to Outperform from Market Perform at Raymond James
Cognizant (CTSH) upgraded to Overweight from Equal Weight at Morgan Stanley
El Paso Pipeline (EPB) upgraded to Buy from Neutral at Citigroup
Fidus Investment (FDUS) upgraded to Strong Buy from Outperform at Raymond James
Finisar (FNSR) upgraded to Outperform from Sector Perform at RBC Capital
Home Loan Servicing (HLSS) upgraded to Overweight from Neutral at Piper Jaffray
InvenSense (INVN) upgraded to Buy from Neutral at Roth Capital
Kinross Gold (KGC) upgraded to Neutral from Sell at Goldman
NICE Systems (NICE) upgraded to Buy from Neutral at UBS
Newpark Resources (NR) upgraded to Overweight from Underweight at First Analysis
Niska Gas (NKA) upgraded to Neutral from Sell at Citigroup
PennyMac (PFSI) upgraded to Outperform from Market Perform at Wells Fargo
SolarCity (SCTY) upgraded to Outperform from Market Perform at Raymond James
TC PipeLines (TCP) upgraded to Neutral from Sell at Citigroup
Tallgrass Energy (TEP) upgraded to Buy from Neutral at Citigroup
Veeco (VECO) upgraded to Buy from Outperform at CLSA

Downgrades

Ambac Financial (AMBC) downgraded to Sell from Neutral at MKM Partners
Blackhawk (HAWK) downgraded to Neutral from Overweight at Piper Jaffray
Ciena (CIEN) downgraded to Sector Perform from Outperform at RBC Capital
Citigroup (C) downgraded to Hold from Buy at Societe Generale
Genesis Energy (GEL) downgraded to Neutral from Buy at Citigroup
JDSU (JDSU) downgraded to Sector Perform from Outperform at RBC Capital
Nestle (NSRGY) downgraded to Neutral from Outperform at Credit Suisse
PG&E (PCG) downgraded to Hold from Buy at Deutsche Bank
PG&E (PCG) downgraded to Neutral from Buy at Citigroup
Pinnacle West (PNW) downgraded at BofA/Merrill
Pinnacle West (PNW) downgraded to Neutral from Buy at BofA/Merrill
Rose Rock Midstream (RRMS) downgraded to Neutral from Buy at Citigroup
Ternium (TX) downgraded to Equal Weight from Overweight at Morgan Stanley

Initiations

Atlas Energy (ATLS) initiated with a Buy at Deutsche Bank
Atlas Resource Partners (ARP) initiated with a Hold at Deutsche Bank
Bill Barrett (BBG) initiated with a Neutral at Mizuho
Carrizo Oil & Gas (CRZO) initiated with a Buy at Mizuho
Colfax (CFX) initiated with a Neutral at Longbow
Columbia Property Trust (CXP) initiated with a Market Perform at JMP Securities
EP Energy (EPE) initiated with a Neutral at Mizuho
Integrated Silicon (ISSI) initiated with a Buy at B. Riley
McGraw Hill Financial (MHFI) initiated with a Buy at Janney Capital
Oracle (ORCL) initiated with a Buy at Cantor
Synergy Resources (SYRG) initiated with an Outperform at Imperial Capital
Valeant (VRX) initiated with a Buy at Cantor

COMPANY NEWS

Exact Sciences (EXAS) announced that an FDA advisory panel recommended approval of its Cologuard colorectal cancer screening test
PG&E (PCG) said it expects criminal charges in San Bruno case
Ford (F) announced plans to invest $500M in Ohio engine plant, create 300 jobs to build new F-150
Parametric Sound (PAMT) provided an update following completion of its combination with Turtle Beach and said it expects adjusted EBITDA for FY14 to total $20M-$25M
GCI (GNCMA) said negotiations with Viacom (VIA) stalled
GM's (GM) Opel unit said sales of Opel brand in China to cease in January 2015
Rolls-Royce (RYCEY) selected by ANA (ALNPY) to provide Trent engines worth $1.1B to power 25 Boeing (BA) 787 Dreamliner aircraft

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Continental Building (CBPX), Oxford Industries (OXM), Red Hat (RHT)

Companies that missed consensus earnings expectations include:
AdCare (ADK), RE/MAX Holdings (RMAX), Conatus Pharmaceuticals (CNAT), Cara Therapeutics (CARA), Metabolix (MBLX)

Companies that matched consensus earnings expectations include:
Progress Software (PRGS), Restoration Hardware (RH)

NEWSPAPERS/WEBSITES

Amazon (AMZN) denies report of streaming-media service, Variety says
Wal-Mart (WMT) seeks $5B from Visa (V) over swipe fees, WSJ says
Apple (AAPL) to release new iPhone as early as September, Nikkei says
Total (TOT) in talks with Lukoil (LUKOY) for shale partnership, FT reports
Rumors suggest Jazz (JAZZ) looking to buy ARIAD (ARIA), Daily Mail reports
Toyota (TM) recalling Avalon cars for airbag deployments, Detroit News reports
Microsoft (MSFT) sets internal goal of 25M Windows tablets in 2014, DigiTimes says
Baidu (BIDU) prevails in lawsuit over search results, Reuters reports
Target (TGT) lawsuit reveals liable security firm Trustwave, WSJ reports

SYNDICATE

58.com (WUBA) 6M share Secondary priced at $38.00
CBS Outdoor Americas (CBSO) 20M share IPO priced at $28.00
Caesar's (CZR) files to sell 7M common shares
CommScope (COMM) 17.5M share Secondary priced at $22.00
Endocyte (ECYT) 4.5M share Secondary priced at $21.00
Energous (watt) 4M share IPO priced at $6.00
Everyday Health (EVDY) 7.15M share IPO priced at $14.00
Exterran Partners (EXLP) files to sell 5.4M common units representing limited partners
Mercer (MERC) 7M share Secondary priced at $7.15
MoneyGram (MGI) 8M share Secondary priced at $16.50
Sprouts Farmers Market (SFM) 15M share Secondary priced at $33.75
Voxeljet (VJET) files to sell 4.25M American Depositary Shares

It just hasn't been JPMorgan's year. Or several years for that matter. The bank which has been on a steady downward slope when it comes to paying billions in quarterly "non-recurring, one-time" legal settlements and charges, and for which engaging in criminal behavior which is neither admitted nor denied, yet which has cost JPM nearly $30 billion in the past several years, has just had its latest "wristslapping" incident, one which involves none other than the recently departed CEO of JPM Asia, Fang Fang, whose office was raided on March 26 by Hong Kong's anti-corruption agency amid a U.S. investigation into the bank’s hiring practices as reported by Bloomberg.

From Bloomberg:

The Independent Commission Against Corruption seized computer records and documents after searching the office of Fang Fang, the company’s outgoing chief executive officer for China investment banking, said the people, who asked not to be identified because the investigation is confidential.

 

“We will not comment on individual cases,” Alan Tse, an ICAC spokesman, said by phone yesterday. Marie Cheung, a Hong Kong spokeswoman for JPMorgan, declined to comment on the ICAC search.

 

The New York-based bank announced Fang’s resignation March 24. His departure comes amid an investigation into JPMorgan (JPM)’s Asian hiring practices. U.S. authorities are examining whether the bank employed people in Asia so that their relatives in government would steer business to the bank, people with knowledge of the probes have said.

 

The banker joined JPMorgan in August 2001 and became head of the firm’s China investment-banking unit in 2007 and was made vice chairman for Asia investment banking in 2009. Prior to joining the bank, Fang worked as a vice president of Beijing Enterprises Holdings Ltd., an investment company controlled by the Beijing government.

...

JPMorgan, the world’s biggest investment bank by fees last year, said in August that the U.S.’s Securities and Exchange Commission had sought information on its employment practices and client relationships in Hong Kong. U.S. prosecutors were given e-mails written by Fang in which the banker supported the hiring of China Everbright Group Chairman Tang Shuangning’s son, the Wall Street Journal reported March 24. Those e-mails also highlighted the potential for doing business with China’s state-backed conglomerate while Fang hasn’t been accused of any wrongdoing, the paper said.

 

The probes have posed hurdles to JPMorgan’s involvement in at least two recent investment-banking transactions. The bank decided to quit China Everbright Bank Co.’s Hong Kong share sale in November because the investigation delayed an internal approval process, according to two people with knowledge of the matter. The $3 billion deal was the largest first-time offering by any company in Hong Kong last year.

If indeed as Bloomberg suggest the investigation was driven by US authorities, it would imply that the US is getting even more aggressive in its pursuit of high-level JPM employees only not so much in the US, but increasingly in that gold mine for banking, China, and specifically Hong Kong, where we remind readers, a month ago a JPM FX trader jumped to his death.

Which means only one thing: even more billions in "one-time, non-recurring" fines are coming.

As for Fang: "Fang quit the bank as he wants to spend more time with his family, a person with knowledge of the matter said earlier." Depending on how strong of a message Obama's political circle wants to send Jamie Dimon, Fang may soon be out of luck with the whole "spending time with the family" plan.

• Why did Yellen use criminals in her employment case studies? Hilsenrath explainz (Hilsenrath)
• GM avoided defective switch redesign in 2005 to save a dollar each (Reuters)
• Xuzhou Zhongsen Said to Avert Bond Default on Guarantor Aid  (BBG)
• France's New Finance Minister Faces Fiscal Challenge (WSJ)
• The magic is gone: Draghi’s Attempt to Talk Down Euro Lost on Traders (BBG)
• Another John Kerry smashing success: U.S. Gambit on Mideast Peace Talks Falters (WSJ)
• Combat-Ready China Military Seen as Xi’s Goal in Graft Battle (BBG)
• Huge earthquake off Chile's north coast triggers tsunami (Reuters)
• Pressure rises on Gross as investors pull $3.1 billion from Pimco's flagship fund (Reuters)
• 'Too Big to Fail' still thriving (Reuters)
• Overdraft Fees at Banks Hit a High, Despite Curbs (WSJ)
• Windows XP: Old Platforms Die Hard, Security Risks Live On (WSJ)

Overnight Media Digest

WSJ

* Securities and Exchange Commission Chairman Mary Jo White said on Tuesday her agency has "a number" of investigations into potentially unlawful trading practices by high-frequency trading firms. (http://r.reuters.com/sam28v)

* Amid a growing clamor over the role of high-frequency traders in the markets, Virtu Financial Inc has delayed the start of its pitch to investors on its initial public offering. (http://r.reuters.com/hem28v)

* Samsung Electronics Co Ltd copied Apple Inc's breakthrough iPhone to remain competitive, the U.S. company said as a new round opened in their long-running patent feud. Samsung, meanwhile, countered that it was being targeted as a proxy for Apple's rivalry with Google Inc. (http://r.reuters.com/jem28v)

* Goldman Sachs Group Inc is close to selling a once-iconic trading business based on the floor of the New York Stock Exchange to Dutch firm IMC Financial Markets, according to people familiar with the matter. (http://r.reuters.com/qam28v)

* Wells Fargo & Co said Timothy Sloan will leave his current post as finance chief and take over the wholesale banking group, succeeding the retiring David Hoyt. (http://r.reuters.com/dem28v)

* Comcast Corp's deal to buy Time Warner Cable Inc has run into an unexpected source of turbulence: a weak stock price. In the nearly seven weeks since the deal was announced, Comcast's share price has dropped nearly 10 percent, reducing the value of its all-stock offer for Time Warner Cable to $143.55 a share from $158.82 per share when it was announced. (http://link.reuters.com/zem28v)

* A U.S. judge on Tuesday ordered Mt. Gox founder and Chief Executive Mark Karpeles to come to Texas, where the Japanese exchange has filed for U.S. bankruptcy protection. At a hearing in U.S. Bankruptcy Court in Dallas, Judge Stacey Jernigan set an April 17 date for Mr. Karpeles to answer questions under oath from lawyers who represent customers with frozen bitcoin accounts. (http://r.reuters.com/vem28v)

* Two banks have dropped their lawsuit against Target Corp and its security assessor, Trustwave Holdings Inc, following the theft of 40 million credit and debit card numbers from the retailer last year, according to court documents. (http://r.reuters.com/mem28v)

* Federal prosecutors have brought a rare criminal case against PG&E Corp's San Francisco utility over a 2010 fatal pipeline explosion in San Bruno, California, charging the company with knowingly breaking federal safety rules.(http://r.reuters.com/mam28v)

* Banks are turning to overdraft fees as revenue fall on deposit accounts, despite the Federal Reserve stopping them in 2010 from automatically charging customers overdraft fees on debit-card and automated-teller-machine transactions. (http://r.reuters.com/vam28v)

* Investors pulled $3.1 billion from Bill Gross's Pimco Total Return Fund in March, marking the 11th consecutive month of outflows at the marquee fund for Pacific Investment Management Co. The data, released late Tuesday by fund-research firm Morningstar Inc, underscores the challenges confronting the Newport Beach, California-based money manager following a year of record redemptions and a management shake-up. (http://r.reuters.com/pem28v)

* BlackBerry Ltd said late Tuesday that it is ending its licensing agreement with T-Mobile Inc when it expires later this month, a surprise move that comes two months after the two companies' chief executives sparred online. (http://r.reuters.com/rem28v)

* Executives of PricewaterhouseCoopers were put on the spot at a Senate subcommittee hearing on Tuesday by a public reading of their emails discussing how to preserve overseas tax benefits for client Caterpillar Inc. In one 2008 email, Thomas F. Quinn, a PwC tax partner, warned that the giant maker of construction and mining equipment might lose tax benefits if some Swiss-based product managers relocated to the U.S. (http://r.reuters.com/sem28v)

* The spring thaw helped push U.S. auto sales in March to one of the strongest rates in years, putting the industry back on track for growth this year after two months of winter doldrums. (http://r.reuters.com/kem28v)

FT

US law firm Schulte Roth & Zabel has expanded to open a new European practice in London to advice activist hedge funds as its U.S. clients are beginning to examine positions in UK-based companies.

In a move to expand its connected-car market, the Spanish telecom giant, Telefonica will provide Internet connectivity to all Tesla cars in Europe.

Royal Dutch Shell said it will lower its costs in its U.S. shale gas business by switching to cheaper Chinese machinery - a shift which could serve as a potential threat to western industrial equipment makers.

Private hospitals and politicians allege insurance companies such as Bupa "bribe" patients by offering cash payments to use NHS services for procedures such as angioplasty.

Hargreaves Services Plc is in talks to invest in UK Coal, Britain's largest coal miner, which is seeking a 10-million pound government fund to close two of its three pits in Britain and sell-off of its surface mines if the bid by Hargreaves fails.

NYT

* As families of crash victims lined the back of the House hearing room, displaying photos of their lost loved ones, General Motors Co's Chief Executive Mary Barra told lawmakers that the company was considering paying damages to victims of accidents in the millions of cars recalled for defective ignition switches. (http://link.reuters.com/fam28v)

* Officials of Caterpillar Inc sparred with members of a Senate panel on Tuesday, defending more than a decade's worth of tax practices that put most of the company's profits out of reach of United States tax authorities. (http://link.reuters.com/gam28v)

* A federal judge ordered the Marvell Technology Group Ltd to pay about $1.54 billion to Carnegie Mellon University for selling billions of semiconductors that infringed the school's two hard disk drive patents. While that amount is 31 percent more than the $1.17 billion initially awarded by a jury in Dec. 2012, it was less than half the maximum $3.75 billion that Carnegie Mellon sought. (http://link.reuters.com/ham28v)

* Glen Taylor, the billionaire owner of the Minnesota Timberwolves basketball team, has signed a letter of intent to buy The Minneapolis Star Tribune, the newspaper announced on Tuesday. Details of the cash offer were not disclosed. (http://link.reuters.com/jam28v)

* Billionaire investor Steven A. Cohen is putting pressure on his traders to try to keep his investment firm SAC Capital Advisors together, as the once-powerful hedge fund awaits a judge's decision next week on its guilty plea to securities fraud charges. (http://link.reuters.com/pam28v)

* As lawyers of Apple Inc and Samsung Electronics Co Ltd made their opening statements in their patent trial in a federal courthouse here, they could not even agree on what the fight was about. Apple said it was seeking money to stop Samsung from copying its products. But Samsung said the case at heart was about Apple's attempt to stifle consumer choice by taking aim at its main competitor in the phone business. (http://link.reuters.com/tam28v)

Canada

THE GLOBE AND MAIL

* With only five days of campaigning left ahead of elections, Quebec party leaders are into their final blitz as the Liberals and the Parti Quebecois take aim at some of their traditional strongholds that swung over to the Coalition Avenir Quebec in the most recent election. (http://link.reuters.com/hym28v)

* In a sign of the feverish atmosphere leading up to next week's provincial vote in Quebec, five McGill University students have hired a high-profile human-rights lawyer and filed an emergency court injunction in a bid to get on the Quebec voters' list. (http://link.reuters.com/mym28v)

Reports in the business section:

* After winning a $1 billion rail contract from a South African freight company, Bombardier Inc says it is confident of a bigger breakthrough in the emerging African market - but first it must weather a storm of controversy over its local partners in the deal. (http://link.reuters.com/nym28v)

NATIONAL POST

* Quebec Premier Pauline Marois personally has had a catastrophic few weeks ahead of the provincial elections, from which she will find it difficult to recover. She needs to win a majority next Monday to avoid the guillotine that awaits all Parti Quebecois leaders who disappoint their brothers and sisters in the movement. Such a victory now seems unlikely. (http://link.reuters.com/qym28v)

* Alberta's long-ruling Progressive Conservative Party released another annual report showing it sliding ever further into the red this week, but the disclosure does not show the full picture, a National Post analysis has found. (http://link.reuters.com/sym28v)

FINANCIAL POST

* Companies in Ontario and Quebec are among those on the forefront of modernizing the traditional way of harvesting maple syrup, by applying technology to monitor leaks in the long plastic tubes that draw sap from maple trees. (http://link.reuters.com/tym28v)

* The Bank of Canada could lag the U.S. Federal Reserve in starting to raise rates, but it may also lag behind in terms of the pace of hikes during the upcoming cycle, says a Scotiabank outlook. (http://link.reuters.com/zym28v)

Hong Kong

SOUTH CHINA MORNING POST

-- A scheme to build homes exclusively for Hong Kong people in an effort to provide middle-class buyers with affordable flats may be shelved. Chief Executive Leung Chun-ying suggested that the scheme could be suspended as the number of outside buyers in the market had dropped to a very low level. (link.reuters.com/wak28v)

-- Hongkong Land and Wharf Holdings will suffer the most should the Occupy Central movement carry out its threat to block streets in the heart of the city, a study by investment bank UBS says. Hongkong Land owns offices in the central business district, while Wharf owns shops in Tsim Sha Tsui and Causeway Bay. (link.reuters.com/zak28v)

-- Researchers at the University of Hong Kong have developed a vaccine that may be the first in the world to offer a shield against many influenza viruses - including the deadly H7N9 bird flu strain - in one simple shot. (link.reuters.com/bek28v)

THE STANDARD

-- Apex Benchmark, the second-largest shareholder of Midland , urged the property agency to explain its poor financial performance last year. (link.reuters.com/dek28v)

-- SmarTone has been fined HK$150,000 ($19,300) for breaching the Telecommunication Ordinance by making misleading and deceptive claims on its website. (link.reuters.com/jek28v)

-- Japan's first sales tax hike in 17 years is unlikely to affect Hong Kong holiday-makers, travel agencies say. EGL Tours executive director Steve Huen Kwok-chuen said Japan tours during the Easter holidays would not be affected as they were booked before the tax rise. (link.reuters.com/rek28v)

HONG KONG ECONOMIC JOURNAL

-- China Vanke has bought a commercial and residential site in Hong Kong's Wanchai district for HK$860 million ($110.87 million), its first purchase of a private land site in the city.

HONG KONG ECONOMIC TIMES

-- The number of homes due to be completed this year is estimated at 17,600 units, double that in 2013, and is the highest in 10 years, according to Hong Kong government data. Industry experts expect the increased supply to put pressure on property prices.

APPLE DAILY

-- University of Hong Kong students who join the movement Occupy Central can expect support from the university's new and first expatriate chief, Peter Mathieson, who said he backs peaceful protests, free speech and academic freedom.

Britan

The Telegraph

BRITAIN CAN CUT GAS PRICES BY WORKING WITH EUROPE, SAYS MANDELSON

(http://link.reuters.com/fek28v)

Lord Mandelson believes working with Europe can end Russia's 'divide and rule' tactics on gas pricing as he warned Britain would be "bonkers" to quit the European Union.

BRITAIN HOLDS LESS FOREIGN CURRENCY RESERVES THAN POLAND, SAYS DEUTSCHE BANK

(http://link.reuters.com/gek28v)

Research from Deutsche Bank, titled "Mapping the World's Financial Markets", showed that the UK is ranked 24th in a list of the world's largest holders of foreign currency reserves.

The Guardian

VINCE CABLE DEFENDS ROYAL MAIL SELL-OFF IN COMMONS DEBATE

(http://link.reuters.com/mek28v)

The business secretary, Vince Cable, has refused to apologise over the government's privatisation of Royal Mail , despite a scathing report from the National Audit Office, which said undervaluing the share sale had cost the taxpayer 750 million pounds in a single day.

AIR TRAFFIC CONTROLLERS BEGIN TRIAL AIMING TO REDUCE HEATHROW HOLDING STACKS

(http://link.reuters.com/sek28v)

The time aeroplanes spend circling Heathrow before landing could be cut as air traffic controllers join forces internationally in a trial. The trial, which began on Tuesday and will last until the end of 2014, hopes to see the time planes spend in holding stacks around Heathrow reduced.

The Times

COMPETITION CLIMBDOWN OVER PRIVATE HOSPITAL SALES

(http://link.reuters.com/tek28v)

The Competition and Markets Authority has dropped its demand that BMI Hospitals sell seven of its private medical centres.

UK COAL BACK ON CRITICAL LIST DESPITE BAILOUT

(http://link.reuters.com/wek28v)

The last big coal miner in Britain is facing collapse, with the potential loss of 2,000 jobs, unless it receives an emergency cash injection of more than 10 million pounds.

Sky News

NEW CONSUMER WATCHDOG CMA GOES ON THE PROWL

(http://link.reuters.com/xek28v)

The Competition and Markets Authority (CMA) has become the UK's primary competition and consumer agency, bringing together the Competition Commission and the Office of Fair Trading.

NPOWER HATCHES NEST DEAL AS ENERGY ROW RAGES

(http://link.reuters.com/zek28v)

Npower, which is owned by the German utility RWE, is expected to announce this week a partnership with Nest Labs, a connected devices-maker which was acquired by Google for more than 2 billion pounds.

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS

Domestic economic reports scheduled today include:
ADP employment report for March at 8:15--consensus 193K
Factory orders for February at 10:00--consensus up 1.2%

ANALYST RESEARCH

Upgrades

Actuant (ATU) upgraded to Buy from Neutral at SunTrust
Ameriprise (AMP) upgraded to Overweight from Equal Weight at Morgan Stanley
Apollo Education (APOL) upgraded to Outperform from Market Perform at Wells Fargo
Arthur J. Gallagher (AJG) upgraded to Buy from Neutral at Compass Point
Carter's (CRI) upgraded to Overweight from Neutral at Piper Jaffray
Cognizant (CTSH) upgraded to Buy from Neutral at UBS
Comerica (CMA) upgraded to Market Perform from Underperform at Wells Fargo
DSW (DSW) upgraded to Hold from Sell at Brean Capital
Dover (DOV) upgraded to Outperform from Neutral at Credit Suisse
Fortinet (FTNT) upgraded to Outperform from Market Perform at Wells Fargo
Laredo Petroleum (LPI) upgraded to Buy from Neutral at SunTrust
Penske Automotive (PAG) upgraded to Buy from Neutral at Sterne Agee
The Pantry (PTRY) upgraded to Buy from Hold at Benchmark Co.
Veeva (VEEV) upgraded to Overweight from Equal Weight at Morgan Stanley
Worthington (WOR) upgraded to Buy from Hold at KeyBanc

Downgrades

ArcelorMittal (MT) downgraded to Neutral from Outperform at Credit Suisse
Essex Property Trust (ESS) downgraded to Neutral from Buy at Goldman
Healthstream (HSTM) downgraded to Market Perform from Outperform at Northland
Imperial Oil (IMO) downgraded to Underperform from Neutral at BofA/Merrill
Nordion (NDZ) downgraded to Hold from Buy at Canaccord
The Medicines Co. (MDCO) downgraded to Neutral from Overweight at Piper Jaffray

Initiations

Alkermes (ALKS) initiated with an Outperform at Credit Suisse
E-House (EJ) initiated with a Buy at Brean Capital
Ford (F) initiated with a Neutral at Nomura
General Motors (GM) initiated with a Reduce at Nomura
MAG Silver (MVG) initiated with an Outperform at Scotia Capital
Mobile Mini (MINI) initiated with a Neutral at SunTrust
NRG Energy (NRG) reinstated with an Overweight at Barclays
NRG Yield (NYLD) reinstated with an Equalweight at Barclays
National Fuel (NFG) initiated with a Buy at Jefferies
NiSource (NI) initiated with a Hold at Jefferies
Questar (STR) initiated with a Hold at Jefferies
SouFun (SFUN) initiated with a Buy at Brean Capital
Southwest Gas (SWX) initiated with a Hold at Jefferies

COMPANY NEWS

GlaxoSmithKline (GSK) confirmed plans to stop MAGRIT Phase III trial
BlackBerry (BRRY) ended T-Mobile U.S. (TMUS) licensing agreement
PG&E (PCG) announced criminal charges filed regarding 2010 San Bruno pipeline accident
MannKind (MNKD) said an FDA advisory panel voted in favor of its Afrezza to treat type 1 and type 2 diabetes
Apollo Education (APOL) disclosed that its University of Phoenix subsidiary received a subpoena from the U.S. Department of Education seeking documents related to, among other things, marketing, recruitment, enrollment and financial aid processing
Myriad Genetics (MYGN) disclosed updated pricing from the Centers for Medicare & Medicaid Services for the sequencing of BRCA1 and BRCA2 genes
Envivio (ENVI) said that it is powering live HD sports channels for Apple TV (AAPL) for a "European Tier 1 service provider"

EARNINGS

Ceragon Networks (CRNT) lowers Q1 revenue guidance to $70M-$73M from $83M-$93M
Gold Resource (GORO) reports FY13 EPS 0c, one estimate 10c
Autobytel (ABTL) raises revenue guidance for Q1
Apollo Education (APOL) sees FY14 revenue $3B-$3.1B, consensus $3.06B

NEWSPAPERS/WEBSITES

Banks (C, GS, JPM, MS, DB) seek to cut derivatives exposure, WSJ says
Hulu, Comcast (CMCSA, CMCSK) expected to strike deal for past NBCU shows, WSJ reports
BHP (BHP) said it sees no near-term relief on coal prices, Reuters reports
Apple (AAPL) to act like Google (GOOG) in ad push, Business Insider reports
Russia says JP Morgan (JPM) 'illegally' blocked embassy money transfer, Bloomberg reports
Comcast (CMCSA, CMCSK) share price drop may be headwind to Time Warner Cable (TWC) deal, WSJ says 
Tesla (TSLA) pays Telefonica (TEF) 'millions' in wireless deal, TechCrunch says

SYNDICATE

Blackstone Mortgage (BXMT) files to sell 8M shares of common stock
Global Telecom & Technology (GTT) files to sell 1M common shares for holders
Gramercy Property Trust (GPT) files to sell 11.54M shares for holders
Intercept (ICPT) files to sell 1M common shares, including 400,000 for holders
McDermott (MDR) raises $242M in a tangible equity units offering
New York Mortgage (NYMT) files to sell 13M shares of common stock
Rubicon Project (RUBI) 6.771M share IPO priced at $15.00

And all it took for the FBI, the SEC and now the DOJ to figure out the casino was rigged all along, was for a Michael Lewis book to do their job for them.

• DOJ PROBING HIGH SPEED TRADING FOR INSIDER TRADING: REUTERS

U.S. Attorney General Eric Holder confirms Justice Department investigation into high-frequency trading. http://t.co/ERuwcHcGLt

— WSJ Breaking News (@WSJbreakingnews) April 4, 2014

As WSJ reports,

The Justice Department is investigating high-speed trading practices to determine whether they violate insider-trading laws, Attorney General Eric Holder is expected to tell lawmakers Friday.

 

Mr. Holder, in prepared remarks, said the practice has "rightly received scrutiny from regulators."

 

"The department is committed to ensuring the integrity of our financial markets," Mr. Holder said in testimony about the Justice Department's budget before the House Appropriations Committee. "We are determined to follow this investigation wherever the facts and the law may lead."

 

The Federal Bureau of Investigation said earlier this week that it is probing high-frequency trading. New York Attorney General Eric Schneiderman, the Commodity Futures Trading Commission and the Securities and Exchange Commission are also looking into the practice.

On Monday, in "High Frequency Trading: Why Now And What Happens Next" we predicted that "the high freaks are about to become the most convenient, and "misunderstood" scapegoat, for when the market finally does crash. Which means that those HFT-associated terms which very few recognize now, especially those on either side of the pro/anti-HFT debate who have very strong opinions but zero factual grasp of the matter, such as the following...

• Frontrunning: needs no explanation
• Subpennying: providing a "better" bid or offer in a fraction of penny to force the underlying order to move up or down.
• Quote Stuffing: the HFT trader sends huge numbers of orders and cancels
• Layering: multiple, large orders are placed passively with the goal of “pushing” the book away
• Order Book Fade: lightning-fast reactions to news and order book pressure lead to disappearing liquidity
• Momentum ignition: an HFT trader detects a large order targeting a percentage of volume, and front-runs it.

... will become part of the daily jargon as the anti-HFT wave sweeps through the land."

Of course, another name for "layering" is "spoofing" which is precisely the term that the SEC used today when it announced that it charged the owner of a New Jersey-based trading firm and several other defendants "in a scheme to manipulate the market through an illegal practice known as "spoofing."

From Reuters:

The Securities and Exchange Commission said that Joseph Dondero, a co-owner of Visionary Trading LLC, as well as several other owners and a New York-based brokerage firm called Lightspeed Trading LLC will collectively pay $3 million to settle the charges.

 

Spoofing involves a trader placing orders without the intention of having them executed, a strategy that tricks people into buying or selling stock at artificial prices.

 

Reuters reported earlier this week that the FBI is also investigating the practice of spoofing more broadly in a probe into high-speed trading.

The SEC was kind enough to step away from the porn for a minute for the following soundbite:

"The fair and efficient functioning of the markets requires that prices of securities reflect genuine supply and demand," said Sanjay Wadhwa, a senior associate director of the SEC's New York regional office.

 

"Traders who pervert these natural forces by engaging in layering or some other form of manipulative trading invite close scrutiny from the SEC."

 

The SEC's case comes just days after the FBI and the Commodity Futures Trading Commission each said they were looking more broadly into the practice of spoofing, as part of a wide-ranging investigation into strategies that may be deployed by high-frequency traders.

One HFTer down, millions of vacuum tubes to go:

Dondero has agreed to settle the charges, pay more than $1.9 million, and be barred from the securities industry.

So is this getting clearer now? Yes: precisely those same "strategies" so pervasively used by HFTs, because Virtu didn't have a 99.9% successful trading history in the past four years from "providing liquidity", and which the SEC had no problems condoning as long as the market was going higher, are suddenly being frowned upon, and HFTs are starting to finally feel the wrath of the regulator. But that will be nothing compared to the wrath of the general public, which just like the CEO of BATS has zero understanding of how HFT actually works, when the upcoming market crash is blamed not on the Fed but on 25 year old math PhDs who "trade" and whose lobbying cash at the SEC no longer works now that almighty Goldman has finally turned its back on the high freaks.

Just as we predicted would happen.

And just as a reference so readers can get a sense of the "valuable services" a company like Lightspeed "Our trading software gives you access to real-time quotes and executions faster than ever before" Trading provide, here is an entry from their blog titled, "Ways to Trade the Twitter IPO."

With the huge popularity and notoriety of the name, it is unlikely that many active traders will get their hands on shares at the offering price, but is there a way to trade this stock once it opens to the public? Some are easy, others aren’t likely to be available to you, but here some potential plays.

 

Stay Long

 

The same thesis for going short also works for going long. Especially if the stock doesn’t make a huge jump at the open and appears to be slowly moving higher, going long for the day or longer could be a lucrative play. Just as the outsized volatility could work in your favor in a short position, it could also work as a long position.

 

No Options Available

 

Each exchange determines how soon options will be available on an IPO. For a stock as large and public as Twitter, it’s likely to be fast – as quick as a week but that doesn’t help you on the opening day.

 

If shorting and options trading aren’t practical strategies, what can you do?

 

Trade Related Names

 

The popularity of Twitter will bring more attention to the social media space and that could cause a short term move higher in those second derivative plays tied to Twitter. $FB, $LNKD, and Chinese media company $SINA are likely to see buying interest. Go long or use options. Don’t blindly throw money at these names, though. Look at the charts and see if they’re due for a bounce.

With sage advice such as this, is it any wonder the firm had to "spoof" in order to immitate Virtu's trading perfection?

As for "tricking people into buying or selling stock at artificial prices", surely Visionary Trading and Lightspeed Trader are the only cockroaches. Surely.

Follow ZeroHedge in Real-Time on FinancialJuice

What is there in this world that is transparent? Is there anything left? You just need to take a look around you. The growing number of corruption cases, the people that embezzle, fraudulently take, borrow, beg and steal at whim. These days it’s blatantly happening in front of your very eyes and yet we cannot see it, we do nothing except accept complacently, sheepled into believing that it can’t be changed.

We all know the stock market is rigged beyond our wildest dreams. We all hear that high-speed trading is doing the small-fry investors out of their hard-earned cash. But it’s now black-pool trading that is catching the stock markets in a whirl of foam to hide what’s going on in the darkest recesses of the financial markets. Everything has a dark side, a hidden entrance to the place where the few that are in-the-know are allowed to go; where they can benefit fully from something you can’t see. The darkest side of the stock market is that place where dark pools of liquidity allow financiers to trade high volumes of liquidity without the public actually knowing. Anonymous, unknown public-hidden trades by financial institutions; agreeing directly on the price and the volume to be traded, without making it public means that the public is at a disadvantage.

High-frequency trading is apparently only the tip of the iceberg today as growing volumes of shares are traded in dark pools. Approximately 40% of all US stock that is being traded now takes place outside of the stock market, ‘off exchange’. In 2008, that figure stood at 16%. In Europe things are not quite as bad, but there was an increase of 45% in just six months in the second part of 2013. In total there is an average sum of about 7-10% across the EU. In the US, there were some $21.4 trillion being traded in 2012 and that is certainly being affected by dark pools and hidden trading.

There are 45 dark pools competing with 13 public exchanges. There are some 200 internalizers (brokers that internalize trades, thus not providing data to the market). Dark pools only report data about volume and sales after the trade has actually gone through, while public exchanges do it in real-time adjusting the price according to the volume of sales and purchases. Canada and Australia have tried to curb the volume of dark-pool trades by making sure that there is a limit. The US is still thinking it over.

The US Securities and Exchange Commission stated in 2009 that they were going to get to grips with the problem of dark pools with the objective that “investors get a clearer view of stock prices and liquidity”. The information about volumes and prices was said to be needed to be made public. We are still waiting for theSEC to act. The SEC was supposed to require brokers to offer the public the best available price for stock that was to be bought or sold before dark-pool trading could occur. We are still waiting for that to happen. Patience is a virtue apparently. But, this is beyond the bounds of reason, isn’t it?

Of course, seeing who you are dallying with when the lights go out is much better than waking up in the morning with a huge surprise. Dark pools are a heated debate, but they certainly lead to a greater lack of transparency, endangering financial stability. Some might say that the markets have enough to cope with, but I can’t see the difficulty that they are going through (thanks to Quantitative Easing and easy money being thrown at them left, right and center).

When you have to look around you and everything that can be seen is just opaque, hiding the truth and bending the rules or using them to your advantage, then there is not a lot left to do except either go off and live as a hermit somewhere or join them all in the dark pools. Jump right in. Our society has turned into a seedy bottomless pit of dark opacity. We have no transparency. The word is misunderstood, unused, referring to a bygone era that wasn’t true even then perhaps. Where have all the honest people gone in this world? Why do we allow it all to continue to the detriment of the majority, for the benefit of the few?

Originally posted: Dark-Pool Trading Danger

Yesterday, a retiring 38-year veteran trial lawyer's remarks shone a brighter light on the farce that the SEC has become in recent years. The SEC has become “an agency that polices the broken windows on the street level and rarely goes to the penthouse floors,” Kidney said, adding that his superiors were more focused on getting high-paying jobs after their government service than on bringing difficult cases. The agency’s penalties, Kidney said, have become “at most a tollbooth on the bankster turnpike.” As the full letter below shows, he had a lot more to add on just how the toothless agency should be run...

"The only other item I want to be serious about, besides some personal observations in a minute, is the metric of the division of enforcement: number of cases brought. It is a cancer. It should be changed.

 

The metric we have now is built into the soul of the Division. It has to be removed root and branch"

His concluding questions leave management mouths open...

"Are we so sure that our own domestic corporations and audit firms are law abiding that we can spend vast quantities of staff time and taxpayer money worrying about firms in other countries because a handful of ADRs are sold on U.S. markets?

 

Are we so paralyzed by the organizational stovepipes we have created and made more and more of that we can’t flood the zone on important cases instead?

 

Do we have to preserve bureaucratic organizational boundaries by sweating the minutiae just so each organizational unit can claim to have enough to do to protect some manager’s turf?"

Kidney's Full Retirement Comments below:

Retirement Remarks

Still think he must be exaggerating and is just venting after a lifetime of thankless litigation.. think again...

As The Wall Street Journal reports,

Bruce Karpati, a former top Securities and Exchange Commission lawyer, is heading to private-equity giant KKR & Co. to become global chief compliance officer, said people familiar with the matter.

 

Mr. Karpati, most recently the chief compliance officer for Prudential Financial Inc.'s mutual fund business, is expected to start at KKR later this month, one of the people said.

 

...

 

Mr. Karpati will oversee KKR's compliance with regulations around the world. KKR is a registered investment adviser and has a broker dealer in the U.S. He succeeds H.J. Willcox, who left KKR last year for a similar position at AQR Capital Management LLC.

 

Mr. Karpati spent more than a dozen years at the SEC, rising through the ranks to lead the enforcement division's asset-management unit. He oversaw investigations into a wide variety of investment firms, including a probe that ultimately led to a settlement between hedge-fund manager Philip Falcone and the SEC that banned Mr. Falcone from the securities industry for several years.

As a gentle reminder, here is what Kidney said...

Kidney said his superiors were more focused on getting high-paying jobs after their government service than on bringing difficult cases.

Shocked...? So does the C in SEC stand for Cronyism of another "C" word?

• J.P. Morgan's Dimon Describes Year of Pain (WSJ)
• SAC Faces a Final Reckoning for 14 Years of Insider Scam (BBG)
• New Standards for $693 Trillion Swaps Market Increase Risk of Blowup (BBG)
• China says no major stimulus planned; March trade weak (Reuters)
• As we said in 2012 would happen: Record Europe Dividends Keep $3 Trillion From Factories (BBG)
• Blame it on the algo: Deutsche Bank Said to Find Improper Communication in FX Case (BBG)
• Coke Sticks to Its Strategy While Soda Sales Slide (WSJ)
• Ukraine’s Rust Belt Faces Ruin as Putin Threatens Imports (BBG)
• RBC Joins Goldman in Suing Clients After Singapore Crash  (BBG)
• Abe Rewrites Rules to Rouse Japan With Governance Revamp (BBG)
• U.S. House panel to look at aluminum prices, warehousing (Reuters)
• Brooklyn Apartment Rents Jump to a Record as Leases Surge (BBG)
• Spain Borrowing at German Yields? It’s Possible, Thanks to U.S.  (BBG)
• The princeling of private equity (Reuters)
• Europe’s steelmakers remain under pressure despite rising demand (FT)

Overnight Media Digest

WSJ

* For 13 years running, Americans have been drinking less Coke. Now Diet Coke sales are falling off a cliff. Globally, sales growth of soda is slowing amid concerns about sugar intake and obesity. The trends are industry wide, but it is especially bad news for Coca-Cola Co, a company that derives almost 75 percent of its global sales volume from carbonated soft drinks. (http://r.reuters.com/vaj48v)

* AT&T said on Thursday it is in advanced talks to bring speeds of up to one gigabit per second to six North Carolina cities, or about 10 times the current fastest options. (http://r.reuters.com/mej48v)

* J.P. Morgan Chase & Co Chairman and Chief Executive James Dimon acknowledged that a series of legal headaches in 2013 evolved into "the most painful, difficult and nerve-wracking experience I have ever dealt with professionally." (http://r.reuters.com/pej48v)

* Auto lender Ally Financial Inc's initial public offering priced at the low end of its expected range, raising some $2.38 billion for the U.S. Treasury Department. The deal marks the largest U.S.-listed IPO of the year and sharply reduces the U.S. government's stake in the former General Motors financing arm. (http://r.reuters.com/rej48v)

* Hewlett-Packard Co agreed to pay $108 million to resolve bribery investigations spanning three countries, in a case involving bags of cash, jewelry and tours of the Grand Canyon. U.S. authorities on Wednesday gave a detailed view of corruption at HP, which pleaded guilty to violating the Foreign Corrupt Practices Act and agreed to the facts laid out by the government. (http://r.reuters.com/tej48v)

* Greece plans to sell a new bond, and demand appeared strong among investors ready to look beyond the country's debt crisis. The country's desire to issue the bond, its first longer-term debt sale since its international bailout in 2010, was well known. But details of the planned offering and indications of healthy investor appetite spurred a rally Wednesday in Greece's existing securities. (http://r.reuters.com/wej48v)

* Bank of America Corp agreed to pay at least $772 million to settle allegations it misled customers when marketing credit-card products promising to protect consumers against identity theft and job loss. The pact announced Wednesday is the fifth, and largest, settlement to date in a probe of banks' sales of credit-card add-on products. (http://r.reuters.com/xej48v)

* For U.S. energy companies, it has been a simple and profitable strategy: spin off a piece of the business and secure a special tax treatment. Now, the IRS is wondering if some firms are pushing the popular tactic too far. It is conducting an internal review and taking a temporary break from giving guidance to companies looking to form or expand master limited partnerships. (http://r.reuters.com/duj48v)

* Mars Inc agreed to buy Iams and other pet-food brands from Procter & Gamble Co for $2.9 billion, solidifying its position as the world's biggest pet-food company and effectively ridding P&G of a business that no longer fits with its goals. (http://r.reuters.com/guj48v)

* Popular websites and millions of Internet users scrambled to update software and change passwords Wednesday, after a security bug in crucial encryption code was disclosed sooner than researchers had planned. Facebook Inc and Yahoo Inc's blogging site Tumblr advised users to change their passwords because of the so-called Heartbleed bug while Canada's tax agency shut its filing website as a precaution, weeks before its April 30 filing deadline. (http://r.reuters.com/kuj48v)

FT

Russia's biggest steel company Evraz Plc warned that the crisis in Ukraine could hurt its business in 2014, as it reported a deepening in losses for last year.

The World Steel Association expects a pick up in manufacturing in Europe after six years of recession, and has forecast a 3.1 percent pickup in European steel demand. But European steel companies, plagued by high energy costs, remain wary.

A new regulatory study by The Pensions Regulator shows that employers could be charged 10 times more than competitors for running final-salary pension schemes.

In one of the biggest corporate criminal cases in Ireland, a jury cleared former Anglo Irish Bank Chairman Sean Fitzpatrick of charges associated with loans to family members of the region's business tycoon Sean Quinn.

Co-op Group's senior board member Lord Paul Myners, who has been facing criticism over a proposed restructuring of the group's board, has quit just a week before the group is scheduled to post its results.

NYT

* Bank of America Corp has been ordered to pay about $772 million in refunds to customers and fines to federal regulators to settle allegations that the bank used deceptive marketing and billing practices involving credit card products. (http://r.reuters.com/quj48v)

* Bruce Karpati, a former Securities and Exchange Commission official, is joining the private equity firm Kohlberg Kravis Roberts & Company as its chief compliance officer, a person briefed on the matter said on Wednesday. (http://r.reuters.com/fuj48v)

* Top U.S. investment banks have recently instituted a change in their corporate culture telling their most junior employees to take a few days off a month or on the weekends. The banks are responding to fears across the industry that finance is losing its appeal for bright, ambitious college graduates. (http://r.reuters.com/sej48v)

* Members of the Senate Judiciary Committee expressed concern on Wednesday that the proposed $45 billion merger of Comcast Corp and Time Warner Cable Inc would raise the prices consumers pay for cable television and high-speed Internet service while leaving them with fewer choices for video programming. (http://r.reuters.com/vej48v)

* The Treasury Department on Wednesday sold a 20 percent stake in the once-embattled lender Ally Financial Inc via its initial public offering. The stock sale will raise about $2.4 billion for the government. (http://r.reuters.com/cuj48v)

* A bond insurer halted the bankruptcy proceedings for Detroit by offering to buy four treasures in the city's art museum. The non-binding proposals range as high as $2 billion, including a loan for that amount from a specialized firm that would use the art collection as collateral. Other parties have proposed buying the art collection, or parts of it. (http://r.reuters.com/huj48v)

* Walmart Stores Inc plans to announce on Thursday that it is backing Wild Oats organic products, offering the label at prices that will undercut brand-name organic competitors by at least 25 percent. The move by Walmart is likely to send shock waves through the organic market, in which an increasing number of food companies and retailers are seeking a toehold. (http://r.reuters.com/juj48v)

* Toyota Motor Corp on Wednesday announced a recall of nearly 6.4 million vehicles worldwide for problems with air bags that may not deploy or seats that could move in a crash. The recall, which includes nearly 1.8 million vehicles in the United States, brings Toyota's recall tally for 2014 to almost 2.9 million vehicles in the U.S. (http://r.reuters.com/muj48v)

* When the Federal Reserve changed the guidelines for its stimulus campaign last month, it did not change its commitment to supporting the economy, according to an account of the decision that the Fed published on Wednesday. Janet Yellen, the Fed's new chairwoman, convened a secret meeting in early March to discuss the shift, the Fed disclosed on Wednesday. (http://r.reuters.com/nuj48v)

* American mutual fund investors with significant exposure to bonds issued by indebted companies in fast-growing economies may be at risk, the International Monetary Fund warned in a report published on Wednesday. Bonds issued by big companies in emerging economies have seen explosive growth in recent years after central banks around the globe started making extraordinarily large purchases of government and corporate bonds. (http://r.reuters.com/puj48v)

Canada

THE GLOBE AND MAIL

* A major cybersecurity flaw called "Heartbleed" that exposes encrypted information to hackers has forced the Canada Revenue Agency to shut down its filing system and push back the deadline for online returns. The flaw has got major websites around the world to release software updates to patch a hole that leaves users' personal information vulnerable. (http://r.reuters.com/cek48v)

* Canada's embassy in Beijing has spent about $175,000 in the past two years to buy crates of high-end filters for its staff. Embassy officials are also looking at compensation for workers whose stays in China stand to permanently damage their health. (http://r.reuters.com/hek48v)

Reports in the business section:

* BlackBerry Ltd's Chief Executive John Chen said the company might consider exiting its handset business if it remained unprofitable. Chen, who took over the struggling company in November, said BlackBerry was also looking to invest in regulated industries such as healthcare, and financial and legal services, all of which require highly secure communications. (http://r.reuters.com/mek48v)

NATIONAL POST

* Conservative Party of Canada's efforts to push the Fair Elections Act has run into controversy. The secrecy surrounding the act, the failure to consult in advance of its drafting, the curtailment of debate after, the supreme indifference to legitimate criticism - all under the chilling oversight of the Minister for Democratic Reform, Pierre Poilievre, would be enough to make anyone nervous. (http://r.reuters.com/sek48v)

* The Canadian Broadcasting Corporation may cut about 600 jobs as it grapples with a financial shortfall of $130 million to $150 million, according to a lobby group that watches the national broadcaster closely. (http://r.reuters.com/zek48v)

FINANCIAL POST

* "Heartbleed", a cybersecurity flaw that got major websites around the world to release software patches, went undetected for two years, according to one of the organizations that helped identify it. The bug leaves behind no trace when it is exploited and it may take years before the extent of this security breach is fully known. (http://r.reuters.com/kuk48v)

* Activist investor George Armoyan has called for the removal of Sherritt International Corp Chief Executive David Pathe. Armoyan said some Sherritt insiders, including former directors, have indicated to him that there is a vacuum of leadership at the company. (http://r.reuters.com/quk48v)

China

- State-owned enterprises, especially those owned by the central government, are likely to play an important role in launching large-scale investment projects aimed at stabilising economic growth this year, the paper reported, citing an unnamed source closed to the State-owned Assets Supervisory and Administration Commission.

SHANGHAI SECURITIES NEWS

- China's first private equity-style fund focused on futures investment started fundraising on Tuesday. The private equity product called "Donghang Finance Number One Seeds Asset Management Plan", which is operated by CES Finance, plans to raise 50 million yuan ($8.1 million).

21ST CENTURY BUSINESS HERALD

- China's securities regulator will not restart equity initial public offerings in April because the agency is still in the process of drafting several new regulations, sources closed to the matter told the paper.

- China's major online peer-to-peer lending platform Ppdai raised around $50 million its second round of private fundraising, sources said.

CHINA BUSINESS NEWS

- Executives at privately-owned companies complained forcefully about unequal treatment relative to state-owned firms at a roundtable discussion at the Boao Forum for Asia in Hainan, the paper reported in a front-page article.

CHINA DAILY

- Beijing may impose strict traffic controls and suspend operations of polluting companies to reduce smog during the Asia-Pacific Cooperation Forum scheduled for later this year, said Zhuang Zhidong, deputy head of the Beijing Environmental Protection Bureau.

PEOPLE'S DAILY

- Party cadres should be highly attentive to the ongoing "Mass Line" education campaign, an internal propaganda effort aimed at maintaining the common people's support for the party, said the paper, which acts as a mouthpiece for the ruling Communist Party.

Britain

The Telegraph

TOP ECONOMISTS WARN GERMANY THAT EMU CRISIS AS DANGEROUS AS EVER

(http://link.reuters.com/beh48v)

The eurozone debt crisis is deepening and threatens to re-erupt on a larger scale when the liquidity cycle turns, a leading panel of economists warned in a clash of views with German officials in Berlin.

NEXT CHIEF LORD WOLFSON DONATES £4M BONUS TO STAFF

(http://link.reuters.com/ceh48v)

Lord Wolfson, the chief executive of Next Plc, has waived his £4m bonus for the second consecutive year and awarded it to the clothing retailer's staff.

The Guardian

LORD MYNERS QUITS CO-OPERATIVE GROUP

(http://link.reuters.com/sug48v)

Lord Paul Myners tendered his resignation in the face of mounting opposition to his plan to reform the way the country's biggest mutual Co-operative Group is run.

IMF WARNS EUROPE'S BANKING SYSTEM POSES THREAT TO GLOBAL FINANCIAL STABILITY

(http://link.reuters.com/feh48v)

The eurozone's creaking banking system poses a serious threat to global financial stability, according to the International Monetary Fund, which warned European leaders to accelerate plans to support weak banks and create a banking union.

The Times

ANNUITY SALES TAKE A HIT FROM OSBORNE'S PENSIONS REFORM

(http://link.reuters.com/geh48v)

Just Retirement, a specialist annuity provider, reported that the shock Budget measure "has had a material effect on individually underwritten annuity volumes", and warned that it would not meet the sales growth target of 7 per cent for its full year that had been flagged in February.

BRUSSELS DIVIDEND DEAL GIVES RBS PUSH IN RIGHT DIRECTION

(http://link.reuters.com/heh48v)

Royal Bank of Scotland inched closer to corporate normality yesterday after agreeing a deal with Brussels that paves the way for it to resume paying ordinary dividends and gives it more breathing space to complete a key disposal.

Sky News

CAR INSURANCE 'DROPS TO A FOUR-YEAR LOW'

(http://link.reuters.com/jeh48v)

Car insurance premiums are at a four-year low after a record 19 percent drop in the cost last year, according to Confused.com's car insurance price index.

IMF WARNS INVESTORS OVER 'ROCK-BOTTOM RATES'

(http://link.reuters.com/keh48v)

Investors are becoming dangerously reliant on rock-bottom interest rates, with many becoming so indebted they will face serious problems when borrowing costs rise, the International Monetary Fund (IMF) has warned.

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS

Domestic economic reports scheduled today include:
Jobless claims for week of April 5 at 8:30--consensus 318K
Import price index for March at 8:30--consensus up 0.2% from prior month
Treasury budget for March at 14:00--consensus deficit $36.0B

ANALYST RESEARCH

Upgrades

Akamai (AKAM) upgraded to Buy from Neutral at B. Riley
Alkermes (ALKS) upgraded to Buy from Neutral at Mizuho
AmerisourceBergen (ABC) upgraded to Buy from Neutral at ISI Group
BT Group (BT) upgraded to Neutral from Sell at UBS
DexCom (DXCM) upgraded to Buy from Neutral at Sterne Agee
Nike (NKE) upgraded to Outperform from Neutral at Macquarie
Palo Alto (PANW) upgraded to Outperform from Market Perform at JMP Securities
Premier (PINC) upgraded to Buy from Neutral at ISI Group
Prospect Capital (PSEC) upgraded to Buy from Neutral at Guggenheim
Twitter (TWTR) upgraded to Hold from Sell at Cantor
WESCO (WCC) upgraded to Buy from Neutral at UBS
Wright Medical (WMGI) upgraded to Outperform from Neutral at RW Baird
Yamana Gold (AUY) upgraded to Neutral from Underweight at HSBC

Downgrades

Bed Bath & Beyond (BBBY) downgraded to Neutral from Buy at BofA/Merrill
CF Industries (CF) downgraded to Equalweight from Overweight at Barclays
Cabot Oil & Gas (COG) downgraded to Hold from Buy at Stifel
Imperva (IMPV) downgraded to Perform from Outperform at Oppenheimer
Molson Coors (TAP) downgraded to Neutral from Buy at Nomura

Initiations

Apple (AAPL) initiated with a Buy at Deutsche Bank
Crocs (CROX) initiated with a Buy at Buckingham
Deckers Outdoor (DECK) initiated with a Buy at Buckingham
EMC (EMC) initiated with a Buy at Deutsche Bank
HP (HPQ) initiated with a Buy at Deutsche Bank
IBM (IBM) initiated with a Hold at Deutsche Bank
NeoPhotonics (NPTN) coverage resumed with a Market Perform at Raymond James
NetApp (NTAP) initiated with a Hold at Deutsche Bank
Nutrisystem (NTRI) initiated with a Buy at B. Riley
Questar (STR) initiated with an Underperform at BofA/Merrill
S&T Bancorp (STBA) initiated with an Outperform at Raymond James
STB Systems Inc (STBI) initiated with an Outperform at Raymond James
Skechers (SKX) initiated with an Underperform at Buckingham
Steven Madden (SHOO) initiated with a Buy at Buckingham
UGI Corporation (UGI) initiated with a Buy at BofA/Merrill
Web.com (WWWW) initiated with a Neutral at Buckingham

COMPANY NEWS

IDC said worldwide PC shipments totaled 73.4M units in Q1, down 4.4% y/y (MSFT, HPQ, LNVGY)
Gartner said worldwide PC shipments in Q1 fell 1.7% (MSFT, HPQ, LNVGY)
Costco reported March total company SSS up 5%
Imperva (IMPV) cut its Q1 profit and sales outlook, citing delays in receiving certain anticipated orders as a result of an extended sales cycle. Cybersecurity peers Fortinet
AngioDynamics (ANGO) gave a Q4 earnings outlook that beat estimates while guiding revenues for the upcoming quarter in-line with expectations
Pier 1 Imports (PIR) board authorized a new $200M stock repurchase program
Chevron (CVX) said Q1 earnings expected to be lower than Q4

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
iGATE (IGTE), AngioDynamics (ANGO), PriceSmart (PSMT), Joe's Jeans (JOEZ)

Companies that missed consensus earnings expectations include:
Sigma Designs (SIGM), Apogee Enterprises (APOG), NeoPhotonics (NPTN)

Companies that matched consensus earnings expectations include:
Pier 1 Imports (PIR), Bed Bath & Beyond (BBBY)

NEWSPAPERS/WEBSITES

JPMorgan (JPM) CEO says 2013 was a year of 'pain,' WSJ reports
BlackBerry (BBRY) CEO says would consider sale of handset unit, Reuters reports
Apple (AAPL) departure of interface head Greg Christie, FT reports
Apple (AAPL) weighing 'dramatic' overhaul of iTunes store, Billboard says
General Motors (GM) requests NASA review in recalled vehicles, Detroit News says
Yahoo (YHOO) hires Bobbi Brown to be editor-in-chief of beauty site, Re/code reports
Facebook (FB) removing messaging from main app, TechCrunch says
Competition, overexpansion hurting Whole Foods (WFM) competitors (FWM, SFM, TFM), WSJ reports

SYNDICATE

Adamas Pharmaceuticals (ADMS) 3M share IPO priced at $16.00
Agios Pharmaceuticals (AGIO) files to sell $75M in common stock
Ally Financial (ALLY) 95M share IPO priced at $25.00
Aviv REIT (AVIV) 8M share Secondary priced at $24.10
Box Ships (TEU) files to sell common stocks and warrants
Hi-Crush Partners (HCLP) 4.25M share Secondary priced at $41.29
New Mountain Finance (NMFC) files to sell 3.5M shares of common stock
Stereotaxis (STXS) terminates $15M at-the-market equity offering with Cantor
Sysorex Global (SYRX) 3.333M share IPO priced at $6.00
TransAlta (TAC) announces $125M common stock offering

Submitted by Paul Craig Roberts via The Institute for Political Economy,

Is the US or the World Coming to an End?
It will be one or the other

2014 is shaping up as a year of reckoning for the United States.

Two pressures are building on the US dollar. One pressure comes from the Federal Reserve’s declining ability to rig the price of gold as Western gold supplies shrivel and market knowledge of the Fed’s illegal price rigging spreads. The evidence of massive amounts of naked shorts being dumped into the paper gold futures market at times of day when trading is thin is unequivocal. It has become obvious that the price of gold is being rigged in the futures market in order to protect the dollar’s value from QE.

The other pressure arises from the Obama regime’s foolish threats of sanctions on Russia. Other countries are no longer willing to tolerate Washington’s abuse of the world dollar standard. Washington uses the dollar-based international payments system to inflict damage on the economies of countries that resist Washington’s political hegemony.

Russia and China have had enough. As I have reported and as Peter Koenig reports here http://www.informationclearinghouse.info/article38165.htm Russia and China are disconnecting their international trade from the dollar. Henceforth, Russia will conduct its trade, including the sale of oil and natural gas to Europe, in rubles and in the currencies of its BRICS partners.

This means a big drop in the demand for US dollars and a corresponding drop in the dollar’s exchange value.

As John Williams (shadowstats.com) has made clear, the US economy has not recovered from the downturn in 2008 and has weakened further. The vast majority of the US population is hard pressed from the lack of income growth for years. As the US is now an import-dependent economy, a drop in the dollar’s value will raise US prices and push living standards lower.

All evidence points to US economic failure in 2014, and that is the conclusion of John Williams’ April 9 report.

This year could also see the breakup of NATO and even the EU. Washington’s reckless coup in Ukraine and threat of sanctions against Russia have pushed its NATO puppet states onto dangerous ground. Washington misjudged the reaction in Ukraine to its overthrow of the elected democratic government and imposition of a stooge government. Crimea quickly departed Ukraine and rejoined Russia. Other former Russian territories in Ukraine might soon follow. Protesters in Lugansk, Donetsk, and Kharkov are demanding their own referendums. Protesters have declared the Donetsk People’s Republic and Kharkov People’s Republic. Washington’s stooge government in Kiev has threatened to put the protests down with violence. http://rt.com/news/eastern-ukraine-violence-threats-405/ Washington claims that the protests are organized by Russia, but no one believes Washington, not even its Ukrainian stooges.

Russian news reports have identified US mercenaries among the Kiev force that has been sent to put down the separatists in eastern Ukraine. A member of the right-wing, neo-Nazi Fatherland Party in the Kiev parliament has called for shooting the protesters dead.

Violence against the protesters is likely to bring in the Russian Army and result in the return to Russia of its former territories in Eastern Ukraine that were attached to Ukraine by the Soviet Communist Party.

With Washington out on a limb issuing threats hand over fist, Washington is pushing Europe into two highly undesirable confrontations. Europeans do not want a war with Russia over Washington’s coup in Kiev, and Europeans understand that any real sanctions on Russia, if observed, would do far more damage to Europeans. Within the EU, growing economic inequality among the countries, high unemployment, and stringent economic austerity imposed on poorer members have produced enormous strains. Europeans are in no mood to bear the brunt of a Washington-orchestrated conflict with Russia. While Washington presents Europe with war and sacrifice, Russia and China offer trade and friendship. Washington will do its best to keep European politicians bought-and-paid-for and in line with Washington’s policies, but the downside for Europe of going along with Washington is now much larger.

Across many fronts, Washington is emerging in the world’s eye as duplicitous, untrustworthy, and totally corrupt. A Securities and Exchange Commission prosecuting attorney, James Kidney used the occasion of his retirement to reveal that higher ups had squelched his prosecutions of Goldman Sachs and other “banks too big to fail,” because his SEC bosses were not focused on justice but “on getting high-paying jobs after their government service” by protecting the banks from prosecution for their illegal actions. http://www.counterpunch.org/2014/04/09/65578/

The US Agency for International Development has been caught trying to use social media to overthrow the government of Cuba. http://rt.com/news/cuba-usaid-senate-zunzuneo-241/

This audacious recklessness comes on top of Washington’s overthrow of the Ukrainian government, the NSA spying scandal, Seymour Hersh’s investigative report that the Sarin gas attack in Syria was a false flag event arranged by NATO member Turkey in order to justify a US military attack on Syria, Washington’s forcing down Bolivian President Evo Morales’ presidential plane to be searched, Saddam Hussein’s “weapons of mass destruction,” the misuse of the Libyan no-fly resolution for military attack, and on and on. Essentially, Washington has so badly damaged other countries’ confidence in the judgment and integrity of the US government that the world has lost its belief in US leadership. Washington is reduced to threats and bribes and increasingly presents as a bully.

The self-inflicted hammer blows to Washington’s credibility have taken a toll. The most serious blow of all is the dawning realization everywhere that Washington’s crackpot conspiracy theory of 9/11 is false. Large numbers of independent experts as well as more than one hundred first responders have contradicted every aspect of Washington’s absurd conspiracy theory. No aware person believes that a few Saudi Arabians, who could not fly airplanes, operating without help from any intelligence agency, outwitted the entire National Security State, not only all 16 US intelligence agencies but also all intelligence agencies of NATO and Israel as well.

Nothing worked on 9/11. Airport security failed four times in one hour, more failures in one hour than have occurred during the other 116,232 hours of the 21st century combined. For the first time in history the US Air Force could not get interceptor fighters off the ground and into the sky. For the first time in history Air Traffic Control lost airliners for up to one hour and did not report it. For the first time in history low temperature, short-lived, fires on a few floors caused massive steel structures to weaken and collapse. For the first time in history 3 skyscrapers fell at essentially free fall acceleration without the benefit of controlled demolition removing resistance from below.

Two-thirds of Americans fell for this crackpot story. The left-wing fell for it, because they saw the story as the oppressed striking back at America’s evil empire. The right-wing fell for the story, because they saw it as the demonized Muslims striking out at American goodness. President George W. Bush expressed the right-wing view very well: “They hate us for our freedom and democracy.”

But no one else believed it, least of all the Italians. Italians had been informed some years previously about government false flag events when their President revealed the truth about secret Operation Gladio. Operation Gladio was an operation run by the CIA and Italian intelligence during the second half of the 20th century to set off bombs that would kill European women and children in order to blame communists and, thereby, erode support for European communist parties.

Italians were among the first to make video presentations challenging Washington’s crackpot story of 9/11. The ultimate of this challenge is the 1 hour and 45 minute film, “Zero.” You can watch it here: http://www.youtube.com/watch?v=QU961SGps8g&feature=youtu.be

Zero was produced as a film investigating 9/ll by the Italian company Telemaco. Many prominent people appear in the film along with independent experts. Together, they disprove every assertion made by the US government regarding its explanation of 9/11.

The film was shown to the European parliament.

It is impossible for anyone who watches this film to believe one word of the official explanation of 9/11.

The conclusion is increasingly difficult to avoid that elements of the US government blew up three New York skyscrapers in order to destroy Iraq, Afghanistan, Libya, Somalia, Syria, Iran, and Hezbollah and to launch the US on the neoconservatives agenda of US world hegemony.

China and Russia protested but accepted Libya’s destruction even though it was to their own detriment. But Iran became a red line. Washington was blocked, so Washington decided to cause major problems for Russia in Ukraine in order to distract Russia from Washington’s agenda elsewhere.

China has been uncertain about the trade-offs between its trade surpluses with the US and Washington’s growing encirclement of China with naval and air bases. China has come to the conclusion that China has the same enemy as Russia has–Washington.

One of two things is likely: Either the US dollar will be abandoned and collapse in value, thus ending Washington’s superpower status and Washington’s threat to world peace, or Washington will lead its puppets into military conflict with Russia and China. The outcome of such a war would be far more devastating than the collapse of the US dollar.

Ever since Goldman's anti-HFT Op-Ed less than a month ago, and since the even more recent full-hearted support by Goldman of Michael Lewis' most recent entry into the anti-HFT crusade (one promoting the Goldman-supported IEX exchange), one thing has been clear: the days of market structure in its current format are numbered. This was further confirmed after Goldman exited both its legacy Spear Leeds & Kellogg designated market making post at the NYSE, and is said to be winding down its market-dominating dark pool, Sigma X.

It also means that our 5 year crusade against HFT - not because we want it replaced with a different, Goldman-backed exchange but because HFTs inherently destabilize the market (see May 2010 and the now daily flash crash in individual stocks and/or exchanges) - and specifically those most profitable but also most parasitic and predatory HFT strategies...

... is coming to an end, with both the DOJ, FBI and SEC finally paying attention.

Sure enough, Post reports that just three weeks after the Gary Cohn Op-Ed, the SEC is "preparing to remove some high-frequency trading firms."

The crackdown begins:

In a purge of computerized markets, prompted by public outrage unleashed by Michael Lewis’ “Flash Boys,” the SEC’s campaign will see numerous enforcement actions, new rules and new business practices — a sweeping overhaul that could benefit the beleaguered New York Stock Exchange, The Post has learned.

 

“You’ll probably see the commission coalesce around those enforcement cases and then bring new rules on high-frequency trading,” a source with knowledge of the SEC’s thinking told The Post. “There’s a lot of pressure on the SEC to act.”

More importantly, the broken maker/taker model, i.e., in which HFTs are paid rebates for "liquidity providing" limit orders, even if these are merely frontrunning of large block orders, is about to be overhauled:

Intense lobbying by the NYSE’s owners, IntercontinentalExchange Group (ICE), for reform of the controversial “maker-taker” rebate rule for buying or selling shares is likely to get more sympathy. The rule’s abolition or amendment, seen as increasingly likely, would help reverse NYSE’s losses to rivals who have taken volume with their better pricing.

 

“Back in the day, we used to call it pay to play (now it is called maker-taker), and we used to vigorously fight against it,” said NYSE floor trading vet Doreen Mogavero. “You know, the practice was originally devised by Bernard Madoff — need I say more?”

 

The source familiar with SEC thinking says the NYSE could get a boost as regulators force out dodgy players among the market’s 45 secretive dark pools, 200 “internalizers” and 13 public exchanges. But it might also be a mixed blessing.

 

“Yes, some high-frequency guys are going to be taken out of the game, but the NYSE might get rules they don’t care for,” the source said. “The ability of exchanges to develop and [profit] from special-order types is going to be stopped — and this exchange business of selling direct data feeds is going by the wayside.”

It's not just HFTs, bur dark pools are about to fall under the spotlight:

The SEC is also mulling a trial run for a so-called trade-at rule, requiring brokerages and dark pools to send their orders to the NYSE, Nasdaq and other public exchanges unless better stock prices occur elsewhere, sources say.

The confirms what Reuters reported several days ago when it said that "U.S. securities regulators are considering testing a proposed reform that could drive business to major stock exchanges and away from alternative trading venues such as "dark pools" that critics say may be hurting investors by reducing the quality of pricing."

The proposal, which has so far only been discussed among staff involved in policymaking at the U.S. Securities and Exchange Commission, could limit how much trading occurs inside brokerages and in dark pools, according to people familiar with the matter.

 

The measure aims to address a concern among some regulators and academics about the increasing level of trading that happens outside of exchanges.

 

They say that the amount of trading being done in the "dark" means that publicly quoted prices for stocks on exchanges may no longer properly reflect where the market is, meaning that investors may not be getting the best prices for their trades.

One can keep reading here, or merely glance the graphic below to see how much trading has moved from lit exchanges ever since Reg NMS to dark venues. In short: unlit has lost a stunning 40% of volume as increasingly more traders seek to avoid being frontrun by the HFT parasites.

Why is all this happening? Because as everyone should know by now, what Goldman wants, Goldman gets. And Goldman wants a complete overhaul of a market that is systematically broken. Our only question is can this overhaul take place without an epic market rout as the HFTs suddenly all go into "Off" mode as their 25 year old math PhD operators look for greener pastures (and to get the hell out of Dodge before the subpoenas come flying in).

The Financial Times reports:

[Facebook] The social network is only weeks away from obtaining regulatory approval in Ireland for a service that would allow its users to store money on Facebook and use it to pay and exchange money with others, according to several people involved in the process. 

The authorisation from Ireland’s central bank to become an “e-money” institution would allow Facebook to issue units of stored monetary value that represent a claim against the company. This e-money would be valid throughout Europe via a process known as “passporting”.

Facebook has also discussed potential partnerships with at least three London start-ups that offer international money transfer services online and via smartphones: TransferWise, Moni Technologies and Azimo, according to three people involved in the discussions.

In the case of Azimo, Facebook offered to pay the company $10m to recruit one of its co-founders as a director of business development, according to people familiar with the situation.

 Yes, this space is heating up. It makes me feel good! You see, the Visas, Mastercards, Western Unions and Paypals of the world make a lot of money selling a relatively cheap services for a relatively large amount. BUT!!!! The Goldmans and JP Morgans of the world make much more money by selling very deep margined products and services for a lot more while paying a lot less to create them. It is here where UltraCoin has staked its ground. As the competition amongst the big boys starts to heat up, they will want to crawl up the food chain and I already have the ladder built! 

“Facebook wants to become a utility in the developing world, and remittances are a gateway drug to financial inclusion,” said a person familiar with the company’s strategy. Facebook recently passed 100m users in India, which is its largest national market outside the United States.

My last post on this topic illustrated how UltraCoin will operate in developing markets by allowing currency, stock and financial asset exposure trades of anywhere from $5 dollars to $5 million, as well as sending money to others for just a little more than nothing, as excerpted from "Hardware IS Dead" Thesis Has Now Torn Through All Handset Providers & Now Everyone Can Act On It:

I've created an infrastructure that significantly expands these investment markets by allowing anyone, anywhere with an Internet connection (of almost any speed) to participate in almost any of the world's public financial markets. Taking the subject matter of this article into consideration, we can short Samsung on its own home exchange of Korea for nearly any amount, from $10 million US down to $8 ...

 Back to the FT article:

It also comes as other internet groups – in particular, China’s Tencent and Alibaba – race to turn their sites into mobile payment platforms.

Google has reiterated its commitment to expanding its mobile payments and wallet products, which have yet to be widely adopted by consumers. It is registered in the UK to issue electronic money, in a process similar to the authorisation which Facebook is seeking in Ireland.

In 2013, the company  [Facebook] facilitated $2.1bn worth of transactions, almost exclusively from games, according to documents filed with the Securities and Exchange Commission.

Vodafone has acquired an e-money licence for the phone company to operate financial services in Europe.

“It’s great news that non-banks are challenging the traditional banking monopoly,” said Simon Deane-Johns, a UK-based lawyer and European payments expert at law firm Keystone Law.

 It will be interesting to see how the potential bidding contest will form as these companies compete to build the next generation financial infrastructure. I believe that I am very well positioned, as excerpted from yesterday's missive:

 Related BoomBustBlog research

• Ukraine forces move against separatists (FT)
• China GDP Gauge Seen Showing Deeper Slowdown (BBG)
• China Is Losing Its Taste for Gold (WSJ)
• Regulators Weigh Curbs on Trading Fees (WSJ)
• Obama, Putin Talk as Unrest Roils Eastern Ukraine (WSJ)
• Japan PM talks with BOJ chief, does not push for easing (Reuters)
• BRICS countries to set up their own IMF (RBTH)
• IMF Members Weigh Options to Sidestep U.S. Congress on Overhaul (WSJ)
• Zebra to Buy Motorola Solutions Unit for $3.45 Billion (BBG)
• Chinese Thunder God Herb Works as Well as Pain Therapy (BBG)
• Italian Premier Renzi Names State-Controlled Company Bosses (WSJ)
• China New Credit Declines as Money-Supply Growth Decelerates  (BBG)
• European Companies See Sales Growth Hit by Exchange Rates (WSJ)

Overnight Media Digest

WSJ

* Jeff Immelt may give up leadership of General Electric Co sooner than his expected 20-year tenure, as he and fellow directors re-evaluate the right term for its chief executive, people familiar with GE's thinking said. (http://r.reuters.com/xek58v)

* Citigroup Inc Chief Executive Michael Corbat vowed to find an "industrial-strength" solution to the regulatory problems dogging the bank. Speaking after Citigroup reported better-than-expected first-quarter earnings on Monday, Corbat faced more than a dozen questions from analysts on the bank's recent failure to win regulatory approval to return capital to shareholders. (http://r.reuters.com/sak58v)

* Boeing Co said it has reached a partial agreement on details of a new deal with one of its largest suppliers, Spirit AeroSystems Holdings Inc, though after months of talks, the two sides have yet to finalize a long-term pact for key parts of its main commercial jet programs. The proposed agreement would replace a deal that ran out in 2013 and was then extended, covering parts such as fuselages produced for Boeing's best-selling 737 plane. (http://r.reuters.com/guk58v)

* Google Inc on Monday acquired a maker of solar-powered drones - a startup that Facebook Inc had also considered acquiring - as the technology giants battle to extend their influence and find new users in the far corners of the earth. Google didn't disclose the purchase price for New Mexico-based Titan Aerospace, which is developing jet-sized drones that are intended to fly nonstop for years. (http://r.reuters.com/wuk58v)

* A fee system that is a major source of revenue for exchanges and some high-frequency trading firms is coming under the heightened scrutiny of regulators concerned that market prices are being distorted, according to top Securities and Exchange Commission officials. (http://r.reuters.com/juk58v)

* Some of Twitter Inc's biggest and earliest backers said they don't intend to sell shares when rules barring them from doing so expire next month, a vote of confidence in the young public company, whose shares have tumbled in recent months. (http://r.reuters.com/muk58v)

* In the first courtroom appearance by a Samsung executive during the high-stakes patent case against Apple Inc , former U.S. mobile division CEO Dale Sohn said the South Korean firm successfully changed its approach from marketing its products together with mobile carriers to promoting its own brand. Sohn said Samsung's gains in the U.S. smartphone market are the result of a strategy shift begun in 2011, not because it "followed" Apple. (http://r.reuters.com/tak58v)

* General Motors Co Chief Executive Mary Barra took new steps on Monday to revamp the auto maker's senior staff as it copes with the internal and external fallout from recent massive and troubled safety recalls. GM said its heads of human resources and communications had left the company Monday. GM said the two left to pursue "personal interests" and their exits weren't connected to a nearly decade-long delay in recalling vehicles. (http://r.reuters.com/vak58v)

* A federal court has barred Medtronic Inc from selling its new artificial heart valve to most patients in the United States, despite finding that the device is "safer" and has "a lower risk of death" than a competing device. (http://r.reuters.com/buk58v)

* A federal appeals court struck down part of a controversial rule requiring publicly traded U.S. companies to say whether their products contain certain minerals from war-torn central Africa, citing free-speech concerns. (http://r.reuters.com/wak58v)

* Mt. Gox founder Mark Karpeles said he would not come to the United States later this week to answer questions about the Japanese bitcoin exchange's U.S. bankruptcy case, Mt. Gox lawyers told a federal judge on Monday. Mt. Gox's bankruptcy lawyers said that Karpeles is "not willing to travel to the U.S.," despite an order from Bankruptcy Judge Stacey Jernigan. (http://r.reuters.com/nek58v)

* More than 51,500 stockbrokers failed a basic exam needed to sell securities at least once, according to data that Wall Street regulators don't disclose to investors, and those who repeatedly failed have on average worse disciplinary records. Securities regulators, notified this month of the Journal analysis, said they would consider giving more information to investors. (http://r.reuters.com/rek58v)

FT

Ukraine's central bank raised its benchmark interest rate for the first time in eight months in an effort to shore up its currency and rein in inflation as its political crisis deepens.

Spanish telecoms provider Telefonica SA is offering to lease some spectrum to a German competitor in a bid to secure EU antitrust approval for its proposed takeover of KPN's E-Plus unit in Germany.

Glencore Xstrata Plc has offered $1.3 billion to buy Chad-focused oil company Caracal Energy underscoring its ambition to expand upstream in the oil sector.

Italian Prime Minister Matteo Renzi proposed new managers for state-backed companies such as oil major Eni and defence group Finmeccanica in a shake-up that tests Renzi's pledge to break with old-style cronyism.

Security company G4S is facing criticism from shareholders for announcing a big pay rise for its new chief executive, despite a recent scandal involving the overcharging of UK taxpayers for tagging offenders.

Google has bought dronemaker Titan Aerospace in an attempt to provide Internet access to more parts of the world.

NYT

* In the first major shake-up of General Motors Co's senior management since the company announced a wide-ranging recall in February, its chief spokesman and head Washington adviser, and its top human resources executive have left the company. (http://r.reuters.com/fek58v)

* Investors and analysts feared the worst from Citigroup Inc , the global bank that has been besieged for months by regulatory problems and an industry-wide trading slump. But Citigroup managed to beat Wall Street expectations on Monday, with a 4 percent increase in first-quarter profits, compared with a year earlier. (http://r.reuters.com/jek58v)

* Last week, Sotheby's defended itself against activist investor Daniel Loeb by questioning both his strategy and his credentials in the art world. On Monday, Loeb sought to rebut criticisms of both. In a 30-page document, Loeb's Third Point hedge fund laid out its case to shareholders about why it should win three seats on the auction house's board. (http://r.reuters.com/kek58v)

* For rent and utilities to be considered affordable, they are supposed to take up no more than 30 percent of a household's income. But that goal is increasingly unattainable for middle-income families as a tightening market pushes up rents ever faster, outrunning modest rises in pay. (http://r.reuters.com/pek58v)

* Even as the cost of prescription drugs has plummeted for many Americans, a small slice of the population is being asked to shoulder more and more of the cost of expensive treatments for diseases like cancer and hepatitis C, according to a report to be released on Tuesday by a major drug research firm. (http://r.reuters.com/wek58v)

Canada

THE GLOBE AND MAIL

* IT expert Peter Faist, swept up in a criminal probe into the alleged destruction of government records, agreed to testify at a committee of the Ontario legislature via videoconference. (http://r.reuters.com/qyk58v)

* Conservative senators are recommending the Canadian government abandon plans to exempt certain fundraising calls from election spending limits, one of nine changes to the controversial Fair Elections Act recommended unanimously by a Senate committee. (http://r.reuters.com/cum58v)

Reports in the business section:

* The hundreds of Canadians whose social insurance numbers were stolen from the Canada Revenue Agency in a Heartbleed breach likely won't find out they were hit for several days. The CRA announced Monday, following a temporary shutdown of its public online services caused by the Heartbleed Internet bug, that about 900 social insurance numbers were stolen from its computers. (http://r.reuters.com/mum58v)

NATIONAL POST

* Canadian defence and diplomatic officials have been quietly working on plans for possible Canadian military missions - as well as shoring up non-religious groups on the ground - in Syria as its three-year civil war continues. Internal documents obtained by the Ottawa Citizen show National Defence has drawn up at least five scenarios in which it could become involved in Syria's ongoing civil war. (http://r.reuters.com/zum58v)

* One month after she resigned as Alberta Premier amid a series of spending scandals, Alison Redford is back in the spotlight for revelations that she took her daughter on 50 government flights, including a long weekend to Jasper taken at the height of cleanup efforts for the 2013 floods. (http://link.reuters.com/cym58v)

FINANCIAL POST

* Western cable giant Shaw Communications Inc said Monday it plans to trim 3 percent of its workforce as it consolidates several of its operations into more streamlined divisions. (http://r.reuters.com/fym58v)

* Canada's financial regulator has unveiled a set of proposed guidelines for mortgage insurance providers aimed at tightening standards around underwriting governance and risk management. (http://r.reuters.com/mym58v)

China

CHINA SECURITIES JOURNAL

- Further reform of real estate markets calls for a long-term mechanism to increase supply, instead of short-term stimulus, an editorial said, commenting on rumours that restrictions on property development are likely to be eased at local level.

- The China Insurance Regulatory Commission (CIRC) is going to explore multiple channels to fulfill the financing needs in infrastructure construction in the urbanisation process, including using preferred shares, said Wang Zuji, vice chairman of the CIRC.

SHANGHAI SECURITIES NEWS

- Sources said China's insurance regulators are conducting the first round of inspections into domestic companies' investment risks within the insurance industry, in particular possible inside trading.

CHINA BUSINESS NEWS

- Analysts expect the economic growth rate for the first quarter of 2014 to come in around 7.5 percent.

CHINA ECONOMIC WEEKLY

- China's local governments have been relying too much on income generated by selling lands, with Zhejiang and Tianjin paying off two thirds of governments' debts through land sales in 2012, according to auditing data released by provincial governments.

SHANGHAI DAILY

- The capacity of Pudong International Airport's Terminal-1 will rise to 36 million passengers a year from the current level of 20 million with the addition of a whole new floor to be undertaken. This major project is set to get under way this year, said the Shanghai Airport Authority.

CHINA DAILY

- "After the first round of ballyhoo, the China (Shanghai) Pilot Free Trade Zone (FTZ) has not yet excited enterprises with any tangible breakthrough," wrote an editorial blaming the Shanghai municipal government for the failure of the FTZ to attract investor interest by enacting significant reforms.

PEOPLE'S DAILY

- China's Central Commission for Discipline Inspection and Supervision Department made public of 220 cases of CCP members' misbehaviour from April 8 to 11, with their names posted on the department's website. It has recently opened a reporting channel for Internet users to facilitate the supervision and punishment over the party members.

Britain

The Times

BARCLAYS BOWS TO SHAREHOLDER PRESSURE BY OUSTING PAY CHIEF

Sir John Sunderland has been ditched as the head of Barclays' remuneration committee in an attempt to placate angry shareholders days before its annual meeting.

CO-OP STAFF TELL BOARD IT'S JEOPARDISING THEIR JOBS

Representatives of some of the Co-operative Group's 90,000-strong workforce have waded into the row at the stricken mutual, accusing board members of indulging in "petty politicking" and putting livelihoods at risk.

NEWLY FLUSH GLENCORE SPLASHES OUT IN CHAD

Glencore Xstrata has acquired Caracal Energy , its partner in oil-producing assets in the central African country of Chad, in a deal that values the company at $1.35 billion.

The Telegraph

OUSTED G4S BOSS COLLECTS 400,000 POUNDS-A-YEAR PENSION Annual report details payments to Nick Buckles after a "challenging" year that culminated in the criminal tagging scandal.

SSP BEEFS UP BOARD AHEAD OF POTENTIAL 2-BLN-STG FLOAT Fast-food caterer appoints a trio of corporate heavyweights from the travel and retail worlds as it weighs up a London listing.

The Guardian

UK WORKERS RECEIVE FIRST REAL PAY RISE FOR FOUR YEARS Wage increases, forecast at 1.8 percent in February, finally overtake inflation at 1.6 percent to March, according to official data.

PEUGEOT CITROEN BOSS PLEDGES RETURN TO PROFIT BY 2018 Carlos Tavares unveils programme promising to reverse losses in Europe and emerging markets following sales decline.

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS
Domestic economic reports scheduled today include:
Empire State manufacturing survey for April at 8:30--consensus 8.0
Consumer Price Index for March at 8:30--consensus up 0.1% from prior month
Long-term Treasury International Capital flows for February at 9:00--consensus $30B
NAHB housing market index for April at 10:00--consensus 49

ANALYST RESEARCH
Upgrades

Basic Energy (BAS) upgraded to Hold from Sell at Wunderlich
Beacon Roofing (BECN) upgraded to Buy from Neutral at SunTrust
Carlisle (CSL) upgraded to Outperform from Market Perform at FBR Capital
Citigroup (C) upgraded to Outperform from Market Perform at Bernstein
EnerNOC (ENOC) upgraded to Overweight from Neutral at JPMorgan
Equinix (EQIX) upgraded to Outperform from Perform at Oppenheimer
Estee Lauder (EL) upgraded to Conviction Buy from Buy at Goldman
General Cable (BGC) upgraded to Buy from Neutral at Longbow
Ingram Micro (IM) upgraded to Buy from Neutral at Citigroup
Key Energy (KEG) upgraded to Hold from Sell at Wunderlich
MasterCard (MA) upgraded to Buy from Neutral at Janney Capital
MedAssets (MDAS) reinstated with an Outperform at Raymond James
Morgan Stanley (MS) upgraded to Buy from Neutral at BofA/Merrill
New York & Co. (NWY) upgraded to Buy from Neutral at Janney Capital
Pier 1 Imports (PIR) upgraded to Overweight from Equalweight at Barclays
Qlik Technologies (QLIK) upgraded to Buy from Neutral at Mizuho
Sealed Air (SEE) upgraded to Outperform from Neutral at Macquarie
Veeco (VECO) upgraded to Buy from Hold at Berenberg
Visa (V) upgraded to Buy from Neutral at Janney Capital
Yahoo (YHOO) upgraded to Outperform from Neutral at Macquarie

Downgrades

AXIS Capital (AXS) downgraded to Market Perform from Outperform at Raymond James
Diamondback Energy (FANG) downgraded to Neutral from Buy at SunTrust
IBM (IBM) downgraded to Neutral from Buy at Citigroup
International Paper (IP) downgraded to Neutral from Buy at Longbow
PetSmart (PETM) downgraded to Underperform from Neutral at BofA/Merrill
RockTenn (RKT) downgraded to Neutral from Buy at Longbow
Sharp (SHCAY) downgraded to Underperform from Hold at Jefferies
Travelers (TRV) downgraded to Market Perform from Outperform at Raymond James
Wal-Mart (WMT) downgraded to Underperform from Market Perform at William Blair

Initiations

Amber Road (AMBR) initiated with a Buy at Canaccord
Amber Road (AMBR) initiated with a Buy at Needham
Amber Road (AMBR) initiated with a Buy at Stifel
Amber Road (AMBR) initiated with an Outperform at Pacific Crest
Borderfree (BRDR) initiated with a Buy at Canaccord
Borderfree (BRDR) initiated with a Sector Perform at RBC Capital
Borderfree (BRDR) initiated with an Outperform at Credit Suisse
Borderfree (BRDR) initiated with an Outperform at Pacific Crest
Dean Foods (DF) initiated with a Buy at BB&T
Halozyme (HALO) initiated with a Buy at Citigroup
Repligen (RGEN) initiated with a Buy at Jefferies
Spansion (CODE) initiated with a Buy at Sterne Agee
TPG Specialty Lending (TSLX) initiated with a Buy at BofA/Merrill
TPG Specialty Lending (TSLX) initiated with a Buy at Janney Capital
TPG Specialty Lending (TSLX) initiated with an Equalweight at Barclays
Versartis (VSAR) initiated with a Buy at Canaccord
Versartis (VSAR) initiated with a Buy at Citigroup
Versartis (VSAR) initiated with an Overweight at Morgan Stanley

COMPANY NEWS

Zebra Technologies (ZBRA) said it will acquire Motorola's (MSI) enterprise unit for $3.45B
Blackhawk (HAWK) completed its spin-off from Safeway (SWY)
Whirlpool (WHR) boosted its dividend 20% to 75c per share and said its board approved a $500M share repurchase plan
FedFirst Financial (FFCO) announced a deal to merge with CB Financial Services in a deal valued at $54.5M, entitling FedFirst shareholders to receive $23.00 per share in cash or shares of the new combined company
Pep Boys (PBY) said it expects higher tire prices to weigh on revenue through Q2
Axiall (AXLL) forecast Q1 EBITDA $65M-$70M
Merck (MRK) said the FDA approved the company's GRASTEK tablet

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Infosys (INFY), Pinnacle Financial (PNFP), Sensient (SXT), Bank of the Ozarks (OZRK)

Companies that missed consensus earnings expectations include:
Pep Boys (PBY)

NEWSPAPERS/WEBSITES

GE (GE) CEO may give up leadership earlier than 20-year tenure, WSJ says
Duke Energy (DUK) directors targeted over ash spill, FT reports
Samsung (SSNLF): Gains in smartphone market the result of strategy shift, WSJ reports
Herbalife (HLF) under investigation by NY AG Schneiderman, NY Post reports
Maker Studios stays with Disney (DIS) offer, Re/code says
Patients paying much more for specialty drugs (AZN, BMY, LLY, GSK, JNJ, MRK, NVS, PFE, RHHBY, SNY), NY Times reports
Aleris looking to sell recycling, alloy segment, WSJ reports
Google Glass (GOOG) goes on sale to U.S. residents today, USA Today reports

SYNDICATE

City Office REIT (CIO) 5.8M share IPO priced at $12.50
Galena (GALE) files to sell 6M shares of common stock for holders
National General (NGHC) files to sell 12.82M shares of common stock for holders
Paycom Software (PAYC) 6.645M share IPO priced at $15.00
TransEnterix (TRXC) 12.5M share Secondary priced at $4.00

The Securities and Exchange Commission announced today:

The Securities and Exchange Commission today charged a former 20-year employee of BP p.l.c. and a senior responder during the 2010 Deepwater Horizon oil spill with insider trading in BP securities based on confidential information about the magnitude of the disaster.  The price of BP securities fell significantly after the April 20, 2010 explosion on the Deepwater Horizon rig, and the subsequent oil spill in the Gulf of Mexico, resulted in an extensive clean-up effort.

 

According to the SEC’s complaint, filed in U.S. District Court for the Eastern District of Louisiana, BP tasked Keith A. Seilhan with coordinating BP’s oil collection and clean-up operations in the Gulf of Mexico and along the coast.  Seilhan, an experienced crisis manager, directed BP’s oil skimming operations and its efforts to contain the expansion of the oil spill. 

 

The complaint alleges that within days, Seilhan received nonpublic information on the extent of the evolving disaster, including oil flow estimates and data on the volume of oil floating on the surface of the Gulf.

“Seilhan sold his family’s BP securities after he received confidential information about the severity of the spill that the public didn’t know,” said Daniel M. Hawke, chief of the Division of Enforcement’s Market Abuse Unit.

 

***

 

The complaint alleges that by April 29, 2010, in filings to the SEC, BP estimated that the flow rate of the spill was up to 5,000 barrels of oil per day (bopd).  The company’s public estimate was significantly less than the actual flow rate, which was estimated later to be between 52,700 and 62,200 bopd.  The information that Seilhan obtained indicated that the magnitude of the oil spill and thus, BP’s potential liability and financial exposure, was likely to be greater than had been publicly disclosed.

 

According to the complaint, while in possession of this material, nonpublic information, and in breach of duties owed to BP and its shareholders, Seilhan directed the sale of his family’s entire $1 million portfolio of BP securities over the course of two days in late April 2010.  The trades allowed Seilhan to avoid losses and reap unjust profits ….

Interestingly, the head of BP - Tony Hayward - sold 1.4 million pounds worth of BP shares a few weeks before the start of the Gulf oil spill.  While - at first glance - this sound like it could not possibly have been connected to the Gulf spill, BP actually had major problems with the Gulf well months before the spill. In other words, the spill hadn't yet happened ... but it should have been obvious to knowledgeable insiders that the well was highly dangerous and unstable.

Sadly, Mr. Seilhan, Mr. Hayward and the rest of the BP team made normal oil-skimming procedures impossible because they sunk the oil with Corexit dispersant … so the oil skimmers couldn’t get to it.

And it is beyond doubt that BP and the government blatantly low-balled the amount of oil spilled.

Indeed, most people still don’t understand that – while the well was “capped” in 2010 – top experts say that the oil spill could have increased  the amount of oil flowing form natural seeps in the area … so that more oil continues to leak into the Gulf for years.   Indeed,  large oil slicks have flowed for yearsafter the BP well was capped (and BP’s explanations for this phenomenon don’t hold up to scrutiny.)

Postscript:  Some BP personnel were criminally indicted for manslaughter and lying to federal investigators.

But the U.S. has let BP back into the Gulf.  And BP is going to drill even deeper… with an even greater potential for disaster (and see this).

Back in 2011, many people were outraged when it was revealed that two months before the US Treasury pushed the insolvent GSEs into bankruptcy, then Treasury Secretary, Goldman alum Hank Paulson held a secret meeting with various hedge funds (most of them headed by Goldman alumni themselves) in which he gave them advance warning about the imminent bankruptcy, and allowing them to trade appropriately on material, and certainly non-public information.

Since then the general population has gotten far more used to encouraged criminal activity and facilitated insider trading by the government so comparable revelations no longer generate the expected loathing and disgusts, which is perhaps why over the past week the Obama administration once again leaked material information, in effect allowing and encouraging frontrunning of public data, when it told "asset managers last week that it was planning additional sanctions against Russia over the conflict in Ukraine."

Bloomberg reports that the meeting, convened a week before talks with Russia in Geneva that ended yesterday, left managers grappling with the question of whether the government intended to follow through, or was trying to trigger asset sales through the threat of sanctions, said the person. Former administration officials have said forcing Russia out of global financial markets is the strongest tool President Barack Obama has at his disposal in trying to defuse the ongoing crisis between Russia and Ukraine.

Officials from the Treasury Department and the National Security Council met in Washington with mutual-fund and hedge-fund managers, according to a person who attended. Their comments sent a message that more sanctions are on the way and that investors, if they were concerned about the impact, should manage that risk, said the person, who asked not to be identified because the discussions weren’t public.

 

The meeting in Washington last week included several mutual-fund companies with large bond units, according to the person. Separately, the U.S. Securities and Exchange Commission has been asking U.S. asset managers about their investments in Russian securities, said the person.

 

The National Security Council is the president’s main forum for considering national security and foreign policy matters.

At least while Obama was happy leaking clearly material information to a select few, he didn't force them to sell Russian assets. At least not yet:

An administration official, who asked for anonymity to discuss internal deliberations, said there have been no specific requests made to investors not to invest in Russia. The official said the Department of Commerce and the Treasury do have conversations with the business community to explain what they’re doing, such as briefing executives after a sanctions announcement. The official said the government maintains open lines of communication so businesses understand what policy makers are doinga.

No, the perfectly public trading "reco" was left to Obama spokesman Jay Carney. We all know what happened after.

As for those who participated, their actions indicate quite clearly that when it comes to securities laws, there are "laws", or rather loopholes, for the chosen ones, and then there are laws for everyone else.

One bond manager at a large U.S. mutual-fund company, who also asked not to be named citing company policy, said the firm has been working to sell Russian debt and wasn’t inclined to return to the market in the near future. The person, who hadn’t heard of any government attempts to influence money managers, said the company perceives risk in Russia as having increased significantly.

So just in case those lovely anchors with ultra white tooth veneers of financial comedy TV are still confused why the general public has completely given up on the stock, and every other "market", it is not only the HFT parasites, it is not only the Fed's gross manipulation of every asset class known to man and economist. It is the fact that insider trading is not only condoned but encouraged from the very top, and what's worse - it benefits only those who no longer have to worry about money ever again.

Submitted by Lance Roberts of STA Wealth Management,

Just like the hit series "House Of Cards," Wall Street earnings season has become rife with manipulation, deceit and obfuscation that could rival the dark corners of Washington, D.C. From time to time I do an analysis of the previous quarters earnings for the S&P 500 in order to reveal the "quality" of earnings rather than the "quantity" as focused on by Wall Street.  One of the most interesting data points continues to the be the extremely low level of "top line" revenue growth as compared to an explosion of the bottom line earnings per share.  This is something that I have dubbed"accounting magic"and is represented by the following chart which shows that since 2009 total revenue growth has grown by just 31% while profits have skyrocketed by 253%.

As I have discussed previously:

"Since 2000, each dollar of gross sales has been increased into more than $1 in operating and reported profits through financial engineering and cost suppression.  The next chart shows that the surge in corporate profitability in recent years is a result of a consistent reduction of both employment and wage growth.  This has been achieved by increases in productivity, technology and offshoring of labor.  However, it is important to note that benefits from such actions are finite."

As we enter into the tsunami of earning's reports for the first quarter of 2014, it will be important to look past the media driven headlines and do your homework.  The accounting mechanizations that have been implemented over the last five years, particularly due to the repeal of FASB Rule 157 which eliminated "mark-to-market" accounting, have allowed an ever increasing number of firms to "game" earnings season for their own benefit.  

This was confirmed in a recent WSJ article which stated:

"If you believe a recent academic study, one out of five [20%] U.S. finance chiefs have been scrambling to fiddle with their companies' earnings.

 

Not Enron-style, fraudulent fiddles, mind you. More like clever—and legal—exploitations of accounting standards that 'manage earnings to misrepresent [the company's] economic performance,' according to the study's authors, Ilia Dichev and Shiva Rajgopal of Emory University and John Graham of Duke University. Lightly searing the books rather than cooking them, if you like."

This should not come as a major surprise as it is a rather "open secret." Companies manipulate bottom line earnings by utilizing "cookie-jar" reserves, heavy use of accruals, and other accounting instruments to either flatter, or depress, earnings.

"The tricks are well-known: A difficult quarter can be made easier by releasing reserves set aside for a rainy day or recognizing revenues before sales are made, while a good quarter is often the time to hide a big "restructuring charge" that would otherwise stand out like a sore thumb.

 

What is more surprising though is CFOs' belief that these practices leave a significant mark on companies' reported profits and losses. When asked about the magnitude of the earnings misrepresentation, the study's respondents said it was around 10% of earnings per share."

Of course, the reason that companies do this is simple: stock based compensation. Today, more than ever, many corporate executives have a large percentage of their compensation tied to company stock performance. A "miss" of Wall Street expectations can lead to a large penalty in the companies stock price. 

As shown in the table, it is not surprising to see that 93% of the respondents pointed to "influence on stock price" and "outside pressure" as the reason for manipulating earnings figures.

Note: For fundamental investors this manipulation of earnings skews valuation analysis particularly with respect to P/E's, EV/EBITDA, PEG, etc. Revenues, which are harder to adjust, may provide truer measures of valuation such as P/SALES and EV/SALES.

So, as we head into earnings season, it is important to be aware of what is real, and what isn't. Wade Slome brought this into focus recently via theInvesting Caffeine blog: where he pointed out four things to look for:

"Distorted Expenses: If a $10 million manufacturing plant is expected to last 10 years, then the depreciation expense should be $1 million per year. If for some reason the Chief Financial Officer (CFO) suddenly decided the building would last 40 years rather than 10 years, then the expense would only be $250,000 per year. Voila, an instant $750,000 annual gain was created out of thin air due to management’s change in estimates.

 

Magical Revenues: Some companies have been known to do what’s called 'stuffing the channel.' Or in other words, companies sometimes will ship product to a distributor or customer even if there is no immediate demand for that product. This practice can potentially increase the revenue of the reporting company, while providing the customer with more inventory on-hand. The major problem with the strategy is cash collection, which can be pushed way off in the future or become uncollectible.

 

Accounting Shifts: Under certain circumstances, specific expenses can be converted to an asset on the balance sheet, leading to inflated EPS numbers. A common example of this phenomenon occurs in the software industry, where software engineering expenses on the income statement get converted to capitalized software assets on the balance sheet. Again, like other schemes, this practice delays the negative expense effects on reported earnings.

 

Artificial Income: Not only did many of the trouble banks make imprudent loans to borrowers that were unlikely to repay, but the loans were made based on assumptions that asset prices would go up indefinitely and credit costs would remain freakishly low. Based on the overly optimistic repayment and loss assumptions, banks recognized massive amounts of gains which propelled even more imprudent loans. Needless to say, investors are now more tightly questioning these assumptions. That said, recent relaxation of mark-to-market accounting makes it even more difficult to estimate the true values of assets on the bank’s balance sheets."

For really short term focused traders none of this really matters as price momentum trumps fundamentals. However, for longer term investors who are depending on their "hard earned" savings to generate a "living income" through retirement, understanding the "real" value will mean a great deal. Unfortunately, there are no easy solutions, online tips or media advice that will supplant rolling up your sleeves and doing your homework. 

As the WSJ article concludes:

"The CFOs in the study named and ranked several red flags.

 

First and foremost, investors should keep an eye on cash flow: Strong earnings when cash flow deteriorates may be a sign of trouble. The advantage of this approach is that, unlike some of the other warning signs, it is easily measurable, arming the investors and analysts who do their homework with strong ammunition against management.

 

Secondly, stark deviations from the earnings recorded by the company's peers should also set off alarm bells, as should weird jumps or falls in reserves.

 

The other potential problem areas are more subjective and more difficult to detect. When, for example, the chief financial officers urge stakeholders to be wary of 'too smooth or too consistent' profits or 'frequent changes in accounting policies,' they are asking them to look at variables that don't necessarily point at earnings (mis)management.

 

As the quarterly ritual of the earnings season approaches, executives and investors would do well to remember the words of the then-chairman of the Securities and Exchange Commission Arthur Levitt in a 1998 speech entitled "The Numbers Game."

 

'While the temptations are great, and the pressures strong, illusions in numbers are only that—ephemeral, and ultimately self-destructive.'"

Couldn't have said it better myself.

• Ukraine Accord Nears Collapse as Biden Meets Kiev Leaders (BBG)
• Novartis reshapes business via deals with GSK and Lilly (Reuters)
• Moscow Bankers See Fees Slide 67% as Ukraine Crisis Grows (BBG)
• Why ECB's QE will be Ukraine's fault: Draghi Gauges Ukraine Effect as ECB Tackles Low Inflation (BBG)
• As Phone Subsidies Fade, Apple Could Be Hurt (WSJ)
• Amazon Sales Take a Hit in States With Online Tax (BBG)
• Ford Speeds Up Succession Plan: Mark Fields, Auto Maker's No. 2, Seen Replacing Alan Mulally as CEO Ahead of Schedule (WSJ)
• U.S. force in Afghanistan may be cut to less than 10,000 troops (Reuters)
• IBM End to Buyback Splurge Pressures CEO to Boost Revenue (BBG)
• Netflix Calls Out AT&T for Subpar Streaming Performance (BBG)
• GPIF Shakes Up Committee With Three Abe Panel Members (BBG)
• First sign of South Korea ferry disaster was call from a frightened boy (Reuters)

Overnight Media Digest

WSJ

* Activist investor William Ackman and Valeant Pharmaceuticals International Inc are seeking to acquire Allergan Inc, according to a filing on Monday with the Securities and Exchange Commission. The deal, if successful, would create a behemoth in the global eye-care and skin-care drug industries. Each company has a stock-market capitalization of more than $40 billion. (http://r.reuters.com/was68v)

* Ford Motor Co Chief Executive Alan Mulally will leave the company earlier than expected after a more than seven-year run in which he oversaw a significant expansion of the U.S. automaker, people familiar with the matter said. Mulally's successor will be Mark Fields, a Ford veteran who survived management turmoil in the years before Mulally's 2006 arrival. (http://r.reuters.com/vas68v)

* Facebook Inc is planning a mobile-ad network that will allow the company to tap its vast reservoir of data about users to help marketers target ads on other services. The network, which has been in the works for years, is set to be announced at Facebook's F8 conference at the end of the month.(http://r.reuters.com/tas68v)

* A Texas group sued the Federal Aviation Administration in federal court to challenge the agency's order to stop using drones in the group's searches for missing people, the latest round in an intensifying battle over regulation of the sector. (http://r.reuters.com/xas68v)

* For years, equities had taken a back seat to the bigger and often more-profitable business of buying and selling fixed-income securities and commodities. But as those units are squeezed by new regulation and uncooperative markets, banks are putting more muscle behind catering to the trading needs of equity investors. (http://r.reuters.com/zas68v)

* Tuesday Morning Corp and its former chief executive settled a discrimination lawsuit that alleged she was fired after developing breast cancer. Kathleen Mason, the head of the home-furnishings closeout retailer, was ousted in June 2012 after a 12-year run during which the company's stock fell nearly 60 percent. (http://r.reuters.com/ces68v)

* U.S. wireless carriers are making unexpectedly fast progress moving their customers away from subsidized phones, a shift that could put further pressure on sales of expensive devices like Apple Inc's iPhone. (http://r.reuters.com/des68v)

* Netflix Inc will raise the price of its streaming service for new members by a dollar or two a month, it said on Monday. It also said that it now has more than 34 million paid subscribers in the U.S. (http://r.reuters.com/ges68v)

FT

Fears of a conflict between pro-Kiev and secessionist forces were stoked after Russia's foreign minister vowed to put an end to the unrest in eastern Ukraine on Monday.

U.S. shares in Britain's AstraZeneca jumped on Monday after media reports revealed that Pfizer had made a tentative $100 billion takeover approach.

The Bank of England will oversee an ethical hacking programme of 20 major banks and other financial institutions in the UK to test the resilience of their computer systems.

Britain's Barclays, one of the world's biggest commodities traders, is looking to exit parts of its metals, agricultural and energy business in a move expected to be announced this week.

Microsoft said on Monday it had completed the steps necessary to finalise the purchase of Nokia's devices and services business though it made a few changes to the original terms of the 5.4 billion euro deal agreed last year.

Listed property firms in the UK are selling riskier assets and consolidating their borrowings as demand from overseas investors push property prices higher.

NYT

* Ford Motor Co has picked Mark Fields, its chief operating officer, to succeed Alan R. Mulally as the next chief executive of the company, according to a person with knowledge of the move. The selection of Fields would hasten the retirement of Mulally, who has said previously that he would stay as chief executive of Ford through the end of this year. (http://r.reuters.com/zes68v)

* Activist investor William A. Ackman, among the brashest men on Wall Street, made perhaps the boldest move yet for an activist. By teaming up with Valeant Pharmaceuticals International Inc, a big health care company, and offering to buy Allergan Inc, the maker of Botox, for roughly $50 billion. (http://r.reuters.com/bus68v)

* Investment banks, which rushed into the new territory of physical commodities starting at the turn of the century, are now beating a retreat. The latest bank expected to make an exit is Barclays Plc, which plans to announce on Tuesday that it will get out of large parts of its commodities business, according to a person briefed on the British bank's plans. (http://r.reuters.com/fus68v)

* Netflix Inc on Monday voiced strong opposition to Comcast Corp's planned $45 billion takeover of Time Warner Cable Inc, even while confirming that it was raising subscription prices. (http://r.reuters.com/gus68v)

* The U.S. Supreme Court on Monday seemed inclined to offer at least modest help to Argentina's creditors. The issue before the justices was in some ways a minor one, and they will soon decide whether to hear a second and more significant case arising from Argentina's 2001 default on billions of dollars of debt. (http://r.reuters.com/hus68v)

Canada

THE GLOBE AND MAIL

* Herb Gray, a former deputy prime minister and one of Canada's longest-serving parliamentarians, died on Monday at the age of 82. (http://r.reuters.com/gat68v)

* Air Canada has suspended two employees seen in a video dropping passengers' carry-on baggage into a bin several metres below at Toronto's Pearson International Airport. (http://r.reuters.com/jat68v)

Reports in the business section:

* Activist investor Bill Ackman is teaming up with Canada-based drug maker Valeant Pharmaceuticals International Inc to make a multi-billion dollar bid for California eye and skin care company Allergan Inc. (http://r.reuters.com/mat68v)

NATIONAL POST

* The Canadian Prime Minister's Office coughed up C$4.1 million ($3.7 million) in severance and separation pay over the first seven years of Stephen Harper's tenure for 196 departing PMO employees, according to government documents. (http://r.reuters.com/gut68v)

* With Victoria set to ban virtually all forms of public smoking, city councillors in the British Columbia capital are mulling the creation of small patches of neutral ground in which the region's 30,000 or so smokers could "kill themselves in peace" without breaking the law. (http://r.reuters.com/kut68v)

FINANCIAL POST

* Retreat and cut your losses, or carry on fighting. Those are the choices facing TransCanada Corp after the United States government's non-decision to put the Keystone XL pipeline on hold, yet again, possibly until next year, perhaps indefinitely. (http://r.reuters.com/dut68v)

* Rogers Communications Inc's new Chief Executive Guy Laurence still won't go into detail on his strategy to reboot growth at the company, but he is now hinting that it will hinge on getting all of the company's telecom and media assets to work better together. (http://r.reuters.com/put68v)

China

CHINA SECURITIES JOURNAL

- The China Banking Regulatory Commission (CBRC) has launched a research process into the regulation of Peer-to-Peer (P2P) credit channel to achieve better risk management, capital pooling is to be forbidden.

- As of the first quarter of 2014, the 1,917 funds run by 81 fund management companies have lost a sum of 65.8 billion yuan ($10.57 billion), according to data pooled by TX Investment Consulting Co. Ltd, a fund research company.

SHANGHAI SECURITIES NEWS

- The draft version of China's Environment Protection Law has been submitted to the Standing Committee of the National People's Congress, sources said, with more regulation to fight against air pollution and breakthrough in information disclosure mechanism to be expected.

CHINA DAILY

- More police armed with handguns are being deployed nationwide to conduct regular patrols on the streets amid rising concerns over public security, the Ministry of Public Security said on Monday. "The presence of armed police will enable immediate responses to emergencies and effectively combat violent crimes," said Yan Zhengbin, deputy director of the ministry's public security management bureau.

SHANGHAI DAILY

- A draft version of China's Criminal Law has been submitted to the top legislature, aiming to clearly define that eating endangered animals, or buying them for that or any other purpose, is illegal, sources said.

PEOPLE'S DAILY

- China's cabinet is going to authorise 7 supervision teams to 14 local governments to facilitate supporting policies for the development of small- and medium-sized enterprises.

Britain

The Telegraph

ASTRAZENECA BRINGS IN WALL STREET 'DEFENDERS' AMID PFIZER BID SPECULATION Goldman Sachs and Morgan Stanley are understood to have been hired by AstraZeneca amid speculation the drug maker could receive a new approach from Pfizer.

FORMULA ONE PROFITS STUCK IN THE SLOW LANE Profits of the motor racing series controlled by private equity firm CVC fell by $137 million last year, driven by accelerating payments under a new deal with the sport's 11 teams.

The Times

LET HOUSEHOLDS SHARE 250 MLN STG ENERGY WINDFALL, BIG SIX TOLD

Britain's six big energy companies have been urged to hand back at least 245 million pounds to consumers after it emerged that they will spend less than expected on a household insulation scheme.

36 BLN STG REBUILDING SCHEMES TO BEGIN

More than 200 projects to rebuild Britain by improving the roads and rail network, broadband coverage and flood defences will begin this year, David Cameron and George Osborne will reveal on Tuesday.

The Guardian

SCOTTISH INDEPENDENCE: GORDON BROWN WARNS OF PENSIONS 'TIMEBOMB' Ex-prime minister enters increasingly tight battle over independence as 'yes' campaign gains momentum.

BARCLAYS TO SELL ITS COMMODITIES TRADING TO FOCUS ON BANKING ARM The announcement comes before bosses face a storm of protests at the bank's annual general meeting.

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS

Domestic economic reports scheduled today include:
FHFA house price index for February at 9:00--consensus up 0.5% for the month
Existing home sales for March at 10:00--consensus down 1% to 4.56M rate
Richmond Fed manufacturing index for April at 10:00--consensus 2

ANALYST RESEARCH

Upgrades

AstraZeneca (AZN) upgraded to Buy from Neutral at Citigroup
athenahealth (ATHN) upgraded to Buy from Neutral at SunTrust
Barrick Gold (ABX) upgraded to Buy from Neutral at Goldman
FX Energy (FXEN) upgraded to Outperform from In-Line at Imperial Capital
Facebook (FB) upgraded to Outperform from Neutral at Credit Suisse
Fidelity Southern (LION) upgraded to Outperform from Market Perform at Keefe Bruyette
Fiesta Restaurant (FRGI) upgraded to Strong Buy from Outperform at Raymond James
First Financial (FFIN) upgraded to Neutral from Underperform at Macquarie
Home Depot (HD) upgraded to Outperform from Market Perform at BMO Capital
Intuit (INTU) upgraded to Equal Weight from Underweight at Evercore
KT Corporation (KT) upgraded to Outperform from Neutral at Macquarie
Lennox (LII) upgraded to Buy from Neutral at MKM Partners
Main Street (MAIN) upgraded to Outperform from Market Perform at Raymond James
Modine Manufacturing (MOD) upgraded to Outperform from Neutral at RW Baird
National Bank of Greece (NBG) upgraded to Neutral from Underperform at BofA/Merrill
Netflix (NFLX) upgraded to Buy from Hold at Cantor
Netflix (NFLX) upgraded to Outperform from Market Perform at Raymond James
Norwegian Cruise Line (NCLH) upgraded to Buy from Neutral at Goldman
Ruth's Hospitality (RUTH) upgraded to Outperform from Market Perform at Raymond James
Sinopec (SNP) upgraded to Neutral from Underperform at BofA/Merrill
Summit Midstream (SMLP) upgraded to Buy from Neutral at Goldman

Downgrades

CommonWealth REIT (CWH) downgraded to Sell from Hold at Stifel
Del Frisco's (DFRG) downgraded to Market Perform from Outperform at Raymond James
Deutsche Bank (DB) downgraded to Neutral from Buy at UBS
Fidelity & Guaranty Life (FGL) downgraded to Neutral from Outperform at Credit Suisse
QEP Resources (QEP) downgraded to Equalweight from Overweight at Barclays
Wisconsin Energy (WEC) downgraded to Fair Value from Buy at CRT Capital
Zillow (Z) downgraded to Fair Value from Buy at CRT Capital
Zions Bancorp (ZION) downgraded to Equal Weight from Overweight at Evercore

Initiations

2U (TWOU) initiated with a Buy at Goldman
Aerohive Networks (HIVE) initiated with a Buy at Goldman
Aerohive Networks (HIVE) initiated with an Overweight at Piper Jaffray
Akorn (AKRX) initiated with a Buy at Jefferies
Anacor (ANAC) initiated with a Buy at Jefferies
Buenaventura (BVN) initiated with a Neutral at Goldman
Everyday Health (EVDY) initiated with a Buy at Stifel
First Solar (FSLR) initiated with a Buy at Brean Capital
Franco-Nevada (FNV) initiated with a Neutral at Goldman
GSV Capital (GSVC) initiated with a Buy at Roth Capital
GW Pharmaceuticals (GWPH) initiated with an Overweight at Morgan Stanley
Glori Energy (GLRI) initiated with an Outperform at RW Baird
Immersion (IMMR) initiated with a Buy at B. Riley
Magna (MGA) initiated with a Neutral at UBS
Perrigo (PRGO) initiated with a Buy at Jefferies
Salix (SLXP) initiated with a Buy at Jefferies
SunEdison (SUNE) initiated with a Hold at Brean Capital
SunPower (SPWR) initiated with a Buy at Brean Capital
Supernus (SUPN) initiated with a Hold at Jefferies
Synaptics (SYNA) initiated with a Buy at Sterne Agee
Varonis (VRNS) initiated with an Outperform at Imperial Capital
XenoPort (XNPT) initiated with a Buy at Jefferies

COMPANY NEWS

Eli Lilly (LLY) said it will acquire Novartis Animal Health (NVS) for $5.4B in all-cash transaction
Novartis (NVS) said it will divest Vaccines business to GSK (GSK) for $7.1B and said it will acquire GSK's oncology products for $14.5B
Novartis (NVS), GSK Consumer Healthcare (GSK) formed a joint venture
Valeant (VRX) said in a filing that it intends to propose merger with Allergan (AGN); Allergan said it will evaluate any offer, if received, from Valeant and Pershing Square
Netflix (NFLX) said it opposes Comcast (CMCSA)-Time Warner Cable (TWC) deal
Netflix (NFLX) said it sees adding $1-$2 per month for new subscribers
Manchester United (MANU) said David Moyes has left as manager

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
BNY Mellon (BK), Potlatch (PCH), Regions Financial (RF), Carlisle (CSL), Signature Bank (SBNY), TAL Education (XRS), Western Alliance (WAL), Great Southern Bancorp (GSBC), GulfMark Offshore (GLF), Helix Energy (HLX), Rush Enterprises (RUSHA), First Defiance Financial (FDEF), Celanese (CE), Rent-A-Center (RCII), Customers Bancorp (CUBI), Cadence Design (CDNS), Matthews (MATW), Hexcel (HXL), Bank of Hawaii (BOH), Rambus (RMBS), PLX Technology (PLXT), Waste Connections (WCN), Banner Corp. (BANR), Netflix (NFLX), Exactech (EXAC)

Companies that missed consensus earnings expectations include:
Teck Resources (TCK), Brown & Brown (BRO), Healthstream (HSTM), Werner (WERN), Glacier Bancorp (GBCI), Zions Bancorp (ZION), Wilshire Bancorp (WIBC), Umpqua Holdings (UMPQ), Forward Air (FWRD)

Companies that matched consensus earnings expectations include:
Mercantile Bank (MBWM), BancorpSouth (BXS)

NEWSPAPERS/WEBSITES

Ackman, Valeant (VRX) team up on Allergan (AGN) bid, WSJ reports
Barclays (BCS) to exit parts of commodities business, NY Times says
Citigroup (C) looks to sell about 50 branches in California, Bloomberg reports
Investment banks (MS, C, USB, WFC, JPM, GS, BAC) battling over stock trading, WSJ reports
Companies with cloud businesses (GOOG, AMZN, RAX) worried about Aereo case, Re/code says
GlaxoSmithKline (GSK) says Novartis (NVS) deal could lead to more disposals, Reuters reports
Novartis (NVS) CEO says bolt-on acquisitions still possible, Reuters reports

SYNDICATE

Agios Pharmaceuticals (AGIO) files to sell 2M shares of common stock
Allison Transmission (ALSN) files to sell 25M shares for holders
FireEye (FEYE) files to sell 13.3M shares of common stock for holders
ePlus (PLUS) files to sell 1.79M shares of common for holders

Michael Lewis’ new book “Flash Boys: A Wall Street Revolt,” hit the top of The New York Times bestseller list a week after its release.   As you would expect, the book is skilfully assembled and quite sensational.  When I first started to read it, I too was convinced that Lewis was on to a big story, an important narrative about the seamy underside of Wall Street.  

But the more I read and, more important, the more I checked his story with my colleagues on the operations side of the financial markets, the more it becomes apparent that Lewis has missed the real story – and perhaps deliberately.  The headline of “Flash Boys” is about Wall Street traders using fast technology and unfair tactics to trade ahead of retail investors – and they do – but Lewis misses the real issues, namely: 1) a lack of transparency and 2) deliberate complexity.   

It is important to distinguish between issues related to the “flash crash” of May 2010, when the deliberately fragmented ghetto that is the US equity markets almost melted down and the daily business of HFT.  The former is discussed in an important 2011 paper by Ananth Madhavan of BlackRock, Inc. Unfortunately, as the title of his book confirms, Lewis combines the two issues together into an often confusing narrative that is almost impossible for laymen to understand.

The abusive aspect of HFT which Lewis rightly identifies is not so much about the speed of the trading but rather always being first in line.  If you think of the current market price of a stock, a couple of years ago, the trader using HFT used to sit just above and below the current market price, and sought to execute quickly when the market price either went up or down.  The fact of computers and fast network connections enables this HFT activity, but it is not really the key part of the strategy.  Instead the key is to always be first in line.

The important part of the story that Lewis misstates is that there is no conspiracy, no illegal activities.  All of the strategies used in HFT are not only legal, but they are the result of extensive rule making and public hearings by Congress, the Securities and Exchange Commission, FINRA and the major exchanges.  So while Lewis is right to say that these strategies “screw” retail customers in a practical sense, the fact is that the activity has been entirely blessed by Congress, regulators and the major exchanges.

In the first aptly named chapter, “Hidden in Plain Sight,” Lewis describes groups of traders attempting to conceal their activities, great stuff if your chief objective is to sell books.  But the reality is that the top three HFT firms – Goldman Sachs, Morgan Stanley and Credit Suisse – have been very visibly investing in trading technology for decades.  These investments in computers and fast network connections not only give them an advantage over other firms, but afford these firms bragging rights on the Street.  If you are an equity trader, you don’t want to work at a “flow shop” like Merrill Lynch.

Part of the reason that the Big Media is making such a fuss over “Flash Traders” is that they have no idea how the equity markets actually work in the brave new world of Reg NMS – 600 pages of unintelligible rules and definitions. Lewis notes that as the size of equity trades after 2000 “had plummeted, the markets had fragmented and the gap in time between the public view of the markets and the view of high frequency traders had widened.”  This passage and others give readers the false impression that the speed of the HFT is the key point, but this is incorrect.

Going back to the point about being first in line, let’s take an example.  The BATS order type known as “display-price sliding” allows an investor to essentially position themselves in the center of the equity market for a given stock.  This means that when the market price changes, instead of the HFT “market order” being canceled as per the National Best Bid and Offer (NBBO) rule, it simply “slides” to follow the market.  Most investors and advisors don’t even know that such an order type exists.

For example, when Lewis talks about the fact that Virtu Financial had made money almost every day for five years, the reader is given the impression that the speed of the trading gave Virtu and other HFT shops the advantage.  But the reality is that the high frequency trader not only executes before the retail customer, as Lewis describes, but is always first in line.  This structural duplicity is programed into the system, but is perfectly kosher under Reg NMS.

Indeed, the real scandal is that all of this has been entirely blessed by the SEC, FINRA and the major exchanges and is described in the voluminous public documentation for permitted order types.  But suffice to say, virtually nobody in the Big Media or at most Wall Street firms understand any of this or knows, for example, that there are over 100 different order types allowed by the SEC and FINRA under current law and regulations.

The crime of HFT is that Congress, the SEC and other regulators have allowed a handful of Wall Street firms to assemble a set of opaque market rules that few people understand. You could probably put all of the Wall Street operations people who really understand HFT in a large conference room.  Outside of the small community of traders and operations people who make HFT work, almost nobody else on Wall Street really understand the nuances of the business.  And virtually nobody at the SEC has a clue how this works in practice. 

We should thank Michael Lewis for using his celebrity and considerable writing skills to draw attention to this issue of HFT, but “Flash Boys” incorrectly demonizes individual traders and firms.  Lewis “Puts a Face on HFT,” but in doing so misses the real point of the problem.  Instead of drawing an accurate picture of HFT, namely corruption and stupidity in Washington, admittedly a banal and boring tale, Lewis chose instead to create a sensational and interesting fictional narrative that will obviously sell more books.  

“Flash Boys” is a book written for Hollywood instead of the history books or policy makers. Just as the hyper-popular “Wolf of Wall Street” was not an accurate portrayal of fraudster Tom Prousalis, as his daughter Christina testifies, the story line in “Flash Boys” is more fictional dramatization than fact.  The true perpetrators in Michael Lewis’ tale of Wall Street greed and corruption are, in order of complicity, the US Congress, the SEC, FINRA and major exchanges, and last but not least the community of Buy and Sell Side Advisors, who genuinely do not understand how HFT really works.  That covers just about everybody.    

As illustrator Walt Kelly’s Pogo said famously: “We have met the enemy and he is us.”

• Ukraine forces kill up to five rebels, Putin warns of consequences (Reuters)
• Obama to Russia: More sanctions are 'teed up' (AP)
• Vienna Banks Bemoan Russia Sanctions Testing Cold War Neutrality (BBG)
• GE’s $57 Billion Cash Overseas Said to Fuel Alstom Deal (BBG)
• GM posts lower first-quarter profit after recall costs (Reuters)
• Apple Stock Split Removes Obstacle to Inclusion in Dow (BBG)
• U.S. regulators to propose new net neutrality rules in May (Reuters)
• U.K. Resurrecting Loans for 95% of Value Seen as Risky (BBG)
• Obama reaffirms commitment to Japan on tour of Asia allies (Reuters)
• Bank Cutting Commodities Trade Severs Link With Equities (BBG)
• The left’s secret club (Politico)
• Russian social media CEO quits, flees country (AP)

Overnight Media Digest

WSJ

* The Food and Drug Administration plans Thursday to impose the first federal regulations on electronic cigarettes, eventually banning sales of the popular devices to anyone under 18 and requiring makers to gain FDA approval for their products. (http://r.reuters.com/ruh78v)

* Regulators are proposing new rules on Internet traffic that would allow broadband providers to charge companies a premium for access to their fastest lanes. The Federal Communications Commission plans to put forth its rules on Thursday. The proposal marks the FCC's third attempt at enforcing "net neutrality" - the concept that all Internet traffic should be treated equally. (http://r.reuters.com/sah78v)

* Primark, a clothing chain whose formula of fashionable looks at rock-bottom prices has proved a hit with UK shoppers, said Wednesday it plans to open its first U.S. store late next year in the former Boston home of the original Filene's Department Store. (http://r.reuters.com/meh78v)

* New cars and trucks-including some of the season's hottest sellers-are stacked up outside U.S. factories as auto makers and railroads struggle to overcome delays brought on by winter weather and the rise of production outside the Midwest. The logjams have left dealers short of some popular models, such as the Ford Explorer sport-utility vehicle and Toyota RAV4, ahead of the biggest months of the year for new-car sales. (http://r.reuters.com/buh78v)

* Zynga Inc said founder Mark Pincus is giving up his operating role at the videogame company, one of several management changes announced along with first-quarter results that included a 36 percent decline in revenue. Pincus has decided to give up his role as chief product officer. (http://r.reuters.com/heh78v)

* Apple Inc in a nod to restive shareholders, added $30 billion to its stock-buyback plan, raised its dividend about 8 percent and declared an unusually large 7-for-1 stock split as it reported strong iPhone sales that defied expectations of a slowdown. (http://r.reuters.com/vah78v)

* A surge in prices helped drive down sales of newly built homes in March, the latest indication that the housing market is struggling to regain traction. Sales of new single-family homes fell 14.5 percent from February to a seasonally adjusted annual rate of 384,000, the Commerce Department said Wednesday. That was the lowest annual rate since last July, though the pace for January and February was revised higher. (http://r.reuters.com/weh78v)

* Facebook Inc proved its recent advertising windfalls were no fluke, nearly tripling profit on a 72 percent increase in revenue in its first quarter, surpassing Wall Street expectations. Chief financial officer David Ebersman is stepping down from the company two years after he orchestrated one of the largest, and tumultuous, IPOs in history. (http://r.reuters.com/xah78v)

* Chobani Inc reached a deal for a $750 million investment from private equity firm TPG, as the maker of Greek yogurt prepares for a potential initial public offering and expands into other products such as cooking ingredients and desserts. (http://r.reuters.com/zah78v)

* A federal bankruptcy watchdog overseeing TelexFree's Chapter 11 case found compelling evidence of fraud, dishonesty and gross mismanagement and asked a judge to order the appointment of a trustee to take control of the company. TelexFree has been accused of illegally operating a $1 billion pyramid scheme targeting Brazilian and Dominican immigrants. Most of the company's leadership and several of its promoters have been charged with civil fraud by the Securities and Exchange Commission. (http://r.reuters.com/rah78v)

FT

Warren Buffett, whose Berkshire Hathaway Inc is the Coca-Cola Co's largest shareholder, said the U.S. beverage company's equity pay plan was "excessive" but abstained from voting on the scheme on Wednesday.

Mark Pincus, founder of troubled games maker Zynga Inc , is stepping out of day-to-day work at the company as it seeks to remake itself.

A surprise 17 percent jump in iPhone unit sales, driven by China, helped Apple Inc beat revenue expectations for the first quarter, lifting shares by 8 percent.

Facebook Inc, the world's largest social network, posted first-quarter results that sent its stock up 4 percent in after-hours trading, quelling recent doubts over its ability to make money on mobile.

Boeing Co raised its full-year earnings expectations and posted results ahead of analysts' expectations for the first three months of the year, as Chief Executive Jim McNerney said the aerospace and defence group was braced for "significant and sustained growth".

NYT

* New York's financial regulator filed a lawsuit against a subprime auto lender, accusing it of violating certain provisions of the Dodd-Frank financial overhaul act. The complaint filed in Federal District Court in Manhattan, contends that Long Island-based Condor Capital Corporation siphoned millions of dollars away from the accounts of unwitting borrowers. (http://r.reuters.com/nah78v)

* The principle that all Internet content should be treated equally as it flows through cables and pipes to consumers looks all but dead. The Federal Communications Commission said on Wednesday that it would propose new rules that allow companies like Walt Disney Co, Google Inc or Netflix Inc to pay Internet service providers like Comcast Corp and Verizon Communications Inc for special, faster lanes to send video and other content to their customers. (http://r.reuters.com/qah78v)

* Going further than any state so far, Vermont on Wednesday passed a law requiring the labeling of foods that contain genetically engineered ingredients. Though the move came in a tiny state far from the nation's population centers, proponents of such labeling immediately hailed the legislative approval as a significant victory. (http://r.reuters.com/ceh78v)

* The Justice Department's criminal division, which oversees some of the biggest investigations into Wall Street and corporate crime, is adding to its ranks. Marshall L. Miller, a longtime federal prosecutor in Brooklyn, was named to the criminal division's No. 2 spot. (http://r.reuters.com/keh78v)

* Amazon.com Inc will stream a selection of HBO series, mini-series and original movies as part of its Prime subscription service, the latest alliance between technology and entertainment companies trying to capture viewers who are moving online. (http://r.reuters.com/neh78v)

* Mark Pincus, the founder of Zynga Inc, is stepping back from the once-hot social gaming company as its new leader seeks a turnaround. Zynga said that Pincus decided to give up all operational responsibilities at the company, though he will remain its chairman and largest shareholder. (http://r.reuters.com/qeh78v)

Canada

THE GLOBE AND MAIL

* Canada's Conservative government is launching a national discussion of proposed new pension plans that share the investment risk between employers and employees. (http://r.reuters.com/byj78v)

* No damage was reported after a 6.7 magnitude earthquake hit off the northern coast of Vancouver Island on Wednesday night. The U.S. Geological Survey reported that the epicentre was about 94 kilometres south of Port Hardy and struck at a depth of 11 kilometres. (http://r.reuters.com/nyj78v)

Reports in the business section:

* McDonald's Canada has suspended further use of the temporary foreign worker program after criticism that several franchises at the fast-food chain were favouring foreign workers over seemingly qualified Canadian applicants. (http://r.reuters.com/gyj78v)

NATIONAL POST

* As Philippe Couillard and his Liberal cabinet were sworn in Wednesday at the legislature in Quebec City, the prominent place given the Canadian flag and the lieutenant governor - the Queen's representative - made it plain that the Parti Quebecois era was over. (http://r.reuters.com/syj78v)

* Canada, which has long blocked discussion of Arctic issues at NATO, is under increasing pressure from allies to drop its resistance and come up with a co-ordinated response to Russia's aggressive militarization in the Far North. (http://r.reuters.com/tyj78v)

FINANCIAL POST

* Almost never has an activist investor expressed such love for a company's management and strategy as Bill Ackman's cross-border crush on Valeant Pharmaceuticals International Inc . (http://r.reuters.com/mak78v)

* Crescent Point Energy Corp has signed an agreement to buy CanEra Energy Corp, a privately held oil and gas producer in southeast Saskatchewan, in a deal valued at C$1.1 billion, including debt. (http://r.reuters.com/zak78v)

China

CHINA SECURITIES JOURNAL

- Another 10 companies have announced plans to list on China's equity markets, bringing the total number of firms planning listing to 75.

- Total profit of state-owned companies reached 311 billion yuan ($49.86 billion) in the first quarter of this year, up 3.4 percent from a year earlier, the State-owned Assets Supervision and Administration Commission said.

SHANGHAI SECURITIES NEWS

- The China Securities Regulatory Commission said it would perform random checks on companies seeking initial public offering to ensure that the information disclosed in their prospectus are accurate.

- China State Construction Engineering Corp's 2013 net profit rose 29.6 percent to 20.4 billion yuan ($3.27 billion) and said it expects newly signed contracts in 2014 to reach more than 1.2 trillion yuan.

CHINA DAILY

- There will be an oversupply of office space in China in the coming three years, with second-tier cities being hit first, industry analysts said.

- China's household consumption may rise to as high as 50 percent of gross domestic product by 2020, compared with 35 percent today, findings from Nielson Holdings BV showed. The increase will create investment opportunities in second-and third-tier cities.

SHANGHAI DAILY

- China is on track to meet mandatory targets on cutting pollution and improving energy efficiency by 2015, a state planning official said, after the program had fallen behind due to strong economic growth in 2011 and 2012.

Britain

The Telegraph

INDEPENDENT SCOTLAND HAS PARALLELS WITH ICELAND, WARNS S&P

Scotland could end up with a banking system much like that of Iceland on the eve of the financial crisis if it votes for independence, according to a warning from one of the world's leading rating agencies. (http://link.reuters.com/dyg78v)

REPORT INTO CO-OP BANK FAILURE TO BLAME GOVERNANCE

The Co-op Bank's near collapse will be blamed on the struggling lender's poor governance, in a report to be published next week by a former senior civil servant. (http://link.reuters.com/fyg78v)

The Guardian

BARCLAYS FACES ROUGH RIDE AT AGM OVER TAX HAVENS AND BANKERS' BONUSES

Barclays is braced for a stormy annual shareholder meeting on Thursday with protesters pledging to question its role in tax havens, funding of coal mines and the 9 billion pounds ($15.10 billion) of bonuses paid out to its investment bankers since the financial crisis. (http://link.reuters.com/hyg78v)

ROYAL MAIL IN SPOTLIGHT AGAIN AS MPS QUESTION BANKERS WHO HANDLED SELL-OFF

The Royal Mail privatisation will be the subject of fresh scrutiny by Members of Parliament next week when bankers from Goldman Sachs and UBS - which handled the sell-off of the 500-year-old institution - are summoned to give evidence to a high-profile parliamentary committee. (http://link.reuters.com/gyg78v)

PRIMARK TO ENTER U.S. MARKET WITH BOSTON STORE

Primark, the fashion store that brought the 3 pound jumper dress to the British shopper, is to open in the United States as it attempts to become a global chain. (http://link.reuters.com/qyg78v)

The Independent

PATISSERIE VALERIE OWNER HOPES TO RAISE 33 MLN STG IN LONDON FLOAT

Serial entrepreneur Luke Johnson, the owner of Patisserie Valerie, is returning to the stock market with the planned 170 million pound flotation of the cafe chain on London's junior AIM exchange. (http://link.reuters.com/jyg78v)

SPORTS DIRECT GOES ON THE ATTACK AFTER MIKE ASHLEY BONUS VOTE

Mike Ashley's Sports Direct has launched an attack against its institutional investors, warning of "further uncertainty" after they refused to back a multimillion-pound payout to the billionaire founder. (http://link.reuters.com/pyg78v)

DRAX TUMBLES OVER GOVERNMENT U-TURN ON SUBSIDY TERMS

Shares in Drax Group fell 10 percent after the government said a new subsidy scheme would only apply to limited part of its plan to convert much of its giant coal-fired plant into biomass burners. (http://link.reuters.com/myg78v) ($1 = 0.5960 British pounds)

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

Aixtron (AIXG) upgraded to Neutral from Underweight at HSBC
Apple (AAPL) upgraded to Buy from Outperform at CLSA
Asbury Automotive (ABG) upgraded to Buy from Hold at BB&T
Ciena (CIEN) upgraded to Buy from Neutral at UBS
Cullen/Frost (CFR) upgraded to Market Perform from Underperform at Keefe Bruyette
Ericsson (ERIC) upgraded to Outperform from Market Perform at BMO Capital
First Midwest (FMBI) upgraded to Buy from Neutral at Guggenheim
Goodyear Tire (GT) upgraded to Conviction Buy from Buy at Goldman
HMS Holdings (HMSY) upgraded to Outperform from Perform at Oppenheimer
Hawaiian Holdings (HA) upgraded to Neutral from Underperform at BofA/Merrill
M&T Bank (MTB) upgraded to Buy from Hold at Deutsche Bank
MicroStrategy (MSTR) upgraded to Buy from Hold at Deutsche Bank
NuStar Energy (NS) upgraded to Buy from Hold at Stifel
O'Reilly Automotive (ORLY) upgraded to Strong Buy from Market Perform at Raymond James
Republic Airways (RJET) upgraded to Neutral from Underperform at BofA/Merrill
Southwest Bancorp (OKSB) upgraded to Outperform from Market Perform at Raymond James
TriQuint (TQNT) upgraded to Outperform from Market Perform at Northland Securities

Downgrades

AT&T (T) downgraded to Long-Term Buy from Buy at Hilliard Lyons
Canadian National (CNI) downgraded to Market Perform from Outperform at BMO Capital
Core Laboratories (CLB) downgraded to Underweight from Overweight at Morgan Stanley
First Industrial Realty (FR) downgraded to Hold from Buy at KeyBanc
Randgold Resources (GOLD) downgraded to Neutral from Overweight at HSBC
Southern Copper (SCCO) downgraded to Neutral from Buy at BofA/Merrill
Susser Holdings (SUSS) downgraded to Neutral from Outperform at Macquarie
Xilinx (XLNX) downgraded to Neutral from Outperform at Credit Suisse

Initiations

NXP Semiconductors (NXPI) initiated with an Outperform at BMO Capital
Nord Anglia (NORD) initiated with an Overweight at JPMorgan
Xerox (XRX) initiated with a Positive at Susquehanna
YY Inc. (YY) initiated with a Buy at Maxim

COMPANY NEWS

Apple (AAPL) announced several capital actions, including a $30B increase in its share repurchase authorization, an 8% increase in its quarterly dividend to $3.29 per share and a 7-for-1 stock split that will take effect in June. Apple's quarterly iPhone sales totaled 43.7M, topping estimates, while iPad sales disappointed
Facebook (FB) said CFO David Ebersman will step down and will be succeeded by David Wehner, currently the company's VP, Corporate Finance and Business Planning. Facebook announced that its mobile daily active users totaled 609M at the end of Q1, and the company's revenue from advertising grew 82% to $2.27B, with 59% of its ad revenue coming from mobile. The company also said Messenger, Instagram both reached 200M monthly active users in Q1
Qualcomm (QCOM) disclosed receipt of a "Wells Notice" from the SEC that the SEC has made a preliminary determination recommending the filing of enforcement action against the company related to anti-bribery violations
Zynga (ZNGA) announced that founder Mark Pincus will move on from his role as Chief Product Officer but continue to serve as chairman of the company's board
Ericsson (ERC) announced the division of business unit networks into two units
Men's Wearhouse (MW) extended its tender offer for Jos. A. Bank (JOSB) to May 7
Herbalife (HLF) said ABC report raises questions Ackman should answer

EARNINGS

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

Wyndham (WYN), NorthWestern (NWE), Alamos Gold (AGI), Cabot Microelectronics (CCMP), Starwood Hotels (HOT), Helmerich & Payne (HP), Diamond Offshore (DO), Potash (POT), Cash America (CSH), Stanley Black & Decker (SWK), Aetna (AET), Time Warner Cable (TWC), VASCO Data Security (VDSI), Logitech (LOGI), NXP Semiconductors (NXPI), Northfield Bancorp (NFBK), TriState Capital (TSC), O'Reilly Automotive (ORLY), Teradyne (TER), Orrstown Financial (ORRF), PTC Inc. (PTC), Sun Bancorp (SNBC), Oceaneering (OII), Brookline Bancorp (BRKL), First Interstate (FIBK), Service Corp. (SCI), Eagle Bancorp (EGBN), CVB Financial (CVBF), Equifax (EFX), MKS Instruments (MKSI), Infinera (INFN), Callaway Golf (ELY), CoStar Group (CSGP), West Corp. (WSTC), Financial Institutions (FISI), Selective Insurance (SIGI), Lam Research (LRCX), Fortinet (FTNT), Apple (AAPL), Aspen Insurance (AHL), Tyler Technologies (TYL), Allied World (AWH), Flowserve (FLS), Exponent (EXPO), Hudson Technologies (HDSN), Ferro (FOE), E-Trade (ETFC), Assurant (AIZ), Symetra Financial (SYA), Everest Re (RE), Polycom (PLCM), Citrix (CTXS), Robert Half (RHI), F5 Networks (FFIV), TriQuint (TQNT), Allegiant Travel (ALGT), LSI Corp. (LSI), On Assignment (ASGN), Align Technology (ALGN), Oritani Financial (ORIT), Facebook (FB), Qualcomm (QCOM)

Companies that missed consensus earnings expectations include:

Invacare (IVC), PulteGroup (PHM), Dunkin' Brands (DNKN), Colfax (CFX), WESCO (WCC), Patterson-UTI Energy (PTEN), Safeguard Scientifics (SFE), CARBO Ceramics (CRR), Novartis (NVS), Old Second Bancorp (OSBC), The Bancorp (TBBK), TAL International (TAL), LPL Financial (LPLA), NewMarket (NEU), Morningstar (MORN), Graco (GGG), Kaiser Aluminum (KALU), Churchill Downs (CHDN), Susquehanna (SUSQ), Ingram Micro (IM), Xilinx (XLNX), Electro Scientific (ESIO), Cheesecake Factory (CAKE), Varian Medical (VAR), IPC The Hospitalist Co. (IPCM), Interface (TILE), ResMed (RMD), Famous Dave's (DAVE), Safeway (SWY), Fusion-io (FIO), SunCoke Energy (SXC), Monarch Casino (MCRI), Chicago Bridge & Iron (CBI), Texas Capital (TCBI), Greenhill & Co. (GHL), Datawatch (DWCH), United Stationers (USTR), Tractor Supply (TSCO), Stryker (SYK), Rocky Brands (rcky)

Companies that matched consensus earnings expectations include:

Eli Lilly (LLY), Sequans (SQNS), Core Laboratories (CLB), Blackhawk (HAWK), Innovative Solutions (ISSC), Angie's List (ANGI), Zynga (ZNGA), ServiceNow (NOW)

NEWSPAPERS/WEBSITES

FDA to impose first federal regulations on e-cigarettes (MO, LO, PM, RAI, VGR), WSJ reports
Publicis (PUBGY) sees U.K. tax approval in Omnicom (OMC) deal, WSJ reports
General Electric (GE) in talks to buy Alstom, Bloomberg says
Alstom says 'not aware' of any potential bid by General Electric (GE), WSJ reports
Buffett (BRK.A): Moving oil by rail safely major industry concern, Reuters reports
General Motors (GM) says it has shipped 'thousands' of replacement ignition switches, Reuters says
Nokia (NOK) to not include India phone plant in Microsoft (MSFT) deal, Bloomberg says

SYNDICATE

Agios Pharmaceuticals (AGIO) 2M share Secondary priced at $44.00
Hannon Armstrong (HASI) 5M share Secondary priced at $13.00
New Source Energy (NSLP) 3M share Secondary priced at $23.25
Parametric Sound (HEAR) files to sell $45M in common stock
Sarepta (SRPT) 2.65M share Secondary priced at $38.00
SunCoke Energy Partners (SXCP) files to sell 2.8M common units
Tsakos Energy (TNP) 11M share Spot Secondary; price range $7.25-$7.50
Yingli Green Energy (YGE) files to sell 25M ADSs

In an SEC filing today, GM, it appears, has been forced to admit that:

• *GM SAYS FACING RECALL INQUIRES FROM MULTIPLE GOV'T AGENCIES

As WSJ reports,  government filing that it is under investigation by federal prosecutors, the Securities and Exchange Commission, a state attorney general, Congress and the National Highway Traffic Safety Administration for its handling of a recent rash of recalls. And furthermore,

• *60 PUTATIVE CLASS ACTIONS SUITS FILED OVER SWITCH RECALL

The company says in the filing it isn't currently able to estimate the potential costs of lawsuits or investigations tied to the ignition recall, but adds resolving the probes could have a "material adverse impact" on the company's finances.

As WSJ adds,

GM formally confirmed the existence of a federal criminal probe of the recall by the U.S. Attorney for the Southern District of New York, in its quarterly report to the SEC filed today. GM had earlier reported an 82% drop in first quarter earnings, largely because of a $1.3 billion charge related to the ignition switch and other recalls.

 

GM said it believes it is "cooperating fully" with requests for information from the various investigating agencies, although it is paying fines to NHTSA for missing an April 3 deadline to respond fully to questions from the auto-safety regulator.

 

It isn't clear from GM's filing what aspects of the ignition-switch recall matter the SEC or the unidentified state attorney general are investigating.