Lately, it has become particularly fashionable to bash private equity, especially among those workers in the employ of the state. The argument, in as much as capitalism can be summarized in one sentence, is that PE firms issue excess leverage, making bankruptcy inevitable (apparently those who buy the debt are unaware they will never get their money back), all the while cutting headcount to maximize cash flow (apparently the same PE firms don't realize that their investment will have the greatest terminal value to buyer if it has the highest possible growth potential, which means revenue and cashflow, which means proper CapEx investment, which means streamlined income statement, which means more efficient workers generating more profits, not less). The narrative ultimately culminates with some variation on a the theme that PE firms are responsible for offshoring jobs. While any of the above may be debated, and usually is especially by those who have absolutely no understanding of finance, one thing is certain: when it comes to bashing PE, America's public workers should be the last to have anything negative to say about Private Equity, and the capital markets in general. Why? Because when it comes to fulfilling those promises of a comfortable retirement with pensions and benefits paying out in perpetuity, always indexed for inflation, and otherwise fulfilling impossible dreams, who do America's public pension fund administrators go to? The very same private equity firms that have suddenly become outcast number 1.

Here is the New York State Common Retirement Fund, which "holds assets in trust for more than one million employees and retirees from State governments, most local governments and some public authorities." The fund manages $150.6 billion as of March 31, 2012; it is the third largest pension plan in the US, with its California cousin: Calpers, the biggest. Some facts about the pension fund:

Member Information:

• Overall membership in NYSLRS: 1,059,398
  • 656,224 members (active or vested)
  • 403,174 retirees and beneficiaries
  • 95% are members of ERS; 5% are members of PFRS

Average Pensions:

• Average pension for all ERS retirees in FY 2012: $20,241
• Average pension for all PFRS retirees in FY 2012: $42,259

Employer Contribution Rates:

• FY 2014 average contribution rates: 20.9 percent of payroll for ERS; 28.9 percent of payroll for PFRS.
• Employers contributed roughly $4.59 billion to the Retirement System in FY 2012.
• Employees contributed $273.2 million in FY 2012.
• Employer and employee contributions have helped the Fund remain well funded.

In other words, it is the fund's obligation to allocate cash to places where it will generate the highest returns. So where does the NY Retirement fund go to make sure the money of its public workers is best managed? This is where: thousands and thousands of private equity firms (from the source, in reverse chronological order):

2007

Kline Hawkes Growth Equity Fund through the Aldus/NY Emerging Fund, $15 million commitment. This is a new relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on February 7.

Globespan Capital Partners V through the GKM Newport/NY Venture Capital Fund, $15 million commitment. This is a new relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on February 22.

Green Equity Investors V, $125 million commitment. CRF has been an investor with Green since 2002. No placement agents were involved inCRF’s investment. The commitment closed on March 1.

Draper Fisher Jurvetson IX through the GKM Newport/NY Venture Capital Fund, $25 million. This is an existing relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on March 2.

Founders Equity, $18 million additional commitment. This brings the total committed to Founders to $38 million. This is an existing relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on March 6.

Lion Capital II, €125 million commitment. This is an existing relationship for CRF. Citigroup received a fee from Lion for placement agent services. The commitment closed on March 7.

Clearwater Capital Partners III, $50 million commitment. This is a new relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on March 13.

TPG Star through the Hudson River Fund II, $25 million commitment. CRF has invested with TPG since 1997. No placement agents were involved in CRF’s investment. The commitment closed on March 14.

Apex Investment Fund VI through the GKM Newport/NY Venture Capital Fund, $12.5 million commitment. This is a new relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on March 15.

Technology Partners VIII through the GKM Newport/NY Venture Capital Fund, $20 million. This is an existing relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on March 15.

A venture capital fund through the Fairview Ventures II-NY Fund, $7.5 million. For competitive reasons the identity of the fund is not disclosed. This is an existing relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on March 15.

Saw Mill Capital Partners II through the Hudson River Fund II, $20 million commitment. This is a new relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on March 19.

SAIF Partners III, $50 million commitment. This is a new relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on March 20.

Psilos Group Partners III through the GKM Newport/NY Venture Capital Fund, $20 million. This is a new relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on March 28.

Tudor Ventures III through the GKM Newport/NY Venture Capital Fund, $10 million commitment. This is a new relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on March 30.

Summer Street Capital II through the Hudson River Fund II, $5 million commitment. CRF has been an investor in Summer Street since 2000. No placement agents were involved in CRF’s investment. The commitment closed on March 30.

KKR Asia Fund, $50 million commitment. KKR is an existing relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on June 20.

Accent 2008 through the Access/NY European Middle Market Buyout Fund, €10 million commitment. No placement agents were involved in CRF’s investment. The commitment closed on June 26.

Kohlberg Investors VI through the Hudson River Fund II, $25 million commitment. This is an existing relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on June 29.

Carlyle Partners V, $150 million. This is an existing relationship for CRF. Carlyle reported that no placement agents were involved in CRF’s investment in Carlyle Partners V. The commitment closed on September 7.

A private equity fund through the Hudson River Fund II, $75 million commitment. This is an existing relationship for CRF. For competitive reasons, the identity of the fund is not disclosed. No placement agents were involved in CRF’s investment. The commitment closed on September 10.

OCM Opportunities Fund VIIb, $200 million commitment. CRF has been an investor with OCM since 1999. No placement agents were involved in CRF’s investment. The commitment closed on September 19.

Roark Capital Partners II through Hudson River Fund II, $15 million commitment. CRF has been an investor in Roark since 2005. Lazard received a fee from Roark for placement agent services.  The commitment closed on September 28.

TXU through Strategic Co-Investment Partners, $25 million commitment. No placement agents were involved in CRF’s investment. The commitment closed on September 28.

Platinum Equity Capital Partners II through the Hudson River Fund II, $20 million commitment. This is a new fund relationship for CRF. Citigroup Global Markets received a fee from Platinum for placement agent services. The commitment closed on October 12.

RLJ Partners through the Aldus / NY Emerging Fund, $20 million commitment. This is a new fund relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on October 15.

Warburg Pincus Private Equity Partners X, $350 million commitment. CRF has been an investor with Warburg since 1989. No placement agents were involved in CRF’s investment. The commitment closed on October 19.

European buyout fund through the Access/NY European Middle Market Buyout Fund, €6 million commitment. CRF will release the name of the fund once the fund has formally closed with all investors. This is a new fund relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on October 23.

High Road Capital Partners Fund I through the Hudson River Fund II, $15 million commitment. This is a new fund relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on October 30.

Paladin III (NY), $25 million commitment. CRF has invested with Paladin since 2004. No placement agents were involved in CRF’s investment. The commitment closed on November 15.

Blum Strategic Partners IV, $75 million commitment. CRF has invested with Blum since 2001. No placement agents were involved in CRF’s investment. The commitment closed on November 19.

GESD II through the Hudson River Fund II, $15 million commitment. This is a new fund relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on December 5.

Nogales Investors Fund II, $10 million additional commitment. This is an existing relationship for CRF. Nogales reported that Liati Capital was involved in the transaction as a placement agent but Liati agreed not to be compensated. The additional commitment closed on December 11.

Giza Venture Fund V through the Hudson River Fund II, $15 million commitment. CRF has invested with Giza since 2005. No placement agents were involved in CRF’s investment. The commitment closed on December 20.

2008

FIMI Opportunity IV through the Hudson River Fund II, $20 million commitment. This is a new fund relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on January 2.

N+1 Private Equity Fund II through the Access/NY European Middle Market Buyout Fund, €10 million commitment. This is a new fund relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on January 9.

Bridgepoint Europe IV, €100 million commitment. CRF has been an investor with Bridgepoint since 1998. No placement agents were involved in CRF’s investment. The commitment closed on January 18.

Craton Equity Partners through the Aldus / NY Emerging Fund, $10 million commitment. This is a new fund relationship for CRF. Arvco Capital received a fee from Craton for placement agent services. The commitment closed on January 28.

Performance Venture Capital Fund II, $75 million commitment. Performance is an existing relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on March 26.

Quaker BioVentures through the Aldus/NY Emerging Fund, $10 million commitment. This is a new relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on April 25.

Paladin III through the Hudson River Fund II, $15 million commitment. This is an existing relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on April 30.

CVC European Equity Fund V, €150 million commitment. CVC is an existing relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed May 7.

Levine Leichtman Capital Partners IV, $50 million commitment. Levine Leichtman is a woman-owned firm, and is an existing relationship for CRF. Wetherly Capital Group received a fee from Levine Leichtman for placement agent services. The commitment closed May 22.

TPG Partners VI, $300 million commitment. TPG is an existing relationship for CRF. No placement agents were involved in CRF’s investment, which closed June 9.

SW Pelham Fund III through the Aldus/NY Emerging Fund, $10 million commitment. SW Pelham is a minority and woman-owned firm and is a new relationship for CRF. Potomac Capital Markets received a fee from SW Pelham for placement agent services. The commitment closed June 2.

Lindsay Goldberg III, $250 million commitment. Lindsay Goldberg is an existing relationship for CRF. No placement agents were involved in CRF’s investment, which closed July 30.

VantagePoint CleanTech Partners II through the GKM Newport/NY Venture Capital Fund, $50 million commitment. The commitment is part of the Green Strategic Investment Program. This is an existing relationship for CRF. The commitment closed July 31.

Ares Corporate Opportunities Fund III, $100 million commitment. Ares is an existing relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed September 16.

Asia Alternatives Capital Partners II, $50 million commitment. Asia Alternatives is a minority and women-owned firm. Asia Alternatives is a new relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed September 24.

GenNx360 Capital Partners, $60 million commitment. GenNx360 is a minority-owned firm. GenNx360 is a new relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed September 30.

Jerusalem Venture Partners Media V through the Hudson River II, $10 million commitment. This is a new relationship for CRF. No placement agents were involved in CRF’s investment. This commitment closed October 15.

Aisling Capital Partners III, $45 million commitment. Aisling is an existing relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed October 17.

2009

NYSCRF Pioneer Partnership Fund A, $200 million commitment. Pioneer Partnership A is one of three captive fund-of-funds within the emerging manager program and is managed by Bank of America Capital Access Funds. This is a new relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on January 21.

NYSCRF Pioneer Partnership Fund I, $100 million commitment. Pioneer Partnership I is one of three captive fund-of-funds within the emerging manager program and is managed by Parish Capital Advisors. This is a new relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on January 21.

NYSCRF Pioneer Opportunities Fund I, $250 million commitment. Pioneer Opportunities I is one of three captive fund-of-funds within the emerging manager program and is managed by Parish Capital Advisors. This is a new relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on January 21.

Softbank Capital Technology New York, $20 million additional commitment. This is in addition to an existing $30 million commitment. Softbank NY is part of the Instate Program. Softbank is an existing relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on January 29.

DFJ Gotham Fund II, $25 million commitment. This is a new relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed March 12.

PCGI/NYSCRF Emerging Europe Investment Program, $100 million commitment. This is a new relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed March 13.

Falcon Strategic Partners III, $50 million commitment. This is an existing relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on June 30.

Carpenter Community BancFund through the NYSCRF Pioneer Partnership Fund B, $30 million commitment. Carpenter is part of CRF’s Emerging Manager program. This is a new fund relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on June 30.

TA XI, $100 million commitment. This is an existing relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed July 29.

Hellman & Friedman Capital Partners VII, $200 million commitment. This is an existing relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on September 8.

Hudson Clean Energy Partners, $100 million commitment. This is a new relationship for CRF. No placement agents were involved in CRF’s  investment. This commitment is part of the Comptroller’s Green Strategic Investment Program. The commitment closed on October 30.

Clearlake Capital Partners II, $15 million commitment through the NYSCRF Pioneer Partnership Fund - A. Clearlake II is part of CRF’s Emerging Manager program. This is a new relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on November 2, 2009.

DeltaPoint Capital IV (New York), $25 million commitment. This is an existing relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on November 6, 2009.

Bunker Hill Capital II, $25 million through the Pioneer Partnership Fund B. Bunker Hill is part of CRF’s Emerging Manager program. This is a new relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on December 7, 2009.

Relativity Fund, $30 million through the Pioneer Partnership Fund B. Relativity is part of CRF’s Emerging Manager program. This is a new relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on December 11, 2009.

Bunker Hill Capital II, $25 million through the Pioneer Partnership Fund B. Bunker Hill is part of CRF’s Emerging Manager program. This is a new relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on December 7, 2009.

Relativity Fund, $30 million through the Pioneer Partnership Fund B. Relativity is part of CRF’s Emerging Manager program. This is a new relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on December 11, 2009.

2010

DBL – The California Equity Fund, $7.5 million through the NYSCRF Pioneer Partnership Fund A. This is a new relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on May 30.

Gilde Buyout Fund IV, €20 million commitment. This is an existing relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on June 29.

Blackstone/GSO Capital Solutions Fund, $50 million commitment. This is an existing relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed on July 9.

High Peaks Seed Ventures NY, $15 million. This is an existing relationship for CRF and part of CRF’s In-State Appleseed Venture Capital Program. No placement agents were involved in CRF’s investment. The commitment closed August 2.

Institutional Venture Partners XIII, $45 million. This is an existing relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed August 17.

Blackstone Capital Partners VI, $300 million. This is an existing relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed August 17.

Oaktree Capital Management, $200 million. CRF invested $100 million in OCM Opportunities Fund VIII and $100 million in OCM Opportunities Fund VIIIb. This is an existing relationship with CRF. No placement agents were involved in the investment. The commitments closed September 30.

Grey Mountain Capital Partners, $12.5 million through the NYSCRF Pioneer Partnership Fund A. This is a new relationship for CRF. No placement agents were involved in the investment. The commitment closed October 18.

JMI Equity Fund VII, $40 million. This is a new relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed November 19.

Capital Alliance Private Equity III Limited, $15 million through the NYSCRF Pioneer Partnership Fund B. This is a new relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed November 27.

Vista Foundation Fund I, $50 million commitment. This is an existing relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed December 17.

KKR China Growth Fund, $125 million commitment. This is an existing relationship for CRF. No placement agents were involved in CRF’s investment. The commitment closed December 30.

2011

Centerbridge Capital Partners II, $150 million. This is a new relationship for CRF. No placement agents were involved in CRF's investment. The commitment closed on January 18.

M² NY Pioneer Fund, $100 million. This is a new relationship for CRF. The commitment is part of the Comptroller's Emerging Manager program. No placement agents were involved in CRF's investment. The commitment closed on March 1.

FS Equity Partners VI, L.P., $80 million. This is an existing relationship with CRF. No placement agents were involved in the investment. The commitment closed April 21, 2011.

Dominus Capital Partners, $20 million through the NYSCRF Pioneer Partnership Fund A. This is a new relationship for CRF. No placement agents were involved in CRF's investment. The commitment closed on April 28.

Tenex Capital Partners, $25 million through the NYSCRF Pioneer Partnership Fund A. This is a new relationship for CRF. No placement agents were involved in CRF's investment. The commitment closed on April 29.

Access/NY European Middle Market Buyout Fund II - €200 million (two €100 million tranches) was committed. Access is an existing relationship for CRF. Access is a fund of funds focused on buyout opportunities in Europe. No placement agents were involved in CRF’s investment. The investment closed on May 4, 2011.

KSL Capital Partners III $115 million was committed. KSL is a buyout fund within the Private Equity Portfolio. This investment represents a new relationship for CRF. No placement agents were involved in the CRF’s investment. The investment closed on May 31, 2011.

Initiative & Finance FCPR I, €10 million, through the Access/NY European Middle Market Buyout Fund II. This is a new relationship for CRF. No placement agents were involved in CRF's investment. The commitment closed on May 12.

Asia Alternatives Capital Partners III, $50 million. This is an existing relationship for CRF. No placement agents were involved in CRF's investment. The commitment closed on May 20.

Snow Phipps II - $100 million commitment. Snow Phipps is a new relationship for CRF. No placement agents were involved in CRF’s investment. The investment closed on June 30, 2011.

New York Balanced Pool Asia Investors, $75 million. This is an existing relationship for CRF. No placement agents were involved in CRF's investment. The commitment closed on June 23.

New York Co-Investment Pool Asia Investors, $125 million. This is an existing relationship for CRF. No placement agents were involved in CRF's investment. The commitment closed July 1.

Litorina IV, €9.4 million through the Access/NY European Middle Market Buyout Fund II. This is an existing relationship for CRF. No placement agents were involved in CRF's investment. The commitment closed July 7.

Endless LLP Fund III, €8.8 million through the Access/NY European Middle Market Buyout Fund II. This is an existing relationship for CRF. No placement agents were involved in CRF's investment. The commitment closed July 20.

New York Business Development Corporation, $100 million. NYBDC is an existing relationship for CRF. No placement agents were involved in this transaction, which closed on August 1.

Patria-Brazilian Private Equity Fund IV, $75 million commitment. Patria is a new relationship for CRF. No placement agents were involved the transaction, which closed on August 12.

Vista Equity Partners Fund IV, $300 million commitment. Vista Equity is an existing relationship for the CRF. No placement agents were involved in the transaction, which closed on August 31.

TPG Growth II, L. P., $200 million commitment. TPG is an existing relationship for the CRF. No placement agents were involved in the CRF’s investment. This investment closed on September 2, 2011.

Auger II, €10 million commitment. Auger is a new relationship acquired through the Access/NY European Middle Market Buyout Fund II Fund of Funds. This transaction closed on October 4, 2011.

Avenue Europe Special Situations Fund II (Euro), L. P. - €100 million commitment. Avenue is an existing relationship for the CRF. No placement agents were involved in the CRF’s investment. This investment closed on November 4, 2011.

Coutour Venture Partners II, L. P. - $10 million commitment. Contour is a new relationship for the CRF. No placement agents were involved in the CRF’s investment. This investment closed on November 10, 2011.

Hony Capital V, L.P., $100 million. Hony is a new relationship for CRF. No placement agents were involved in the investment, which closed on December 15, 2011.

Hony Capital V, L.P., $15 million discretionary commitment made through the New York Co-Investment Pool Asia Investors, L.P. No placement agents were involved in the investment, which closed on December 15, 2011.

Hony Capital V, L.P., $4 million non-discretionary commitment made through the New York Balanced Pool Asia Investors, L.P. No placement agents were involved in the investment, which closed on December 15, 2011.

Access 2012, L.P., €10 million. Access is a new relationship for CRF acquired through the Access / New York European Middle Market Buyout Fund II, L.P. No placement agents were involved in the investment, which closed on December 21, 2011.

Searchlight Capital, L.P., $150 million. Searchlight is a new relationship for CRF. No placement agents were involved in the investment, which closed on December 29, 2011.

Acon Equity Partners III, L.P., up to $120 million. Acon is an existing relationship for CRF. No placement agents were involved in the investment, which closed on December 30, 2011.

2012

Brightwood Capital SBIC I, LP, $15 million. The Brightwood commitment was made through the M² Y Pioneer Fund, L. P. This is a new relationship for CRF. No placement agent fees were involved in the CRF’s investment, which closed on February 3, 2012.

Actera Partners II, LP, $15 million. Actera is a new relationship through the 57 Stars Emerging Europe Fund (NYSCRF), LP. No placement agent fees were involved in the CRF’s investment. This investment closed on February 7, 2012.

Monroe Capital Partners, LP, $10 million commitment. Monroe is a new relationship for the CRF through the NYSCRF Pioneer Partnership Fund A. No placement agent fees were involved in the CRF’s investment. This investment closed on February 24, 2012.

Green Equity Partners VI, LP, $200 million commitment. Green is an existing relationship for the CRF. No placement agent fees were involved in the CRF’s investment. This investment closed on February 28, 2012.

Farallon Asia Special Situations Fund II, LP, $10 million commitment. Farallon Asia is a new relationship for the CRF through the NY Co-Investment Pool Asia Investors, LP. No placement agent fees were involved in the CRF’s investment. This investment closed on February 29, 2012.

Centerbridge Special Credit Partners II, L.P., $72.8 million commitment. Centerbridge is an existing relationship for the CRF. No placement agents were involved in the CRF’s investment, which closed March 1.

GenNx360 Capital Partners II, L. P., up to $125 million maximum commitment. GenNx360 is an existing relationship for the CRF. No placement agents were involved in the CRF’s investment, which closed March 2.

Siris Partners II, L. P., $20 million commitment. Siris is a new relationship through the M² NY Pioneer Fund. No placement agent fees were involved in the CRF’s investment. This investment closed on April 16, 2012.

Fortissimo Capital Fund III, L.P., $10 million commitment. This is a new relationship for CRF through the 57 Stars Emerging Europe Fund. No placement agents were involved in the investment, which closed on May 17, 2012.

Clearwater Capital Partners IV, L.P., $75 million commitment. This is an existing relationship for CRF. No placement agents were involved in the investment, which closed on May 15, 2012.

Quadriga Capital Private Equity Fund IV, L.P., €10 million commitment. Quadriga is an existing relationship through the Access/NY Middle Market Buyout Fund. No placement agents were involved in the investment, which closed on May 7, 2012.

Ares Corporate Opportunities Fund IV, L.P., $150 million commitment. Ares is an existing relationship for the CRF. No placement agent fees were involved in the CRF’s investment, which closed on June 29, 2012.

The Fifth Cinven Fund (Cinven V), L.P., €150 million commitment. Cinven is an existing relationship for the CRF. No placement agent fees were involved in the CRF’s investment, which closed on June 12, 2012.

Palatine Private Equity Fund II, L.P., £8.7 million commitment. Palatine is a new relationship for the CRF through the Access/NY Middle Market Buyout Fund II. No placement agents were involved in the CRF’s investment, which closed on July 6, 2012.

* * *

The list above includes only the private equity firms that the NY pension fund has invested cash in. It excludes the capital allocations to hedge funds (we will release that list once the hedge fund bashing begins) and other alternative asset managers: that list is also just as massive. Furthermore, the list is also only for one pension fund: we leave it to the more inquisitive readers to conduct the same analysis for other US pension funds. Going further back will certainly reveal many more names, among them, with virtual certainy, a rather infamous company known as Bain Capital.

For those who are still confused what the above list means, here is the summary: bash Private Equity all you want, but ask this: who is the biggest enabler of private equity's infamous "offshoring" - answer: Uncle Sam, whose desperate need to allocate cash for most efficient management of welfare resources, just happens to be one of the biggest (if not the biggest) source of "Equity" in Private Equity. Because without private equity, America's millions of civil servants would have little hopes of generating the kinds of pension, retirement and healthcare returns for the rest of their lives they have grown accustomed to expect.

And the last thing America, with its 350% in consolidated public and private debt/GDP can withstand, is its population suddenly realizing its entitlement hopes and dreams (excluding the $100 trillion in underfunded liabilities of course) rest in the hands of the same bankers that everyone loves so much to hate.

Another interesting trend courtesy of the low interest rate environment created by the Federal Reserve is the feverish chase for yield. In a previous article we discussed that a large part of the higher rental prices were coming from a segment that had lost their homes via foreclosure. Since the housing bubble popped millions of Americans have lost their homes. As the report also found, many of those stayed within the same area but likely shifted to a single-family rental or an apartment. What we did not discuss however is how investors are playing a role in pushing up rental yields as well. As bigger blocks of large investors purchase distressed properties, many add value to the property and try to push rental prices upwards. I saw a presentation a few months ago of some local investors in Southern California purchasing older apartment buildings (some built in the 1970s) and upgrading them to more modern standards. Once the upgrades were complete, these investors pushed rents up by 7 to 10 percent. What impact is the flood of investors having on the market?

Shift from owning to renting

The drop in home ownership has largely come from the removal of two factors:

-1. The easy access toxic loans that provided leverage to anyone with a pulse

-2. The millions that have lost their home via foreclosure

Even with super low down payment loans like FHA insured products, many Americans simply cannot afford to purchase a home even in today’s low rate environment. Yet this low rate environment has had a big impact on rentals:

“BNP Paribas: - As investors seek returns, housing looks increasingly attractive. A lot of increased activity has come from cash buyers; the National Association of Realtors reports that the share of existing single-family home sales purchased by cash buyers has risen to just below 30% from 20% a few years ago. Private equity investors have also been reportedly buying blocks of homes for rental conversion.”

This is major shift. 30 percent of recent single-family home sales went to cash buyers. Private equity is now having a big impact on this market. The chase for yield is largely driving these investors and rental yields are favorable in many markets. Many investors have looked at markets that have been forgotten and jump in, buy up places in blocks, and try to push rents up because of the perceived added value of their upgrades. It is an interesting process but once again the Federal Reserve is largely pushing big money into a market that is impacting most Americans. At a time when incomes are stagnant higher rents stretch budgets even further.

Monthly payment versus price

The massive drop in mortgage rates is largely a method to keep home values inflated. Do not doubt this for one second. Even the Fed came out directly stating that QE3 was largely going to be a MBS program. You do not get more specific than that. They have an open commitment that is likely to buy nearly half a trillion in MBS within a 12 month period.

The impact is enormous here. For example, let us run a $500,000 mortgage from 2000 at 8 percent and one today at 3.5 percent:

Principal and interest @ 8%: $3,668

Principal and interest @ 3.5% $2,245

To get the monthly PI similar to what it is today with an 8 percent mortgage would require that $500,000 mortgage to be at $300,000. Even with a low rate people will be paying this much over the life of the loan only with principal and interest:

$500,000 mortgage PI @ 3.5% over 30 years: $808,000

Add in taxes, insurance, and maintenance and you are inching closer to $1 million for a $500,000 mortgage. The focus on the monthly payment is really driving a large part of the housing market today. That is why FHA insured loans have come in to plug the low down payment market left by the toxic mortgage debacle.

Thanks to these low rates, big investors are likely also bidding home prices up competing with families simply looking to buy a home. More unintended consequences. It is a fascinating trend seeing so many investors actually jumping into the rental game. Big money however is fickle and as quickly as the trend ends, it will quickly evaporate.

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• Euro Leaders Face October of Unrest After September Rally (Bloomberg)
• Dad, you were right (FT)
• 25% unemployment, 25% bad loans, 5% drop in Industrial Production, and IMF finally lowers its 2013 Greek GDP forecast (WSJ)
• Global IPOs Slump to Second-Lowest Level Since Financial Crisis (Bloomberg)
• France's Hollande faces street protest over EU fiscal pact (Reuters)
• EU Working to Resolve Difference on Bank Plan, Rehn Says (Bloomberg)
• China manufacturing remains sluggish (FT)
• Samaras vows to fight Greek corruption (FT) ... and one of these days he just may do it
• Leap of Faith (Hssman)
• Germany told to 'come clean’ over Greece (AEP)

Overnight Media Digest

WSJ

* Xstrata Plc's board of directors recommended Monday that its shareholders vote in favor of Glencore International Plc's revised merger proposal after making several revisions aimed at breaking a logjam over executive pay that has threatened to derail the historic tie-up.

* Energy producer Dynegy Inc is set to leave bankruptcy protection on Monday as a much leaner company, but perhaps one more vulnerable to a takeover.

* Nokia Oyj, looking to increase use of its mapping software, will unveil a new deal with Oracle Corp intended to give Oracle's customers access to Nokia's growing vault of map data and location services.

* Global trade is stalling, dimming prospects that exports will buoy the U.S. economy in the coming months.

* Accounting rule makers are on the verge of rolling back a widely assailed provision that counterintuitively adds to U.S. banks' profits when their debt looks riskier to investors and penalizes them when it looks safer.

* LG Electronics Inc and Whirlpool Corp have agreed to settle patent infringement disputes related to refrigerators, concluding years of patent litigation between the two companies.

* A start-up called FreedomPop, backed by a founder of Skype, is set to launch a wireless data service that promises to save customers hundreds of dollars a year, at a time when cellphone bills are chewing up a growing share of the household budget.

* Private-equity firm First Reserve Corp has formed a new venture to build pipelines throughout the booming oil fields of North Dakota, an investment aimed at resolving transportation bottlenecks plaguing energy producers in the region.

FT

XSTRATA CLOSE TO BACKING GLENCORE OFFER

Xstrata is preparing to recommend the latest merger offer from Glencore on Monday.

BERLIN AND PARIS UNITE ON EADS HOLDINGS

Germany and France have agreed a common position on the tie-up of EADS and BAE Systems.

GRADUATES TURN AWAY FROM WALL ST

More graduates are opting for careers outside investment banking as the pull of big bonuses is replaced by job insecurity in the industry.

PRIVATE EQUITY MANAGERS FEAR TAX HIT

Private equity fund managers are so worried about changes to the way their income is taxed in the US that some are trying to rewrite agreements with investors.

NEWS CORP BOOSTS COMPLIANCE TEAMS

News Corp has hired a senior official from the Securities and Exchange Commission and a former federal prosecutor to lead new compliance units.

CASTLE TRUST EYES CASH-STRAPPED HOMEBUYERS

The former head of the City of London watchdog is to chair a new company that offers cash-strapped homebuyers interest-free loans.

GLOBAL ETF SECTOR IN LINE FOR RECORD YEAR

Investors are on course to put a record amount of money into exchange-traded funds.

OIL GROUPS TUSSLE FOR COLOMBIA LICENCES

Some of the world's largest oil companies are jostling for licences to explore for shale gas in Colombia.

MILIBAND SOUNDS WARNING NOTE ON BANKS

Ed Miliband caused concern in the City of London on Sunday when he warned that a future Labour government might split Britain's biggest banks.

US CANDIDATES' FUTURES UP FOR DEBATE

Barack Obama is scheduled to spend Monday holed up in Nevada for intensive debate practice.

PENSION INJECTIONS FIGHT TO TRIM SHORTFALLS

Britain's largest employers have poured roughly 175 billion pounds ($282.59 billion) into their underfunded pension schemes over the past decade.

NYT

* A tax break for wage earners for which the White House campaigned hard last winter now finds little support in Washington, as Congress struggles with deficits.

* Six major American banks were hit in a wave of computer attacks last week, by a group claiming Middle Eastern ties, that caused Internet blackouts and delays in online banking.

* While Greece agreed last week to cut pensions, Spain said it would raise its payouts, a stark example of why Europe's debt and deficit problems have proved so difficult to resolve.

* Canadian auto workers at Chrysler Group ratified a new contract with the company, the auto union said Sunday.

* Many auto executives were not that enthusiastic about battery-powered cars at their outset, and now that sales of electric vehicles made by Tesla Motors Inc and Renault have been disappointing, some car manufacturers are playing down the technology.

* A few months after Governor Andrew Cuomo was poised to approve hydraulic fracturing in several struggling New York counties, his administration is reversing course and starting the regulatory process over, garnering praise from environmental groups and stirring anger among industry executives and upstate landowners.

* A special media court on Sunday found the Tehran bureau chief of the Thomson Reuters news agency guilty of "spreading lies" against the Islamic system for a video script that briefly described a group of women involved in martial arts training as killers.

Canada

THE GLOBE AND MAIL

* A research paper written for the Center for Security and Defence Studies at Carleton University estimates the cumulative effect of the Harper government's strategic review and the overlapping deficit reduction action plan will carve up to $2.5-billion out of the nearly C$21-billion National Defence budget by 2014-2015.

* The federal government has issued a tender calling for the design of low-emission Canadian Coast Guard ships that would incorporate hydrogen fuel cell technology.

* The fallout from an E. coli contamination at an Alberta slaughterhouse continues to spread, with more than 1,100 products now being recalled as Premier Alison Redford urges consumers to keep buying her province's beef.

Reports in the business section:

* Unionized workers at Chrysler's Ontario plants voted to accept a new contract on Sunday, marking the Canadian Auto Workers' successful negotiation of fresh agreements with the three big U.S. auto makers.

* British Columbia's softwood lumber industry is finally on the comeback trail, fueled by a recovery in U.S. housing starts and steady demand from China, according to analysts.

NATIONAL POST

* Theater and art impresario David Mirvish says he plans to tear down Toronto's Princess of Wales Theater and replace it with three condo towers.

* The Toronto Transit Commission has voted to contract out a segment of its cleaning force in order to save money, angering existing transit employees.

FINANCIAL POST

* Federal NDP Leader Thomas Mulcair told Toronto's business community that he would support the establishment of a West-East pipeline provided that project developer Enbridge pay for the environmental costs.

European economic update:

• Sweden Manufacturing PMI 44.7 – lower than expected. Consensus 46.4. Previous 45.1.
• Norway PMI 48.9 – lower than expected. Consensus 49.5. Previous 48.7.
• Hungary Manufacturing PMI 52.5. Previous 49.6.
• Poland Manufacturing PMI 47.0. Previous48.3.
• Spain Manufacturing PMI 44.5 – higher than expected. Consensus 44.2. Previous 44.0.
• Czech Republic Manufacturing PMI 48.0. Previous 46.7.
• Switzerland Manufacturing PMI 43.6 – lower than expected. Consensus 47.5. Previous 46.7.
• Italy Manufacturing PMI 45.7 – higher than expected. Consensus 44.0. Previous 43.6.
• France Manufacturing PMI 42.7. Previous 42.6.
• Germany Manufacturing PMI 47.4 – higher than expected. Consensus 47.3. Previous 47.3
• UK Manufacturing PMI 48.4 – lower than expected. Consensus 49.0. Previous 49.5.

Fly on the Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

Allscripts (MDRX) upgraded to Buy from Hold at ISI Group
Brightcove (BCOV) upgraded to Top Pick from Outperform at RBC Capital
Callaway Golf (ELY) upgraded to Strong Buy from Market Perform at Raymond James
Coldwater Creek (CWTR) upgraded to Overweight from Neutral at Piper Jaffray
DreamWorks (DWA) upgraded to Buy from Neutral at Janney Capital
Finish Line (FINL) upgraded to Neutral from Underperform at Sterne Agee
InterActiveCorp (IACI) upgraded to Buy from Hold at Needham
Myriad Genetics (MYGN) upgraded to Overweight from Neutral at Piper Jaffray
Rudolph Tech (RTEC) upgraded to Outperform from Neutral at Credit Suisse

Downgrades

Alliant Techsystems (ATK) downgraded to Hold from Buy at Jefferies
Allstate (ALL) downgraded to Market Perform from Outperform at FBR Capital
Baidu (BIDU) downgraded to Hold from Buy at Jefferies
Boston Beer (SAM) downgraded to Sell from Neutral at UBS
Brooks Automation (BRKS) downgraded to Underperform from Neutral at Credit Suisse
Check Point (CHKP) downgraded to Sector Perform from Outperform at RBC Capital
Citigroup (C) downgraded to Neutral from Buy at Sterne Agee
CommVault (CVLT) downgraded to Sector Perform from Outperform at RBC Capital
Fifth Third (FITB) downgraded to Market Perform from Outperform at Keefe Bruyette
Fortinet (FTNT) downgraded to Sector Perform from Outperform at RBC Capital
Forum Energy (FET) downgraded to Market Perform from Outperform at FBR Capital
Gilead (GILD) upgraded to Outperform from Market Perform at Bernstein
M.D.C. Holdings (MDC) downgraded to Underperform from Neutral at Credit Suisse
Mercury Computer (MRCY) downgraded to Hold from Buy at Jefferies
Microsoft (MSFT) downgraded to Sector Perform from Outperform at RBC Capital
Molson Coors (TAP) downgraded to Underweight from Equal Weight at Morgan Stanley
PulteGroup (PHM) downgraded to Neutral from Outperform at Credit Suisse
Quality Systems (QSII) downgraded to Underweight from Equal Weight at Morgan Stanley
RealPage (RP) downgraded to Outperform from Top Pick at RBC Capital
Sprint (S) downgraded to Market Perform from Outperform at Raymond James
Texas Instruments (TXN) downgraded to Neutral from Positive at Susquehanna
VMware (VMW) downgraded to Sector Perform from Outperform at RBC Capital
Wendy's (WEN) downgraded to Neutral from Buy at Janney Capital

Initiations

ITT Exelis (XLS) initiated with a Buy at Jefferies
Yelp (YELP) initiated with an Equal Weight at Barclays
Zillow (Z) initiated with an Equal Weight at Barclays

HOT STOCKS

Glencore (GLNCY), Xstrata (XSRAY) reach agreement on final terms of merger
Olympus (OCPNY) and Sony (SNE) to form business and capital alliance
Transocean (RIG) said Brazil injunction order partially suspended
Sears (SHLD) announced tax services agreement with Jackson Hewitt
U.S. Steel (X) reached collective bargaining agreements with United Steelworkers
Canadian Pacific (CP) reached tentative agreement with United Steelworkers
First Reserve sold majority interest in Acteon to KKR (KKR)
Ball (BLL) to acquire extruded aluminum packaging business in Mexico
DOJ cleared SAP (SAP) acquisition of Ariba (ARBA)
Caterpillar (CAT) to raise prices on most machines by 0%-3%, effective January 2013
Abbott (ABT) confirmed FDA approval of HUMIRA for treatment of ulcerative colitis
FDA approved heart defibrillator from Boston Scientific (BSX)/Cameron Health
Sunshine Heart (SSH) announced conditional approval of IDE from the FDA
Hertz (HTZ) franchised Swiss business to Emil Frey Group
Saks (SKS) opened store in Almaty, Kazakhstan
Hillenbrand (HI) subsidiary acquired software solutions provider HMIS
Informatica (INFA) announced public takeover offer for Heiler Software AG
Wi-LAN (WILN) acquired a global portfolio of over 150 patents and patent applications from Alvarion (ALVR) for $19M.
Cal-Maine Foods (CALM) sees FY13 feed costs near record high levels

EARNINGS/GUIDANCE

Companies that beat consensus earnings expectations last night and today include:
Cal-Maine Foods (CALM)

Companies that matched consensus earnings expectations include:
Synergetics (SURG)

NEWSPAPERS/WEBSITES

Global trade is stalling, dimming prospects that exports will help the U.S. economy in the coming months. The World Trade Organization projected the global volume of trade in goods would expand only 2.5% this year, down from 5% last year and nearly 14% growth in 2010. A Dutch government agency, the CPB Netherlands Bureau for Economic Policy Analysis, estimates it fell outright in June and July, the Wall Street Journal reports
Euro zone manufacturing put in its worst performance in the three months to September since the depths of the recession, pointing to a new recession. Markit's Eurozone Manufacturing Purchasing Managers' Index (PMI) rose to 46.1 in September from 45.1 in August and above the preliminary reading of 46.0. But that was its 14th month below the 50 mark that divides growth from contraction. The output index rose to 45.9 from August's 44.4 but that was the seventh month of decline, Reuters reports
Banks are charging U.S. consumers the lowest interest rates on new car loans since the Fed began surveying them in 1971. That rates helped ignite a 9.5% jump in light-vehicle sales last month and maintained the fastest pace since the U.S. government’s “cash for clunkers” program three years ago, according to analysts surveyed by Bloomberg.
European Aeronautic, Defence & Space Co.’s (EADSY) major shareholder Lagardere SCA called the terms of the proposed merger with BAE Stystems (BAESY)  “unsatisfactory,” Bloomberg reports

BARRON’S

Goldman Sachs (GS) shares could rally 25% in the next year
Opko (OPK) shares are pinned to success with new diagnostic tests
Kraft's (KFT) Mondelez spin-off is probably a better buy
Nike (NKE) shares should continue to underperform
Steelcase (SCS) shares could rise 15% or more in the next year
Transocean (RIG): Brazilian judicial waters need to calm down
RIM (RIMM) shows signs of life but still faces a difficult road

SYNDICATE

B&G Foods (BGS) files to sell 3.63M shares of common stock
Infinity Pharmaceuticals (INFI) files to sell 11.42M shares of common stock for holders
Navidea (NAVB) files to sell 300K shares of common stock for holders
Mattress Firm (MFRM) files to sell 4.73M shares for holders
Uranium Resources (URRE) files to sell 53.11M shares of common stock for holders
Vista Gold (VGZ) files to sell 8.3M shares of common stock for holders

ACTIVIST/PASSIVE FILINGS

Gabelli reports 5.01% stake in Nabi Biopharmaceuticals (NABI)
Peltz's Trian lowers stake in Legg Mason (LM) to 9.54% after transfer of shares

• No Joy on Wall Street as Biggest Banks Earn $63 Billion (Bloomberg)
• And more good news: IMF’s Blanchard Says Crisis Will Last a Decade (Reuters)
• Hobbit Returns to Find Middle Earth Has Become Expensive (Bloomberg)
• Freddie's Foreclosure Plan Hits Roadblock (WSJ)
• Who will buy the FT? Pearson CEO Scardino Will Step Down as Fallon Takes Over (BBG)
• Jeremy Lin Said to Be in Talks With Harvard on Licensing Deal (Bloomberg)
• Jon Weil tears apart the NYAG "prosecution" - Eric Schneiderman Will Have to Do Better Than This (BBG)
• Portugal Offers to Exchange Bonds as It Seeks Debt Market Access (Bloomberg)
• Is unlimited growth a thing of the past? (FT-Martin Wolf)
• European Bank Capital Results Overtaken by Tougher Global Rules (Bloomberg)
• China’s Slowdown Reverberates as ADB Cuts Forecasts (Bloomberg)
• Tokyo has no plan to extend currency swap deal with Seoul (Reuters)

Overnight Media Digest

FT

BLOW FOR BRITAIN'S NUCLEAR REVIVAL

A Franco-Chinese consortium has walked away from the race to build Britain's new generation of nuclear reactors.

MILIBAND INVOKES 'ONE NATION BRITAIN'

Britain's opposition leader Ed Miliband cast himself as a humble man of the people on Tuesday in a confident speech at the Labour party conference.

US STEPS UP PROBES ON INSIDER TRADING

U.S. authorities have increased the number of new investigations into insider trading by almost half in the past year.

FSA TO TIGHTEN UP LISTING RULES

Rules aimed at cracking down on dominant shareholders and reverse takeovers have been set out by the City of London watchdog.

DEUTSCHE TELEKOM EYES DEAL FOR US UNIT

Deutsche Telekom is in talks about merging its T-Mobile USA subsidiary with rival MetroPCS.

L&G INVESTMENT ARM TARGETS PAY MASTERS

Legal & General has stepped up efforts to crack down on excessive pay by voting against 18 remuneration committee chairmen.

PE GROUPS EYE BANK DEAL IN EUROPE

Blackstone has set up a joint venture for financial services deals with London-based Anacap Financial Partners.

EU REVIEW WANTS BANKING TRADING RINGFENCED

Europe's biggest banks must detach their risky trading activities from their retail operations, according to conclusions of an EU review.

EU DRAFT URGES CONTRACTS FOR EURO STATES

Euro zone countries would have to sign binding contracts with Brussels, committing them to detailed fiscal reform, according to a draft EU agenda.

FRENCH REVOLT AGAINST NEW TAX GOES VIRAL

French President Francois Hollande faced divisions in his party on Tuesday over a 2013 budget crucial to his credibility with euro zone partners.

NYT

* The parent company of T-Mobile USA, the struggling cellphone service provider, is in talks to buy MetroPCS Communications Inc as it fights to compete against two bigger rivals.

* Autos in the United States flew off the lot at the highest sales rate in four years in September, adjusted for seasonal variations, according to the research firm Autodata.

* Spain's 17 regional governments agreed to stick to budget deficit targets set by the central government, giving Prime Minister Mariano Rajoy some breathing space.

* Facebook Inc Chief Operating Officer Sheryl Sandberg told marketers the company was focused on proving the promise of advertising.

* A European Union panel recommended banks be forced to split traditional lending from riskier trades as a way to safeguard the financial system.

* In an address to the nation after a 40 percent fall in the value of Iran's currency over the last week, Mahmoud Ahmadinejad said his country was facing a "psychological war" waged by the United States.

* Better Place, an electric vehicle infrastructure company, said on Tuesday that it had replaced Shai Agassi, its charismatic chief executive and founder, with Evan Thornley, the company's top executive in Australia.

Canada

THE GLOBE AND MAIL

* British Columbia Premier Christy Clark has issued a veiled threat to withhold electricity needed to operate controversial oil sands pipelines if the projects do not meet her demands.

* The plan to share buildings for British and Canadian embassies in the future has sparked criticism from those who accuse Ottawa of merging its diplomatic brand with Britain - and questions about whose flag would fly over shared embassies.

Reports in the business section:

* The federal government eliminated the approval of 30-year amortization periods on government-backed mortgages in June - and the decision's impact can now be seen most vividly in the cooling off of Greater Vancouver's market, with sales falling for everything from entry-level homes to luxury houses, Bank of Montreal senior economist Sal Guatieri said Tuesday.

* A group of disabled former Nortel employees who saw their benefits slashed after the company's demise have filed a lawsuit seeking $60-million from the two trust companies charged with administering the onetime telecommunications giant's health fund.

NATIONAL POST

* The 35-acre former Molson Brewery site, once home to Barrie, Ontario's biggest employer, and later the country's largest indoor grow-op, worth an estimated $8.9 million, sits fallow, ragweed sprouting up in the former parking lots.

It is owned by Fercan Developments Inc, whose principal is Toronto property developer Vince DeRosa. But federal prosecutors assert the property is the proceeds of crime; a forfeiture hearing, with its goal of seizing it for the Crown, is under way this week in Newmarket, Ontario.

* Nearly a year after Ontario's air ambulance service descended into scandal, interim president Ron McKerlie says Ornge has stepped "out of the shadows."

Since late last year, Ornge has grappled with a series of revelations about generous executive perks, chronic understaffing, inadequate equipment and excessive delays.

FINANCIAL POST

* Air Canada unveiled its plans Tuesday for a new integrated leisure group made up of its Air Canada Vacations division and its new low-cost carrier.

* Automakers reported another strong month of sales in September with cars and trucks flying off dealership lots across the country at near historic highs. Carlos Gomes, Scotiabank senior economist, said the overall market for autos grew 6 percent year-over-year in Canada in September led by a 12 percent surge in sales for import brands.

European economic update:

• Sweden Services PMI 47.3 – lower than expected. Consensus 50.3. Previous 50.8.
• Spain Services PMI 40.2 – lower than expected. Consensus 42.0. Previous 44.0.
• Italy Services PMI 44.5 – higher than expected. Consensus 44.0. Previous 44.0.
• France Services PMI 45.0 – lower than expected. Consensus 46.1. Previous 46.1.
• Germany Services PMI 49.7 – lower than expected. Consensus 50.6. Previous 50.6.
• Euro Area services PMI 46.1 – higher than expected. Consensus 46.0. Previous 46.0.
• Euro Area Composite PMI 46.1 – higher than expected. Consensus 45.9. Previous 45.9.
• UK Services PMI 52.2 – lower than expected. Consensus 53.0. Previous 53.7.

Fly On The Wall 7:00 AM Market Update

ANALYST RESEARCH

Upgrades

American Axle (AXL) upgraded to Outperform from Sector Perform at RBC Capital
Assurant (AIZ) upgraded to Buy from Neutral at Goldman
CSX (CSX) upgraded to Market Perform from Underperform at Bernstein
DineEquity (DIN) upgraded to Buy from Neutral at Janney Capital
Norfolk Southern (NSC) upgraded to Market Perform from Underperform at Bernstein
Thoratec (THOR) upgraded to Buy from Neutral at UBS

Downgrades

Ann Inc. (ANN) downgraded to Neutral from Buy at SunTrust
Embraer (ERJ) downgraded to Neutral from Outperform at Cowen
Express (EXPR) downgraded to Neutral from Buy at SunTrust
Heartland Payment (HPY) downgraded to Sell from Hold at Stifel Nicolaus
Hill-Rom (HRC) downgraded to Equal Weight from Overweight at Morgan Stanley
Mosaic (MOS) downgraded to Neutral from Buy at Lazard Capital
Nationstar Mortgage (NSM) downgraded to Neutral from Buy at Sterne Agee
Potash (POT) downgraded to Neutral from Buy at Lazard Capital
Texas Instruments (TXN) downgraded to Sector Perform from Outperform at Pacific Crest

Initiations

Aegerion (AEGR) initiated with an Overweight at JPMorgan
Agree Realty (ADC) initiated with a Buy at Wunderlich
Allegheny Technologies (ATI) initiated with a Buy at Longbow
Avago (AVGO) initiated with a Buy at Capstone
Broadcom (BRCM) initiated with a Buy at Capstone
Brookdale Senior Living (BKD) initiated with a Buy at Deutsche Bank
Capital Senior Living (CSU) initiated with a Buy at Deutsche Bank
EQT Midstream Partners (EQM) initiated with a Buy at Citigroup
Emeritus (ESC) initiated with a Buy at Deutsche Bank
Five Star Quality (FVE) initiated with a Buy at Deutsche Bank
Health Care REIT (HCN) initiated with an Outperform at RBC Capital
Lorillard (LO) initiated with a Buy at CLSA
Marvell (MRVL) initiated with a Hold at Capstone
Michael Kors (KORS) initiated with an Outperform at William Blair
NXP Semiconductors (NXPI) initiated with a Buy at Capstone
NeoGenomics (NGNM) initiated with a Buy at B. Riley
O'Reilly Automotive (ORLY) initiated with an Overweight at Stephens
PerkinElmer (PKI) initiated with an Overweight at JPMorgan
Westport Innovations (WPRT) initiated with a Buy at UBS

HOT STOCKS

Oracle (ORCL) CEO Ellison told CNBC not planning any major acquisitions like NetApp (NTAP)
KBR (KBR) awarded Statoil (STO) contract to conduct LNG studies in Tanzania
Mylan (MYL) sued FDA for approval of generic version of Diovan, Bloomberg reported
Boeing (BA) said air cargo market will expand at 5.2% annual rate over next 20 years
Carlyle Group (CG) purchased 55% stake in Vermillion
CBIZ (CBZ) acquired The Pruett Group
AB Volvo (VOLVY) Buses consolidates manufacture of complete buses in Europe

EARNINGS/GUIDANCE

Companies that beat consensus earnings expectations last night and today include:
Intellipharmaceutics (IPCI)

Companies that missed consensus earnings expectations include:
Xyratex (XRTX)

NEWSPAPERS/WEBSITES

Apple's (AAPL) Asian component suppliers have started mass production of a new tablet computer smaller than the current iPad, sources say, as the company tries to stay competitive against rivals such as Google (GOOG) and Amazon.com (AMZN), the Wall Street Journal reports
Shipments of beer in the U.S. are increasing for the first time since 2008 in another sign that consumers are slowly emerging from the recession. Much of the rebound is being driven by small-batch "craft'' brewers, reflecting shifting tastes and forcing dominant players Anheuser-Busch InBev (BUD) and MillerCoors (TAP) to increasingly borrow from upstarts' playbooks. Beer shipments in the U.S. were up 1.9% to 141.4M barrels in the first eight months of 2012 after falling three straight years, according to the Beer Institute, an industry group, the Wall Street Journal reports
Best Buy (BBY) founder Richard Schulze and at least four private equity firms have started examining the books of the consumer electronics chain, early steps toward what could become a potential $11B buyout, sources say, Reuters reports
Carlyle Group (CG) said it bought a majority stake in Vermillion Asset Management, a commodities-trading hedge fund manager with about $2.2B of assets under management,
its biggest move in an expansion that has seen it diversify from private equity into other alternative asset classes, Reuters reports
BlackRock (BLK) CEO Laurence D. Fink, who has been trying to persuade retail investors to get out of cash, said the U.S. is about a year away from having a more robust economy, Bloomberg reports
The government of Macau won’t issue any licenses for new U.S. companies to operate casinos, predicted Gary Loveman, CEO of Caesars Entertainment Corp. (CZR), Bloomberg reports

SYNDICATE

Antares Pharma (ATRS) files to sell common stock, no amount given
Apollo Commercial (ARI) files to sell 7M shares of common stock
B&G Foods (BGS) 3.63M share Secondary priced at $30.25
BioLineRx (BLRX) files to sell 4.2M American Depositary Shares for holders
Javelin Mortgage (JMI) 7.25M share IPO priced at $20.00
LifeLock (LOCK) 15.7M share IPO priced at $9.00
Luxfer (LXFR) 8M share IPO priced at $10.00
NY Mortgage Trust (NYMT) commences offering of 13.5M shares of common stock
Rigel Pharmaceuticals (RIGL) announces common stock offering, no amount given

• Draghi Says Next Move Not His as Spain Resists Bailout (Bloomberg)
• Europe Readies Bond Buying (WSJ)
• EU Doubts on Deficit Cutting May Hinder Spain’s Path to Bailout (Bloomberg)
• Merkel to Visit Greece for First Time Since Crisis Outbreak (Bloomberg)
• Fed's Bullard warns inflation won't ease U.S. debt burden (Reuters)
• Walmart Workers Stage a Walkout in California (NYT)
• Natural Gas Glut Pushes Exports (WSJ)
• BOJ Refrains From More Stimulus as Political Pressure Mounts (Bloomberg)
• Big funds seek to rein in pay at Wall Street banks (Reuters)
• Hong Kong Luxury Sales Fall as Chinese Curb Spending (Bloomberg)
• Dave and Busters Pulls IPO due to "Market Conditions" (Reuters) - so market at anything but all time highs now is market conditions?
• Weak U.S. labor market looms ahead of elections (Reuters)
• Glut of Solar Panels Poses a New Threat to China (NYT)
• Israeli forces kill American gunman in hotel shoot-out (Reuters)
• As Iran’s Currency Keeps Tumbling, Anxiety Is Rising (NYT)
• Republicans lead Obama in war for judicial dominance (Reuters)

Overnight Media Digest

WSJ

* Barry Zubrow, a trusted lieutenant of JPMorgan Chase & Co Chief Executive James Dimon, is expected to give up his job as regulatory affairs chief in what would be the latest reshuffling to follow a multibillion-dollar trading blunder.

* Samsung Electronics Co said Friday it expects a record operating profit for the third quarter, which analysts attributed to stellar sales of the company's flagship smartphones despite an intensifying global patent battle with Apple Inc

* Huawei Technologies Co Ltd has reached out to investment banks for advice on issuing stock to the public as the Chinese telecom company considers ways to improve its odds of winning big contracts in markets like the U.S.

* Zynga Inc forecast a third-quarter net loss including acquisition charges and lowered its 2012 financial outlook for the second time this year.

* Apollo Global Management, parent of "American Idol" owner Core Media Group, is proposing a merger of Core and Endemol, a Dutch production company whose shows include "Big Brother" and "Deal or No Deal," say people familiar with the situation.

* Facebook Inc, the social network started by Mark Zuckerberg in his Harvard dorm eight years ago, reached the milestone of one billion monthly active members on Sept. 14.

* A consortium including Exxon Mobil Corp, ConocoPhillips Co and BP Plc said late Wednesday it is moving forward with plans to export natural gas from Alaska's North Slope in a project that could cost as much as $65 billion.

* AMR Corp's American Airlines said it will now take several extra days, and perhaps disrupt some flight schedules through the early part of the weekend, to ensure that passenger seats on more than four dozen of its jets are properly secured.

* U.S. officials moved this week to shut down websites owned by Canada Drugs, the Internet pharmacy and drug wholesaler that distributed counterfeit Avastin to U.S. doctors last year, the latest in a crackdown on the international gray market for pharmaceuticals.

FT

JOHNSON SLAMS GOVERNMENT OVER AIRPORTS

London Mayor Boris Johnson has attacked the government as "blind" and "complacent" for delaying action on London's airport capacity crunch.

MORGAN STANLEY CHIEF WARNS ON WALL ST PAY

Morgan Stanley is preparing to cut job cuts and smaller bonuses planned for next year, the bank's chief executive, James Gorman, said on Friday.

GOOGLE EBOOK WIN LITTLE THREAT TO AMAZON

Google Inc and a group of publishers have agreed to a settlement over making digital copies of books.

RUSSIA MOOTS ARCTIC OIL LICENCES FOR WEST

Russia is considering allowing western companies to own oil licences in its Arctic waters, according to its energy minister, Alexander Novak.

BAE TIE-UP BAD FOR UK, WARNS DARLING

The British government would have no stake in the enlarged group formed by the merger of BAE Systems and EADS , said Alistair Darling, the former chancellor of the exchequer.

BARCLAYS ALTERS INVESTMENT BANKING SHAPE

Barclays announced a shake-up at its investment bank on Thursday as the group tries to cut costs and reduce risks to its reputation.

REDROW'S CHAIRMAN RAISES BID FOR GROUP

Steve Morgan, the chairman of Redrow, has raised his offer for the housebuilding company he founded more than 35 years ago.

ECB KEEPS INTEREST RATES UNCHANGED

Mario Draghi, president of the European Central Bank, on Thursday came close to demanding that European leaders make use of his bond-buying plan.

FACEBOOK REACHES 1 BLN ACTIVE USERS -

Social media company Facebook Inc reported on Thursday it reached the 1 billion user mark last month

Canada

THE GLOBE AND MAIL

* XL Foods, the Alberta beef packer at the center of a massive recall, is taking full responsibility for the tainted product as questions mount over why Canadian officials let the company's plant operate for two weeks after the U.S. deemed the meat unfit to cross the border.

The company acknowledged its food-safety practices were "not enough" and said it would work with the Canadian Food Inspection Agency to strengthen them.

* Quebec's ever-expanding corruption scandal has reached into the home and headquarters of a mayor long considered untouchable.

About 70 investigators from the province's anti-corruption squad descended on Laval City Hall and the home of Mayor Gilles Vaillancourt on Thursday, seizing documents and databases related to contracts handed out by Quebec's fastest-growing big city.

Reports in the business section:

* The federal New Democratic Party formally disapproved of CNOOC Ltd's U.S. $15.1 billion offer to acquire Calgary's Nexen Inc, aiming to widen opposition to China's plan to secure a major foothold in the oil sands.

* Canadian Imperial Bank of Commerce, the country's fifth-largest bank by assets, has unveiled an ambitious plan to expand its banking hours by doubling the number of locations open on Sunday, to 107. That will put CIBC squarely in second place, after Toronto-Dominion Bank, which has made weekend banking hours a key part of its strategy.

The strategy for the banks is to lure customers from competitors who aren't open every day, betting that Canadians are too time pressed to do their banking during the week.

NATIONAL POST

* Federal Agriculture Minister Gerry Ritz has faced intense criticism from opposition parties about the extensive recall of beef products sparked by an E. coli scare at an XL Foods plant in Alberta, but Thursday was the first day this week he faced his critics inside the House of Commons.

NDP leader Thomas Mulcair demanded he resign over the largest beef recall in Canadian history.

* Canada is poised to claim ownership of a vast new expanse of undersea territory beyond its Atlantic and Arctic coasts that's greater in size than Quebec and equal to about 20 percent of the country's surface area.

The huge seabed land grab has been in the works since 1994, when federal scientists first conducted a "desktop study" of Canada's potential territorial expansion under a new UN treaty allowing nations to extend their offshore jurisdictions well past the current 200-nautical-mile limit of so-called "Exclusive Economic Zones" in coastal waters.

FINANCIAL POST

* SNC-Lavalin received renewed signs of confidence in its operations Thursday after being selected as the preferred bidder for a $1.4 billion B.C. transit project and winning a potash feasibility project in New Mexico.

A consortium headed by the Montreal-based engineering and construction giant has been tabbed by the B.C. government to design and build the Evergreen Line Rapid Transit project.

* Junior miner Sulliden Gold Corp has backed off plans to introduce a "milestone bonus" program, that would pay insiders for achieving expected goals on the way to developing its Shahuindo project in Peru. The plan, ended after a shareholder revolt, meant that they could receive large amounts of money well before reaching production.

Australia

THE AUSTRALIAN FINANCIAL REVIEW (www.afr.com)

--Sources close to takeover talks between surf, street, skate and ski wear retailer Billabong International and private equity firm TPG Capital have revealed that the latter is worried about Billabong's core brand and its medium-term forecasts. TPG is the sole suitor for Billabong after rival Bain Capital withdrew from proceedings last month. The private equity group has until October 24 to finalise due diligence for its A$695 million bid, observers added. Page 15.

--Apollo Global Management and Oaktree Capital , the two hedge funds that control more than A$1 billion of Nine Entertainment Co's senior debt, are considering lodging a bid for the free-to-air broadcaster if Nine's management decides to put the business on the market. Observers said the concept would not damage a sale process, with the senior lenders only being given the option to "buy" the company if Nine does not receive a suitable offer from an outside party. Page 15.

--Discovery Metals yesterday announced that a Chinese private equity firm had lodged a A$830 million takeover bid for the silver and copper producer, with the company's board saying it "strongly believes" that uncovering the offer was in the best interests' of investors. Discovery's share price has soared by 23 percent over the last seven days, with the current price of A$1.455 just below Cathay Fortune Corporation's A$1.70 a share offer. Cathay Fortune already owns 13.7 percent of Discovery. Page 15.

--Elmer Funke Kupper, chief executive of the Australian Securities Exchange, yesterday admitted that relations between the stockmarket and its core clients would become more strained in the future as both parties venture into each other's markets in search of new business opportunities. "I think the relationship between exchanges and banks around the world is being tested  the challenge of course for us and all our clients is that growth is hard to come by," he added. Page 19.

THE AUSTRALIAN (www.theaustralian.news.com.au)

--Street, surf, skate and ski wear group Billabong International yesterday issued a statement to the Australian Stock Exchange confirming that private equity firm TPG Capital had not withdrawn from talks to buy the Australian retailer for A$694 million. The announcement following a 23 percent fall in Billabong's share price to A$1.01, its lowest level in three months. Page 19.

--Global miner BHP Billiton has been identified as one of three suitors for offshore United States oil and gas assets owned by the national oil company of Brazil, Petrobras. Observers note that, provided the report is accurate, it would be a surprising change in tack from BHP chief executive Marius Kloppers, who has been warning stakeholders and investors that the company would limit expenditure after cancelling A$50 billion of development projects. Page 19.

--Rural services firm Elders yesterday surprised observers when it published private correspondence between itself and Ruralco, its largest shareholder, in an attempt to clear the air about discussions the two parties have had about a possible merger. Elders told the stock market in a statement that Ruralco had sent a letter proposing a merger, but the board rejected it because it was "conceptual in nature and lacked sufficient detail to enable it to be evaluated". Pg 19.

--Australia and New Zealand Banking Group (ANZ) yesterday announced it was investing A$1.5 billion in technology to reduce the lender's branch network footprint, a move that would save as much as A$350 million annually in operating costs. "We don't need as much space  as we remodel the branches over the next few years, we won't need to be in as big a location to offer the same services," Phil Chronican, Australian chief of ANZ, said. Page 19.

THE SYDNEY MORNING HERALD (www.smh.com.au)

--The Australian Competition and Consumer Commission yesterday announced that it would not support supermarket giant Woolworths' acquisition of hardware stores owned by G Gay & Co, finding that the takeover was likely to significantly reduce competition by eliminating one of two major competitors to Woolworths in Melbourne's Ballarat region. The regulator added that if the deal proceeded, Woolworths' remaining rivals in the area were unlikely to be able to compete against the supermarket giant's Masters outlets and rival hardware retail chain Bunnings. Page B3.

--Supermarket giant Woolworths will today launch its A$1.4 billion Shopping Centres Australasia Property Group, an entity housing 70 marketplace stores in Australia and New Zealand. The group's largest store will be the 28,000 square metre outlet in Kwinana, Perth, followed by the 22,000 square metre store in Victoria's Lilydale. Analysts from investment house UBS added that a proposed A$500 million capital raising from Woolworths would deliver "modest" returns for shareholders, with the proceeds being used to "retire debt with capital management likely in 2014". Page B3.

--Steel manufacturer Arrium yesterday upgraded guidance for its iron ore exports as the company continues its defence against a A$1 billion takeover bid from a foreign syndicate. Arrium, formerly known as OneSteel, previously predicted 8 million tonnes of iron ore exports for the 2012-13 financial year but yesterday increased that amount to 9 million tonnes. Page B4.

--National Australia Bank (NAB) employees have received a subpoena from a United States court as part of a class action over more than A$1 billion in losses that the lender absorbed on subprime mortgages. NAB shareholders launched the lawsuit after the bank wrote down its investments in collateralised debt obligations four years ago. Court orders have also been given to two staff at accounting giant KPMG. Page B4.

THE AGE (www.theage.com.au)

--Australian pension funds managing up to A$350 billion in assets are expected to join their counterparts in the United States and Britain in asking News Corporation to remove chairman Rupert Murdoch and his sons Lachlan and James from the media conglomerate's board in the wake of the phone hacking scandal. The Australian Council of Super Investors representative body said that family members on the News Corp board should be replaced with talented outside directors with integrity. Page B1.

--Greg L'Estrange, former chief executive of Gunns, yesterday said that the failed forestry group lacked accountability and failed to follow its own guidelines. "It's not a company with a culture of complying with policies  transparency was the most difficult part of my job," Mr L'Estrange said, adding that there was no "standard forward forecasting methodology" in the group's monthly finance management report. Page B2.

--Qantas Airways has begun marketing flights to London via Dubai as part of its alliance deal with Middle Eastern carrier Emirates Airlines, with observers saying that Qantas has decided it can begin laying the foundations of the deal without the approval of regulators. The Australian Competition and Consumer Commission is still reviewing the 10-year alliance between the companies. Analysts said it seemed that the commission could not give an interim approval to the companies before the release of a draft decision on the deal later this year. Page B3.

--Mayne Pharma yesterday announced that it was in the process of acquiring pharmaceutical developer Metrics Inc for as much as US$120 million, which observers noted is more than double the United States-based firm's current market capitalisation. "The combined business will have 14 marketed products plus 17 new products in various stages of development," Mayne Pharma said. Page B3.

Fly on the Wall 7:00 Market Snapshot

ANALYST RESEARCH

Upgrades

Automatic Data Processing (ADP) upgraded to Buy from Neutral at Goldman
Dollar Tree (DLTR) upgraded to Outperform from Neutral at Credit Suisse
FIS (FIS) upgraded to Outperform from Neutral at RW Baird
Family Dollar (FDO) upgraded to Outperform from Neutral at Credit Suisse
Informatica (INFA) upgraded to Buy from Neutral at Nomura
Owens-Illinois (OI) upgraded to Buy from Neutral at Goldman
Thermo Fisher (TMO) upgraded to Outperform from Market Perform at Wells Fargo
Western Alliance (WAL)  upgraded to Outperform from Market Perform at Keefe Bruyette

Downgrades

Adtran (ADTN) downgraded to Underweight from Equal Weight at Barclays
ArcelorMittal (MT) downgraded to Neutral from Buy at Citigroup
Autoliv (ALV) downgraded to Sell from Neutral at UBS
Beneficial Mutual (BNCL) downgraded to Market Perform at Keefe Bruyette
Biogen (BIIB) downgraded to Perform from Outperform at Oppenheimer
Capital Federal (CFFN) downgraded to Market Perform from Outperform at Keefe Bruyette
Endo Health (ENDP) downgraded to Sector Perform from Outperform at RBC Capital
F5 Networks (FFIV) downgraded to Equal Weight from Overweight at Barclays
Gardner Denver (GDI) downgraded to Hold from Buy at KeyBanc
Hewlett-Packard (HPQ) downgraded to Neutral from Buy at Sterne Agee
Marriott (MAR) downgraded to Hold from Buy at ISI Group
Marriott (MAR) downgraded to Neutral from Buy at UBS
MeadWestvaco (MWV) downgraded to Neutral from Buy at Goldman
Meridian Interstate (EBSB) downgraded to Market Perform at Keefe Bruyette
PAREXEL (PRXL) downgraded to Hold from Buy at Jefferies
Zynga (ZNGA) downgraded to Neutral from Outperform at RW Baird

Initiations

Annie's (BNNY) initiated with a Neutral at Janney Capital
Astoria Financial (AF) initiated with a Hold at Jefferies
CapLease (LSE) initiated with an Outperform at JMP Securities
Hain Celestial (HAIN) initiated with a Buy at Janney Capital
MarketAxess (MKTX) initiated with a Market Perform at BMO Capital
Molex (MOLX) initiated with a Hold at Jefferies
QCR Holdings (QCRH) initiated with an Outperform at Raymond James
RF Micro Devices (RFMD) initiated with a Neutral at Lazard Capital
Skyworks (SWKS) initiated with a Buy at Lazard Capital
The Inventure Group (SNAK) initiated with a Buy at Janney Capital
TriQuint (TQNT) initiated with a Buy at Lazard Capital
Vanguard Natural (VNR) initiated with a Buy at UBS

HOT STOCKS

Moody's placed long term rating of Hewlett-Packard (HPQ) under review for downgrade
iStar Financial (SFI) said Moody's upgraded its corporate family rating to B2 from B3
National Credit Union Administration sued Credit Suisse (CS) over mortgage-backed securities
AT&T (T) debuts Windows 8 (MSFT) tablets for holiday shopping season
AB Volvo (VOLVY) signed letter of intent to divest plant in Spain
Thor Industries (THO) subsidiary acquires Kansas bus operation
CBIZ (CBZ) acquired anesthesia billing company ProMedical
Saba Software (SABA) delayed certain SEC filings

NEWSPAPERS/WEBSITES

Four years after the financial crisis, as the stock market reaches toward new highs, many investors refuse to return. Stock indexes have doubled in value since the market low in March 2009, but investors have pulled a net $138B from mutual funds and exchange-traded funds that invest in U.S. stocks, according to the Investment Company Institute, a mutual-fund trade group. Investors over the same period put $1T into bond funds, the Wall Street Journal reports
Energy companies are moving to export natural gas from the U.S., looking for more profitable markets as a gas glut pushes prices to the lowest levels in a decade. A consortium including ExxonMobil (XOM), ConocoPhillips (COP) and BP (BP) said it’s going ahead with plans to export natural gas from Alaska's North Slope in a project that could cost as much as $65B, the Wall Street Journal reports
The Greek leader Antonis Samaras said his country couldn’t manage beyond November without the next tranche of international aid and suggested the ECB could help by easing the terms of its Greek debt holdings, Reuters reports
Fiat (FIATY) CEO Marchionne would buy GM’s (GM) European subsidiary Opel if GM's alliance with Peugeot (PEUGY) dissolves, according to Italian daily Il Sole-24 Ore, Reuters reports
UnitedHealth Group (UNH) is in talks to buy a stake or all of the Brazilian insurer and hospital operator Amil Participacoes that has a  market value of $4.47B, sources say, Bloomberg reports
American Airlines (AAMRQ) risks having to tap its $5B bankruptcy cash fund and probably will lose some passengers after on-time arrivals fell, cancellations jumped and incorrectly installed seat clamps were found on six planes, Bloomberg reports

SYNDICATE

Arbor Realty Trust (ABR) commences offering of 3.5M shares of common stock
FXCM (FXCM) files to sell 9M shares of common stock for holders
Fleetmatics (FLTX) 7.813M share IPO priced at $17.00
Infoblox (BLOX) 5M share Secondary priced at $20.00
Walker & Dunlop (WD) files to sell 21.64M shares of common stock for holders

From Jason Kelly, author of The New Tycoons: Inside the Trillion Dollar Private Equity Industry That Owns Everything - an excerpt

Prologue

Standing in Legoland in Carlsbad, California in 2011, fulfilling a promise to my then eight-year-old son William, it hit me. I was strolling around a Blackstone-owned property. We'd woken up in a Homewood Suites, owned by Blackstone-backed Hilton. We'd driven to the park in a rental car from Hertz, owned by private-equity firms Carlyle and Clayton, Dubilier & Rice. Practically every time I'd opened my wallet that day, it had been to a company owned by private equity. Even on vacation, I couldn't escape.

A few months later, I had dinner with Greg Brenneman, who'd held top positions at Continental, Burger King, and Quizno's, all private-equity-owned at the time he was involved. Brenneman is now the chairman of CCMP Capital, whose investments have included 1-800-Flowers.com and Vitamin Shoppe. We talked at length about the ubiquity of PE ownership -- my J. Crew sweater, the Dollar General store in my wife's hometown in the Catskills. I started a running list on my BlackBerry that quickly grew to dozens of examples. Brand names piled up, from Toys "R" Us to Petco. The more I looked, the more I found it.

The numbers are staggering. Private-equity firms globally and collectively had almost $3 trillion in assets at the end of 2011.¹ The companies they own account for about 8 percent of the U.S. gross domestic product by one estimate.²

Contemplating how they got all that money in the first place triggered another thought, a memory of a colleague mentioning that her mother was a teacher in suburban Toronto and had her retirement account in the hands of the Ontario Teachers' Pension Plan. I'd profiled that pension for Bloomberg Businessweek in early 2010 -- they were pursuing a strategy of buying companies directly, like vitamin retailer GNC. Thousands of other pensions, endowments, and government funds, from California to Singapore, were committing hundreds of billions to the likes of Blackstone and KKR. I thought of my in-laws, each with a pension. They, and millions of folks like them were, usually unknowingly, owners of dozens of companies on my ever-growing BlackBerry list.

While the business of buying and selling companies is far from new, the emergence of these players was relatively sudden. What began as a cottage industry known as bootstrapping and leveraged buyouts in the 1970s and 1980s, had blossomed in the 1990s as a handful of small players started to grow rapidly and others, eyeing a huge opportunity, hung out their own shingles. Somewhere toward the turn of the twenty-first century, the more genteel "private equity" became the chosen descriptor. The name may have changed, but the basic business model was the same: collect money, pair it with debt, and buy a company with the intent of selling it down the line for a profit.

The period from 2000 to the present changed everything. Small private partnerships accustomed to rounding up a few hundred million dollars suddenly were raising funds well in excess of $10 billion, accepting huge sums of money from pensions and endowments eager for investment returns topping 20 or 30 percent a year. Wall Street became an eager lender, developing new ways to provide the debt financing in order to get the associated fees. Big investment banks took to investing alongside their clients.

All that money meant that almost nothing was out of bounds for private equity, and 2005 to 2007 saw a spate of deals for companies deeply entrenched in the infrastructure of our everyday lives, from hospital giant HCA to credit card processor First Data to hotelier Hilton.  My own introduction was a baptism by fire; I began covering the industry in February 2007. During my first week, news leaked of the biggest-ever takeover, the leveraged buyout of power producer TXU.

What happened next was a different sort of education. Deal making came to a screeching halt with the credit freeze of 2007 and 2008 that triggered the broader global financial crisis. The private-equity managers generally hunkered down, and tried to soothe their own anxious investors pummeled by the public markets -- investors who also were worried about what they owned through their buyout funds. Unlike hedge funds, where a bad trade can mean huge losses, an ill-conceived private-equity deal can linger. When the dust settled, private-equity firms still owned all of the companies they'd bought in the boom.

Emerging from the crisis, existential questions abounded. My Legoland epiphany demonstrated just how embedded private equity was in our everyday lives. What seemed like an arcane corner of finance when I arrived was actually central to all of us and very few people actually knew who they were or what they did.

Reporting and writing about business, especially finance and especially in New York, can sometimes feel like a demented sports beat, simply keeping score and tracking rich people getting richer or marginally less rich. But in this case, that's just scratching the surface. What these guys are doing matters to all of us in some form or fashion.

Private equity by its nature and design, is secretive, a breathtakingly wealthy corner of the world where the names only occasionally escape the business pages, names like Stephen Schwarzman, David Bonderman, and David Rubenstein. The relatively small firms they've created, by virtue of what they were able to buy with those ever-growing pools gave them outsized influence as owners and employers. Blackstone, Schwarzman's firm, alone counts almost a million employees through companies it controls. They are modern day Wizards of Oz -- the men behind the private-equity curtain.

The best way to understand these men is to look at what they've created, and it's startling how much each of the largest private-equity firms are mirrors of the founders themselves. There's an egotism at the center of the whole exercise. After all, each of these men, some more willingly than others, ditched successful careers because they deeply believed they saw something that only a handful of others did. And then they went a step further. They decided to build what have become massively influential institutions meant to outlast them.

To understand what they created and what it means to have them so entrenched in our lives, I decided to follow the money to reveal through their words and actions the implications of their activities to fix actions. The trail begins in the sanitized meeting rooms of public pensions, moves to palatial suites in skyscrapers with top-of-the-world views, and on to discount stores and pizza chains and hotels, before it comes all the way back to those same vanilla pension offices and eventually to the retirement checks of teachers and firefighters and, in one of several twists, even some workers of the companies owned by private-equity firms.

Along the way, that money finds itself augmented by debt and pushed into companies that may thrive, implode, maintain, or simply fade away. The money befuddles Washington lawmakers and regulators, in a debate sharpened by the presidential candidacy of Mitt Romney. His private-equity career has brought the industry into the public consciousness in a never-before-seen way, prompting its largest players to explain themselves with at times surprising candor.

Their contemplation stems not only from a bright spotlight but from their own personal situations. Having created unbelievable amounts of wealth for themselves, they're mulling their own legacies, in terms of the empires they've built and what they'll ultimately do with their riches.

With all the talk of retirement, it's easy to forget the relative youth of the industry. I've come to think of private equity as a teenager with a lot of potential, but still struggling with adolescent tendencies -- at times unresponsive, rash, selfish, and fluctuating between arrogance and self- doubt. By virtue of some hard work and a lot of luck, it's ended up in a position to potentially be an upstanding member of society. To ignore it or wish it away is foolhardy. It's here and the influence is growing. And whether it's the price of your morning cup of coffee, your bed sheets on a business trip, or the size of your retirement check in the mailbox, you're involved.

1. Paul Hodkinson, "Logjam Gives Buyout Firms $1.2 Trillion Hangover," Financial News, March 19, 2012. http://media.e?nancialnews.com/story/ 2012-03-19/logjam-gives-buyout-?rms-hangover 

2. Katie Gilbert, "New Green Portfolio Program Could Change Private Equity," Institutional Investor, September 6, 2011. www.institutionalinvestor.com/Article/2895315/New-Green-Portfolio-Program-Could-Change-Private-Equity.html

. . .

Continue reading here

• Italy rejects need for EU control (FT)
• ‘Worst US quarterly earnings since 2009’ (FT)
• Chinese firm helps Iran spy on citizens (Reuters)
• World Bank cuts East Asia GDP outlook, flags China risks (Reuters)
• Foxconn factory rolls on in spite of strike (China Daily)
• Economic recovery ‘on the ropes’ (FT)
• Japan Tries Cars That Make the Mini Look Maxi (Businessweek)
• Euro Finance Chiefs to Give Positive Greece Statement, Rehn Says (Bloomberg)
• Romney attacks drones policy (FT)
• Euro zone mulls 20 billion euro separate budget (Reuters)
• Hong Kong’s Leung Seeks Turnaround With Economy Focus (Bloomberg)
• RBA Keeps Some Documents Private in Securency Bribe Probe (Bloomberg)
• India Inflation to Remain at 7.5%-8% Till Early 2013 (WSJ)

Overnight Media Digest

WSJ

* The number of people sickened with fungal meningitis from tainted spinal steroid injections has now risen to 91 in nine states, including seven deaths, federal officials said.

* China's Huawei poses a national-security threat and may have violated U.S. laws, a year-long investigation by the House intelligence committee has concluded.

* Government officials negotiating terms for the proposed merger of BAE Systems and Airbus parent EADS remain deadlocked over key issues including state ownership stakes.

* YouTube expands the program to produce content for its video website as it seeks more ad dollars.

* The U.K. government is laying out the battle lines for additional austerity measures even as it faces pressure to reboot the country's faltering economy.

* Real-estate tycoon Sam Zell is close to tapping the top executive at one of his residential-real-estate companies to replace the chief executive of Zell's international business, who stunned the real-estate industry when he departed suddenly last month, according to people briefed on the matter.

* Foxconn Technology Group, the parent of Hon Hai Precision Industry Co, a major Apple Inc supplier, said Saturday two disputes between employees occurred at one of its China manufacturing plants this month

FT

UK AUSTERITY SQUEEZE SET TO RUN UNTIL 2018

George Osborne is set to be told this autumn that he will have to plug another large hole in the public finances, extending austerity until 2018.

SIR GUS WITHDRAWS FROM BOE GOVERNOR RACE

Gus O'Donnell, former British cabinet secretary, has decided not to apply to become Bank of England governor.

INVESCO VOICES CONCERN OVER BAE TIE-UP

BAE Systems' largest shareholder will on Monday signal its "significant reservations" about the UK defence group's proposed tie-up with EADS.

REGULATOR WARNS ON AUDITORS' ALUMNI

The four leading accountancy firms in Britain could be helping to stifle competition in the audit market, according to a UK regulator probing the dominance of PwC, Deloitte , KPMG and Ernst & Young.

'WORST US QUARTERLY EARNINGS SINCE 2009'

The slowdown in the global economy is expected to result in one of the worst quarterly earnings seasons since late 2009.

GOOGLE MAKES FIRST FORAY INTO CREDIT BUSINESS

Google is getting into the credit business for the first time, with the launch on Monday of a programme in the UK.

FOXCONN SUFFERS UNREST AT IPHONE FACTORY

Foxconn , the Taiwanese contract manufacturer that makes products for Apple, has been hit by a second bout of labour unrest.

OSBORNE CONFIRMS 10 BLN GBP MORE IN CUTS

George Osborne will on Monday confirm plans to slash a further 10 billion pounds ($16.19 billion) from the welfare bill to tackle Britain's debt crisis.

FAVOURABLE TAX DRAWS COMPANIES TO UK

At least 20 multinationals are drawing up plans to move their regional or global headquarters to Britain over the next year.

EU HAPPY WITH UK RURAL BROADBAND PLAN

The European competition commissioner Joaquin Almunia is ready to approve plans to pump 530 million pounds ($858.23 million) of UK state aid into rural broadband.

NYT

* YouTube, now carrying more polished output, will announce more original channels to the 100 it has introduced in the last year.

* The Securities and Exchange Commission is paying a trading firm for software that will give the agency its first real-time window on an increasingly sophisticated stock market.

* Tucker Carlson's Daily Caller has quadrupled its page views and total audience in two years, and it announced that it became profitable this year.

* The recall of 268,000 CR-V crossovers in the United States announced on Saturday was Honda Motor's third recall for the week.

* With gasoline prices reaching record highs across California over the last week, Governor Jerry Brown moved on Sunday to alleviate some of the pain at the pump.

Canada

THE GLOBE AND MAIL

* Dozens of protesters rushed the gates of Marineland on Sunday demanding an end to what they called the abuse of whales, dolphins and other animals at the amusement park, but the situation was quickly brought under control, police and organizers said.

* A company with the same address and ID number as the Toronto-based owner of a chartered bus that crashed on a New Jersey highway wasn't authorized to operate in the United States, documents indicate. The bus flipped, slid and crashed into a boggy embankment on an interstate exit ramp in Wayne, New Jersey, on Saturday morning.

Reports in the business section:

* The NHL lockout's potential impact on business is likely to be top of mind when Bauer Performance Sports Ltd reports first-quarter earnings Tuesday and follows up with a conference call next week. The ice hockey-equipment maker Bauer also has an ambitious game plan to expand its presence in lacrosse - the fastest-growing team sport in North America.

* Sam Duboc made his name on Bay Street with successful private equity investments in unfashionable companies such as Hair Club for Men. Now Duboc is working on an ambitious turnaround project: fixing Canada's woeful venture capital industry.

NATIONAL POST

* The number of illnesses linked to beef products from the XL Foods plant in Brooks, Alberta has increased to 10 people from three provinces.

* Mafia boss Vito Rizzuto stepped into an unknown world after an eight-year prison stint, with his once-dominant criminal empire decimated by setbacks and his own family devastated by tragedy. He arrived at Toronto's Pearson International Airport on Friday night aboard an Air Canada flight.

FINANCIAL POST

* Six months after announcing its intention to make an offer to acquire Norway's Statoil Fuel & Retail and three months after closing the largest acquisition in its 32-year history, Quebec's Alimentation Couche-Tard Inc is within one high-yield financing of raising the long-term capital needed for the US$2.8-billion acquisition.

* Canadian retailing giant Hudson's Bay Co will cut 210 jobs in Toronto as the company moves its information services department to the United States. HBC said it will transfer 130 jobs from the Canadian information services department to an office in St. Louis, Missouri. Another 80 jobs will be eliminated.

Hong Kong

SOUTH CHINA MORNING POST

-- A four-year-old boy visiting Hong Kong from Saudi Arabia is sick in Queen Mary Hospital with a Sars-like virus suspected to be the same one that emerged in the Middle East last month. If confirmed, it would be the world's third case of the novel corona virus, which killed one man and left the other critically ill.

-- Hong Kong and China Gas, better known as Towngas which is the only distributor of piped gas in the city, will consider a separate listing of its non-city gas businesses, ECO Environmental Investments Limited (ECO), when it reaches about 40 per cent of Towngas' total net profit, managing director Alfred Chan said.

-- Property prices will remain high and may even continue to rise until the new administration's housing measures begin to kick in, industry watchers said.

HONG KONG ECONOMIC TIMES

-- Great Eagle Holdings Ltd said it would buy a hotel property in the heart of Midtown Manhattan at 400 Fifth Avenue, New York, the United States, for $229 million.

THE STANDARD

-- Highly resistant bacteria related to the tuberculosis germ has been found to be the reason for four women taking ill with septic shock after receiving transfusions at the beauty center DR in Causeway Bay.

-- Foxconn Technology Group workers returned to the assembly line that makes Apple Inc's iPhone 5 in Zhengzhou, Henan, after walking off their jobs on Friday (Oct. 5), advocacy group China Labour Watch said.

SING TAO DAILY

-- Hong Kong's Secretary for the Environment Wong Kam-sing said the government has received applications from the two power companies, CLP Power and Hongkong Electric, for a tariff increase next year.

MING PAO DAILY NEWS

-- Sun Hung Kai Properties' Century Gateway project in Tuen Mun has sold 900 units out of 1,075 units so far, reaping HK$6 billion ($773.91 million) for the developer.

RUSSIA

VEDOMOSTI

- The number of Russians who approve of opposition rallies reached 39 percent in September compared to 33 percent in August, the paper writes citing a recent Levada poll.

- Russians spent 30 billion roubles ($971.23 million) on cinema tickets in January-September 2012, which is 18.9 percent more than in the same period of 2011, the daily says.

- Samsung Electronics Co Ltd's sold 28 percent of all tablet computers in Russia in August, while Apple Inc. sold 26.8 percent of its iPads there, the daily reports citing a report by German market research firm GfK.

KOMMERSANT

- Russian government obliged state energy holding Rosneftegaz to pay 50 billion roubles ($1.59 billion) in dividends for the first nine months of 2012, the daily says.

- The paper runs an interview with the leader of Russia's North Caucasian republic of Dagestan, who condemns a recent shooting in central Moscow during a Dagestani wedding.

- Russian car-maker AvtoVAZ increased net profit four-fold to 27.4 billion roubles ($887.06 million) in the first half of 2012 compared to the same period last year, the daily writes.

European economic update

• Switzerland Harmonised CPI -0.4% y/y. Previous -0.5% y/y.
• Germany Industrial Production -0.5% m/m -1.4% y/y – higher than expected. Consensus -0.6% m/m. Previous 1.3% m/m -1.4% y/y.
• Czech Republic Industrial Production -3.1% y/y – lower than expected. Consensus 0.0% y/y. Previous 4.2% y/y.
• Czech Republic Unemployment Rate 8.4% – higher than expected. Consensus 8.3%. Previous 8.3%.

Fly on the Wall 7:00 Market Digest

ANALYST RESEARCH

Upgrades

BlackRock (BLK) upgraded to Buy from Neutral at Citigroup
C.H. Robinson (CHRW) upgraded to Neutral from Underweight at JPMorgan
Constellation Brands (STZ) upgraded to Neutral from Underweight at HSBC
Maxim Integrated (MXIM) upgraded to Neutral from Underweight at JPMorgan
MetroPCS (PCS) upgraded to Outperform from Market Perform at Bernstein
Netflix (NFLX) upgraded to Overweight from Equal Weight at Morgan Stanley

Downgrades

Adtran (ADTN) downgraded to Underweight from Equal Weight at Morgan Stanley
Ashland (ASH) downgraded to Neutral from Overweight at JPMorgan
Intersil (ISIL) downgraded to Underweight from Neutral at JPMorgan
KeyCorp (KEY) downgraded to Hold from Buy at Deutsche Bank
Panera Bread (PNRA) downgraded to Market Perform from Outperform at BMO Capital
Parker-Hannifin (PH) downgraded to Underperform from Neutral at Longbow
RDA Microelectronics (RDA) downgraded to Equal Weight at Morgan Stanley
Renasant (RNST) downgraded to Hold from Buy at Wunderlich
Swift Energy (SFY) downgraded to Neutral from Buy at SunTrust
Webster Financial (WBS) downgraded to Hold from Buy at Deutsche Bank
Western Gas Partners (WES) downgraded to Neutral from Buy at UBS

Initiations

Auxilium (AUXL) initiated with a Buy at WallachBeth
Comcast (CMCSA) initiated with a Sector Perform at Pacific Crest
Kindred Healthcare (KND) initiated with a Neutral at Citigroup
Time Warner Cable (TWC) initiated with a Sector Perform at Pacific Crest

HOT STOCKS

UnitedHealth (UNH) acquired 90% of Amil for $4.9B in cash
Gannett (GCI), Dish (DISH) extend deadline, continue to negotiate to avert TV blackout
Wal-Mart (WMT) and American Express (AXP) to make financial services announcement at 8:30 this morning
Facebook (FB) planning to cut size of credit line, DJ reported
Ecuador to pay Occidental (OXY) $1.77B to settle contract dispute, Bloomberg reported
GenCorp (GY) acquisition of Rocketdyne (UTX) division of United Technologies (UTX)
delayed pending FTC approval
FCC declined to extend cable access rules (NWSA, DTV, LMCA, TWC, VZ, CVC, CMCSA)
Watson Pharmaceuticals (WPI) received EC approval for pending Actavis acquisition
Amazon.com (AMZN) agreed to 11-building purchase in Seattle totaling $1.16B
Hewlett-Packard (HPQ) selected for private cloud services by Renault
Churchill Downs (CHDN) acquired Riverwalk Casino and Hotel for $141M

NEWSPAPERS/WEBSITES

Investors and analysts agree on one thing: Earnings season is likely to be bad. The bigger debate is how much stock investors should worry about the parade of gloomy news. For the first time in 11 quarters, companies in the Standard & Poor's 500-stock index are likely to show a decline in profits, overall, the Wall Street Journal reports
Natural gas prices have jumped in recent weeks, but competition from coal and expectations for warm weather are about to put the brakes on the rally, traders and analysts said, the Wall Street Journal reports
Executives are more downbeat than they have been in years about the prospects for corporate deal making, citing worries about the euro zone and softening in emerging markets, according to a new Ernst & Young survey, Reuters reports
China's services sector increased to 54.3 in September from 52.0 in August, rebounding to its highest level since May, according to the HSBC services sector Purchasing Managers' Index, thanks to a rise in the new business sub-index to 54.0, Reuters reports
Yahoo (YHOO) investors put off by a stock price that has barely budged this year are urging CEO Marissa Mayer to buy back shares and not pay a dividend with the $3B raised from selling a stake in Alibaba Group Holding (ALBCF), Bloomberg reports
Small cars are big sellers for automakers from GM’s (GM) Chevrolet and Fiat (FIATY) to Toyota (TM), Volkswagen (VLKAY) and Honda (HMC), on a pace to capture the largest share of the U.S. auto market since 1993 and driving the best sales month in four years, Bloomberg reports

BARRON’S

Exact Sciences (EXAS) shares should get "healthier”
Brink's (BCO) could rally 25% next year as earnings improve
Johnson Controls (JCI) looks “dented not broken”
Schiff Nutrition (SHF) valuation is higher than fundamentals justify
IAC's (IACI) deal-savvy CEO Greg Blatt is leading the company's transformation
Criticism of Apple (AAPL) won't dent the company or its shares
Things aren't looking up for Hewlett-Packard (HPQ)
Constellation Brands' (STZ) "good times" should continue

SYNDICATE

Miller Energy (MILL) files to sell 12.78M shares of common stock for holders
Palo Alto (PANW) files to sell $225M of common stock for holders

• Rajoy’s Deepening Budget Black Hole Outpaces Spain’s Cuts (Bloomberg)
• ECB May Need to Cut Rates Given Deflation Risk, IMF Says (Bloomberg)
• Global Recession Risk Rises (WSJ)
• Romney Leads Obama in Pew Likely Voter Poll After Debate (Bloomberg)
• IMF Sees Global Risk in China-Japan Spat (WSJ)
• Republicans shift tone on taxing the rich (FT)
• Romney casts Obama's foreign policy as weak, dangerous (Reuters)
• Europe Salutes Greek Budget-Cutting Will, Raising Aid Prospects (Bloomberg)
• U.S. Downgrade Seen as Upgrade as U.S. Debt Dissolved (Bloomberg)
• IMF Says Most Advanced Nations Making Progress Reducing Deficits (Bloomberg)
• Eurozone launches €500bn rescue fund (FT)
• Australia labour market softer than jobless implies-RBA (Reuters)
• India Growth to Drop to Decade Low Amid High Inflation, IMF Says (Bloomberg)

Overnight Media Digest

WSJ

* The global economy risks skidding toward recession just three years after pulling out of the previous one, the International Monetary Fund warned, adding that fighting a renewed world-wide downturn will be much more complex than it was in 2009.

* Chinese telecommunications giant Huawei Technologies lashed out Monday at a scathing congressional report, calling allegations that it may be spying on Americans and violating U.S. laws "little more than an exercise in China-bashing".

* BP Plc said Monday it has sold the large Texas City refinery, scene of a fatal industrial accident in 2005, to Marathon Petroleum Corp in a deal worth up to $2.5 billion.

* UnitedHealth Group Inc's $4.3 billion deal to take over Brazil's Amil Participações SA represents a major bet on the international future of the health-care business, part of a broader effort by American insurers and hospital operators to seek growth overseas.

* The biggest shareholder in BAE Systems Plc has "significant reservations" about a proposed merger with EADS because it may harm the company's ability to win U.S. defense contracts.

* U.S. banks and the Federal Reserve are battling over a new round of "stress tests" even before the annual exams get going later this fall.

The clash centers on the math regulators are using to produce the results. Bankers want more detail on how the calculations are made, and the Fed thus far has resisted disclosing more than it has already.

* American Express Co and Wal-Mart Stores Inc are rolling out a new prepaid card in the retailer's stores and online, opening up a new revenue stream and offering what they call a cheaper alternative to traditional debit cards.

* Coca-Cola Co, PepsiCo Inc and Dr Pepper Snapple Group will start displaying their drinks' calories on vending machines next year and point consumers toward less sugary versions, their latest response to critics who have singled them out for contributing to the nation's obesity epidemic.

* An experimental Alzheimer's treatment from Eli Lilly & Co slowed memory loss by 42 percent in patients with a mild form of the memory-robbing disease in one drug trial and showed positive signs of doing so in another study, according to new data presented on Monday.

* Calxeda Inc, a start-up that provides chips for a new breed of server systems, has raised an additional $55 million as computer makers like Hewlett-Packard Co prepare to offer its technology.

FT

Overview

INVESTOR OPPOSITION TO BAE DEAL MOUNTS

More than 30 percent of shareholders in BAE Systems have expressed significant concerns about the deal with EADS .

OSBORNE DELIGHTS TORY RIGHT WITH SPEECH

George Osborne delighted the Tory right with plans to let bosses strip new staff of employment rights in exchange for shares.

IRAQ SEND CRUDE OIL TO SYRIA

Iraq is quietly shipping supplies of fuel oil to Syria in a deal that has triggered concern in Washington.

RECKITT ADMITS CHIEF SHARE PLEDGE BREACH

Reckitt Benckiser is facing the risk of a regulatory probe after failing to notify the stock market its chief executive pledged shares against a personal loan.

BP'S PARTNER IN TNK-BP LOOKS TO SELL STAKE

BP's billionaire partners in TNK-BP said they want to sell or list their 50 percent stake in the business.

TOTAL WARNS OVER 'INACCURATE' BENCHMARKS

Total, one of the world's largest oil trading groups has warned of "inaccurate pricing" in the benchmarks for the energy market.

FINANCIAL STALWARTS LINE UP TO LEAD BOE

The deadline for aspirants for the BoE governorship passed on Monday with at least four, possibly five, applicants.

EURO ZONE LAUNCHES 500 BLN EURO RESCUE FUND

Euro zone finance ministers launched their permanent 500 billion euro bailout fund on Monday but said Spain did not need a bailout.

STANCHART TARGETS SUB-SAHARAN PUSH

Standard Chartered is preparing to ramp up its presence in sub-Saharan Africa in response to growing investor. demand.

NYT

* The International Monetary Fund is cutting its global economic forecasts yet again, calling the risks of a slowdown "alarmingly high", primarily because of policy uncertainty in the United States and Europe.

* In the latest development to highlight the sensitive terrain that the United States and China are navigating on economic issues, a House committee issued a blistering bipartisan report on Monday that accused Huawei Technologies and ZTE Corp of being arms of the government that had stolen intellectual property from American companies and could potentially spy on Americans.

* UnitedHealth Group agreed on Monday to buy a 90 percent stake in the Brazilian health care provider Amil Participações for $4.9 billion as the American insurer looked to expand in the fast-growing country.

* Big beverage makers including PepsiCo Inc and Coca-Cola Co are retooling their vending machines to let consumers know the number of calories in the drinks available to buy.

* Wal-Mart Stores Inc is taking another leap into the banking world, announcing on Monday a prepaid card and debit account with American Express Co that will give low-income consumers access to features like smartphone deposits.

* Combined results from two studies of an experimental Alzheimer's drug from Eli Lilly & Co suggest it may modestly slow mental decline, especially in patients with mild disease.

* International officials told Greece on Monday night to accelerate the pace of economic reform in exchange for further financing from a stalled bailout package.

* Germany sought on Monday to ward off talk of a bailout program for Spain, as euro zone finance ministers were gathering for their monthly meeting.

* American Airlines and British Airways said Monday that Qatar Airways would join their Oneworld alliance, giving them access to one of the world's fastest-growing airlines and a modern hub in Doha, the capital of Qatar.

* With its economy still reeling from the housing crash, Ireland is making a bold move to help tens of thousands of struggling homeowners.

The Irish government expects to pass a law this year that could encourage banks to substantially cut the amount that borrowers owe on their mortgages, a step that no major country has been willing to take on a broad scale.

* Allied World Assurance, a publicly traded insurance company, has acquired a substantial minority interest in MatlinPatterson, the private equity and hedge fund firm, according to people briefed on the deal.

Canada

THE GLOBE AND MAIL

* Faced with a $14.8 billion deficit and a stubbornly high health-care budget, the Ontario government is taking a heightened interest in the billings of emergency-department doctors.

A group representing the province's 2,000 emergency doctors is warning its members of a recent flurry of formal audits by the Ministry of Health questioning the details of billings for services.

* Corporate tax revenue coming in to Ottawa was up slightly last year, even as the Conservative government was in the midst of an aggressive plan to lower the corporate tax rate.

The federal government raised $31.7 billion from corporate taxes in the fiscal year that ended March 31, up from $30.5 billion in 2010-11. The new data on corporate tax revenue will be examined closely in Ottawa, where debate over the appropriate rate has been a dominant theme of recent election campaigns.

Reports in the business section:

* Retailers bracing for next year's arrival of U.S. discount juggernaut Target Corp face a more immediate threat: the lowly dollar store.

The fastest-growing sector in Canadian retailing, dollar stores are forcing mainstream merchants, ranging from discounter Wal-Mart Canada Corp to generalist Canadian Tire Corp Ltd , to step up their own dollar promotions.

* Canada's clean tech sector is getting some new help from the federal government as Ottawa looks to grab a fatter share of the booming global market for renewable energy and energy efficiency.

The government's lead agencies on export assistance and sustainable technology are teaming up to identify and support companies that are moving from development to full commercial effort and are eager to penetrate international markets.

NATIONAL POST

* Canada's electronic spy organization says that the state-of-the-art headquarters now being built in an Ottawa suburb will make it a leader among its allies and attract the best and brightest of spies, according to newly released government documents obtained by The Ottawa Citizen.

FINANCIAL POST

* The chief executive of Quebecor Inc warned Monday the Canadian entertainment industry must start making content that appeals to audiences beyond its borders or risks being overtaken by Web-based providers who are increasingly ramping up global distribution businesses.

* Pension fund managers are looking at taking on more risk in their portfolios as they look to boost returns amid low interest rates and volatile stock markets, according to a report by Pyramis Global Advisors.

Fly on the Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

Allot Communications (ALLT) upgraded to Buy from Hold at Jefferies
Cardinal Health (CAH) upgraded to Buy from Hold at ISI Group
Eli Lilly (LLY) upgraded to Neutral from Sell at Goldman
Interpublic Group (IPG) upgraded to Buy from Neutral at Citigroup
Questcor (QCOR) upgraded to Buy from Hold at Jefferies
RadioShack (RSH) upgraded to Buy from Underperform at BofA/Merrill
Shoe Carnival (SCVL) upgraded to Buy from Neutral at Sterne Agee
Trinity Industries (TRN) upgraded to Strong Buy from Market Perform at Raymond James
Downgrades
Ann Inc. (ANN) downgraded to Equal Weight from Overweight at Morgan Stanley
Arch Coal (ACI) downgraded to Sell from Neutral at Goldman
DirecTV (DTV) downgraded to Neutral from Overweight at JPMorgan
Edison International (EIX) downgraded to Hold from Buy at Jefferies
First Interstate (FIBK) downgraded to Equal Weight from Overweight at Barclays
Fluidigm (FLDM) downgraded to Neutral from Buy at Mizuho
Fulton Financial (FULT) downgraded to Equal Weight from Overweight at Barclays
Intel (INTC) downgraded to Underperform from Market Perform at Bernstein
Johnson & Johnson (JNJ) downgraded to Sell from Neutral at Goldman
Netflix (NFLX) downgraded to Underperform from Buy at BofA/Merrill
Progress Software (PRGS) downgraded to Underperform from Neutral at Mizuho
State Auto (STFC) downgraded to Underperform from Market Perform at Keefe Bruyette
Taseko Mines (TGB) downgraded to Hold from Buy at Canaccord

Initiations

ASML (ASML) initiated with an Outperform at CLSA
Allison Transmission (ALSN) initiated with an Overweight at Piper Jaffray
Apple (AAPL) initiated with a Neutral at Nomura
Caterpillar (CAT) initiated with a Neutral at Piper Jaffray
Cisco (CSCO) initiated with a Buy at Buckingham
Cullen/Frost (CFR) initiated with an Underweight at Barclays
Dell (DELL) initiated with a Sell at Citigroup
F5 Networks (FFIV) initiated with a Neutral at Buckingham
FirstMerit (FMER) initiated with an Overweight at Barclays
Fuel Systems (FSYS) initiated with an Overweight at Piper Jaffray
Hewlett-Packard (HPQ) initiated with a Sell at Citigroup
IBM (IBM) initiated with a Buy at Citigroup
Juniper (JNPR) initiated with a Neutral at Buckingham
Lazard (LAZ) initiated with a Sell at UBS
Lexmark (LXK) initiated with a Sell at Citigroup
NetApp (NTAP) initiated with a Neutral at Citigroup
Oshkosh (OSK) initiated with a Neutral at Piper Jaffray
POZEN (POZN) initiated with a Buy at Ascendiant Capital
Paccar (PCAR) initiated with an Overweight at Piper Jaffray
Pier 1 Imports (PIR) initiated with a Buy at Deutsche Bank
Pioneer Natural (PXD) initiated with an Outperform at Wells Fargo
SYNNEX (SNX) initiated with a Neutral at Citigroup
Vertex (VRTX) initiated with a Buy at Deutsche Bank

HOT STOCKS

ING Groep (ING) to sell ING Direct UK to Barclays (BCS)
AT&T (T) and IBM (IBM) create breakthrough global cloud service for businesses
Rio Tinto (RIO) said planning further cost reductions
Boston Scientific (BSX) to acquire Rhythmia Medical
Continental Resources (CLR) announced five-year plan to triple production/reserves
Sees FY13 production growth of 30%
Korn/Ferry International (KFY), SAP’s (SAP) SuccessFactors form strategic partnership
Publicis Groupe (PUBGY) acquired premier Malaysian interactive agency Arachnid
AOL (AOL) launched new Games.com
ABM (ABM) to acquire Air Serv for $158M
Principal Financial (PFG) to acquire Cuprum
Ithaca Energy buys two U.K. subsidiaries from Noble Energy Capital (NBL) for $38.5M
AngioDynamics (ANG) to acquire Vortex Medical for $15M

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
E2open (EOPN), AngioDynamics (ANGO)

NEWSPAPERS/WEBSITES

The global economy risks sliding toward recession three years after pulling out of the previous one, the IMF warned, adding that fighting a renewed world-wide downturn will be much more complex than it was before, the Wall Street Journal reports
U.S. banks and the Fed are fighting over a new round of "stress tests" before the annual exams begin this fall. The battle centers on the math regulators are using to produce the results. Bankers want more detail on how the calculations are made, and the Fed has resisted disclosing more than it has, the Wall Street Journal reports
Phil Anschutz began auctioning Anschutz Entertainment Group, with an expectation that the sports and entertainment giant should draw bids in the $10B range, higher than previously believed, sources say. Potential bidders include trade buyers such as Liberty Media Corp (LMCA), investment companies such as Guggenheim Partners LLC; private equity firms such as Thomas H. Lee Partners LP, Bain Capital LLC and Colony Capital LLC, Reuters reports
British Defence Secretary Philip Hammond said he hoped to meet his French, German and U.S. counterparts to discuss the proposed merger of aerospace groups EADS (EADSY) and BAE Systems (BAESY), a day before a deadline for the deal, Reuters reports
State Street (STT) and Bank of New York Mellon (BK) will charge depositors negative interest rates to hold Danish kroner and Swiss francs as customers seek refuge from the crisis-stricken euro. That means money managers, insurance companies and pension funds have to pay the bank to hold the cash, Bloomberg reports.
Fiat (FIATY) will lower its outlook for the European auto market when the company updates its five-year plan that runs through 2014,said CEO Sergio Marchionne said, Bloomberg reports

SYNDICATE

Athersys (ATHX) files to sell 17M shares of common stock
Laredo Petroleum (LPI) offers 12.5M shares of common stock for holders
Penn Virginia (PVA) announces offering of 12M shares of common stock

ACTIVIST/PASSIVE FILINGS

Sophrosyne Capital reports 8.95% passive stake in AspenBio Pharma (APNB)
Clarke sends letter to Vitran (VTNC), recommends sale of SCO segment

• Global easing deluge resumes: Bank of Korea Slashes Policy Rate (WSJ)
• And Brazil: Brazil cuts Selic rate to new record low of 7.25 pct (Reuters)
• With Tapes, Authorities Build Criminal Cases Over JPMorgan Loss (NYT) Just don't hold your breath
• IMF snub reveals China’s political priorities (FT)
• Add a dash of trade wars: Revised Duties Imposed by U.S. on Chinese Solar Equipment (Bloomberg)
• IMF calls for action as euro zone crisis festers (Reuters)
• Dubai Losing Billions as Insecure Expats Send Money Abroad (BBG)
• Softbank in Advanced Talks to Acquire Sprint Nextel (WSJ)
• Lagarde calls for brake on austerity (FT)
• EU lambasts Turkey over freedoms (FT)
• Race Tightens in Two States (WSJ)
• Polls see comfortable win for Netanyahu (FT)
• Fed's Fisher says U.S. must tackle fiscal cliff to spur hiring (Reuters)
• Tarullo Calls for Cap on Bank Size (WSJ) - "it's only fair"
• Fed Says Economy Grows ‘Modestly’ on Housing, Autos (BBG)

Overnight Media Digest

WSJ

* BAE Systems Plc and EADS called off their merger after the UK, France and Germany failed to agree on how much influence they should have over the combined entity.

* JPMorgan Chase and Co's chief financial officer is expected to step down over the next two quarters and is likely to move into a different job at the bank, people close to the company say.

* Mitt Romney is deadlocked with President Barack Obama in two key battlegrounds - Florida and Virginia - while still behind in Ohio, according to new polls taken after the Republican's strong performance in the first presidential debate.

* Standard & Poor's Ratings Services cut its rating on Spain and maintained a negative outlook, citing the mounting pressures from the country's economic recession.

* Eastman Kodak Co said it would terminate its health-care and survivor-benefits program, resolving a $1.2 billion retiree-benefits liability.

* A top Federal Reserve official Wednesday called on Congress to consider capping the size of the nation's financial firms, marking one of the most high-profile challenges to the way Wall Street does business.

* H&R Block Inc is exploring how to escape the burden of being regulated by the Federal Reserve without giving up on financial services.

* Regulators are closely watching how much of a boost U.S. banks give their third-quarter profits by trimming their cushions against bad loans, highlighting an issue that will be in the forefront in coming days as banks report earnings.

* European Union Transport Commissioner Siim Kallas is preparing legal action against EU member countries to force faster action on a delayed program to unify the bloc's airspace, according to a speech he will deliver Thursday.

FT

POLITICAL BACKLASH OVER BA DEAL COLLAPSE

Attempts to create a European giant to rival Boeing of the U.S. collapsed on Wednesday, amid investor anger at the handling of a multibillion-euro merger.

GOLDMAN'S 'MUPPET HUNT' DRAWS A BLANK

Goldman Sachs has told its board of directors that an internal investigation found little substance to allegations that bankers refer to clients as "muppets".

PUBLIC TO TAKE 51 PCT IN DIRECT LINE IPO

Retail shareholders are to invest a greater sum in Direct Line's initial public offering than any other UK flotation in at least the past five years.

IMF SOUNDS ALARM OVER JAPANESE BANKS

The huge and rising government bond holdings of Japanese banks leave them vulnerable, the International Monetary Fund has warned.

BRANDS FEAR PITFALLS OF AMAZON CATWALK

Big fashion brands are fretting over whether to offer their wares on Amazon as its move into clothing forces them to make a decision.

DOWNING ST CAUGHT IN BAE/EADS CROSSFIRE

Downing St was caught in the crossfire from the collapse of the BAE-EADS talks as MPs questioned why the government were keen to back the deal.

CAMERON VOWS TO UNLOCK BRITAIN'S POTENTIAL

British Prime Minister David Cameron warned voters to brace for "painful decisions" on the economy on Wednesday but offered little new to alter a grim growth outlook.

APPLE RETREAT SPURS SWITCH OUT OF TECHS

A drop in shares of Apple in recent weeks has driven a rotation out of technology shares and reinforced the standing of financials as the best performing sector.

NYT

* The European aerospace giants, EADS and BAE Systems Plc, said Wednesday they had failed to win government support for a merger that would have created an entity with a combined market value of about $50 billion.

* Federal authorities are using taped phone conversations to build criminal cases related to the multibillion-dollar trading loss at JPMorgan Chase and Co, focusing on calls in which employees openly discussed how to value the troubled bets in a favorable way.

* The private equity giants Blackstone Group and Kohlberg Kravis Roberts and Co are longtime rivals that compete for multibillion-dollar deals. But during last decade's buyout boom, according to newly released e-mails in a civil lawsuit accusing them of collusion, the two firms appeared to be on much cozier terms.

* Toyota Motor Corp announced on Wednesday that it was recalling 7.4 million vehicles worldwide, including 2.5 million in the United States, to repair power-window switches that can break down and pose a fire risk.

* GlaxoSmithKline Plc plans to open up much of its drug research in an apparent effort to deflect criticism that important information gathered in clinical trials often does not see the light of day.

* The Commerce Department issued its final ruling Wednesday in a long-simmering trade dispute with China, imposing tariffs ranging from about 24 to nearly 36 percent on most solar panels imported from the country.

* Costco Wholesale Corp continues to draw more shoppers and sign up new members, giving the wholesale club operator higher net income and revenue in its fiscal fourth quarter. The company's performance beat Wall Street's expectations, and its shares touched a record high on Wednesday before easing a bit.

* The European Union's transport commissioner intends on Thursday to threaten legal action against member governments that do not soon take serious steps toward integrating their air traffic control operations.

* Two top Chinese officials will not attend international financial meetings in Tokyo this week, in an apparent snub aimed at showing China's displeasure with Japan's handling of a dispute over islands claimed by both Asian nations.

* U.S. Internal Revenue Service commissioner Douglas Shulman announced Wednesday that he will leave his post next month, ending a four-and-a-half year term during which he modernized some of the agency's infrastructure while cracking down on tax dodging by corporations and offshore tax evasion by individuals.

Canada

THE GLOBE AND MAIL

* Flaws in a national databank that helps determine the value of houses across Canada have helped fuel inflation in home prices, putting mortgage lenders and borrowers at greater risk, key players in the housing sector have warned.

* A Canadian naval intelligence officer pleaded guilty to spying for Russia, a public admission of an embarrassing espionage scandal that has damaged Canada's reputation among allies and will likely reverberate for years.

Reports in the business section:

* British Columbia is attacking Enbridge Inc for its failure to detect most recent leaks on its U.S. pipelines, raising questions about the company's ability to spot oil spills in remote stretches of its proposed $6-billion Northern Gateway project.

NATIONAL POST

* Rocked by allegations of illegal financing, the Quebec Liberals mounted a counter-attack in defence of their party's reputation Wednesday.

* Five weeks after its election, Pauline Marois' minority Parti Québécois government abandoned one of its central election promises Wednesday but still failed to win the opposition support it needs.

Finance Minister Nicolas Marceau announced that the government would maintain a health tax introduced by the Liberals and scale back a plan to significantly increase taxes on the wealthy.

FINANCIAL POST

* As the debate intensifies over whether Ottawa should open the floodgates to Chinese investment in the Canadian oil and gas sector, some argue that Nexen Inc, the Calgary-based oil and gas producer targeted by CNOOC Ltd, isn't worth protecting because its assets are predominantly based overseas.

* The province of Ontario has gone from criticizing the oil sands to increasing its efforts to capture their economic benefits.

Brad Duguid, Ontario's minister for economic development, says he plans to increase his department's attention to Alberta by adding more staff to deal with trade issues.

Australia

THE AUSTRALIAN FINANCIAL REVIEW (www.afr.com)

--Kevin Gallagher, chief executive of construction and engineering contractor Clough, yesterday said that some of the problems in the industry had been created by excessively ambitious tenders from engineering firms that should have been more prepared for the current market downturn. "I do think, across the sector, the risk and reward equation has got a little bit out of balance, with certain companies perhaps taking on more than they can handle  the minute you go one project too many and you're hiring off the street to fill all your key slots, your risk profile changes dramatically," he said. Pg 25.

--Virgin Australia and Qantas Airways are limiting frequencies on the "golden triangle" routes between Brisbane, Sydney and Melbourne before both airlines absorb too much damage to their profit margins in a bid to take market share from the other, observers say. Scheduling data showed a rise in flight cancellations by Virgin in August and September, a trend corroborated by figures from Qantas. "We have always said we would increase or decrease capacity as our competitors do to protect our position in the market," Qantas chief executive Alan Joyce said. Page 25.

--Guy Elliott, chief financial officer of Rio Tinto , yesterday declared that the mining giant was unlikely to launch a share buyback program, saying that the company lacked the capital to invest in all of its value-adding growth projects. "Right now we don't think we have surplus capital. We are making choices between organic and external investment opportunities and cash returns for shareholders," Mr Elliott said. Page 27.

--Biotechnology group QRxPharma yesterday announced a licensing agreement with speciality pharmacology firm Paladin Labs Inc that will generate double-digit royalties, milestone payments and a A$500,000 upfront fee. John Holaday, managing director of QRx, said the tie-up with Paladin was "our best choice for the Canadian market" because of the company's "sector experience, consistent record of growth in branded pain products, and strong balance sheet". Page 27.

THE AUSTRALIAN (www.theaustralian.news.com.au)

--Oaktree Global Management and Apollo Capital are considering a scenario where Nine Entertainment Co, the free-to-air television broadcaster which owes around A$1 billion in senior debt to the two hedge funds, falls into receivership, observers say. The move comes after investment bank Goldman Sachs accepted a restructuring proposal from Nine management that would see its ownership in Nine fall to 7.5 percent from the 30 percent it is currently demanding. Page 19.

--Proxy advisory and governance consultants will be closely assessing any changes in Leighton Holdings' management after the chief operating officer of Hochtief, Leighton's parent company in Germany, was appointed to the contractor's board. Marcelino Fernandez Verdes was announced as a non-executive director, sparking speculation that ACS, the Spanish parent majority shareholder in Hochtief, is controlling Leighton. Page 19.

--A senior executive at Royal Dutch Shell yesterday refused to rule out using the oil and gas multinational's floating liquefied natural gas technology as a development path for the troubled US$45 billion Browse venture in Western Australia. "All the various opportunities in Australia, they should be illuminated through different lenses. That's all I can say at this moment," Matthias Bichsel, director of projects and technology at Shell, said. He added that the technology allowed the production of liquefied natural gas "without disturbing coastlines or building a big facility in some pristine environment". Page 19.

--Greg Medcraft, chief executive of the Australian Securities and Investments Commission, yesterday told the Financial Services Institute of Australasia forum in Sydney that the regulator would increase its monitoring of share sales and high-frequency trading in "dark pools". Mr Medcraft noted there was a rising concern around the world about the effect of high-frequency trading in unregulated markets and added that the regulator was looking at proposals to introduce a mandatory "kill switch" to shut down "rogue" algorithms used to make high-frequency trades. Page 19.

THE SYDNEY MORNING HERALD (www.smh.com.au)

--Wealth management giant AMP yesterday warned that the Federal Government's proposed changes to superannuation, which would force billions of dollars in taxpayer savings to be transferred to commission-free accounts, may be in violation of the constitution. AMP added that it did not accept the government's premise that a gradual "transition" would take place after the introduction of the laws was delayed until 2017. "It is an overt taking away of the existing entitlement to the remuneration that the advisers currently receive through existing contractual agreements," AMP said. Page B1.

--Fund manager Fidelity yesterday forecast that healthcare groups would become more successful as the world's population increases and generates more wealth, with sales of hearing aids, eyecare, generic treatments and coronary stents expected to increase. "Ageing populations will clearly drive demand for healthcare across areas like hearing aids and eye care  the young will also take with them pretty bad habits, so bad dietary habits means higher incidences of chronic diseases, like diabetes and heart disease," Nicola Stafford from Fidelity Global Demographics Fund said. Page B2.

--KordaMentha, the insolvency specialists appointed as receivers for Gunns, yesterday announced that there was "significant stakeholder support" for continuing with the collapsed forestry's group's A$2.2 billion pulp mill venture in Tasmania. Daniel Bryant from PPB Advisory, the current administrator of Gunns, said he expected a report into the failure of the business to be presented to creditors next month. Page B3.

--Scott Berriman, director of office leasing at real estate group Knight Frank, yesterday said that there was a rise in available office space in good quality properties in central business districts. "The threat of emerging subleases is felt more in Melbourne, where [Australia and New Zealand Banking Group] is dumping 27,000 square metres and [National Australia Bank] is looking to offload 7100 square metres," Mr Berriman stated. He added that "in most cases the subleases provide inadequate tenure to present a genuine competitive threat to the direct lease market". Page B3.

THE AGE (www.theage.com.au)

--Peter Meurs, former managing director of engineering group WorleyParsons and a current director at iron ore producer Fortescue Metals Group, lost more than A$35 million in the 2011-12 financial year after buying into an executive share program created by Fortescue non-executive chairman and founder Andrew Forrest. According to Fortescue's annual report, which was released yesterday, Mr Meurs received A$8.1 million in the 2012 financial year, although he invested nearly A$100 million to acquire 16.6 million shares under Mr Forrest's plan. Page B3.

--Beach Energy yesterday revealed another oil find that could generate around 444,000 barrels of recoverable oil. The South Australian-based gas and oil producer said the resource was uncovered in central Australia's Cooper Basin region. "The pre-drill upside gross estimate for the Namur target of 440,000 barrels of recoverable oil is supported by wireline log data," the company said. Page B3.

--The decision by the Reserve Bank of Australia to lower interest rates this month has improved consumer sentiment but the forecast for consumer expectations has also fallen, according to a new survey. The Westpac-Melbourne Institute Index, which measures consumer confidence, climbed by 1 percent in October to 99.2, after jumping by 1.6 percent the month prior. Page B3.

--An energy company in South Australia yesterday claimed that it will be able to help solar and wind power generators better store energy after making a breakthrough in battery technology. Richard Turner, chief executive officer at ZEN, said utility companies in Australia had expressed interest in a trial of the technology, which is already being shipped to customers in the United States. Mr Turner forecast that ZEN's yearly revenue could rise to A$500 million from approximately A$60 million now over the next four years. Page B3.

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

American Campus (ACC) upgraded to Buy from Neutral at Janney Capital
Banner Corp. (BANR) upgraded to Outperform from Market Perform at Keefe Bruyette
Heartland Payment (HPY) upgraded to Outperform from Market Perform at Raymond James
New York Times (NYT) upgraded to Overweight from Equal Weight at Barclays
Total System (TSS) upgraded to Market Perform from Underperform at Raymond James

Downgrades

Alliance Data (ADS) downgraded to Market Perform from Strong Buy at Raymond James
Analog Devices (ADI) downgraded to Equal Weight from Overweight at Morgan Stanley
Caterpillar (CAT) downgraded to Sector Perform from Outperform at RBC Capital
Celgene (CELG) downgraded to Neutral from Overweight at Piper Jaffray
Check Point (CHKP) downgraded to Hold from Buy at Needham
Greenhill & Co. (GHL) downgraded to Neutral from Positive at Susquehanna
Higher One (ONE) downgraded to Underweight from Overweight at Piper Jaffray
HomeAway (AWAY) downgraded to Equal Weight from Overweight at Morgan Stanley
Host Hotels (HST) downgraded to Neutral from Buy at Goldman
Johnson Controls (JCI) downgraded to Market Perform from Outperform at Wells Fargo
Marriott (MAR) downgraded to Neutral from Buy at Goldman
QIAGEN (QGEN) downgraded to Underweight from Neutral at HSBC
Siemens (SI) downgraded to Hold from Buy at Deutsche Bank
Texas Instruments (TXN) downgraded to Neutral from Outperform at Credit Suisse

Initiations

Activision Blizzard (ATVI) initiated with an Outperform at Credit Suisse
Cott Corp. (COT) initiated with a Buy at Citigroup
Crown Castle (CCI) initiated with a Buy at Nomura
Ecolab (ECL) initiated with an Overweight at Piper Jaffray
Electronic Arts (EA) initiated with a Neutral at Credit Suisse
Exxon Mobil (XOM) initiated with a Buy at Dahlman Rose
Genomic Health (GHDX) initiated with a Neutral at Goldman
H.B. Fuller (FUL) initiated with an Overweight at Piper Jaffray
HCA Holdings (HCA) initiated with an Overweight at Barclays
Life Time Fitness (LTM) initiated with an Outperform at Wedbush
LifePoint Hospitals (LPNT) initiated with an Underweight at Barclays
Rite Aid (RAD) initiated with a Buy at BTIG
SBA Communications (SBAC) initiated with a Buy at Nomura
Take-Two (TTWO) initiated with a Neutral at Credit Suisse
Town Sports (CLUB) initiated with a Neutral at Wedbush
Universal Health (UHS) initiated with an Overweight at Barclays
W.R. Grace (GRA) initiated with an Overweight at Piper Jaffray
Zynga (ZNGA) initiated with an Underperform at Credit Suisse

HOT STOCKS

ING Group (ING) to sell Malaysia insurance operations to AIA for EUR1.3B
Lenovo (LNVGY) becomes No. 1 PC maker for first time, beating out Hewlett-Packard (HPQ)
Cliffs Natural (CLF) reached tentative agreement with United Steelworkers
Alaska Air (ALK) entered purchase agreement with Boeing (BA), initial order 50 737s
Quad/Graphics (QUAD) to acquire Vertis for $258.5M
Emulex (ELX) opened subsidiary in Beijing, and invests further in the region
Ruby Tuesday (RT) sees FY13 margin improvement of 150-200 basis points
Mueller Water (MWA) division acquired North Alabama Pipe Corporation
Huaneng Power Int'l (HNP) Suzhou gas-fired co-generation project approved

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Pacific Premier Bancorp (PPBI), DragonWave (DRWI), PrivateBancorp (PVTB)

Companies that missed consensus earnings expectations include:
API Technologies (ATNY), Richardson Electronics (RELL), VOXX International (VOXX), Ruby Tuesday (RT)

NEWSPAPERS/WEBSITES

Fed governor Daniel Tarullo called on Congress to consider capping the size of the nation's financial firms, marking one of the most high-profile challenges to the way Wall Street does business.Tarullo recommended curbing banks' growth by putting a limit on their nondeposit liabilities, which are sources of funding for operations that go beyond consumer deposits, the Wall Street Journal reports
U.S. telecommunications equipment makers are watching the Chinese technology market for what they see as Beijing's possible response to a rebuff by U.S. lawmakers: retaliation, the Wall Street Journal reports
JPMorgan Chase (JPM) CEO Jamie Dimon lashed out at the government for a lawsuit alleging misdeeds at Bear Stearns, over four years after JPMorgan was asked to rescue the failing financial firm. Dimon said the company is still paying the price for doing the Fed "a favor" by buying Bear Stearns in early 2008, Reuters reports
The IMF prodded Europe and the U.S. to move quicker to resolve their debt troubles, blaming slow progress for creating economic uncertainty and slowing global growth, Reuters reports
A Seoul court granted Apple’s (AAPL) request to delay a sales ban imposed on some iPhones and iPads after an August ruling that they infringed on Samsung Electronics Co.’s (SSNLF) patents, Bloomberg reports
Pratt & Whitney (UTX), building an engine for Airbus SAS’s A320neo, said orders for the new geared turbo-fan powerplant may double as airlines seek more fuel-efficient aircraft, Bloomberg reports

SYNDICATE

CombiMatrix (CBMX) files to sell 4.67M shares of common stock for holders
Corporate Office Properties (OFC) files to sell 6M shares of common stock
InnerWorkings (INWK) files to sell 459,629 shares of common stock for holders
Intercept (ICPT) 5M share IPO priced at $15.00
Kythera Biopharmaceuticals (KYTH) 4.4M share IPO priced at $16.00
Northstar Realty (NRF) files to sell 13.7M shares of common stock for holders
PrivateBancorp (PVTB) announces offering of $75M of common stock
Realogy Holding (RLGY) 40M share IPO priced at $27.00
Royal Gold (RGLD) announces 5.25M share common stock offering
Shutterstock (SSTK) 4.5M share IPO priced at $17.00

With 'private equity' discussions sliding for one moment off the front pages, NYTimes' DealBook notes that it appears these 'honorable' job-creating entities were allegedly colluding to drive down the prices of more than two dozen takeovers. During the last decade's buyout boom, according to newly released e-mails in a civil lawsuit accusing them of collusion, the two firms appeared to be on much cozier terms.

In September 2006, for instance, Blackstone and K.K.R. were both circling the technology giant Freescale Semiconductor. After a Blackstone group outbid a K.K.R. consortium to buy Freescale for nearly $18 billion, Hamilton E. James, the president of Blackstone, e-mailed his colleagues about Henry Kravis, the billionaire co-founder of Blackstone's rival:

"Henry Kravis just called to say congratulations and that they were standing down because he had told me before they would not jump a signed deal of ours,"

 

Mr. James wrote, two days later, in an e-mail to Mr. Kravis's cousin and co-founder, George R. Roberts. "We would much rather work with you guys than against you,"

Mr. James wrote. "Together we can be unstoppable but in opposition we can cost each other a lot of money."...

 

"Agreed," responded Mr. Roberts.

The e-mails are part of a court filing Wednesday in an antitrust civil lawsuit brought against 11 of the world's largest private equity firms that accuses them of colluding to drive down the prices of more than two dozen takeovers of publicly traded companies.

A judge ordered the private equity defendants to file an unsealed version of the court papers: "These e-mails are strong signals of anticompetitive behavior,"..."It is always highly problematic when you have such freewheeling discussions between competitors."...

As purchase prices reached into the tens of billions of dollars, the firms pooled their money together to make the acquisitions. The private equity industry has said that the consortiums, or club deals, allowed the firms to spread the risk of owning such a large company. In addition, the firms said that by working together they could bring complementary skills in operating the companies once they acquired them.

While the private equity firms characterized the period from 2003 to 2007 as a time of big deal-making and collaboration, the Massachusetts lawsuit contends that something far more sinister was at work... Calling the period "the conspiratorial era," the lawsuit depicts a secret pact between the firms that divided up the big deals among themselves and artificially - and illegally - kept their prices low. There was a "you don't bid on my deal, I won't bid on yours" understanding between the firms, according to the lawsuit.

K.K.R. expressly asked its competitors to "step down on HCA" and not bid on the company, according to an e-mail that was unsealed and written by Daniel Akerson, then a partner at Carlyle and now the chief executive of General Motors. Two colleagues at the private equity firm TPG e-mailed each other about the firm's reasons for deciding to not compete for HCA, according to the lawsuit...

"All we can do is do [u]nto others as we want them to do unto us," Jonathan Coslet, a TPG executive, wrote. "It will pay off in the long run even though it feels bad in the short run."...

Mr. Bush, the University of Houston antitrust law professor, said that such an exchange between the TPG executives should raise eyebrows among government antitrust regulators as classic anticompetitive conduct.

"This sounds like mutual back-scratching," said Mr. Bush. "I'll scratch your back by not bidding on this deal, and you'll scratch mine by not bidding on the next."

(h/t Manal Mehta)

• Obama takes offensive against Romney in debate rematch (Reuters)
• Obama Says Romney Words Aren’t ‘True’ in Second Debate (Bloomberg)
• Obama takes Romney head-on in debate (FT)
• And another joins the club: Thailand Unexpectedly Cuts Rate as Global Outlook Worsens (Bloomberg)
• PBOC Injects Less Cash (WSJ)
• Japan to Hold Special Cabinet Meeting After Economy Downgraded (Bloomberg)
• Greek Coalition Duo Reject Labour Moves Proposed by Troika (WSJ)
• Opposition wanes to Spanish aid request (FT)
• RBS to Exit U.K. Asset Protection Plan After $4 Billion Fees (Bloomberg)
• Spain Retains Investment Grade Credit Rating From Moody’s (Bloomberg)
• US diplomat asks Japan, ROK to resolve islands spat (China Daily)
• Stagnation not due to austerity, says OBR (FT)

Overnight Media Digest

WSJ

* Vikram Pandit, who was named chief executive of Citigroup Inc on the eve of the financial crisis and led the bank through a bruising five-year stretch that included a $45 billion federal rescue, abruptly stepped down on Tuesday.

* Softbank Corp's shares rallied 9.6 percent on Tuesday after Chief Executive Masayoshi Son made an impassioned pitch for the company's debt-laden investment in Sprint Nextel Corp, recovering about a third of the $8.9 billion in market value that Softbank had lost the previous two days.

* Goldman Sachs Group Inc reported a big quarterly profit and more than doubled its revenue. Net revenue soared to $8.35 billion from $3.59 billion in last year's third quarter.

* Visa Inc is preparing to name a new chief executive as soon as this month to succeed Joseph Saunders, who is expected to retire from the credit-card giant when his contract expires in March, according to people familiar with the process.

* Hon Hai Precision Industry Co Ltd acknowledged that it hired underage workers at one of its China plants, in the latest hit to the labor practices of the major contractor for Apple Inc and other electronics giants.

* Intel Corp's profit dropped 14 percent in the third quarter, underscoring tough times for the personal computer sector amid competition from tablet-style devices and other headwinds.

* Microsoft Corp set the starting price for its new tablet computer due out next week at $499, following the lead of Apple Inc's iPad while undercutting pricing of some of the software giant's allies.

* International Business Machines Corp reported declining third-quarter revenue in each of its major segments, including a double-digit-percentage dip in hardware sales, the latest indication that businesses could be cutting back on technology spending.

* Electric-car-battery manufacturer A123 Systems Inc filed for Chapter 11 bankruptcy protection with a plan to sell its auto-business assets to an American rival, Johnson Controls Inc.

FT

PANDIT RESIGNS FROM CITI AFTER BOARD CLASH

Citigroup Inc Chief Executive Vikram Pandit resigned abruptly on Tuesday after months of simmering tensions with the board of directors.

MASTERCARD MINES DATA FOR MARKETERS

MasterCard is analysing transaction data to help marketers direct targeted advertising at consumers.

BBA CONSIDERS REGISTER TO BAN ROGUE BANKERS

UK bankers face the risk of being barred from their profession by an independent body if they misbehave, under new rules under consideration.

INDONESIA PROBES CLAIMS OVER BUMI UNIT

Indonesia's market regulator is investigating the use of funds raised in an initial public offering of one of London-listed Bumi Plc's key assets.

CWC SET TO OFFLOAD MACAU GROUP STAKE

Cable & Wireless Communications is in advanced talks to sell its controlling stake in Macau's largest telecoms group to Citic Telecom International.

CLARK WARNS BANKS TO PURGE TAINTED STAFF

Britain's banks must purge those remaining staff who are tainted by scandal or who fail to grasp the need for a complete culture change, Greg Clark said on Tuesday.

EU WARNS GOOGLE RISKS FINES OVER PRIVACY

EU regulators have demanded that Google substantially change its controversial privacy policies or risk fines.

SOCGEN TO SUSPEND SOME JAPAN ACTIVITIES

Societe Generale has been ordered to suspend some of its private banking activities in Japan after the country's financial regulator found "serious violations" of laws.

NYT

* Weeks before Vikram Pandit's surprise resignation on Tuesday as chief executive of Citigroup Inc, the banking giant's powerful chairman, Michael O'Neill, was privately huddling with other board members to plan how to replace him, according to several people briefed on the talks.

* 27 European data-protection agencies asked Google Inc to modify its global privacy policy that governs dozens of Google online services - including the flagship search engine, Android mobile phone apps and YouTube videos.

* After months of delay, the Spanish government is edging closer to making a decision about whether to ask for European financial assistance.

* International Business Machines Corp delivered a mixed and somewhat unsettling quarterly performance. Profits barely exceeded Wall Street's expectations, while revenue fell well below.

* Intel Corp crossed an earnings bar it lowered for itself last month, but the problems plaguing its main market for semiconductors - personal computers - seemed no closer to ending.

* Goldman Sachs Group Inc said it had a strong comeback for the third quarter of 2012, buoyed by private equity holdings that had weighed down its earnings a year ago.

* Bank of America Merrill Lynch has hired Margaret Ren to lead its Chinese operations, according to an internal memorandum. Ren joins the company from BNP Paribas, where she was the corporate finance chairman for greater China.

* The troubled battery maker A123 Systems Inc filed for bankruptcy, dealing a blow to the Obama administration's program to jump-start a domestic battery industry and spur development of electric vehicles.

Canada

THE GLOBE AND MAIL

* The voice of Canada's CEOs is urging parents to enroll their kids in Asian language classes to match them with the growing appetite of employers for multilingual workers.

John Manley, the former finance minister who now heads the Canadian Council of Chief Executives, said it is time for a national debate over how to encourage new language skills as part of the country's trade efforts.

* Ontario premier Dalton McGuinty spent much of last Saturday on the phone with five of his closest advisers, informing them that he had decided to resign after nine years in office, sources said.

Those phone conversations paved the way for McGuinty's surprise announcement at an emergency caucus meeting on Monday evening that he was resigning after 16 years as Liberal Leader and just one year after winning a minority government.

Reports in the business section:

* The large number of condos being built in Toronto is now curbing the rise in both prices and rents. Resale prices for high-rise units in the country's most populous city are flattening out after years of appreciation, and the degree to which monthly rents have been rising has begun to slow.

NATIONAL POST

* Immigration Minister Jason Kenney defended a proposed law Tuesday that would give him the power to bar visitors from Canada for "public policy" reasons, saying it would be used rarely and only against hate mongers who incite violence.

FINANCIAL POST

* EnStream LP, a joint venture between the country's three biggest wireless operators, is selling its experimental Zoompass mobile payment service in a bid to partner more closely with the country's big banks, which saw the platform as a competitor. EnStream was formed by Rogers Communications Inc, BCE Inc and Telus Corp in 2005

Fly On The Wall 7:00 am Market Digest

ANALYST RESEARCH

Upgrades
Adtran (ADTN) upgraded to Neutral from Sell at Goldman
Brown & Brown (BRO) upgraded to Outperform from Market Perform at Keefe Bruyette
Equity Residential (EQR) upgraded to Outperform from Market Perform at Raymond James
Essex Property Trust (ESS) upgraded to Strong Buy from Outperform at Raymond James
Fortinet (FTNT) upgraded to Buy from Hold at Wunderlich
Mid-America Apartment (MAA) upgraded to Strong Buy from Outperform at Raymond James
Murphy Oil (MUR) upgraded to Buy from Hold at Brean Capital
Pinnacle Financial (PNFP) upgraded to Outperform from Market Perform at Raymond James

Downgrades
American Tower (AMT) downgraded to Equal Weight from Overweight at Barclays
Apollo Group (APOL) downgraded to Neutral from Buy at BofA/Merrill
Cisco (CSCO) downgraded to Hold from Buy at Cantor
Diebold (DBD) downgraded to Underweight from Neutral at JPMorgan
ExlService (EXLS) downgraded to Neutral from Outperform at RW Baird
IBM (IBM) downgraded to Neutral from Buy at Janney Capital
IMAX (IMAX) downgraded to Neutral from Positive at Susquehanna
M.D.C. Holdings (MDC) downgraded to Market Perform from Outperform at Raymond James
Murphy Oil (MUR) downgraded to Equal Weight from Overweight at Barclays
Resources Connection (RECN) downgraded to Neutral from Outperform at Macquarie
Ryland Group (RYL) downgraded to Market Perform from Outperform at Raymond James
Texas Instruments (TXN) downgraded to Underperform from Neutral at Longbow
Toll Brothers (TOL) downgraded to Outperform from Strong Buy at Raymond James

Initiations
Mellanox (MLNX) initiated with a Market Perform at JMP Securities
StemCells (STEM) initiated with a Buy at Ascendiant Capital
Universal Display (PANL) initiated with an Outperform at JMP Securities
Xylem (XYL) initiated with a Neutral at DA Davidson

HOT STOCKS

Citigroup (C) Chairman O'Neil said no "shoe to drop" on Pandit resignation
New CEO Corbat said "needs some time in chair" before setting targets
Citigroup outlook lowered to Negative by Moody's
U.S. International Trade Commission to investigate VirnetX (VHC), SAIC (SAI) complaint against Apple (AAPL)
Credit Agricole (CRARY) announced sale of Emporiki to Alpha Bank
RBS (RBS) confirmed exiting U.K. government's asset protection scheme
ASML Holding NV (ASML) and Cymer (CYMI) announced ASML will acquire all outstanding shares of Cymer in a cash-and-stock transaction valued at EUR1.95B
Penn West Exploration (PWE) to dispose of non-core properties for $1.3B
Cisco (CSCO) and Citrix (CTXS) extend partnership into networking, cloud and mobility
Statoil (STO) and Statkraft acquired Dudgeon Offshore wind power project
Intel (INTC) sees overall PC business growing at half the expected seasonal rate in Q4
CFO Smith sees excess capacity charges into FY13. Said capacity will improve in 1H13
Emeritus (ESC) and HCP (HCP) to acquire 142 senior housing communities for $1.8B
C.H. Robinson (CHRW) sold T-Chek Systems to Electronic Funds Source for $302.5M in cash
Helix Energy (HLX) to sell three pipelay vessels for $252.75M
CSX (CSX) still sees 2012 earnings growth, margin expansion. Targeting 65% operating ratio by 2015
Boise (BZ) ceased production at St. Helens mill, cut 100 jobs
Marten Transport (MRTN) CEO: confident in long-term strategy
Stanley Furniture (STLY) CEO sees overall sales "flat to slightly down"

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
BNY Mellon (BK), BlackRock (BLK), Knight Capital (KCG), Check Point (CHKP), Pinnacle Financial (PNFP), Renasant (RNST), Wintrust Financial (WTFC), Cathay General (CATY), Fulton Financial (FULT), United Rentals (URI), Badger Meter (BMI), BancFirst (BANF), CSX (CSX), Manhattan Associates (MANH), Sonic (SONC), Cree (CREE), Apollo Group (APOL), Intel (INTC)

Companies that missed consensus earnings expectations include:
Textron (TXT), WNS Holdings (WNS), Stanley Black & Decker (SWK), First Cash Financial (FCFS), Linear Technology (LLTC), Stanley Furniture (STLY), Marten Transport (MRTN), Interactive Brokers (IBKR)

Companies that matched consensus earnings expectations include:
Fortinet (FTNT), IBM (IBM)

NEWSPAPERS/WEBSITES

A potential Spanish request for financial aid is becoming tangled in diplomacy between euro-zone capitals, despite Madrid's new willingness to move forward. In a reprieve for Madrid, Moody's Investors Service said Spain's sovereign-debt rating remains investment grade, the Wall Street Journal reports
IBM (IBM) reported lower Q3 revenue in each of its major segments, including a double-digit-percentage dip in hardware sales, the latest indication that businesses could be cutting back on technology spending, the Wall Street Journal reports
U.K. banks may no longer be allowed to cut their capital reserves if doing so fails to increase lending in the struggling economy or undermines financial stability, says Britain's Financial Services Authority, Reuters reports
Starbucks (SBUX) may face an investigation into its British tax affairs after a senior member of parliament called for a probe into how the company could avoid paying tax on $1.93B of sales since 2009, Reuters reports
Citigroup (C) is hiring seven bankers in Japan in anticipation that more companies will make cross-border acquisitions and restructure, sources say, Bloomberg reports
Sprint Nextel (S) expects the U.S. Justice Department will complete a review of the company’s agreement to sell a majority stake to Softbank (SFTBF) within an initial 30-day period and won’t warrant an extended investigation, Bloomberg reports

SYNDICATE

Acadia Healthcare (ACHC) files $200M of common stock, 18.5M shares for holders
HCP Inc. (HCP) files to sell 22M shares of common stock
Kite Realty Trust (KRG) files to 9.5M shares of common stock

ACTIVIST/PASSIVE FILINGS

Attiva reports 9.8% stake in Spanish Broadcasting (SBSA), suggests spin-off
Deerfield reports 5.34% passive stake in Molina Healthcare (MOH)
Deerfield reports 6.19% passive stake in InterMune (ITMN)

The primary, if not only, reason there has been a brief spike in subsidized demand for housing in recent months, has been the GSE/FHFA endorsed REO-To-Rental plan, and associated securitization conduits, in which large asset managers have been encouraged to take advantage of government funded, risk-free financing (and entirely bypassing banks who have given up on loan origination due to legacy liability issues which have every bank tied up in litigation from now until Feddom come - just see today's Bank of America results) and purchase foreclosed properties in bulk, with the intention of converting them into rental properties. Needless to say, the subsidization of this wholesale purchasing of foreclosures, coupled with the ongoing "foreclosure stuffing" pursued by the big banks (as a reminder days to foreclose in New York just hit a record 1,072 per RealtyTrac as banks simply refuse to clear housing inventory faster knowing full well withheld inventory is an additional clearing price subsidy) is the main reason why the punditry has been confused into believing there is a housing rebound. That this "rebound" is merely a subsidized demand pull phenomenon a la the "cash for clunkers" auto sales program is patently clear to most. Nonetheless what little confusion is left, is finally coming to an end, thanks to none other than one of the first entrants in the REO-To-Rental space, $31 billion hedge fund Och Ziff, which a year after entering the program with hopes of quick riches, is now looking to cash out.

As Reuters reports, "Och-Ziff Capital Management Group LLC, the $31 billion hedge fund led by Daniel Och, recently told its investment partner, 643 Capital Management, that it wants to exit from the foreclosed homes business, said several people familiar with the matter." Why is Daniel Och calling it a day: "the New York-based hedge fund is looking to sell now because the returns it is generating from rental income are less than expected and it is looking to take advantage of a recent rebound in home prices in northern California." And so yet another myth unravels. Look for all the other piggybackers and late entrants to follow promptly in Och-Ziff's steps as the primary driver of distressed housing demand goes as easily as it came.

Reuters explains how REO-to-Rental is coming to an end:

The hedge fund is looking to make a profit on a portfolio of about 300 foreclosed homes in northern California that were acquired at distressed prices, said the sources, who did not want to be identified because they were not authorized to discuss the matter.

 

Though the total value of the portfolio is not known, its business model involved buying homes at an average price of about $100,000 apiece. In addition, Och-Ziff and its partner needed to spend tens of thousands of dollars on each home for potential renovations before renting them out.

 

The decision by Och-Ziff to exit the market after just a year is notable since the hedge fund was one of the first institutional investors to see the large supply of foreclosed homes in the United States as a new asset class that could generate consistent income if operated as rental properties.

What is effectively happening is that once again the large institutions, in this case those who are unburdened by legacy liabilities, i.e., hedge funds (it should be rather distressing that instead of banks serving the roles of landlords, this time around it is it is big hedge funds who are offering homes for rent) who have access to ZIRP are attempting to arb out the retail borrowing spread. The problem however is that while those who have access to Fed funding are expecting large, consistent ROEs, the other side of the equation is missing, and as rental prices increase fewer and fewer Americans can take advantage of the hedge funds' "generosity." This is what happens as the middle class collapse continues and as America's society sees its nominal (not to mention real) income continue to decline as hourly earnings collapse (as we pointed out last week).

And since the Fed has both broken and massively distorted the business cycle (recall: JP Morgan Finds Obama, And US Central Planning, Has Broken The Economic "Virtuous Cycle"), an investor can make an asset allocation decision in a far shorter length of time. In this case it took Och Ziff just one year to go from start to finish, and now to cash out as it sells to other, less sophisticated investors who have yet to discover the lack of IRR associated with the REO-to-Rental program.

Och-Ziff's move could indicate that institutional investors may have to dial back their expectations, especially with regards to rental income.

 

"It's not surprising that some investors may have overestimated rental returns," said Rick Sharga, executive vice president with Carrington Mortgage Holdings, a division of Carrington Capital, which has been buying and renting foreclosed homes since 2007. "If you are an investor getting into this cold you were probably making assumptions based on models rather than experience."

 

Gregor Watson, founder of 643 Capital Management, which is Och-Ziff's partner, said he is not marketing the portfolio of homes but declined to comment further. An Och-Ziff representative declined to comment.

Och Ziff is the first to wave goodbye...

Over the past year, other high-profile Wall Street names, such as Blackstone Group, Oaktree Capital Management, Colony Capital and TCW, have all committed money to investing in foreclosed homes. Oaktree has invested in a fund managed by Carrington.

 

Wall Street analysts estimate that this year alone, private equity firms, hedge funds and other investment firms have raised between $6 billion and $8 billion to acquire single-family homes at either foreclosure auctions or from banks. So far, private equity giant Blackstone has emerged as one of the biggest buyers, spending more than $1 billion to gobble up foreclosed homes.

 

Sharga said it was not surprising that an early market entrant like Och-Ziff would look to get out and take advantage of the recent appreciation in home values. He said other early financial investors also may change direction and decide to cash in sooner rather than later.

 

"This is a normal winnowing-out process," Sharga said. "We will see other early entrants depart."

... but it won't be the last. Expect all other subsidized "buyers" in the space to proceed to dump their properties en masse shortly. The problem is that once the greater fool is no longer clearly defined at the poker table, and the get rich quick scam has been exposed, the offerless market quickly goes back to being bidless. Which is precisely what will be the catalyst for the 4th leg down of the dead cat bouncing housing market, and the end of the illusion that this time it's different and Bernanke has actually done something right.

• Debt Fuels a Dividend Boom - Firms Collect Payouts, and Investors Get Yield; 'Reminiscent of the Bubble Era' (WSJ)
• Black Monday Echoes With Computers Failing to Restore Confidence (BBG)
• Poll: Obama Leads in Wisconsin, Iowa (WSJ)
• Gold Imports by India Seen Climbing First Time in Six Quarters (BBG)
• Europe pushes ahead towards ECB bank supervision (Reuters)
• ... And fails: Summit fails to agree timetable for aid to failing lenders (FT)
• Toyota Prius Dominates California as State’s No. 1 Model (BBG)
• Italy raises €18bn in huge bond sale (FT)
• Diplomacy inbox fills up as U.N. awaits U.S. presidential vote (Reuters)
• Goldman braced for more revelations (FT)
• China power brokers agree preferred leadership team (Reuters)
• EU, Japan Warn Against New US Swaps Rules (WSJ)
• Why VaR is the most meaningless contraption ever: Morgan Stanley shows the ‘flaky’ side of model (FT)
• Made in France Trumps Consumer Choice in Hollande Jobs Quest (BBG)
• North Korea threatens South over propaganda balloons (Reuters)

Overnight Media Digest

WSJ

* President Barack Obama retains steady leads over Mitt Romney in Wisconsin and Iowa, two battlegrounds drawing increased attention in the final sprint to Election Day, according to new polls conducted just before and after Tuesday's presidential debate.

* Google Inc's quarterly earnings report hit Wall Street more than three hours early on Thursday due to a glitch. The bigger glitch was what the Internet giant's results actually showed.

* European leaders early Friday agreed to have a new supervisor for euro-zone banks up and running next year, a step that will pave the way for the bloc's bailout fund to pump capital directly into banks throughout the single-currency area.

* Microsoft Corp's quarterly earnings dropped 22 percent amid weak demand for personal computers and slowing growth for its once-strong business software, underscoring the stakes for the company to successfully launch its dramatically overhauled Windows operating system next week.

* Big bond auctions in Italy and Spain gave a surprising boost to the biggest countries reeling under Europe's debt crisis, with Italy selling a record 18 billion euros ($23.57 billion) worth - enough to satisfy its borrowing needs for the rest of the year in one unexpected stroke.

* China said its economy continued to slow in the third quarter just weeks before it embarks on a once-a-decade change in leadership, compounding concerns about the outlook for one of the world's major engines of growth.

* The board of Lowe's Cos Inc is looking for an heir apparent to Chief Executive Robert Niblock, as the home-improvement retailer struggles to compete with resurgent rival Home Depot Inc.

* Chilean retail giant Cencosud SA agreed to acquire the Colombian business of French retailer Carrefour SA for 2 billion euros ($2.6 billion), in a move that shows how local companies are taking advantage of European counterparts weakened by the Continent's debt crisis.

FT

BARCLAYS SETS ASIDE FURTHER FUNDS FOR PPI

Barclays reported a spike in claims of unwanted insurance policies sold, forcing it to set aside a further 700 million pounds ($1.13 billion).

OXFORD INVESTMENT CHIEF CRITICISES BUYOUTS

Oxford University's investment chief accused private equity bosses of failing their clients by charging excessive fees and delivering lacklustre returns.

GOOGLE TRADING HALTED AFTER EARNINGS ERROR

Third-quarter earnings from Google were published several hours earlier than planned on Thursday, sparking a panic sell-off of the company's shares.

ARCELORMITTAL EXPLORES IRON ORE STAKE SALE

ArcelorMittal is exploring the sale of a stake in its $10 billion Canadian iron ore business, as the world's biggest steel company struggles to cope with the downturn.

M STANLEY SHOW THE 'FLAKY' SIDE OF MODEL

Morgan Stanley adjusted its own benchmark of potential losses in a move that boosted its reported capital buffers, sparking debate over banking measures.

NEWSWEEK TO ABANDON PRINT EDITION

Newsweek's print edition in to cease publication after 79 years, pinning their hopes on cost-cutting and an "all-digital" strategy.

WALMART PROBED IN INDIA OVER INVESTMENT

Walmart is being investigated in India over accusations that it secretly invested in supermarkets.

SHELL IN US TALKS TO EXTEND ARCTIC LEASES

Royal Dutch Shell, the European oil company, has been in talks with the U.S. government over extending its leases for oil development in the Arctic seas north of Alaska.

NYT

* Sprint Nextel Corp has moved to protect one of its most valuable assets - access to a big chunk of spectrum - just as it is preparing to become a more aggressive force in wireless, with the backing of SoftBank Corp of Japan.

* Google Inc released a disappointing earnings report on Thursday that sent its stock price plummeting and reflected the challenges the company faces as it tries to make money in a mobile world.

* On Thursday, Newsweek buckled under the pressure afflicting the magazine industry in general and newsweeklies in particular, with their outdated print cycles that have been overtaken by the Internet. Tina Brown, editor-in-chief of Newsweek and The Daily Beast, announced that Newsweek would cease print publication at the end of the year and move to an all-digital format.

* Microsoft Corp is on the verge of releasing Windows 8, its biggest software product in years - and the company's lackluster financial results on Thursday underscored how badly the company needs it to succeed.

* Indian regulators have begun an informal inquiry into allegations that Wal-Mart Stores Inc violated rules restricting foreign investment in the country's fast-growing retailing industry.

* Morgan Stanley earnings rebounded strongly in the third quarter as skittish clients returned to doing business with the company.

* Verizon Communications reported on Thursday that its net income in the third quarter rose 15.5 percent, to $1.59 billion, from a year ago. The company said revenue climbed 3.9 percent to $29 billion, in line with a survey of analysts' expectations by FactSet.

* Union Pacific Corp said Thursday that its third-quarter profit climbed 15 percent because price increases and more automotive and chemical shipments helped the railroad offset a 12 percent decline in coal shipments.

* Southwest Airlines Co eked out a small third-quarter profit in spite of a September slowdown, the company said on Thursday.

* After months of slowing growth, the Chinese economy may finally have bottomed out. But concerns remain about whether and when it can resume the rapid expansion of recent years.

* Airtime, the much-hyped video chat site created by Sean Parker and Shawn Fanning, the two behind the music sharing service Napster, has turned out to be far from a sure thing.

The site is just four months old, and the staff is tweaking its features to make it more appealing. So far, though, Airtime's traffic appears to be little more than a trickle.

* Hoping to stave off a brewing trade war, Mexican tomato growers said on Thursday that they would agree to significant increases in the minimum price at which their products can enter the United States and to establish a system to bolster compliance and enforcement.

Canada

THE GLOBE AND MAIL

* Dalton McGuinty's decision to suspend all business at the Ontario legislature has created divisions within Liberal Party ranks, with some members of provincial parliament g r owing uneasy and one potential leadership candidate openly criticizing the move as a way to avoid scrutiny.

* After escaping the largest human-trafficking ring in Canadian history, Tibor Baranyai could have quietly returned to his native Hungary. Instead, he chose to help police and prosecutors take down the criminal organization that forced him to work as a virtual slave on construction sites.

Reports in the business section:

* With one eye on the strong resource economy and the other on its chief rival, Air Canada is ramping up the frequency of its short regional flights in Western Canada.

* The spat between Enbridge Inc and British Columbia is escalating, with each side accusing the other of being out of line regarding discussions - or more precisely, the lack of discussions - over explosive issues tied to the controversial oil sands pipeline the province currently opposes.

NATIONAL POST

* A retired city of Montreal engineer says he collected more than $600,000 in cash kickbacks from construction companies over nearly 20 years.

FINANCIAL POST

* Research In Motion Ltd Chief Executive Thorsten Heins fired back at a New York Times article on the apparent social embarrassment of being seen using a BlackBerry smartphone.

* Canada's securities industry regulator is calling for tougher oversight of the Canadian version of Libor. In an emailed statement, a spokesperson for the Investment Industry Regulatory Organization of Canada said while it isn't aware of any problems with the Canadian Dealer Offered Rate, or CDOR, "(r)ecent experiences with Libor have pointed to a need for increased scrutiny of such survey-based reference rates."

Fly On The Wall 7:00 am Market Snapshot

ANALYST RESEARCH

Upgrades

Abbott (ABT) upgraded to Outperform from Market Perform at Wells Fargo
Alliant Energy (LNT) upgraded to Buy from Hold at Wunderlich
Cheniere Energy Partners (CQP) upgraded to Outperform from Neutral at Credit Suisse
Cummins (CMI) upgraded to Overweight from Neutral at Piper Jaffray
Harley-Davidson (HOG) upgraded to Overweight from Neutral at JPMorgan
Home Loan Servicing (HLSS) upgraded to Overweight from Equal Weight at Barclays
Huntington Bancshares (HBAN) upgraded to Market Perform from Underperform at FBR
Intuitive Surgical (ISRG) upgraded to Buy from Neutral at BofA/Merrill
SanDisk (SNDK) upgraded to Overweight from Neutral at Piper Jaffray
T. Rowe Price (TROW) upgraded to Overweight from Neutral at JPMorgan
Verizon (VZ) upgraded to Outperform from Sector Perform at Pacific Crest

Downgrades

AMD (AMD) downgraded to Market Perform from Outperform at FBR Capital
athenahealth (ATHN) downgraded to Underperform from Hold at Jefferies
Barclays (BCS) downgraded to Hold from Buy at Canaccord
Fifth Third Bancorp (FITB) downgraded to Neutral from Buy at Compass Point
Genco Shipping (GNK) downgraded to Sell from Hold at Deutsche Bank
Google (GOOG) downgraded to Neutral from Buy at BofA/Merrill
Google (GOOG) downgraded to Perform from Outperform at Oppenheimer
Janus Capital (JNS) downgraded to Underweight from Neutral at JPMorgan
KeyCorp (KEY) downgraded to Neutral from Buy at Citigroup
Lloyds Banking (LYG) downgraded to Underweight from Neutral at JPMorgan
Marvell (MRVL) downgraded to Hold from Buy at Deutsche Bank
Marvell (MRVL) downgraded to Hold from Buy at Jefferies
Marvell (MRVL) downgraded to Market Perform from Outperform at FBR Capital
Marvell (MRVL) downgraded to Neutral from Outperform at Credit Suisse
Marvell (MRVL) downgraded to Neutral from Overweight at JPMorgan
Marvell (MRVL) downgraded to Underperform from Outperform at CLSA
Meadowbrook (MIG) downgraded to Underperform from Sector Perform at RBC Capital
NVIDIA (NVDA) downgraded to Market Perform from Outperform at FBR Capital
Northrop Grumman (NOC) downgraded to Perform from Outperform at Oppenheimer
Snap-On (SNA) downgraded to Neutral from Buy at Janney Capital
WESCO (WCC) downgraded to Neutral from Buy at Citigroup

Initiations

Celanese (CE) initiated with a Neutral at JPMorgan
Clarcor (CLC) initiated with a Perform at Oppenheimer
DSW Inc. (DSW) initiated with a Neutral at Citigroup
Donaldson (DCI) initiated with a Perform at Oppenheimer
Guess (GES) initiated with an Underweight at Morgan Stanley
Pegasystems (PEGA) initiated with a Neutral at Wedbush
Salesforce.com (CRM) initiated with an Outperform at Wedbush

HOT STOCKS

Microsoft (MSFT) reaffirmed FY13 operating expense guidance $30.3B-$30.9B
Said rise of multi-screen consumer creating huge opportunities
Burger King (BKW) launched specialty coffees with Nescafe Milano by Nestle (NSRGY)
ING Groep (ING) to sell insurance units in Hong Kong, Macau, Thailand
Yahoo (YHOO) to close Korean business
Air Products (APD) CEO: starting our FY13 with weak economic momentum worldwide
MeadWestvaco (MWV) to acquire Ruby Macons, terms not disclose
Baker Hughes (BHI) CEO: Well positioned in growing and emerging markets
Schlumberger (SLB) still sees uncertainty surrounding global economy outlook
USB's (USB) Elavon and Banco Santander (SAN) form merchant services JV in Spain
Chipotle (CMG) sees flat to low-single digit comparable restaurant sales in 2013
Sees 165-180 new restaurant openings next year
AMD (AMD) sees PC market under pressure for "several quarters"
Said it must diversify beyond the traditional PC market
To cut workforce by 15%
Duff & Phelps (DUF) acquired CETERIS

EARNINGS

Companies that beat consensus earnings expectations last night and today include: Honeywell (HON), Schlumberger (SLB), Valmont (VMI), Western Alliance (WAL), Capital One (COF), Rambus (RMBS), Robert Half (RHI), SanDisk (SNDK), athenahealth (ATHN), NCR Corp. (NCR), B&G Foods (BGS), Cubist (CBST), Microsoft (MSFT)

Companies that missed consensus earnings expectations include:
Baker Hughes (BHI), Air Products (APD), Cytec Industries (CYT), AMD (AMD), E-Trade (ETFC), Chipotle (CMG), Acacia Research (ACTG)

Companies that matched consensus earnings expectations include:
General Electric (GE), People's United (PBCT)

NEWSPAPERS/WEBSITES

The Google (GOOG) filing was sent early due to human error and not a systems problem, R.R. Donnelley (RRD) CEO Tom Quinlan told the Wall Street Journal
A series of failed deals is upsetting Chinese firms trying to invest in U.S. businesses and throwing fuel on an increasingly tense trade relationship between the two largest economies, the Wall Street Journal reports
Archer Daniels Midland (ADM), which bought a 10% stake in Australia’s GrainCorp, valuing the company at $2.8B, wants talks on a takeover that would give the U.S. agribusiness a stronger platform to supply Asia, Reuters reports
BP’s (BP) board will meet today to consider a cash and stock offer worth over $25B from Rosneft for its 50% stake in TNK-BP, Reuters reports
Expansion by tech companies from Amazon (AMZN) to Apple (AAPL) to Facebook (FB) is helping drive a rebound in U.S. office development from the lowest in more than five decades as default rates on construction mortgages decline from a 2010 peak, Bloomberg reports
Foreign direct investment in China declined for the 10th time in 11 months, as companies reduced spending amid a slowdown in their economy. Investment fell 6.8% from a year earlier to $8.43B, according to the Ministry of Commerce, Bloomberg reports

SYNDICATE

Cleveland BioLabs (CBLI) files to sell common stock and warrants
Copano Energy (CPNO) files to sell 6M common units
Marathon Petroleum (MPC) unit launches 15M share IPO
Puma Biotechnology (PBYI) 6.5M share Secondary priced at $16.00
Seadrill Partners (SDLP) 8.75M share IPO priced at $22.00

Here are my thoughts on Google's Q3. I'm at home with my ill daughter and a hobbled PC that refuses to do rich text, so an introduction will be posted here and a link to the full review will be included that points to the full review on BoomBustBlog.Before I get into them I will like to reiterate that many pundits, investors, analysts and traders still have no clue as to the type of company that Google is. Imagine a private equity firm that has consistently put out the leaders (as in the number one company) in several industries, every 3rd year or so for 10 years straight. Now, take that private equity fund and give it it's own operations with some of the smartest engineers and strategists in the world, and have them spend 1.5 Billion (that's Billion with a "B"") in R&D annually to discover new things. Now fund that private equity fund and R&D camp with cashflow from the world's largest automated web advertising firm, whose closest competition is so far away as to barely even be known for its wares by the average person. Now, add to it the worlds fastest growing, largest and most technically advanced mobile operating system. Then add to it the largest patent portfolio and 4th largest handset maker in the world (remember the mobile industry is where its at now). Then add to it the largest and by far the most prominent digital media destination AND publsihing property in the world. Then add to that the largest consumer and enterprise cloud operations in the world. 

Finally, add to the mix the largest, most oft use and most entrenched search engine which (when combined with the cloud properties) basically makes this company the defacto gatekeeper for digital data for the world.

What would you have with this new world conglomerate? You'd have Google, that's what you'd have. Now, on to my anecdotal quips on Google's dramatic Q3....

Enterprise wide margins have dropped. I suspect the Motorola acquisition and the influx of mobile revenues, which alter the supply-demand landscape dramatically, thus dropping pricing power for the near to medium term.

See the rest of the full review on BoomBustBlog.

The last time we checked on the (funding) status of America's real presidential race - the one where America's uber-wealthy try to outspend each other in hopes of purchasing the best president money can buy - the totals were substantially lower. With November 6 rapidly approaching, however, the scramble to lock in those record political lobbying IRRs is in its final lap. And thanks to the unlimited nature of PAC spending, look for the spending to really go into overdrive in the next 2 weeks as the spending frenzy on the world's greatest tragicomedy hits previously unseen heights.

RESTORE OUR FUTURE

Total raised as of Sept. 30: $110.5 million - supports Republican presidential candidate Mitt Romney

• Bob Perry - Houston builder who was a major donor to Swift Boat Veterans for Truth, a group that helped undermine 2004 Democratic presidential nominee John Kerry by attacking his Vietnam War record. Total donations: $10 million
• Sheldon Adelson - billionaire Las Vegas casino magnate who built the Venetian hotel and casino. Donation: $5 million
• Miriam Adelson - Sheldon's wife. Donation: $5 million
• Bill Koch - brother of conservative financiers David and Charles Koch. He runs Oxbow Carbon, a Florida-based firm that is also a donor and shares its address with another contributor, Huron Carbon. Total donations, including through firms: $4 million
• Steven Lund - runs Nu Skin, a Utah skin care and cosmetics company whose former executives have been linked to two other firms that share an address in Provo, Utah, and donated to the Super PAC: F8 LLC and Eli Publishing. Lund's wife Kalleen is also a donor. Total donations from the Lunds and firms: $3 million
• Julian Robertson - hedge fund industry legend at Tiger Management. Total donations: $1.3 million
• Crow Holdings - Dallas-based investment firm managing the wealth of the family of the late Dallas real estate mogul Trammell Crow, whose sons Harlan and Trammell S. Crow are also donors. Total Crow Holdings and Crow donations: $1.3 million
• Harold Simmons - billionaire Dallas banker and CEO of Contran Corp who has contributed to PACs supporting Rick Perry and Newt Gingrich. Donations: $1.3 million
• Frank VanderSloot - Idaho businessman who runs the nutritional and cosmetics company Melaleuca. The firm and its subsidiaries have also donated. Total donations: $1.1 million
• The Villages of Lake Sumter - a community in Florida run by billionaire Gary Morse, who is also a donor alongside his wife Renee and their several children. Along with the Morse family, thirteen companies controlled wholly or partially by Morse that share an address in The Villages have also contributed. Total donations of all: $1.7 million.
• Kenneth Griffin - Chicago-based hedge fund manager and CEO of Citadel LLC. Total donations: $1.1 million
• Bob Parsons - billionaire founder of web hosting giant Go Daddy. Donation: $1 million
• Jim Davis - chairman of New Balance Athletic Shoes Inc. Donations: $1 million
• Stanley Herzog - CEO of Missouri-based Herzon Contracting Corp. Donation: $1 million
• Bruce Kovner - billonaire hedge fund manager at Caxton Alternative Management. Donation: $1 million
• Rocco Ortenzio - Pennsylvania healthcare executive and founder of Select Medical Corp. Total donations: $1 million
• John Childs - founder of private equity firm J.W. Childs Associates LP in Florida. Donation: $1 million
• Edward Conard - a New York investor and former executive at Bain Capital, a private equity firm co-founded by Romney. Donation: $1 million
• John Kleinheinz - Texas hedge fund manager for Kleinheinz Capital Partners Inc. Donation: $1 million
• J.W. Marriott Jr. - chairman and CEO of Marriott International, brother of Richard. Total donations: $1 million
• Richard Marriott - chairman of Host Marriott International. Total donations: $1 million
• Robert McNair - owner of the Houston Texans football team. Donation: $1 million.
• Robert Mercer - New York hedge fund manager at Renaissance Technologies. Donation: $1 million
• John Paulson - a prominent New York hedge fund manager at Paulson and Co. Donation: $1 million
• Rooney Holdings Inc - private investment firm formed in 1980s to acquire the Manhattan Construction Co. and has since expanded into many areas. Total donations: $1 million
• Paul Singer - hedge fund manager who helped fund efforts to legalize gay marriage in New York. Donation: $1 million
• Paul and Sandra Edgerly - Paul Edgerly of Brookline, Massachusetts, is an executive at Bain. The Edgerlys each have given $500,000. Total donations: $1 million
• Steven Webster - private equity executive at Avista Capital in Houston. Total donations: $1 million
• Robert Brockman - executive at Reynolds and Reynolds, a Dayton, Ohio-based car dealership support company that shares a P.O. Box with CRC Information Systems Inc, Fairbanks Properties LLC and Waterbury Properties LLC, which split the donation three ways. Total donations: $1 million
• Miguel Fernandez - chairman of MBF Healthcare Partners, a private equity firm. MBF Family Investments also donated to the Super PAC. Total donations: $1 million
• Renco Group Inc. - owned by New York billionaire Ira Rennert, another frequent contributor to Republicans this year. Donation: $1 million
• OdysseyRe Holdings Corp - reinsurance underwriting company in Stamford, Connecticut that is a U.S. subsidiary of Toronto-based Fairfax Financial. Donation: $1 million

PRIORITIES USA ACTION

Total raised as of Sept. 30: $50.1 million - supports Democratic President Barack Obama

• James Simons - billionaire hedge fund manager, founder of Renaissance Technologies Corp. Donation: $3.5 million
• Fred Eychaner - founder of Newsweb Corp. Donation: $3.5 million
• Jeff Katzenberg - chief executive of DreamWorks Animation. Donation: $3 million
• Steve Mostyn - Houston attorney. Donation: $2 million
• Irwin Mark Jacobs - former CEO of Qualcomm Inc. Donation: $2 million
• Jon Stryker - billionaire activist and heir to the medical supply company fortune of his grandfather. Donation: $2 million
• Anne Cox Chambers - billionaire daughter of James M. Cox, founder of Cox Enterprises. Total donations: $1.5 million
• National Air Traffic Controllers Association - union representing more than 16,000 workers. Donation: $1.3 million
• S. Daniel Abraham - billionaire creator of Slim-Fast brand, chairman of S. Daniel Abraham Center for Middle East Peace. Donation: $1.2 million
• Barbara Stiefel - retiree in Coral Gables, Florida. Donation: $1.1 million
• United Auto Workers - Donations through various funds: $1.1 million
• Kareem Ahmed - chief executive at Landmark Medical Management in California. Donation: $1 million
• David Boies, Jr - New York lawyer. Donation: $1 million
• Morgan Freeman - Hollywood actor. Donation: $1 million
• Amy Goldman - writer and heiress to the New York real estate fortune of Sol Goldman. Donation: $1 million
• Franklin Haney - owner and CEO of FLH Company, a Washington-based real estate company. Donation: $1 million
• Bill Maher - stand-up comedian. Donation: $1 million
• Mel Heifetz - real estate developer and gay activist. Donation: $1 million
• Michael Snow - Minnesota lawyer. Donation: $1 million.
• Steven Spielberg - film director. Donation: $1 million.
• Ann Wyckoff - Seattle philanthropist. $1 million.
• Service Employees International Union Committee on Political Education - union representing more than 2 million workers. Donation: $1 million.
• United Association of Journeymen and Apprentices of the Plumbing and Pipe Fitting Industry - union representing some 340,000 workers. Total donations: $1 million

AMERICAN CROSSROADS

Total raised as of Sept. 30: $68 million - supports Republican candidates for federal offices

• Harold Simmons - Total donations together with Contran Corp: $15.5 million
• Bob Perry - Total donations: $6.5 million
• Robert Rowling - an Irving, Texas, businessman and a conservative and active Republican donor. His company, TRT Holdings Inc, which runs Omni Hotel and Gold's Gym chains, is also a donor. Total donations: $4 million
• Joe Craft - billionaire coal executive from Tulsa, Oklahoma, and CEO of Alliance Holdings, which is also a donor. Total donations: $2.1 million
• Jerry Perenchio Living Trust - a trust of billionaire television tycoon A. Jerrold Perenchio, who is a former chairman of Spanish-language broadcaster Univision. Donation: $2 million
• Crow Holdings - Dallas-based real estate investment firm. Total donations: $1.5 million
• Weaver Holdings and Weaver Popcorn - Indiana-based company specializing in popcorn. Total contributions: $1.9 million
• Stephens Inc - a Little Rock, Arkansas, broker dealer. Total donations: $1.3 million
• Armstrong Group - telecommunications conglomerate in Pennsylvania. Donation: $1.3 million
• JWC III Revocable Trust - Donatoin: $1.3 million
• Robert Brockman - executive at Ohio-based Reynolds and Reynolds. Similarly to Restore Our Future, three firms sharing a P.O. Box - CRC Information Systems Inc, Fairbanks Properties LLC and Waterbury Properties LLC - split the donation three ways. Total donations: $1 million
• Whiteco Industries - Indiana-based company involved in advertising, construction, entertainment and hotels. Donation: $1 million
• The Mercury Trust - entity linked to California private equity firm of Saul Fox. Donation: $1 million
• Clayton Williams Energy Inc - Midland, Texas-based drilling company. Donation: $1 million
• Jay Bergman - of PETCO Petroleum Corporation. Donation: $1 million
• Kenneth Griffin - Citadel Investment Group chief executive. Total donations: $1 million
• Wayne Hughes - Founder of Public Storage. Total donations: $1 million
• John Childs - Chairman and CEO of Boston-based JW Childs Associates. Total donations: $1 million
• Philip Geier - New York executive. Total donations: $1 million
• Irving Moskowitz - a Florida bingo magnate who runs a charity in California and is known for his support of Jewish settlers in East Jerusalem. Donation: $1 million
• Robert Mercer - co-CEO of hedge fund Renaissance Technologies. Donation: $1 million

BARACK OBAMA (Democrat)

• Total raised, including transfers: $609.4 million
• Raised in September, including transfers: $136.2 million
• Total transferred from the funds jointly used by the campaign and the Democratic Party: $176.6 million
• Transferred in September: $39.8 million
• Total spent: $469.9 million
• Spent in September: $111.4 million
• Cash on hand: $99.3 million
• Debt: $2.6 million

DEMOCRATIC NATIONAL COMMITTEE

• Total raised: $253.6 million
• Raised in September: $20.3 million
• Total transferred in: $108.4 million
• Transferred in September: $4.0 million
• Total spent: $261.6 million
• Spent in September: $22.8 million
• Cash on hand: $4.6 million
• Debt: $20.5 million

OBAMA VICTORY FUND 2012 (The main joint Obama/DNC fund)

• Total raised: $371.1 million
• Raised in September: $80.0 million
• Cash on hand: $45.2 million

MITT ROMNEY (Republican)

• Total raised, including transfers: $337.2 million
• Raised in September, including transfers: $76.2 million
• Total transferred from the funds jointly used by the party and the Romney campaign: $236.4 million
• Transferred in September: $34.2 million
• Total spent: $298.2 million
• Spent in September: $54.7 million
• Cash on hand: $63.1 million
• Debt: $5.0 million

REPUBLICAN NATIONAL COMMITTEE

• Total raised: $331.2 million
• Raised in September: $48.4 million
• Total transferred in: $127.5 million
• Transferred in September: $28.6 million
• Total spent: $249.4 million
• Spent in September: $42.4 million
• Cash on hand: $82.6 million
• Debt: $9.9 million

ROMNEY VICTORY INC (Joint Romney/RNC fund - third quarter, July through Sept.)

• Total raised: $375.6 million
• Raised in third quarter: $235.2 million
• Cash on hand: $37.4 million

Appendix: SUPER PACS:

RESTORE OUR FUTURE, a Super PAC supporting Romney

• Total raised: $110.5 million
• Raised in September: $14.8 million
• Total spent: $94.9 million
• Spent in September: $4.6 million
• Cash on hand: $16.6 million

PRIORITIES USA, a Super PAC supporting Obama

• Total raised: $50.1 million
• Raised in September: $15.3 million
• Total spent: $43.6 million
• Spent in September: $12.8 million
• Cash on hand: $7.3 million

AMERICAN CROSSROADS, a Super PAC supporting Republicans

• Total raised: $68.0 million
• Raised in September: $11.4 million
• Total spent: $53.4 million
• Spent in September: $27.9 million
• Cash on hand: $15.8 million

Source: Reuters

Facebook's price bounced 20%+ between earnings announcement yesterday and the posting of this article.  Curiously enough, the stock bounced to within a mere SEVENTY CENTS of our mutliple's based valuation target the day after earnings. I feel some love is in order here, for that was  damn good call! Subscribers, please reference the FB IPO Analysis & Valuation Note - update with per share valuation released exactly 5 months ago on 05/21/2012 (click here to subscribe). Just to remember where we came from (I'm just using the time period where it was possible to short or buy puts on the stock, to keep things real)....

As for keeping it real:

MOBILE GROWTH: Roughly 14 percent of its ad revenue came from mobile advertising, up from somewhere around zero. This is to be expected, but since we don't have any real baselines or history to compare this to, it truly means nothing other than Facebook has and can make SOME money from mobile. The query du jour is how much, and when, no?

THE NUMBERS: Facebook Inc. posted a loss of $59 million, or 2 cents per share, in the July-September period. Adjusted earnings of 12 cents per share were a penny better than expected. Revenue rose 32 percent to $1.26 billion. That's also higher than the $1.23 billion Wall Street was looking for.

All should still be aware of the primary factor in this "growth company" stock's story....

These facts should not have been a surprise, and blog subscribers were made aware nearly a year ago, as excerpted from our 2nd most recent forensic analysis.

As excerpted from Facebook's earnings press release: Payments and other fees revenue for the third quarter was $176 million, a 13% increase over the same quarter in the prior year and a 9% decline sequentially from the second quarter of 2012. So, where did that drop likely come from? Well reference the part about Zynga below, warned roughly 7 months before the fact!

As excerpted from BoomBustBlog Challenges Face Ripping Facebook Share Peddlers That Left Muppets Faceless And Nearly 50% Poorer After IPO:

I made it clear that those who lost roughly half of their capital at or near the IPO price simply forfeited those funds from not readign BoomBustBlog, and this sitaution was virtually guaranteed. I felt so strongly about it that I made much of my opinion available for free this time.

Here's where I broke it down on Capital Account

I also happened to do the same on the Max Kesier show...

Subscribers who haven't refreshed their viewing of our Facebook research should do so now - (subscription only) FaceBook IPO & Valuation Note Update. Pro and instititional subscribers are welcome to peruse the downloadable Facebook Valuation Model, allowing you to input your own assumptions in the very unlikely event you may not agree 180% with me :-)

And from the archives...

Facebook Finally Faces The Fact Of BoomBustBlog Analsysis

I discussed Facebook on the Peter Schiff radio show, the Facebook excerpt is below...

From my previous Facebook analysis public excerpt:

Yeah, I was on a roll last year, wasn't I? That's not the gist of it either, as we reminisce even more...

Additional Facebook analysis, valuationa and commentary.

On Max Keiser, go to the 13:55 marker for more on Facebook...

From Nomi Prins, former Goldman managing director who did not write a NYT op-ed.

Before The Election Was Over, Wall Street Won

• Greece Faces Need for Additional Assistance: €30 billion (WSJ)
• Greeks fail to agree on bailout terms (FT)
• The report that got the NYT banned on the Chinese interweb: Billions in Hidden Riches for Family of Chinese Leader (NYT)
• Bo Xilai: China parliament expels disgraced politician (BBC)
• Japan Adds Stimulus Amid Threat of Bond-Sale Disruption... $9.4 billion (Bloomberg)
• Hubbard Said to Prefer Treasury Chief to Fed If Romney Wins (Bloomberg)
• 9 More Banks Subpoenaed Over Libor (WSJ)
• Romney raises $112m in 17 days (FT)
• Amid Cutbacks, Greek Doctors Offer Message to Poor: You Are Not Alone (NYT)... no, we are all broke
• Muni Downgrades Top 2011 Total on Weak Economy: Moody’s (Bloomberg)
• Ireland urges ECB to commit to bond-buying (FT)
• Cameron and Clegg unite in EU demands (FT)
• Wheeler Favours Lower N.Z. Currency Without Unorthodox Policies (Bloomberg)
• S Korea grows at slowest pace in 3 years (FT)

Overnight Media Digest

WSJ

* Apple Inc regained some momentum in its fourth quarter, selling more iPhones than expected while triggering some concerns about the iPad.

* In its first acquisition under Chief Executive Marissa Mayer, Yahoo Inc has purchased a mobile app called Stamped, with the aim of adding mobile-software experts to the struggling internet company's ranks.

* Sprint Nextel Corp's third-quarter loss widened on steep customer losses and the continuing shutdown of its older Nextel network.

* Samsung Electronics Co's third-quarter profit jumped 91 percent in a period when it was the only big manufacturer with new phones at the high end of the market. But the company indicated that momentum may stall in the current quarter.

* Amazon.Com Inc reported its first loss in more than nine years, as the retail giant's revenue growth slowed while it continued to spend heavily on product development for devices such as the Kindle tablets and e-readers, as well as on new warehouses.

* Pearson Plc said talks are under way to combine its Penguin Group with Random House, which is owned by Bertelsmann SE & Co.

* After years of often-fractious relations, Sumner Redstone said his daughter, Shari Redstone, could end up succeeding him as the overseer of his controlling interests in Viacom Inc and CBS Corp flying in the face of conventional wisdom that Viacom CEO Philippe Dauman was assured the role.

* Credit Suisse Group AG is quietly pushing to turn one of its trading venues into an exchange, an unusual bid that, if successful, would create the only U.S. stock exchange owned outright by a Wall Street bank.

* Nine more banks have received subpoenas in connection with a probe into alleged widespread interest-rate manipulation by banks, a person familiar with the investigation said.

* Secret recordings of Raj Rajaratnam sent the hedge-fund manager to prison for insider trading. Now, his lawyers say a government misstep early in the investigation should set him free

FT

FORD CUTS 1,400 JOBS AT UK PLANT

Ford Motor announced on Thursday that it would close two of its UK manufacturing operations and cut 1,400 jobs next year.

JAPAN GRAPPLES WITH ITS FISCAL CLIFF

The Japanese finance ministry will hold crisis talks with bond dealers in the world's largest government debt market on Friday.

PENGUIN AND RANDOM HOUSE IN DEAL TALKS

Bertelsmann and Pearson are in talks about combining their publishing divisions, Random House and Penguin.

CREDIT SUISSE TO CUT EXTRA $1 BLN

Credit Suisse reported a 63 percent fall in third-quarter net profits on Thursday and increased its cost-cutting programme by $1 billion.

ECCLESTONE REBUFFS BANK'S $400 MLN F1 DEMAND

Bernie Ecclestone, chief executive of Formula One, has rebuffed a demand for some $400 million in damages from BayernLB, the German bank.

KKR EYES BARGAINS IN SPAIN

Kohlberg Kravis Roberts (KKR), one of the world's biggest private equity firms, is scouring Spain for investment opportunities as property assets are being sold.

BRITAIN MOVES OUT OF RECESSION

Britain's double-dip recession has ended after the economy grew 1 percent between the second and third quarters.

EURO ZONE BANKS START ROAD BACK TO HEALTH

Investors may be jittery about much of southern Europe. But euro zone policy makers can claim significant improvements in crisis-hit banking systems.

COE ON MARKS FOR 12 MLN POUND IMAGE DEAL

Lord Coe could make 12 million pounds ($19.37 million) when he sells the image rights to his future earnings.

NYT

* In the last five weeks, Apple Inc has revamped its entire product lineup with new iPods, iPhones and computers. But on Thursday it said those products would be more expensive to make, nibbling into its ample profits.

* Ford Motor Co has broken from the pack of troubled European automakers, announcing deep cuts that include shutting three factories in the region and eliminating 5,700 jobs.

* Pearson Plc, the British media conglomerate that owns Penguin, said it was discussing a potential deal with Random House's owner, Bertelsmann of Germany.

* Amazon.Com Inc said it lost money in the third quarter, continuing a trend of unimpressive earnings reports for the retailer.

* The number of people who said they were sexually assaulted by Jimmy Savile, one of Britain's most popular television hosts, expanded to 300 from 200 in just the last week, and other people may have acted with him, Cmdr. Peter Spindler, the Scotland Yard officer heading the investigation, said.

* Patricia Millett, a lawyer for the former hedge fund manager Raj Rajaratnam asked a panel of federal appeals court judges to set aside his conviction, arguing that the government had used deceptive methods to obtain permission to wiretap his cellphone.

Canada

THE GLOBE AND MAIL

* The Quebec-Vermont border is the scene of growing chaos as illegal migrants hop over unguarded entry points or drive through guarded crossings on the outbound lanes, zipping by helpless Canadian border officials.

The goal of the migrants, many of whom come from Roma communities in Europe, is to make their refugee claims from inside Canada, officials say. If captured at the border, they risk being returned to the United States on the basis of a bilateral agreement.

* On the day it was revealed that Toronto's mayor had again run afoul of the integrity commissioner, Rob Ford called for her office and those of two other watchdogs to be abolished because they are a "waste of taxpayers' money."

Reports in the business section:

* The United States is in danger of falling back into recession if its politicians cannot agree on how to avoid a "fiscal cliff" of tax increases and spending cuts, warns the head of the International Monetary Fund.

In an interview with the Globe and Mail, Christine Lagarde said that a failure by the leaders of the world's largest economy to come up with a fiscal plan would have "dire economic consequences" - and is a major risk to a Canadian economy that has outperformed most other industrialized countries.

* Canada's largest chain of metropolitan newspapers will close the gates in the new year and ask readers to pay to read their online content. Postmedia Network said it would put up paywalls at all of its titles early in the new year, including the National Post, as it reported a C$28 million ($28.17 million) third-quarter loss.

NATIONAL POST

* Canadian authorities are claiming to have uncovered a human smuggling ring that has brought hundreds of Romanian refugee claimants to the Toronto area through Mexico, the National Post has learned. The smugglers are charging between C$10,000 and C$30,000 for passage to Canada along a route that runs from Mexico to Texas to greater Toronto.

* Census data released Wednesday reveal Canada's vast linguistic landscape, with 191 distinct languages. And for more than two million Canadians, the language spoken at home is neither English or French.

FINANCIAL POST

* Squeezed between public alarm over increasing ownership of Canadian resources by state-owned entities and investors demanding their payday, Prime Minister Stephen Harper has promised new rules to ensure Canadians don't get short-changed.

* Air Canada's pilots have selected new leaders to oversee the 3,000 member union, a few months after losing an arbitration ruling that imposed a new collective agreement with the country's largest airline.

China

CHINA SECURITIES JOURNAL

-- China's 68 fund companies have made a total loss of around 75 billion yuan ($12.02 billion) in the third quarter, consultancy data showed.

-- China is studying a plan on the country's income distribution reform, which is expected to be released by the end of this year, a spokesperson of the ministry of human resources and social security was quoted as saying.

FINANCIAL NEWS

--China Life, the world's largest insurer by market value, saw its total assets grow by 73.75 percent in the first nine months of the year to exceed 20 billion yuan, according to data by the China Insurance Regulatory Commission.

SHANGHAI SECURITIES NEWS

--Chinese securities firms are hoping that a new regulation allowing them to set up a managed fund to trade commodity futures will boost their revenue as the industry battles against cut throat competition with meager brokerage commissions.

CHINA DAILY (www.chinadaily.com.cn)

--China's urban registered unemployment rate stood at 4.1 percent at the end of September, the same level as at the end of the second quarter this year, according to data by the ministry of human resources and social security. This was lower than the officially set ceiling of 4.6 percent for this year.

SHANGHAI DAILY

--Fedex will build a new $100 million freight hub at Shanghai's Pudong International Airport, following rivals DHL and UPS, to tap the booming local cargo market.

--China is mulling a long-awaited law for mental health, which is expected to better protect people's rights by prohibiting abuses of compulsory inpatient treatment.

Fly On The Wall 7:00 Market Snapshot

ANALYST RESEARCH

Upgrades

AllianceBernstein (AB) upgraded to Equal Weight from Underweight at Morgan Stanley
CME Group (CME) upgraded to Outperform from Market Perform at Raymond James
CarMax (KMX) upgraded to Outperform from Neutral at Credit Suisse
Cerner (CERN) upgraded to Buy from Hold at Jefferies
Dime Community (DCOM) upgraded to Outperform from Underperform at Raymond James
Expedia (EXPE) upgraded to Buy from Hold at Benchmark Co.
Expedia (EXPE) upgraded to Outperform from Market Perform at Raymond James
Expeditors (EXPD) upgraded to Conviction Buy from Sell at Goldman
Huntington Bancshares (HBAN) upgraded to Buy from Neutral at Citigroup
Mylan (MYL) upgraded to Buy from Hold at Canaccord
Paccar (PCAR) upgraded to Market Perform from Underperform at Wells Fargo
PulteGroup (PHM) upgraded to Outperform from Sector Perform at RBC Capital
Rogers Communications (RCI) upgraded to Neutral from Sell at Goldman
StellarOne (STEL) upgraded to Strong Buy from Outperform at Raymond James

Downgrades

BJ's Restaurants (BJRI) downgraded to Market Perform from Outperform at William Blair
Cabela's (CAB) downgraded to Neutral from Overweight at Piper Jaffray
Electronic Arts (EA) downgraded to Sector Perform from Outperform at Pacific Crest
Franklin Resources (BEN) downgraded to Equal Weight from Overweight at Morgan Stanley
Freescale (FSL) downgraded to Neutral from Overweight at Piper Jaffray
M/I Homes (MHO) downgraded to Market Perform from Outperform at JMP Securities
Maxwell (MXWL) downgraded to Equal Weight from Overweight at Stephens
NuStar Energy (NS) downgraded to Underperform from Outperform at Credit Suisse
Plexus (PLXS) downgraded to Hold from Buy at Deutsche Bank
Power-One (PWER) downgraded to Equal Weight from Overweight at Stephens
Spirit AeroSystems (SPR) downgraded to Neutral from Outperform at Credit Suisse
St. Jude Medical (STJ) downgraded to Neutral from Outperform at Credit Suisse
Trex Company (TREX) downgraded to Hold from Buy at BB&T
Vipshop (VIPS) downgraded to Hold from Buy at Deutsche Bank

Initiations

ARIAD (ARIA) initiated with a Buy at Citigroup
Alkermes (ALKS) initiated with a Buy at Citigroup
ArQule (ARQL) initiated with a Buy at Citigroup
Bonanza Creek Energy (BCEI) initiated with a Buy at SunTrust
Dick's Sporting (DKS) initiated with a Market Perform at BMO Capital
The Medicines Co. (MDCO) initiated with a Neutral at Citigroup

HOT STOCKS

Amazon.com (AMZN) to hire over 50,000 for seasonal, holiday positions
Said investing very heavily in capacity
KKR & Co. (KKR) said to struggle with $8B goal for North American LBO fund, Bloomberg reported
Gardner Denver (GDI) confirmed exploration of strategic alternatives
Boeing (BA) acquired Miro Technologies, terms not disclosed
Rbedbox (CSTR), Redbox Instant signed agreements with Warner Bros (TWX)
Emulex (ELX) CEO: Well positioned for share gains in our core markets
Republic Airways (RJET), Caesars Entertainment (CZR) signed three year flight agreement
ITC judge ruled in favor of GSI Technology (GSIT)
Pebblebrook Hotel (PEB) to acquire Hotel Palomar San Francisco for $58M
XPO Logistics (XPO) acquired OHL's Turbo Logistics for $50M
Echo Global (ECHO) acquired Sharp Freight Systems
Forum Energy (FET) acquired Wireline Solutions, LLC
Syngenta (SYT) signed global commercial agreement with Novozymes

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Weyerhaeuser (WY), Cabot Oil & Gas (COG), Dun & Bradstreet (DNB), DeVry (DV), PerkinElmer (PKI), NetSuite (N), VeriSign (VRSN), Regal Entertainment (RGC), Clearwire (CLWR), Bally Technologies (BYI), Expedia (EXPE), Deckers Outdoor (DECK), Chubb (CB)

Companies that missed consensus earnings expectations include:
Olin Corp. (OLN), Callaway Golf (ELY), KLA-Tencor (KLAC), Apple (AAPL), Coinstar (CSTR), BJ's Restaurants (BJRI), Duff & Phelps (DUF), Echo Global (ECHO), Amazon.com (AMZN)

Companies that matched consensus earnings expectations include:
Radware (RDWR), GSI Technology (GSIT), QLogic (QLGC), CA Technologies (CA), Netgear (NTGR), Acme Packet (APKT), Sterling Financial (STSA)

NEWSPAPERS/WEBSITES

Credit Suisse Group (CS) is looking to make one of its trading venues an exchange, an unusual bid that, if successful, would create the only U.S. stock exchange owned outright by a Wall Street bank. The plan centers on a trading platform called Light Pool, started last year, the Wall Street Journal reports
Wal-Mart Stores (WMT) plans to open 100 stores in the next three years in China, a slowdown from its earlier growth rates there. The company will add 18,000 jobs to the current 100,000 in China, the Wall Street Journal reports
Lockheed Martin (LMT) said in an SEC filing that it faced a potential termination liability of $1.1B on the F-35 fighter program unless it received additional funding for production of a sixth group of airplanes by year end, Reuters reports
Samsung (SSNLF) said it will book patent-related provisions once a U.S. court makes a ruling on its more than $1B litigation with Apple (AAPL), Reuters reports
U.S. millionaires would rather match the stock market through an exchange-traded index fund than try to beat it using higher-fee hedge funds or billionaire Warren Buffett’s Berkshire Hathaway (BRK.A), Bloomberg reports
Blackstone Group (BX) Chairman Stephen Schwarzman plans to increase real estate investments in Asia after the firm raised more than $13B for a property fund, Bloomberg reports

SYNDICATE

Acadia Realty Trust (AKR) files to sell 3M shares of common stock
American Campus Communities (ACC) 11M share Secondary priced at $43.75
ChipMOS (IMOS) files to sell common stock for stockholders
Oriental Financial (OFG) 4.39M share Secondary priced at $11.00
WhiteWave Foods (WWAV) 23M share IPO priced at $17.00

• U.S. Super Storm’s Record Flooding Lands Blackout Blow (Bloomberg)
• Sandy Carves a Path of Destruction Across the U.S. East Coast (WSJ)
• Losses May Exceed Those of 2011 Storm (WSJ)
• Hurricane Sandy Threatens $20 Billion in Economic Damage (Bloomberg)
• Huge fire in Sandy's wake destroys dozens of NYC homes (Reuters)
• Possible levee break in New Jersey floods three towns (Reuters)
• Apple Mobile Software Head Forstall Refused to Sign Apology (WSJ)
• Stagflation in Spain (Bloomberg)
• German Oct. Unemployment Rose Twice as Much as Forecast (Bloomberg)
• A declining Japan loses its once-hopeful champions (WaPo)
• Unable to copy it, China tries building own jet engine (Reuters)
• Obama Signs Disaster Declarations for NY, NJ (YNN)

Overnight Media Digest

WSJ

* Hurricane Sandy caused massive disruptions to U.S. businesses and threatened billions of dollars in damage to a region packed with corporate headquarters, retail stores and transportation hubs.

* Apple Inc executive Scott Forstall was asked to leave the company after he refused to sign his name to a letter apologizing for shortcomings in Apple's new mapping service, according to people familiar with the matter.

* Google Inc unveiled a new $399 tablet and smartphone powered by its Android mobile operating system, as the Internet giant continues its quest to crack Apple Inc's grip on the tablet market and keep other rivals at bay.

* France will consider adopting legislation that would force Google Inc to pay for the right to cite news articles online if the United States search giant fails to settle a long-running dispute with French news publishers over how to share advertising revenue, the office of France's President Francois Hollande said.

* About five months ago, a representative of Pearson Plc contacted Bertelsmann SE & Co. The subject: whether Bertelsmann was interested in combining its Random House book publishing unit with Pearson's Penguin Group. The result of that contact emerged on Monday, when the two companies unveiled the creation of Penguin Random House.

* Microsoft Corp officially released an overhaul for its nascent Windows Phone software, in its latest attempt to catch up to Apple Inc and devices running software from Google Inc.

* Nokia Oyj plans to start selling its eagerly anticipated new range of Lumia smartphones in time for the holiday shopping rush, kicking off the campaign with products going on sale in Europe later this week and then following up with a $99 offering for U.S. buyers.

* Chrysler Group LLC reported an 80 percent jump in its third-quarter profit over a year ago amid strong demand for its cars and pickup trucks and a continuing recovery in the United States auto market.

* Honda Motor Co cut its fiscal-year earnings forecast by 20 percent, reflecting a boycott in China and higher expenses in the United States - its two largest markets - in a gloomy harbinger of Japanese auto makers' half-year reports.

FT

HITACHI AGREES UK NUCLEAR PURCHASE

Hitachi Ltd agreed to buy the Horizon nuclear project for 700 million pounds from its German owners, beating a rival bid from Westinghouse Electric Co and leaving the project's owners "turning cartwheels" at the price.

SANDY SLAMS INTO US EAST COAST

Sandy hit the U.S. as a post-tropical storm on Monday, flooding coastal communities, cutting electricity supplies to hundreds of thousands of homes and leaving schools, financial markets and most businesses planning for another day of closure on Tuesday.

PENGUIN AND RANDOM HOUSE SIGN MERGER DEAL

Parents Bertelsmann and Pearson signed a deal to merge their respective publishing arms, after the Financial Times owner shunned an approach by News Corp to buy its book publisher, in favour of the German media company.

CARLYLE SUBMITS PLAN FOR LONDON SKYSCRAPER

The U.S. private equity group jumped on the London real estate bandwagon on Monday with a proposal for a 1 billion pound development including a 48-storey skyscraper and 500 luxury apartments on the South bank of the Thames.

APPLE SHAKES UP SENIOR RANKS

Apple's has replaced Scott Forstall as its senior software executive after the technology company faced complaints about its malfunctioning maps service. Retail head John Browett is abruptly departing after just six months in the job, leaving hardware design chief Jony Ive with extra responsibility.

SPANISH LENDERS FACE WRITEDOWNS

Spain's bad bank will take on real estate assets at sharply lower values, as the country's new asset management company imposes an average writedown of 45.6 percent on property loans and 63.1 percent on foreclosed properties held by Spanish lenders, in an effort to entice private investors into the scheme.

GLENCORE TO OFFER TO SELL ZINC ASSETS

The commodities trader will offer to sell some assets or change supply contracts on Tuesday, to appease the European Union and speed approval for its $80 billion tie-up with XStrata.

EDITOR CHARGED OVER SWISS BANK EXPOSE ATTACKS 'SICK' GREEK SYSTEM

The Greek journalist who published the names of 2,000 Greeks with Swiss bank accounts said he acted in the public interest to show "how sick the system is" in Greece.

NYT

* Apple Inc fired the executives in charge of its mobile software efforts and retail stores, in a management shake-up aimed at making the company's divisions work more harmoniously together.

* The announcement that Random House and Penguin would merge narrows the business to a handful of big publishers, and could set off a long-expected round of consolidation as the industry adapts to the digital marketplace.

* Safety-Kleen said it would be acquired by Clean Harbors Inc, a provider of environmental cleanup services, for $1.25 billion in cash.

* Stock markets in the United States will be closed again on Tuesday for a second day without trading as Hurricane Sandy's approach intensified the wind and rain in the New York area.

* Nomura Holdings Inc reported a meager profit in the latest quarter as it continued to deal with fallout from an insider trading scandal and weak industry conditions.

* Chrysler Group LLC, the third-largest Detroit automaker, said its third-quarter profit rose 80 percent on the strength of new models, less debt and steadily growing sales in both American and international markets.

Canada

THE GLOBE AND MAIL

* Toronto city manager Joe Pennachetti's office released a highly anticipated report Monday that estimated the municipality could reap as much as C$195 million per year -- on top of a one-time sale or lease of city-owned land -- from an integrated resort casino near the waterfront.

* A record number of Canadians visited a food bank this year, an indication the recession's legacy continues to bite.

More than 882,000 people used a food bank this March, a 2.4 percent increase from last year. Demand is now 31 percent higher than before the recession, a study to be released Tuesday says.

Reports in the business section:

* Canada's C$10.6 billion ($10.60 billion) clean technology industry is on course to eclipse the aerospace industry in size within five years, according to a report being released Tuesday.

* Canadian Oil Sands Ltd, the largest stakeholder in Syncrude Canada Ltd, has revised its 2012 financial outlook and expects its cash to drop significantly next year as debt rises until 2014.

NATIONAL POST

* People across central and eastern Canada hunkered down to face powerful winds and a deluge of rain as approaching superstorm Sandy hit the U.S. and gradually wheeled its way north.

The impact of the weather system extended over a thousand kilometres away from the storm, according to the Canadian Hurricane Centre, with southern Ontario and Quebec experiencing high wind gusts and periods of heavy rain on Monday night.

* A shallow earthquake with a preliminary magnitude of 6.2 struck off British Columbia province on Canada's west coast, the U.S. Geological Survey said, the second powerful earthquake in the region in two days.

FINANCIAL POST

* Canadian miner Yamana Gold Inc reported a 6 percent fall in third-quarter adjusted profit on Monday as lower metal prices and higher production costs outweighed strong gold sales volumes.

* If there is a consensus on the direction of Canada's economy it is this: Growth will initially slow as government revenues are pinched by lower commodity prices, but then pick up enough momentum to balance the budget as planned.

"The good news is that economic growth in Canada continues to be positive, if modest, and among the strongest" in the Group of Seven industrialized nations, Finance Minister Jim Flaherty said Monday after meeting with private sector economists in Ottawa.

China

CHINA BUSINESS NEW

-- The Ministry of Commerce said China took over the United States to attract the most foreign direct investment (FDI) in the first half of this year.

SHANGHAI SECURITIES NEWS

-- Regulators are considering to resume approval for foreign institutions to buy stakes in Chinese commodity futures firms. China has not given approval for any foreign company to buy such stakes since 2008.

-- Although the Chinese currency yuan has hit repeated record highs against the dollar this month, experts believe there will not be large amounts of speculative hot money flowing into China partly due to China's strict capital control.

CHINA SECURITIES JOURNAL

-- China Offshore Oil Engineering Co plans a share private placement to raise up to 3.5 billion yuan ($561 million) to expand the company's deep-sea business.

-- Experts say China needs technical innovations and industrial upgrading to avoid so-called "middle income trap" after 30 years of rapid economic expansion. The phrase is used to describe difficulties for an emerging economy to continue quick growth when it reaches certain level of development while it can not adjust its economic structure in a timely manner.

CHINA DAILY

-- China's 91 listed property developers saw the value of their combined inventories hitting 915.55 billion yuan by the end of September, up 24.08 percent from a year earlier, meaning the companies are under increasing pressure to decrease the size of their stocks.