Monday, October 24, 2016

European Stocks Set To Open Higher Ahead Of PMI Data; Earnings In Focus

By Silvia Amaro
October 24, 2016

European stocks are set to open slightly higher on Monday with investors focused on fresh economic data and corporate earnings.

London's FTSE 100 is expected to open higher by 8 points to 7,028, while the German DAX is expected to open up 8 points at 10,718. The French CAC is set to rise just 2 points higher at 4,4538.

Investors are focused on flash manufacturing and services PMIs for the euro zone, due out at 9 a.m. London time.

Meanwhile, the Bank of England will release its latest Asset Purchase Facility Quarterly Report on Monday. Media reports over the weekend said that small U.K.-based banks were preparing to leave the city before the end of the year, whereas international banks were planning its departure for the start of 2017.

It is an important week for earnings. In Europe, Philips released new numbers showing third-quarter sales of 5.9 billion euros and a 14 percent improvement in adjusted EBIDTA (earnings before interest, taxes, depreciation and amortization).

Oil prices fell Monday after Iraqi officials said the country would not be part of any deal to cut OPEC production.

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Syria: 4 Uncomfortable Truths That Washington Is Ignoring

Bashar al-Assad knows that starvation and siege are working for him.

By Daniel R. DePetris
The National Interest
October 24, 2016

Nobody who has been monitoring the civil war in Syria or who has watched raw footage from civilians and rescue workers can come away from the videos and photos unscathed. The nearly six years of war in Syria have produced so much destruction to the country’s society and so much unaccountability for the political leaders and commanders directing the bombing that one wonders whether the international system is broken beyond repair.

Attempt after attempt by Secretary of State John Kerry to salvage a cessation-of-hostilities agreement with the Russians has become the butt of jokes in Washington conservative circles. Foreign Minister Sergey Lavrov is mugging Kerry and taking his lunch money every single day; he leaves negotiating sessions with confidence, but then quickly realizes that his confidence was misplaced; he’s a masochist who enjoys being humiliated by the Russians in public—the quips go on and on. Much of this is political innuendo made by Republicans in Congress (think Sen. John McCain), who live each and every day to criticize President Obama’s foreign policy. But the sentiment underneath the critiques is real; on Syria, diplomacy equals stalemate and gridlock. In the interim, thousands of additional Syrians are killed.

Diplomats are trained to roughen up the edges when addressing public audiences. But Syria has forced these very same diplomats to embrace some hard truths about the conflict—even if John Kerry and his European colleagues prefer not to acknowledge it.

1. Bashar al-Assad and Russia are Winning

When Vladimir Putin ordered Russian jets into Syria’s skies, President Obama predicted, somewhat confidently, that Moscow was stepping into another Afghanistan, circa 1979. The Russians, the administration claimed, would quickly find out the hard way how monumental a task they decided to take on. The Russians may be successful in using their air power to kill Assad’s enemies and stanch its gains on the battlefield, but the pilots responsible for keeping the Syrian strongman afloat will eventually recognize that their strikes will inflame the opposition, draw more foreign fighters into the conflict and put a giant bull’s-eye on Russian civilians.

Those predictions haven’t turned out to be prescient. We still hear administration officials talking about Moscow entering a quagmire that it will not be able to get out of, but that blurs the fact that Putin has for now provided the Assad regime with a long lease on life. The Russian air force is now an extension of the Syrian military, and tactically has enabled Syrian troops and progovernment militias with the type of air support that Syrian pilots could not offer. East Aleppo, one of the most symbolic bastions of the opposition, would not be pulverized to such an extent if it weren’t for Russian planes in the sky dropping ever-powerful Russian munitions. With every Russian attack, Assad’s government is afforded a better position on the ground and more leverage at the diplomatic table.

2. The Russians Have More At Stake in Syria

The relentless, weeks-long bombardment of Aleppo has unleashed a wave of humanitarianism in the corridors of power in Washington. The split on Syria policy in the Obama administration is palpable, with John Kerry pushing for more U.S. military involvement than President Obama and the National Security Council staff are comfortable with. The drums of humanitarian intervention are banging much louder in Washington today than they have at any time since the 2013 chemical-weapons attack outside Damascus.

Nobody likes watching buildings being demolished, children being pulled from the rubble and the dictator ordering it all safely ensconced in the presidential palace. It’s a humanitarian abomination—scenes that jar the mind. But however horrific the footage is and powerful calls for U.S. military action are, the reality is that the Russians have a lot more at stake in Syria than the United States does. This is not to dismiss U.S. inaction or the arguments of those in the Obama administration and on Capitol Hill who are urging for the creation of a no-fly zone or safe zones. Rather, it’s an acknowledgment that Moscow has a four-decade-long defense relationship with the Assad regime that it’s trying to save, and Russian naval and air assets that it wants to hold onto. Moscow is pouring more military resources into Syria than the United States has or likely ever will. Indeed, Assad may be a bloodthirsty dictator and an Iranian lackey, but he’s also someone who the U.S. could largely ignore or marginalize as it pursued its other interests in the region. For Russia, Assad is the head of a regime that keeps the Islamic barbarians away from the Damascus gates.

3. The Security Council Is On Life Support, and So Is International Law

Assad has exposed the U.N. Security Council and perhaps the entire U.N. bureaucracy over the past five-and-a-half years as paper tigers. Bombing hospitals, medical workers, doctors, apartment buildings, marketplaces, mosques, funerals, bakeries and every other civilian target under the sun has resulted in zero indictments from the International Criminal Court, zero productivity in the Security Council for a resolution to the conflict and no accountability towards international justice. The entire U.N. system, it seems, has broken down; resolutions under Chapter 7 of the charter aren’t followed, humanitarian supplies are purposely blocked by the Syrian government as part of its war strategy, and the Security Council’s permanent members are so divided on who is primarily at fault for the breakdown of previous ceasefire agreements that any notion of diplomatic progress is exceedingly elusive.

Bashar al-Assad is succeeding where others, like Slobodan Milosevic and Saddam Hussein, failed: repeatedly making the Security Council look impotent and childish at the same time as he is directing a scorched-earth policy on his own country. Even Milosevic, whose forces burned Sarajevo and Srebrenica to the ground, had to eventually contend with U.S. airpower after three years.

4. Starve-and-Siege Is Effective

The Assad regime made a concerted decision to throw out the Geneva Conventions in order to fight this war. Bombing hospitals, schools, mosques and bakeries to dust was only part of the strategy; surrounding neighborhoods or districts with an opposition presence, sealing off escape routes, and withholding any food, water or medical care from going into these areas was and remains perhaps the second-most important tactic that the Syrian army has levied throughout the war. What occurred in Daraya, Homs and Moadamiyeh—a mass evacuation of the remaining armed fighters and their families after years of besiegement in exchange for a return of government control—exemplifies just how cruel but successful these tactics have been. All the crying from the United Nations and human-rights community falls on Assad’s deaf ears, particularly when he gains ground from being inhumane.

The international community ought to stop living in a fairytale. Without coming to grips with these four hard facts, we all risk misunderstanding what Assad’s motivations are and what the international community could plausibly do to decrease the violence.

Article Link To The National Interest:

The 5 Biggest Challenges The Global Economy Faces In 2017

World leaders will face a tough time keeping the global recovery on track next year.

The National Interest
October 24, 2016

International forecasters fear that 2017 will not be a big improvement on 2016 for a sluggish global economy. With plenty of risks ahead including geopolitical and economic instability, here are the five main challenges facing the world economy in the upcoming Year of the Rooster.

1. A protectionist president

The International Monetary Fund has warned that rising populism and protectionism have correlated with stagnating economic growth. In its latest “World Economic Outlook,” the IMF’s chief economist Maurice Obstfeld warned that “turning back the clock on trade can only deepen and prolong the world economy’s current doldrums.”

Both rival candidates for November’s U.S. presidential poll have signaled a retreat on the nation’s traditional support for free trade. Democratic nominee Hillary Clinton has suggested she does not support passage of the Trans-Pacific Partnership, the centerpiece of President Barack Obama’s Asian pivot, while Republican candidate Donald Trump has even threatened to withdraw from the North American Free Trade Agreement.

The IMF’s managing director, Christine Lagarde, has described policies that restrict trade as a form of “economic malpractice” that could choke growth, jobs and wages, and further weaken the global outlook.

2. Brexit and European instability

With national elections set for France, Germany and the Netherlands in 2017, each of which feature a far right candidate, there is potential for economically damaging protectionist policies in the eurozone.

However, these merely form the backdrop for the most significant geopolitical event to occur in 2017, Britain’s triggering of Article 50 and the commencement of its slow exit from the European Union.

While Britain’s influence in the global economy has diminished in recent decades, the impact of the June Brexit vote was felt in markets and currencies across the globe. The fact that markets are still rattled was shown recently by the British pound’s fall to 186-year-lows in the wake of British Prime Minister Theresa May’s announcement that Brexit would commence by next March.

The longer the saga continues, the longer the associated uncertainty will be priced into equities and currencies, dampening corporate investment and damaging the European economy as a whole.

3. Monetary policy reaches its limits

A phenomenon arguably already unfolding as central banks reach the limits of the expansionary monetary policy tools at their disposal, 2017 may be the year some have to face the music.

Eight years of quantitative easing (QE) since the global financial crisis have increased the balance sheets of the world’s four largest central banks from $6 trillion to $18 trillion, most of which consists of their own government’s bonds. While QE has succeeded in maintaining short-term liquidity in markets, its diminishing returns mean the end is nigh, with speculation already mounting that the European Central Bank (ECB) and Bank of England (BOE) may be prepared to tighten monetary policy.

The mere hint of tapering led to a “taper tantrum” in European markets earlier this month, similar to that which occurred in the United States in 2013, and should the ECB or BOE pull the plug on QE in 2017, markets will suffer. Japan’s central bank’s move into negative rates territory has also sparked debate over the future of its QE policies and at what point it may be forced to pull back on government bond buying.

4. Tighter fiscal policy weighs

The IMF’s October report predicted fiscal policies in developed economies would tighten even further in 2017, despite calls for increased government spending to drive growth.

A recent survey of money managers by the Bank of America Merrill Lynch found that 48 percent believe that global fiscal policy remains too tight, a sentiment echoed by many other economic commentators worried over the increasing ineffectiveness of monetary policy.

Yet while the West tightens, it will hope China continues its fiscal policy splurge, fueled by a desire to keep economic growth at politically acceptable levels ahead of the 19th National Congress next year.

5. Commodities recovery reverses

Having already annihilated economic growth in Brazil, Russia, Nigeria, and other previously considered rising star economies in 2016, commodity prices will only see a modest recovery in 2017, according to the IMF’s October report.

Softer commodity prices have disproportionately hurt emerging economies, which in recent years have made a disproportionate contribution to global economic growth. While emerging Asia and particularly India have appeared largely resilient, the IMF fears that sub-Saharan Africa, South America, the CIS region and the Middle East will not fare so well, particularly if OPEC fails to reach an agreement on oil production cuts.

The contractions experienced by some of these major emerging economies in 2016, and the unrelentingly sluggish growth being combatted by most developed economies, suggests that 2017 will be yet another challenging year for the world economy. World leaders will face a tough time keeping the global recovery on track next year, even while wars, terrorism and other threats add to the challenges.

Article Link To The National Interest:

As Artificial Intelligence Evolves, So Does Its Criminal Potential

By John Markoff
The New York Times
October 24, 2016

Imagine receiving a phone call from your aging mother seeking your help because she has forgotten her banking password.

Except it’s not your mother. The voice on the other end of the phone call just sounds deceptively like her.

It is actually a computer-synthesized voice, a tour-de-force of artificial intelligence technology that has been crafted to make it possible for someone to masquerade via the telephone.

Such a situation is still science fiction — but just barely. It is also the future of crime.

The software components necessary to make such masking technology widely accessible are advancing rapidly. Recently, for example, DeepMind, the Alphabet subsidiary known for a program that has bested some of the top human players in the board game Go, announced that it had designed a program that “mimics any human voice and which sounds more natural than the best existing text-to-speech systems, reducing the gap with human performance by over 50 percent.”

The irony, of course, is that this year the computer security industry, with $75 billion in annual revenue, has started to talk about how machine learning and pattern recognition techniques will improve the woeful state of computer security.

But there is a downside.

“The thing people don’t get is that cybercrime is becoming automated and it is scaling exponentially,” said Marc Goodman, a law enforcement agency adviser and the author of “Future Crimes.” He added, “This is not about Matthew Broderick hacking from his basement,” a reference to the 1983 movie “War Games.”

The alarm about malevolent use of advanced artificial intelligence technologies was sounded earlier this year by James R. Clapper, the director of National Intelligence. In his annual review of security, Mr. Clapper underscored the point that while A.I. systems would make some things easier, they would also expand the vulnerabilities of the online world.

The growing sophistication of computer criminals can be seen in the evolution of attack tools like the widely used malicious program known as Blackshades, according to Mr. Goodman. The author of the program, a Swedish national, was convicted last year in the United States.

The system, which was sold widely in the computer underground, functioned as a “criminal franchise in a box,” Mr. Goodman said. It allowed users without technical skills to deploy computer ransomware or perform video or audio eavesdropping with a mouse click.

The next generation of these tools will add machine learning capabilities that have been pioneered by artificial intelligence researchers to improve the quality of machine vision, speech understanding, speech synthesis and natural language understanding. Some computer security researchers believe that digital criminals have been experimenting with the use of A.I. technologies for more than half a decade.

That can be seen in efforts to subvert the internet’s omnipresent Captcha — Completely Automated Public Turing test to tell Computers and Humans Apart — the challenge-and-response puzzle invented in 2003 by Carnegie Mellon University researchers to block automated programs from stealing online accounts.

Both “white hat” artificial intelligence researchers and “black hat” criminals have been deploying machine vision software to subvert Captchas for more than half a decade, said Stefan Savage, a computer security researcher at the University of California, San Diego.

“If you don’t change your Captcha for two years, you will be owned by some machine vision algorithm,” he said.

Surprisingly, one thing that has slowed the development of malicious A.I. has been the ready availability of either low-cost or free human labor. For example, some cybercriminals have farmed out Captcha-breaking schemes to electronic sweatshops where humans are used to decode the puzzles for a tiny fee.

Even more inventive computer crooks have used online pornography as a reward for human web surfers who break the Captcha, Mr. Goodman said. Free labor is a commodity that A.I. software won’t be able to compete with any time soon.

So what’s next?

Criminals, for starters, can piggyback on new tech developments. Voice-recognition technology like Apple’s Siri and Microsoft’s Cortana are now used extensively to interact with computers. And Amazon’s Echo voice-controlled speaker and Facebook’s Messenger chatbot platform are rapidly becoming conduits for online commerce and customer support. As is often the case, whenever a communication advancement like voice recognition starts to go mainstream, criminals looking to take advantage of it aren’t far behind.

“I would argue that companies that offer customer support via chatbots are unwittingly making themselves liable to social engineering,” said Brian Krebs, an investigative reporter who publishes at

Social engineering, which refers to the practice of manipulating people into performing actions or divulging information, is widely seen as the weakest link in the computer security chain. Cybercriminals already exploit the best qualities in humans — trust and willingness to help others — to steal and spy. The ability to create artificial intelligence avatars that can fool people online will only make the problem worse.

This can already be seen in efforts by state governments and political campaigns who are using chatbot technology widely for political propaganda.

Researchers have coined the term “computational propaganda” to describe the explosion of deceptive social media campaigns on services like Facebook and Twitter.

In a recent research paper, Philip N. Howard, a sociologist at the Oxford Internet Institute, and Bence Kollanyi, a researcher at Corvinus University of Budapest, described how political chatbots had a “small but strategic role” in shaping the online conversation during the run-up to the “Brexit” referendum.

It is only a matter of time before such software is put to criminal use.

“There’s a lot of cleverness in designing social engineering attacks, but as far as I know, nobody has yet started using machine learning to find the highest quality suckers,” said Mark Seiden, an independent computer security specialist. He paused and added, “I should have replied: ‘I’m sorry, Dave, I can’t answer that question right now.’”

Article Link To The New York Times:

The ‘Rising Tide’ Helping Business Owners

By Naomi Schaefer Riley
The New York Post
October 24, 2016

When Alfa Demmellash left her grandparents’ home in Ethiopia to join her mother in Boston at the age of 13, her family told her that “America is like the land of milk and honey where you will never have to worry again.”

Though she had escaped great misfortune, leaving behind a civil war that had claimed the lives of many relatives, Demmellash still had plenty to worry about. Her mother struggled to earn enough money. So she went to night school and started sewing and selling traditional Ethiopian dresses to bring in something extra.

It wasn’t easy. And like many children of immigrants, once Demmellash arrived she helped her mother navigate the ins and outs of doing business in this country. Now more than 20 years later, Demmellash is helping other budding entrepreneurs do the same thing.

Her organization, Rising Tide Capital, which was launched in 2004 in Jersey City, has helped almost 1,400 entrepreneurs understand the nuts and bolts of starting a business — from dealing with a maze of government regulations to teaching them how to price their product to showing them how to apply for a business loan. On Monday night, Rising Tide will receive one of the Manhattan Institute’s awards for Social Entrepreneurship. It’s hard to imagine a more deserving organization.

Half of the graduates of Rising Tide’s 12-week Community Business Academy already have their own businesses, and the other half are in the planning stages. The average entrepreneur served by Rising Tide is a 40-year-old single mother of two, living on an income of about $35,000 a year in an area where the cost of living for her family is closer to $50,000.

When Demmellash was in high school, she noticed her mother was under-charging her customers. Her mother dreamed of her own dress shop, but she was too intimidated to pursue it. Demmellash would take her mother to get advice at a women’s business center, but she “walked away with a checklist the size of Texas. She would say, ‘Oh, I’m fine doing it the way I’m doing it. The world of business is not for me.’”

Demmellash, who attended Boston Latin high school and graduated from Harvard, decided to start Rising Tide Capital with college classmate Alex Forrester, after the two saw just how few resources there were for people who aspired to start small businesses. While there was an economic boom on Jersey City’s waterfront, they worried that its effects weren’t being seen in other neighborhoods nearby.

“A rising tide may lift all boats,” Demmellash tells me, “but what about the people who don’t have a boat? We have to build more boats.”

On average, business owners who have completed Rising Tide’s program have seen a 64 percent increase in sales and a 47 percent increase in income. Use of public-assistance programs by participants declined, from 27 percent to 12 percent.

Demmellash says programs offered by the Small Business Administration often miss “a vast pool of people who are energetic and talented.” She says the problems are much smaller and more practical than you might think. “I can’t tell you how many times I’ve sat down with someone who is too intimidated even to get their employer identification number from the government.”

Take Pamela Roundtree, who came to the Community Business Academy four years ago to get help with her fitness and nutrition business, New Body, New Mind, New Living. She didn’t know how to measure “how much money you have going in and coming out, how much money to use for marketing or products or rent.”

Geoff Allen had previously started a trucking business in 2011, but, he says, it failed in part because of the economy and “in part because I didn’t have the right tools or the right people to help me.” Thanks to Rising Tide, though, his handyman business, Property Maintenance Guys, has been a great success. Rising Tide’s mentors worked with him for eight weeks getting ready to apply for a loan. Now he’s so busy he has had to turn down contracts.

Allen says he regularly calls his instructors from Rising Tide with questions. But in a fitting turn of events, Rising Tide sometimes needs a handyman. So they call him, too. He’s only too happy to return the favor.

Article Link To The New York Post:

Why A Democrat-Controlled Senate Would Sink Wall Street

By Jonathon Trugman
The New York Post
October 24, 2016

A quick look at the bond and stock markets shows that there are growing jitters as measured by the VIX, or volatility index.

The uneasiness can be tied to the election, but not the presidential one.

The Street figures Hillary Clinton will take the White House. The real concern is the Senate, and whether it will remain Republican-controlled.

Wall Street loves a divided government — in fact, it thrives on one.

The VIX had a 5 percent jump last week after the Rothenberg & Gonzales Political Report stated the Senate race is as tight as can be — at 47-47 with six “tossups” — so the economists and market strategists got nervous.

With the current makeup of the Senate at 54-46 favoring the Republicans, President Obama hasn’t been able to drive through any radical economic changes the past few years.

Recent history shows that an unchecked president — one who has a Senate and House controlled by his own party — is a recipe for disaster and economic dominance of Main Street.

Take, for example, what Obama said at Thursday afternoon’s stump speech about ObamaCare’s “growing pains.”

The destructive health-care act named for him has cost millions of hard-working Americans billions of dollars, and it has kept many out of the labor force, partially or entirely, because companies now hesitate to hire full-timers due to the high cost of benefits associated with those positions.

When it was sent to the then-Democrat-controlled Congress, ObamaCare was pitched and sold by the president as a way to save the average American family $2,500 a year. As it turned out, nothing could have been farther from the truth.

The last thing Wall Street wants to see is a Democrat-controlled Senate with Elizabeth Warren and Bernie Sanders chairing the banking and budget committees.

That’s a very scary post-Halloween thought.

Article Link To The New York Post:

The U.S. Can Stay Friends With The Philippines

By Editorial Board
The Bloomberg View
October 24, 2016

For a moment last week, Philippine President Rodrigo Duterte seemed to have orchestrated one of the most dramatic geopolitical shifts in Asia since the end of the Cold War -- abandoning the U.S., his country’s longtime ally, for rival China. Characteristically, he did so with zero subtlety. In responding, the U.S. should avoid making the same mistake.

That’s not to say Duterte’s anti-U.S. comments in Beijing last week should be dismissed as the ravings of a hot-tempered diplomatic lightweight. He remains the Philippines’ legitimately elected leader, and at least some of his supporters hold anti-American views -- stemming in part from America’s history as a colonial overlord. Whatever Duterte meant -- he now says he was talking only about striking a more independent line in foreign policy -- there’s every reason to believe ties with the U.S. will cool in the near term. Meanwhile, China has promised Duterte billions in soft loans and potential infrastructure investments.

Nevertheless, the Philippines’ pivot contains more fury than substance. Duterte isn’t the first Asian leader to return from China with impressive promises of investment and cooperation; typically, only a fraction of that money gets spent. Duterte’s musings about saddling up with Russia as well as China -- “three of us against the world” -- wildly inflates his country’s global relevance. And if his charm offensive calms tensions in the South China Sea, that would suit the U.S. as well as anyone.

In reality, the U.S. still enjoys great support in the Philippines, from both the military and the public. More than three-fourths of Filipinos say they have “much trust” in America; less than one-fourth say the same about China. Already Duterte’s obsequious praise of the Xi Jinping regime has prompted grumbling at home. The Filipino military has a history of coups -- and little interest in replacing American weapons, logistical support and training with Russian and Chinese technology.

For its part, China has serious inherent shortcomings as a partner. The terms of its development loans have, as often as not, ended up fostering resentment rather than friendship. And on its fundamental point of contention with the Philippines -- over who owns several rocks, reefs and islands that fall within the latter’s exclusive economic zone -- neither country can afford to compromise. Sooner or later, and especially if China uses this temporary calm to resume militarizing certain islands, a break is almost certain.

The U.S. would thus be wise not to overreact to Duterte’s insults. Threats to cut off aid or military support would only swing public support behind his anti-American campaign.

And the U.S. has plenty of other points of influence. American commanders are no doubt already reminding their Filipino counterparts that a radical break in relations would have strategic consequences. Allies such as Japan -- the Philippines’ third-biggest trading partner after China and the U.S. -- can quietly reinforce the message. Meanwhile, the U.S. can and should calmly continue to deepen defense ties with Singapore, Vietnam, Indonesia and other Southeast Asian countries.

When dealing with a hothead, it’s usually good practice to maintain one’s cool. The U.S. has weathered strategic frictions with friends before -- including far more critical allies Japan and South Korea -- and can surely do so again.

Article Link To The Bloomberg View:

Why The WikiLeaks Attack Fizzled

By Bill Scher
Real Clear Politics
October 24, 2016

“Wednesday@HillaryClinton is done. - #Wikileaks.”, tweeted Roger Stone, the longtime Donald Trump adviser and Republican operative, on Oct. 2. He was incorrect on two counts. The splashy release of Clinton campaign Chairman John Podesta’s emails from WikiLeaks came on the following Friday. And Hillary Clinton is not done.

A little more than two weeks have passed since the stolen messages were turned into a searchable online database. Since then, Clinton’s lead in the RealClearPolitics poll average has widened slightly.

Why is that? The emails show the Clinton campaign team to be obsessively calculating political operatives. Some are privately rude to the populists on their left flank, whom they need on Election Day. The revealed transcripts of Clinton’s private speeches suggest she may hold some disingenuous positions in public. That’s pretty bad, right?

Certainly, Julian Assange thought so. He leaked the trove minutes after Donald Trump’s behind-the-scenes “Access Hollywood” recording surfaced, which Podesta believes was an attempt to turn media attention away from Trump’s boasts about groping women. But, Podesta observed, “he didn’t succeed in doing that.”

In the alternative universe where Clinton runs against a generic Republican politician, the media might have turned the emails into a sensationalized feeding frenzy. A taste of what might have been can be found in this report from The Hill about a May 21, 2015 exchange: “Top Clinton aide in leaked email: 'Can we survive not answering questions' from press?” As you learn from a close reading of the story, the headline is misleading.

The aide proposed to Podesta “not answering questions from press at message events” – events designed to drive a campaign theme. The proposal wasn’t a total media blackout. Moreover, Podesta’s response was negative: “If she thinks we can get to Labor Day without taking press questions, I think that’s suicidal.“ In fact, Clinton participated in a few press conferences that summer. But you don’t learn that from The Hill, which instead offered, “At one point, Clinton went 275 days without holding a formal press conference until breaking the drought in September.” That’s true … in 2016. It was not true in the summer of 2015 when the email exchange took place.

But we don’t live in the alternative universe. We live in the universe where WikiLeaks tried to take down a candidate with embarrassing private emails and failed.

Clinton didn’t suffer much from contextually challenged coverage like that in The Hill because Trump hogged most of the negative coverage for himself. A firm believer in the “no such thing as bad publicity” school, Trump chose to rail against those accusing him of sexual assault, thereby ensuring tons of stories about Trump.

So Clinton dodged a bullet. And, to paraphrase “The Wire,” if you come at the queen, you best not miss.

In failing to turn unvarnished internal political machinations into a paralyzing scandal, WikiLeaks may have inadvertently raised the bar on what constitutes a successful act of political cyberwar. If all an email hack accomplishes is the temporary embarrassment of some political aides and supersized serving of gossip for Washington cocktail parties, then the hack is hardly potent ammo.

The truth is, if we saw the raw email from the Ted Cruz, Marco Rubio, Jeb Bush or Bernie Sanders campaigns we would surely see similar political calculations over tricky issues, deliberations how to quash negative media narratives and intemperate comments made about adversaries or even allies. (Whereas the Trump campaign emails are probably in their own category of insanity.) What we see in the Podesta emails is the grist of political life. It’s doesn’t make our politicians fundamentally dishonest or our democracy a sham.

After seeing how the Clinton sausage got ground, perhaps the voting public will now be more likely to view the contents of stolen emails through the prism of political reality. Without a truly scandalous bombshell, each subsequent cyberattack on Clinton’s team, or that of another politician, may be greeted with bigger and bigger shrugs.

The Russian government, which American intelligence believes stole the emails and fed them to WikiLeaks, doesn’t necessarily expect to elect Trump, but wants to, as The Economist put it, “discredit and erode universal liberal values by nurturing the idea that the West is just as corrupt as Russia.” Vox’s Zack Beauchamp fears that "Russia has weaponized the American press” to achieve that goal: “This is how Russia gets us. Once WikiLeaks publishes a trove of newsworthy emails, the press is stuck in a corner: Doing its job will help a hostile foreign power manipulate the American election and arguably even help weaken faith in the press itself. And that’s why Putin’s plan is so devilish: He’s undermining the credibility of two key American institutions in one go.”

But that is only true if Americans are gullible enough to be led down the path Russia want us to take. The blasé reaction from American voters to the contents of Podesta’s emails is a heartening sign that we will not.

Article Link To Real Clear Politics:

Split Your Ticket

By Robert J. Samuelson
The Washington Post
October 24, 2016

There was a time when ticket splitting was common. Voters would support one party’s candidate for president and the other’s for Congress. At its peak in 1972, ticket splitters represented 30 percent of voters, reports political scientist Alan Abramowitz of Emory University. Since then, the practice has gone into eclipse. In 2012, only 11 percent of the electorate were ticket splitters.

And yet...

To bring this nasty and bizarre campaign to a meaningful conclusion, what this country needs is an outburst of ticket splitting. Republicans should vote for Hillary Clinton, and Democrats should back Republican House and Senate candidates. This will strike most people as counterintuitive, if not foolish, but there are three good reasons for doing so.

The first is to make a statement about the outcome. Neither party deserves complete victory. Both nominated widely distrusted candidates. In the latest NBC-Wall Street Journal poll (taken before last week’s final debate), only 40 percent of respondents viewed Clinton positively; a mere 29 percent felt that way about Donald Trump. Parties shouldn’t be rewarded when their popular support is so thin.

The second reason is related: to avoid misinterpretation. Assuming Clinton wins, she and others will claim that the Democrats have a “mandate.” They don’t. Her triumph would be more a repudiation of Trump than an endorsement of her policies. Just because Trump’s behavior was extraordinary — routinely crude, hateful and uninformed — does not make Clinton a beloved figure with a compelling agenda.

The same point holds true for Republicans. Retaining control of the House and, possibly, the Senate would not signal the popularity of their political philosophy, whatever it is. The election’s message for Republicans would seem devastating. Losing the White House for the third consecutive time — and five of the last seven elections — would show how out of touch with political reality they are. Their support is mostly defensive: fear of Democratic one-party rule.

The final reason is the most consequential — and the most hypothetical. Divided government, driven by ticket splitting, might actually produce better government.

How could that be? Superficially, the opposite would seem more likely. Divided government would mean paralyzed government; it’s more gridlock. Clearly, that’s possible. It happened during the Obama years. We could have a repeat performance.

But that’s not inevitable. For starters, we would have a new cast of characters. Clinton, House Speaker Paul D. Ryan (Wis.) and Senate Majority Leader Mitch McConnell (Ky.) are all “transactional politicians” — they want to get things done — as well as fierce partisans. They also know that the gridlock of the past eight years hasn’t done either party much good. All this creates reasons to reach mutually acceptable agreements.

There’s a huge backlog of undone legislative business: immigration, corporate tax changes, military spending, climate change, Social Security and Medicare, to name a few. These are controversial and costly issues. Not only may one party be unable to push them through Congress; neither party may want to act alone, because that implies accepting all the blame for unpopular policies. Divided government might force both parties to search for common ground.

We live in an era defined by what Abramowitz and political scientist Steven Webster call “negative partisanship” — an all-consuming fear of your political opponents’ agenda. What you oppose defines your politics as much as what you support. “It’s not just polarization,” says political scientist Norman Ornstein of the American Enterprise Institute. “It’s tribalism. People on the other side are enemies, not just adversaries, who threaten your way of life.”

Parties have become more ideologically pure, says Abramowitz. That’s one reason ticket splitting has declined. In the ’50s, ’60s and ’70s, conservative Democrats might vote for Republican presidential candidates, so we got Eisenhower, Nixon and Reagan along with Democratic Congresses. Moderate Republicans might favor Democratic congressional candidates. Now, these political fringes have shrunk. “There’s more ideological consistency — and more dislike of the other party,” says Abramowitz.

Well, we’ve tried ideological politics and we’ve learned one thing: It doesn’t work. It doesn’t produce consensus, and it doesn’t produce working majorities, either of the bipartisan or one-party variety. Because parties strive to differentiate themselves, cooperation becomes harder. On both the right and the left, power has flowed to the political fringes, which excel in rhetorical self-righteousness and flunk in legislative accomplishment. Major legislation needs bipartisan support; for confirmation, see Obamacare.

The overriding need of the next president and Congress is for both parties to rebuild their political centers, which — almost certainly — still command the backing of public opinion. Revitalized centrist politics does not guarantee good legislation, but it stands a better chance of producing publicly acceptable legislation. Even this may be a long shot, but it’s our best shot.

Article Link To The Washington Post:

Monday, October 24, Morning Global Market Roundup: Asian Stocks Drift, Dollar Near Nine-Month High

By Shinichi Saoshiro
October 24, 2016

Asian stocks drifted without clear direction on Monday after Wall Street's sluggish performance late last week, while the dollar hovered near nine-month highs as fresh comments from a Federal Reserve official boosted bets of a rate hike by year-end.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS inched up 0.1 percent.

South Korea's Kospi .KS11 gained 0.5 percent. Australian stocks lost 0.6 percent, hurt by a decline in energy shares. The volatile Shanghai market .SSEC rose 1.2 percent, adding to Friday's gains when it advanced on the strength of infrastructure shares.

Japan's Nikkei .N225 treaded water and last stood little changed.

"There are few investors who want to chase the market higher until they see more news from overseas, especially those regarding a U.S. rate hike," said Yutaka Miura, senior technical analyst at Mizuho Securities in Tokyo.

On Friday in Wall Street, the S&P 500 .SPX and the Dow .DJI were little changed and the Nasdaq .IXIC advanced as a record day for Microsoft (MSFT.O) and earnings from McDonald's (MCD.N) helped offset a fall in energy and healthcare shares. [.N]

"It will be something of a hiatus week, given that next week brings the BoJ, Fed and BoE meetings...however there is a heavily back-loaded run of data in the U.S., Japan and euro zone, and there will be a deluge of U.S. and indeed European and Asian corporate earnings," wrote Marc Ostwald, strategist at ADM Investor Services International.

Global markets are bracing for a slew of data this week including consumer price data from Japan and some euro zone countries, third quarter U.S. GDP and a number of purchasing managers' index (PMI) data from developed economies.

In currencies, the dollar index .DXY was up 0.1 percent at 98.805 after touching 98.846, its highest since Feb. 3.

The U.S. currency received a boost last week as the euro slid after the European Central Bank doused talk it was contemplating tapering its monetary easing.

The dollar was also supported by hawkish comments from Fed officials including New York Fed President William Dudley and higher expectations that Hillary Clinton will win the U.S. presidential election, which have increased bets that the Fed will raise rates in December.

The dollar rose 0.1 percent to 103.960 yen JPY=. The euro slipped 0.2 percent to $1.0864 EUR= after falling on Friday to $1.0859, its lowest since March 10.

The Australian dollar was steady at $0.7608 AUD=D4.

The offshore Chinese yuan CNH=D3 hit a new six-year low against a broadly stronger dollar.

Crude oil prices slipped on concerns supply will outweigh demand, with U.S. crude CLc1 down 0.5 percent at $50.62 a barrel.

The contracts had risen about 0.8 percent on Friday on hopes that Russia and OPEC would reach a price agreement, but worries of oversupply have been a persistent drag on the market.

But oil fell Monday after Iraq said it wanted to be exempt from any deal by OPEC to cut production. Latest data also showed that U.S. oil rig count posted the first double-digit rise since August to weigh on the market. [RIG/U]

Brent crude LCOc1 was down 0.3 percent at $51.61 a barrel.

Article Link To Reuters:

Oil Prices Drop As Iraq Says Doesn't Want To Join OPEC Cut

By Henning Gloystein
October 24, 2016

Oil prices fell early on Monday as Iraq said it wanted to be exempt from any deal by producer cartel OPEC to cut production to prop up the market, and as U.S. drillers stepped up work.

Brent crude futures LCOc1 were trading at $51.59 per barrel, down 19 cents, or 0.4 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude was down 22 cents, or 0.4 percent, at $50.63 a barrel.

Traders said the price falls followed comments from Iraq, which said it wanted to be exempt from a production cut by the Organization of the Petroleum Exporting Countries (OPEC) that the group plans to decide at its Nov. 30 meeting.

OPEC plans to reduce production to a range of 32.50 million to 33.0 million barrels per day (bpd), down from 33.39 million bpd in September.

That would be harder to achieve if Iraq, which is OPEC's second-biggest producer after Saudi Arabia, didn't participate.

Iraq said on Sunday that its oil production stood at 4.774 million bpd, with exports standing at 3.87 million bpd.

"We are not going back in any way, not by OPEC not by anybody else," said Falah al-Amri, the head of Iraq's State Oil Marketing Company.

"Comments by Iraq over the weekend that it may not join the OPEC agreement to cut production could see oil prices come under pressure in today's session," ANZ bank said on Monday.

Also pressuring the market, U.S. oil rigs rose by 11 last week, the first double-digit increase since August. [RIG/U]

"We should see rig counts continue to increase in the wake of the recent price rally," Morgan Stanley said.

Ongoing strength in the dollar .DXY, which can crimp demand as it makes fuel purchases more expensive for countries using other currencies at home, also weighed on oil.

On the demand side, Japan's crude imports fell 4.6 percent in September from the same month a year earlier, to 3.27 million bpd, official data showed on Monday.

Despite Monday's lower prices, analysts said that oil markets, which have been dogged by two years of oversupply, might be rebalancing in terms of production and consumption.

"Statistical balances suggest that conditions have improved markedly. We suspect that the market is moving more quickly into balance than is generally recognised," Barclays bank said in a note to clients on Sunday.

"The market moved into a small deficit in Q3, will remain so in Q4 and then the deficit will expand significantly in 2017," it added.

Article Link To Reuters:

Obama Turns Focus To U.S. Congress As He Campaigns For Clinton

By Roberta Rampton
October 24, 2016

President Barack Obama on Sunday campaigned in the battleground state of Nevada for Hillary Clinton, the Democratic candidate he wants to succeed him in the White House - but he spent most of his time talking about the state's Senate race.

Democrats badly want to get back control of the Republican-controlled Senate in the Nov. 8 election, and are sending Obama, Michelle Obama and Joe Biden to states where close races could tip the balance.

In Nevada, Obama reserved most of his firepower for mocking three-term Republican U.S. Representative Joe Heck, who had supported his party's presidential candidate until earlier this month when Donald Trump's campaign went into crisis mode by the release of a video in which he lewdly bragged about groping and kissing women.

"I understand Joe Heck now wishes he never said those things about Donald Trump, but they're on tape, they're on the record," Obama said, using Heck's earlier praise of Trump against him.

It's not just the Senate. Obama wants to capitalize on his high approval rating to help elect more Democrats to the House of Representatives, and has also endorsed about 150 candidates in state legislative races.

At an intimate fundraising dinner in La Jolla, California, on Sunday evening, where tickets started at $10,000, Obama urged about 60 guests to help elect Democratic congressional candidate Doug Applegate, a former Marine colonel who is challenging Republican incumbent Darrell Issa.

"As far as I can tell, (Darrell) Issa's primary contribution to the United States Congress has been to obstruct and to waste taxpayer dollars on trumped-up investigations that have led nowhere," Obama said.

Issa, the former head of the House Oversight Committee, led a series of headline-grabbing investigations into Obama's administration - but has featured a photo of Obama signing legislation on a campaign brochure.

"Now that is the definition of chutzpah!" Obama said.

Last week, Obama excoriated Republican Senator Marco Rubio of Florida - who has a narrow lead over Democratic challenger Patrick Murphy, a congressman - for failing to repudiate Trump.

In the final two weeks leading up to Nov. 8, Clinton said she planned to work hard to support congressional and state races.

"We're going to be emphasizing the importance of electing Democrats down the ballot," Clinton told reporters traveling with her on Saturday.

In Las Vegas, Obama was introduced by the Democratic Senate candidate Catherine Cortez Masto, a two-term Nevada attorney general, who would be the first Latina elected to the U.S Senate if she wins.

"We can't elect Hillary and then saddle her with a Congress that is do-nothing, won't even try to do something," Obama said.

The Nevada Senate seat is the only Senate race this year that Republicans could flip to their control. The seat has long been held by Harry Reid, the Senate Democratic leader, who is retiring.

Cortez Masto currently has a slim 2.3 percentage point lead in an average of polls tracked by RealClearPolitics over Heck.

Obama won Nevada in 2008 and 2012. Polls show Clinton with a 4.2 percentage point lead at 45.4 percent support to Trump's 41.3 percent, according to the RealClearPolitics average.

Article Link To Reuters:

U.S. Banks Add Pieces To New Instant Payments Network

By David Henry
October 24, 2016

By the end of December some U.S. bank customers may begin to notice features of the new Zelle instant payments network appearing on their mobile phone and online banking apps as the financial industry tries to catch up to technology company rivals, such as Venmo.

Paul Finch, chief executive of the bank network operator, Early Warning Services, said during the weekend that buttons on user screens for digital payments at some banks will gradually start to use a uniform procedure for individuals to send and receive money.

Then early next year about 20 banks will put the Zelle name on their mobile apps and web pages. A Zelle app also will be offered to the public for connections through other institutions.

The consortium is taking a series of steps in its attempt to bring more than 100 million customers of banks and credit unions into Zelle without disrupting people who already use other ways to send money with phones and computers.

"This is about creating a wide, and inclusive, alternative to cash and checks for everyone," said Finch, who was at the Money 20/20 payments industry conference in Las Vegas to promote Zelle for its bank owners.

The moves come five years after three of the biggest banks -JPMorgan Chase & Co, Bank of America Corp and Wells Fargo & Co - formed a joint-venture, initially called clearXchange, to make it easier to send money to accounts at different banks.

But the banks were slow to bring other financial institutions into the fold and market the network and so lost momentum to technology company upstarts. Citigroup Inc did not agree to join until September. The banks only recently decided to use the name Zelle.

In the meantime, Venmo appeared. In the three months through September, Venmo processed $4.9 billion of person-to-person payments, up 131 percent from a year earlier.

Venmo, now part of PayPal Holdings Inc, built its following by social networking young adults ready to share dinner tabs and apartment rents with their phones.

But the banks have larger bases of customers to connect as they try to make Zelle ubiquitous. JPMorgan's Chase "Quick Pay," for example, processed $7.4 billion in the three months ended September, up 36 percent from a year earlier, according to bank spokeswoman Rebecca Acevedo.

The initial set of 19 banks to offer Zelle early next year has about 76 million customers using mobile banking apps and about 65 percent of U.S. checking and savings accounts, Finch said. Agreements in place with additional financial institutions, debit card networks and other payment companies, such as Fiserv Inc, will bring the portion of accounts to 90 percent to 95 percent, Finch said.

The bank consortium owners decided that for Zelle to succeed it needs to look and work the same for everyone. But some banks already have made digital payment brand names, such as JPMorgan's Quick Pay, familiar to many of their customers. Those banks will use the Zelle name prominently alongside their established names as Zelle catches on, Finch said.

Article Link To Reuters:

BOJ Frets About Real Estate Lending Boom, Watchful Of Bubble Risk

By Stanley White
October 24, 2016

The Bank of Japan said on Monday it is closely monitoring bank lending to the real estate sector to guard against excessive credit that could lead to overheating and pose risks to financial stability.

The BOJ does not currently see signs of a property bubble, according to a report it released on Monday.

However, the central bank is concerned because the ratio of real estate investment to nominal gross domestic product is uncomfortably high and banks are extremely willing to extend loans to property developers.

The BOJ also expressed concern about falling yields on office buildings in major cities, which suggests that investors have driven prices too high, the report showed.

"On the whole, we are not in an environment of excessive risk taking or overheating in credit," the BOJ said in the report.

"Still, we need to monitor risks posed by the property sector and competition among banks to extend credit."

Commercial bank lending has been rising steadily since the BOJ launched its quantitative easing program in 2013 to spur inflation and end decades of economic malaise.

Despite Japan struggling with low growth and depressed domestic consumption, property development has stood out, being one of the biggest beneficiaries of the increased lending, setting of a wave of residential and office development in Japan's largest cities.

The BOJ said commercial banks' capital adequacy ratios are high enough to withstand financial shocks, according to the report.

The report also said banks do not face any liquidity problems but should continue to carefully manage risks when extending new loans.

Article Link To Reuters:

Oceanwide To Buy U.S. Insurer Genworth For $2.7 Billion, Extends Chinese M&A Push

By Denny Thomas
October 24, 2016

China Oceanwide Holdings Group Co has agreed to buy U.S. insurer Genworth Financial Inc (GNW.N) for $2.7 billion in cash, the latest in a series of moves by Chinese firms to buy overseas assets as their domestic economy slows and the yuan weakens.

In a joint statement on Sunday, Genworth and privately held and family-owned China Oceanwide Holdings said the Chinese firm will pay $5.43 per share to acquire all the Richmond, Virginia-based firm's outstanding shares. The price is a modest 4.2 percent premium to Genworth's Friday closing price.

But the Beijing-based holding firm, little known but founded by well-connected Chinese businessman Lu Zhiqiang, agreed to commit another $1.12 billion towards Genworth debt maturing in 2018 and life insurance claims charges, the statement said. Both firms' boards backed the deal, which remains subject to regulatory approvals and likely won't close before mid-2017.

The purchase comes amid a hectic year for Chinese buyers chasing overseas assets. So far, 2016 has seen mainland firms launch a record $181 billion of overseas mergers and acquisitions - about 70 percent more than the whole of last year.

Chinese investment holding firms have joined insurers like Fosun International Ltd (0656.HK) and unlisted Anbang Insurance Group in leveraging accumulated capital to buy global assets. Some recent purchases have also come from Chinese property companies, keen to reduce reliance on their home market.

Some recent Chinese bids have attracted intense regulatory scrutiny overseas. But rarely has an insurance deal by a Chinese acquirer been blocked outright by international watchdogs, according to people familiar with these transactions.

In some cases Chinese buyers have also been paying top dollar to secure insurance assets. Thaihot Group (000732.SZ) paid nearly three times Dah Sing Financial Holdings Ltd's (0440.HK) 2015 embedded value in a recent $1.4 billion purchase. That was more than double the valuation at which a previous Hong Kong insurance deal was done.

Beijing-based China Oceanwide - described by Genworth President & Chief Executive Officer Tom McInerney as "an ideal owner" going forward - is also the controlling shareholder of Hong Kong-listed China Oceanwide Holdings Ltd (0715.HK), worth about $1.6 billion by market value.

McInerney said the capital commitment from China Oceanwide would strengthen Genworth's business, increasing the likelihood of obtaining regulatory approval.

The parent group's operations span financial services, energy, culture and media, and real estate assets globally, employing more than 10,000 employees worldwide.

Genworth, which traces its roots back to 1871 and went public in 2004, has mortgage insurance operations in the United States, Canada and Australia, well as U.S. life insurance business. Shares in Genworth's Australia unit, Genworth Mortgage Insurance Australia Ltd (GMA.AX), rose 1.9 percent on Monday on the news.

Goldman Sachs (GS.N) and Lazard (LAZ.N) are acting as financial advisors to Genworth. Citigroup (C.N) and Willis Capital Markets & Advisory are acting as financial advisors to China Oceanwide, according to the statement.

Article Link To Reuters:

Rockwell Broadens Its Reach With $6.4 Billion Purchase Of B/E Aerospace

By Alwyn Scott
October 24, 2016

After two years of looking to expand, aircraft component maker Rockwell Collins Inc has struck a deal to buy aircraft interior maker B/E Aerospace Inc for $62 a share in cash and stock, the companies said on Sunday.

The acquisition, valued at $6.4 billion plus the assumption of $1.9 billion in debt, expands the range of products Rockwell Collins supplies to major commercial and business aircraft and broadens its customer base internationally.

Rockwell on Sunday also reported a 14 percent increase in profit to $1.58 a share in its fiscal fourth quarter ended Sept. 30, on a 4 percent rise in sales.

The acquisition, which is expected to be completed next spring, allows both companies to sell to each other’s customers and to deploy Rockwell’s capability with onboard connectivity to make internet-enabled seats, galleys, lavatories and other cabin systems that B/E Aerospace provides.

“B/E is very strong in relationships with airlines,” Rockwell Chief Executive Officer Kelly Ortberg said in an interview. “We're stronger with aircraft makers as well as business aviation operators and the military. We’ll be able to sell our respective products into a much broader market base than either of us could do independently.”

B/E Aerospace plans to use Rockwell’s dealer network and relationships with business jet owners, for example, to know when jets are coming in for avionics upgrades.

“Having that information and time to market directly to the owners of the aircraft is a tremendous opportunity that we're looking to take advantage of,” said Amin Khoury, B/E Aerospace founder and chairman. “It's not something we can do on our own.”

The combination is expected to produce cost savings of about $160 million, with 90 percent captured in the first full year of the acquisition, and provide a double-digit percentage boost to per-share earnings in the first full year, the companies said. They also anticipate it generating more than $6 billion in free cash flow over five years.

The cost savings come from eliminating public company administration at B/E Aerospace, greater buying power with suppliers, consolidating information technology system and using low-cost factory labor across the combined company, Ortberg said.

Little Product Overlap

Rockwell agreed to pay $34.10 a share in cash and $27.90 in shares of Rockwell Collins stock, a 22.5 percent premium to B/E Aerospace's closing price on Friday.

The purchase will curb Rockwell’s appetite for big deals for about three years, but the company will still be looking for smaller acquisitions while paying down debt, Ortberg said.

The companies have little product overlap. Rockwell is best known for avionics, flight control systems and cabin connectivity, while B/E Aerospace is a major provider of aircraft seats, galleys, lighting and other systems.

Rockwell, based in Cedar Rapids, Iowa, has market value of about $11 billion, more than twice the size of Wellington, Florida-based B/E Aerospace, which has a market value of $5.1 billion. The offer represents a 22.5 percent premium to B/E Aerospace's closing price on Friday.

B/E Aerospace brings more aftermarket and aircraft retrofit business to Rockwell, which is mainly focused on new equipment, and also adds exposure to twin-aisle aircraft, said Richard Aboulafia, an aerospace analyst at the Teal Group.

Combined sales will be about evenly split between the U.S. domestic market and international markets, Ortberg said.

Pricing pressures from Boeing Co and Airbus are one driver of such a deal. "But it's also a pretty clear indicator that the market has peaked in terms of deliveries and orders," Aboulafia said of new aircraft sales. "In this environment, consolidation is inevitable as a cost-control move."

Ortberg said that while cost was a factor, "It’s really the transition to the digital airplane that's creating the perfect timing to bring these two entities together.”

Rockwell’s board set up a committee two years ago to examine whether to grow by expanding into new markets or partnering to use existing sales channels. “We thought that (latter strategy) was a much better approach,” he said.

Article Link To Reuters:

Record High In Sight For S&P 500

By Rodrigo Campos 
October 24, 2016

With S&P 500 earnings on track to rise after four consecutive quarters of contraction, U.S. stocks are clearing a major hurdle that puts the record high in sight for the benchmark U.S. stock index.

The S&P 500 hit a record high in mid August even after the long profit slump. The index has trended lower since then, and even closed below its 50-day average for most of the last six weeks. Some analysts have blamed the recent weakness on expectations that earnings would again fail to grow, as estimates showed until early this week.

But stronger-than-expected profit reports from companies such as Microsoft (MSFT.O) and Bank of America (BAC.N) have turned the tide and the blended earnings growth estimate for the third quarter sits now at 1.1 percent. This would effectively end the earnings recession.

"The magnitude of the beats we’ve had is really important," said Art Hogan, chief market strategist at Wunderlich Securities in New York.

"There’s a much larger chance that we break out of range to the upside than the downside and I think it happens before the end of the year," he said.

The end-of-year seasonality is also on the side of stock bulls.

Data from broker-dealer LPL Financial show that since 1980 the median S&P 500 gain in the last 50 trading days of the year is 3.6 percent, an advance that would see the index end the year near 2,200 and above its current record close of 2,190.15. It closed Friday at 2,141.16.

"With the earnings recession showing signs of ending this quarter, the economy is on firmer footing, which could lead to your typical end of year strength,” said LPL's senior market strategist Ryan Detrick.

The energy sector, which had been a large weight on S&P earnings, is leading the index in terms of the magnitude of upbeat surprises.

Early in the reporting season, profits for the sector are coming in 18 percent above expectations, according to Thomson Reuters I/B/E/S data, ahead of the 11 percent surprise factor in financials and an average of 7 percent for the S&P 500.

The strong beats bode well ahead of a week heavy in energy sector reports including its two largest companies, Exxon Mobil (XOM.N) and Chevron (CVX.N), on Friday.

Some energy companies have been able to profit even amid a steep slump in oil prices, noted Roberto Friedlander, head of energy trading at Seaport Global Securities in New York.

He said in a Friday email that the magnitude of strong earnings surprises in the energy space was partly because investors had failed "to truly gauge how efficient and quickly the sector has been able to come down the cost curve and lower break-evens."

S&P 500 energy .SPNY is the leading sector in terms of year-to-date gains, up 15.3 percent in 2016. The only two other sectors up double digits are utilities .SPLRCU, up 10.8 percent, and technology .SPLRCT, up 11.2 percent.

The change in leadership to energy is "an important transition" and an indication that the economy is in stronger footing, said Wunderlich's Hogan.

"People are getting out of defensives and looking into growth."

Article Link To Reuters:

Oil Is Testing $70, According To The Charts

By Brian Price
October 24, 2016

Since pushing above $50 per barrel, crude has taken a bit of a breather. Nevertheless, at least one chartist thinks oil is heading toward fresh highs.

Master technical analyst Louise Yamada says two charts show that crude, still largely trapped in a long-term bear market for more than a year, is targeting new levels around $70.

"The interesting pattern we have in place is the potential reverse head and shoulders bottoming process," explained Yamada on CNBC's "Futures Now" in a recent interview. "Crossing through $50, which we could define as the neckline suggests that the market for oil could go higher."

This notion came as oil markets fell more than 2 percent during Thursday's trading, but eked out a fifth consecutive week of gains.

Yet looking at the charts, the founder of Louise Yamada Technical Research Advisors said that if an investor takes a measured move from the head to the neckline, one could make the projection upward towards $70.

"Interestingly, the left shoulder took about five months and we estimated that, if the right shoulder also took about five months, it should start to move up around October, which is where we are," noted Yamada.

Following the February lows, where crude hit $26 per barrel, the commodity has risen 96 percent—thanks in large part to OPEC's willingness to cut production levels by nearly 700,000 barrels per day. On Sunday, Saudi Arabia stated the cartel was looking for new ways to cooperate with non-OPEC members to stabilize markets.

The fundamental backdrop illustrates why Yamada remains bullish through 2017. However the chart watcher acknowledged there were risks to her thesis in the near term.

"There's a lot of interim resistance. It could take another six months before we even get towards $60. It could go sideways a little bit more and inch its way up over time," she said. "With all the supply stories, one has reason to be skeptical."

One of those reasons has to do with Russia. Igor Sechin, who serves as CEO of Russia's state-run oil producer Rosneft, expressed a desire to potentially increase oil production substantially.

The comments came during a conference in Italy and were interpreted by many as a dig at OPEC, of which Russia is not a member. Additionally, the U.S. oil rig count rose by 11 to 443 on Friday, marking the 17th straight week without a cut.

Yamada went on to say that, in the event that these developments help drive oil back down towards $42, the bottoming process would be curtailed.

Still, she remained relatively optimistic that the sideways movement will eventually break upward.

"The weekly momentum actually put in a positive divergence on the 2009 low at $26," explained Yamada regarding oil prices during the past decade. "It's been fluctuating between turning positive and turning negative. Right now it's got another little positive turn, which perhaps suggest some more consolidation."

The trend has been building for years, she added.

"Going back to 1986, you can see the bottoms. Once the price gets near or through the lower second standard deviation, it's usually a turnaround," Yamada added.

"There's quite an impressive turnaround in this chart that has taken place for crude."

Article Link To CNBC:

AT&T’s Wireless Leap Over Obama

Technology is driving ubiquitous broadband despite the FCC.

By Review & Outlook
The Wall Street Journal
October 24, 2016

The Federal Communications Commission’s 2015 power grab over the internet is premised on the need for government to allocate broadband scarcity. So much for that. AT&T’s $85.4 billion weekend bid to buy Time Warner is the latest bet, and a very big one, that technology is making wireless broadband ubiquitous despite regulatory obstacles.

As usual, the media and political classes are preoccupied with the hole instead of the donut. They’re worried about whether AT&T CEO Randall Stephenson, the empire builder driving the merger, will preserve the “independence” of such supposedly sainted Time Warner properties as CNN and HBO.

That’s hilarious. Time Warner’s properties all march in the same political direction now—toward Democrats and the left—despite their cherished independence. What journalists and progressives really mean in warning Mr. Stephenson is that they want to be able to continue to all think alike.

Mr. Stephenson isn’t about to interfere in any case. He wouldn’t want to endure the political opprobrium if he sought to diversify the Time Warner media worldview beyond the millimeters of difference between Christiane Amanpour and John Oliver. Mr. Stephenson was beaten up once already by America’s ruling progressives when he tried to buy T-Mobile in 2011, and he won’t make that mistake again. He recently gave a speech praising Black Lives Matters.

Another progressive concern not to worry about is the combination of AT&T’s wireless distribution with Time Warner’s content. The merger would not remove a distribution competitor. Instead, AT&T wants to be the wireless version of Comcast, which has been adding content to distribute over its still-captive cable audience. Mr. Stephenson knows that FCC regulation has complicated the distribution business. AT&T can also see that Comcast is planning to go after AT&T’s customers as early as next year when it plans to launch its own wireless brand.

The AT&T-Time Warner tie-up is signaling that the era of the local cable broadband monopoly is ending. As Saturday’s merger press release put it, “With a mobile network that covers more than 315 million people in the United States, the combined company will strive to become the first U.S. mobile provider to compete nationwide with cable companies in the provision of bundled mobile broadband and video.”

Even discounting for the PR hype, this sounds like good news for consumers who have long suffered under the limitations of cable broadband. Technology is allowing for the rollout of wireless broadband at faster speeds and lower costs. Verizon already has cable in its sights with its 5G network rollout as early as 2017.

The real threat to this new era of competition is the Obama-era FCC. Chairman Tom Wheeler justified his application of horse-and-buggy Title II regulation on grounds that government needed to drive broadband distribution. Bureaucracies rarely admit mistakes, so the Wheeler FCC might block the AT&T-Time Warner merger merely to prevent a market demonstration that the agency’s regulatory intervention is unnecessary. Yes, bureaucratic actors really can be that self-interested.

One business issue worth mentioning is AT&T’s rising debt load to execute the purchase. The company says it has a $40 billion bridge loan commitment over 18 months to finance the cash portion of its half-stock, half-cash offer for Time Warner.

But AT&T already has more than $120 billion in debt from its previous acquisitions, and its Standard & Poor’s bond rating is BBB+, close to the edge of investment grade. A downgrade to junk status could raise the company’s borrowing costs considerably. Mr. Stephenson had better hope the combined company’s cash flow can work down that debt burden while the Federal Reserve keeps interest rates at historic lows.

Mr. Stephenson is making a big play on the wireless future, and his legacy as CEO will depend on how it works out. In a better world, the Obama Administration would see all of this as evidence that Mr. Wheeler’s internet gatekeeping is misguided and rewrite its Title II supervision. Alas, that will take an end to progressive rule in Washington.

Article Link To The Wall Street Journal:

Banks’ Brexit Exodus To Start Before Year-End, Lobby Chief Says

Industry concerned by passporting loss, Chief says in Observer; Largest lenders won’t wait for Brexit negotiations to start.

October 24, 2016

Banks in the U.K. will start relocating operations out of the country by year-end, months before formal talks to leave the European Union begin, as London looks set to lose access to the EU single market, the head of the British Bankers Association said in a newspaper commentary.

International banks’ “hands are quivering over the relocate button,” Anthony Browne, chief executive officer of the banking lobby group the BBA, wrote Sunday in the Observer newspaper. “Many smaller banks plan to start relocations before Christmas; bigger banks are expected to start in the first quarter of next year.”

Without identifying any banks by name, he said lenders can’t wait until the last minute and have to “plan for the worst,” especially because “public and political debate at the moment is taking us in the wrong direction.”

Prime Minister Theresa May’s government has sought to quell fears of some financial executives that negotiations with the EU will leave the industry without passporting rights, which allow financial companies to sell services freely around the EU. While Brexit Secretary David Davis last week said he is “determined to get the best deal possible” for banks, May has rejected any special arrangement for the City of London in favor of making immigration controls a priority. If the U.K. curbs the freedom of movement of EU citizens, it will lose access to the market, European Commission officials have said.

70,000 Jobs

Restricted access means U.K. financial firms could lose as much as 40 billion pounds ($49 billion) in revenue and put 70,000 jobs at risk, according to consulting firm Oliver Wyman.

May has said she will trigger formal Brexit talks by invoking Article 50 of the EU’s Lisbon Treaty by the end of March. The negotiations could last as long as two years.

Relying on third parties to maintain a degree of access to EU markets will not be not enough to persuade international banks to stay in London, as some pro-Brexit politicians in the U.K. have argued, Browne wrote. Such agreements will only cover a narrow range of services and can be withdrawn at any time, he said.

“The EU’s equivalence regime is a poor shadow of passporting” and “won’t prevent banks from relocating their operations,” Browne said.

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