TheChek News Flow

Japanese Prime Minister Shinzo Abe’s eponymous program designed to lift Japan out of deflation and into steady long term growth captured investors’ imaginations. It triggered a sharp slide in the yen and a boom in Japanese equities and helped to push inflation into positive territory, seemingly well on the way to providing a solution to the economy’s long term problems.

Abenomics was temporarily derailed by a consumption tax hike at the start of April, which caused Japanese consumers to bring purchases forward into the first quarter. As a result, demand then fell back sharply and the Japanese economy contracted during the following six months.

Plenty of people expect Mr. Abe’s program to pick up where it left off at the end of the first quarter by adding positive impetus to both growth and inflation through monetary and fiscal stimulus. But doubts are creeping in. Foreign inflows into Japanese equities have collapsed. And a few economists argue that Japanese monetary and fiscal policies can’t cure what really ails the economy, which is poor demographics, while the government still falls short with the third prong of Abenomics: structural change.

So why should this matter for the eurozone?

Because investors are also placing enormous faith in the European Central Bank to find a way around the single currency region’s equivalent problems with slow or no growth and incipient deflation. If Abenomics is seen to fail in its primary objectives, doubts will settle on the European project as well. That’s because the eurozone also faces Japanese-style demographics of ageing populations and falling fertility rates.

What’s more, Japan, at least, has a largely unified and homogenous population able to pull together in tough times. By contrast, Europe’s is much more likely to fragment into constituent nations.

If Abenomics doesn’t manage to cure Japan’s economic ills, the pressure on European governments to seek solutions outside of the eurozone will become enormous. This is already starting to show up with Greece. Years of austerity, the economy’s contraction by around a quarter and no sign of where solid recovery might come from means Greek voters are starting to wonder about the benefits of eurozone membership–to judge by political developments. What hope there is rests with the belief that a Japan-style round of quantitative easing by the ECB will come to the rescue.

But if unlimited QE fails to work for Japan, fatal doubts will loom over Europe’s efforts too. Much more than Japan’s economic fate rests on Abenomics.

- I fear inflation in the long run, though far away from that now due to sluggish economy as demand is weak in the US and Europe- US is doing better than anyone else in the world

- Housing market on track, but fragile; still reliant on low interest rates

The New York gourmet burger chain filed papers to go public on Monday, saying it would use the as-yet-undetermined amount of proceeds from the stock sale in part to grow the number of US stores from 36 to about 450.

The Danny Meyer-led company will also use the cash proceeds to grow internationally — from its current footprint of 27 non-US stores, it said in the regulatory filing.

A timeline to reach the 450 stores was not given.

However, Shake Shack, where a single burger at its Grand Central Terminal store goes for $4.95 and a shake sells for $5.15, said it plans to open at least 10 new US company-operated Shacks each year, beginning in fiscal 2015, for the foreseeable future.

Profits at the chain fell 20 percent in the nine months ended Sept. 20, to $3.5 million, despite a 39 percent rise in revenue in the period compared to the year-earlier period. Same-store sales rose 3.0 percent, down from 5.5 percent a year earlier

In 2013, net profits grew 31.2 percent to $5.4 million on a 41.4 percent rise in revenue. Same-store sales grew by 5.9 percent, according to the filing.

To compare, Nasdaq-traded Red Robin Gourmet Burgers has about 500 locations and a $1 billion market cap. Red Robin’s shares have risen 350 percent over the last five years, but only 5 percent in the last 12 months.

Private equity firm Leonard Green & Partners in 2010 bought 40 percent of Shake Shack and stands to benefit handsomely from a stock listing and fast growth.

“We open Shacks in areas where communities gather, often with high foot traffic and substantial commercial density such as New York City’s Theater District, London’s Covent Garden and Dubai’s Mall of the Emirates,” Shake Shack said in the Securities and Exchange Commission filing.

“We will continue to not only fill in existing markets such as New York, Boston, Philadelphia, Washington, D.C., Atlanta, Chicago and South Florida to leverage operational effectiveness as we cluster in high-density markets, but also enter new markets, such as Austin, where we have signed leases,” it added.

Meyer, 56, who founded the chain and serves as its chairman, is a New York high-end restaurant fixture. He also owns and operates the Union Square Cafe, Gramercy Tavern, Blue Smoke, Jazz Standard, The Modern, Maialino, Untitled, North End Grill and Marta.

As is typical of early IPO filings, the Shack Shack papers on Monday did not disclose Meyer’s stake in the company not the equity interest of other large owners. It also did not list how much money the chain expected to raise or if Meyer would be cashing out by selling shares into the IPO.

JPMorgan is leading the underwriting with Latham & Watkins giving legal advice.

Manitowoc's shares rose 11 percent to $23.25 before the bell on Monday.

Ralph Whitworth's Relational Investors urged the company to spin off the foodservice equipment business in June, when it reported an 8.5 percent stake in the Wisconsin-based company.

Manitowoc's crane business has been hurt by weak demand for its rough-terrain and boom trucks, and the company said in October that it expected revenue in the business to decline by a mid-to-high single-digit percentage in 2014.

The crane business contributed nearly 62 percent of Manitowoc's total revenue of about $4 billion in 2013.

Revenue in the foodservice business, which makes ice machines, refrigerators, deep fryers and other cooking equipment, increased about 3 percent in the third quarter ended Oct. 27, while revenue in the crane business fell 6 percent.

Icahn said he would seek board representation, "if appropriate." (1.usa.gov/1xtzti9)

Icahn said he had not yet had any discussions with the company, which has a market value of about $2.80 billion.

Manitowoc was not immediately available for comment.

Up to Friday's close, its stock had fallen about 10 percent this year, compared with a 13 percent rise in the S&P 500 index .SPX.

- Subsidies will be granted to buyers of electric, plug-in hybrids and fuel-cell vehicles. The amount of subsidies will gradually scale down during the period from 2016 to 2020- China will still only subsidize purchases of locally manufactured green vehicles, excluding imported cars by foreign companies.

M&A news: JST -4.8% (thinly traded; announces termination of going private transaction).

Select oil/gas related names showing early weakness: CPE -4.4%, SDRL -2.4% (Seadrill Ltd announces it has exercised a purchase option for the West Polaris from Ship Finance; purchase option price is $456 mln and total consideration payable to Ship Finance is $108 mln ), RDS.A -1.9%, CEO -1.7%, BP -1.5%, RIG -1.3%, TOT -1.2%, STO -1.1%, COP -0.9%, CVX -0.7%.

Other news: MDBX -13.9% ( will amend and restate its financial statements for the year ended December 31, 2013, the third and fourth quarters of 2013 and the first three quarters of 2014), CXW -3.5% (announces that the Federal Bureau of Prisons elected not to renew its contract at CCA's owned and operated 2,016-bed Northeast Ohio Correctional Center), JUNO -3.2% (recent IPO name -- modestly pulling back), LAKE -3% / APT -3% (following intraday move higher on Scotland Ebola news), SNN -2.2% (still checking for anything specific), TM -1.4% (execs comments suggested that company will miss this year's goal for sales), BBL -1.3% (following overseas weakness in Australian miners), BHP -1% (following overseas weakness in Australian miners), FSLR -0.9% (Gordon Johnson said short FSLR on Fast Money), UBNK -0.8% (unveils q4 restructuring initiatives).

Analyst comments: BBT -1.4% ( downgraded to Hold from Buy at Rafferty Capital ), ARR -0.5% (downgraded to Hold from Buy at MLV & Co)

A few Brazil related names are seeing modest strength: VALE +1.5% BBD +1.4%, ABEV +0.6%, PBR +1.2% (will release its Q3 2014 financial statements in January 2015 without the PricewaterhouseCoopers external auditors' report, reiterates that it is reviewing its planning for the year 2015).

Other news: OGXI +19.8% (announces that it has executed an initial agreement with Teva to regain rights to custirsen; will receive a $27 million payment from Teva), XNPT +13% (positive analyst comments on CNBC), NDRM +9.1% (announces topline results of Phase IIa Pharmacokinetic Study of ND0612H and ND0612L; results suggest may provide an effective therapy alternative to current treatments requiring surgery), CJJD +7.3% (after 26% move higher yesterday), RPRX +6.2% (updates Androxal global regulatory status; initiates two Phase 2B Uterine Fibroid Studies), ARCP +4.4% (Corvex discloses 7.1% stake in 13D - had discussions to explore additions to the Board; American Realty Capital says 'he Board will continue to prioritize transparency and an open dialogue with all stockholders'), FMD +3.7% (HC2 Investment Securities discloses 8.56% active stake in 13D filing), TKMR +2.5% (light volume; ongoing volatility in select ebola related names), IDRA +2.2% (provides updates on clinical development of IMO-8400 for Treatment of Waldenstrom's Macroglobulinemia; confirms FDA grants Orphan Drug Designation for IMO-8400), PTRY +1.1% (Gabelli discloses 5.24% active stake in 13D filing ), BBY +1.1% (Jon Najarian said he was a buyer), GRPN +0.8% (Goldman Sachs may soon invest in GRPN unit, according to NYPost ), CKH +0.7% (announces $150 mln increase in share repurchase authorization), KLIC +0.4% (acquires 100% equity stake of Assembléon B.V., in an all cash transaction for $98 mln), OAS +0.4% (ticking higher; SPO Partners discloses 7.1% stake; has had discussions with mgmt and intends to continue to discuss matters, including strategic alternatives).

Analyst comments: CNV +3% (ticking higher, initiated by several analysts)