From: lanreder@oscargruss.com At: Mar 7 2016 15:44:34Subject: Fwd:POM/EXC Spoke to POM IR - all parties in loop and aware of today's filing with DC PSC
POM IR - There were ongoing discussions between the two companies and all the settling parties since the order at the end of the last week of February. All parties were in the loop and aware of today's filing. The alternative proposal is positioned to meet all of requirements that the merger be in the best interests of all parties.
POM is not going to pay a pro-rated dividend if merger closes; company would lose term fee if paid dividend in the interim (~$70M/quarter payout) and the POM Board would determine level of appropriate dividend payment if the merger is terminated.
The companies are in support of revised settlement terms and optional uses for the $25.6M set aside. Settling parties can file comments through March 16; the companies do not know the DC PSC's timing (regarding their request for an April 7 decision) and do not want the record to be reopened. If deal is terminated for regulatory reasons, EXC would owe the $180M term fee to POM.
DISCLAIMER
This information represents neither an offer to buy or sell any security nor, because it does not take into account the differing needs of individual clients, investment advice. Those seeking investment advice specific to their financial profiles and goals should contact their Oscar Gruss & Son Incorporated sales representative. Oscar Gruss & Son Incorporated believes this information to be reliable, but no representation is made as to accuracy or completeness. This information does not analyze every material fact concerning a company, industry, or security. Oscar Gruss & Son Incorporated assumes that this information will be read in conjunction with other publicly available data. Matters discussed here are subject to change without notice. There can be no assurance that reliance on the information contained here will produce profitable results. A security denominated in a foreign currency is subject to fluctuations in currency exchange rates, which may have an adverse effect on the value of the security upon the conversion into local currency of dividends, interest, or sales proceeds. The value of securities and depositary receipts of foreign issuers that are denominated in United States dollars are also influenced by fluctuations in currency exchange rates.
© 2016 Oscar Gruss & Son Incorporated. All rights reserved.
Fed Gov Brainard (FOMC voter, dove): core inflation has been stubbornly low over last 2 years; inflation is very important for Fed policy - CNBC interview
- very focused on inflation and would like to see pattern of higher data points, not just single data points; Jan inflation data was better but was only a single data point
- reiterates there is a risk of inflation slipping lower
- have been good signs in the US, including consumer spending; there are some headwinds, particularly from overseas
Wall St in for a hawkish Fed surprise – Goldman
Investors have grown “complacent” in their expectation the Federal Reserve will adopt a very dovish approach to raising rates this year, despite evidence the US economy is in better shape than when angst swept across financial markets during the first six weeks of the year.
That’s the view from Jan Hatzius, chief economist at Goldman Sachs, who reckons that Fed officials may signal as soon as their meeting next week a sustained appetite to raise interest rates this year.
Interest-rate futures are currently pricing in one rate rise this year, down sharply from expectations of two to three increases at the start of the year, according to a note from Mr Hatzius.
A combination of financial market volatility, along with gloomy economic data released at the start of the year, prompted several top Fed officials to offer a more cautious approach in speeches in the early part of the year.
Indeed, after its January meeting the central bank specifically said it is “closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation”.
But the picture has changed sharply in recent weeks, far more than markets are discounting, Mr Hatzius argued.
Slack in the labour market, for example, appears to be “limited,” with the economy on its way to reaching full employment by the second half of this year. That comes as job growth remains far above the level Goldman estimates as the pace needed to keep the unemployment rate from rising.
At the same time, inflation appears to be picking up at a quicker rate than the Fed expected, with the core PCE price index – the central bank’s favoured inflation gauge – hitting a year-on-year pace of 1.7 per cent in January, 0.1 per cent above the Fed’s forecast for year-end 2016, Mr Hatzius notes.
And after sharp falls through to the middle of February, US equities have rebounded, while corporate credit spreads have tightened and oil has rallied – all signs that strain in the financial markets may be waning.
The Fed’s commentary may “shift in a more hawkish direction” as early as next week’s meeting, Mr Hatzius argues, with its so-called “dot-plot” of forecasts pointing to three rate rises this year.
How low can Mario Draghi go to lift the eurozone?
Mario Draghi is under pressure to deliver a convincing response to the global economic downturn this week.
The European Central Bank chief and the rest of his governing council will meet in Frankfurt on Thursday to decide how to counter the threats posed to the eurozone by the slowdown in growth emerging markets and the sharp fall in the oil price.
A new stimulus package is seen as a near certainty after prices dropped in the year to February. New staff projections from the ECB’s economists are expected to downgrade economic forecasts, showing the eurozone will be saddled with weaker inflation for longer.
Mr Draghi’s own reputation as a man able to do whatever it takes to steer the eurozone towards recovery is at stake. In December, the ECB president was unable to deliver a package in line with investors’ expectations.
There are several options available to the governing council. None, however, are free of drawbacks.
Rate cuts
The ECB now charges 0.3 per cent on eurozone banks’ deposits parked in accounts at Eurosystem central banks. Markets expect the ECB to cut what is known as the deposit rate by 10 basis points on Thursday, with some ECB watchers expecting a deeper cut to minus 0.5 per cent.
There was disappointment in December when the central bank lowered the rate by just 10 basis points, and not the 20 basis point cut that some had hoped for.
But the mood on negative rates has changed.
The sell-off in European bank equities since the start of the year was driven partly by investors’ concerns that the policy is eroding banks’ profitability.
Mr Draghi and another member of the ECB’s top-ranking executive board, Benoît Cœuré, have said central bankers are not responsible for the profitability of lenders — although Mr Cœuré said last week that the ECB was “well aware” that lenders had taken the brunt of the costs of negative rates and had not passed the levy on to retail depositors.
Vítor Constâncio, the ECB’s vice-president and the man responsible for the central bank’s financial stability department, has said they could cut rates in a way that mitigates the “immediate, direct impact” on lenders.
Tiered rates
The ECB could follow the Bank of Japan’s lead and introduce a tiered deposit rate system to shield banks from most of the impact of negative rates. That would, however, expose the central bank to criticism it is engaging in short-sighted moves to weaken its exchange rate.
The BoJ introduced a tiered system earlier this year, charging its negative deposit rate of minus 0.1 per cent only on a fraction of banks’ reserves stored in its coffers.
The ECB could, like the BoJ, impose a lower deposit rate on only some deposits. But while that protects the banks, it would blunt one of the most important channels through which negative rates are supposed to work.
The ECB views its shift below zero interest rates as a complement to its quantitative easing programme. Both policies, it says, force banks and investors to buy riskier assets to compensate for the costs of negative rates.
But a tiered system would weaken this so-called “portfolio rebalancing effect”. It would also remove the pressure on banks to pass on the costs of negative rates to businesses and households, making it less likely they would spend more.
There are serious doubts that negative rates can weaken currencies as much as officials hope — the BoJ’s surprise move only managed to halt the yen’s appreciation for a few days.
Expand QE
The ECB intends to buy €60bn-worth of mostly government bonds each month from now until March 2017 under its landmark quantitative easing programme. Many analysts expect the governing council to take that figure from €60bn to €70bn on Thursday.
The latest economic projections from ECB staff, which governing council members see at the meeting, will be the first to forecast what will happen to inflation in 2018. If inflation is expected to remain below target until then, then the asset purchase programme could be extended for at least another six months.
The ECB could also buy other assets such as corporate bonds or bank bonds.
An expansion in the QE programme has already met with resistance from the governing council’s hawkish wing, which is much keener on rate cuts than bond purchases. However, the fiercest of the hawks, Bundesbank president Jens Weidmann, is one of four of the governing council’s 25 members without a vote this month under the ECB’s rotating voting system, potentially giving Mr Draghi a freer hand to satisfy investors.
From: LAURENT CHEKROUN (MAKOR SECURITIES LO) At: Mar 7 2016 19:52:48
To: LAURENT CHEKROUN (MAKOR SECURITIES LO)
Subject: Fwd:FT : Burberry seeks help to fight off potential takeover bid
Subject: Fwd:FT : Burberry seeks help to fight off potential takeover bid
Burberry seeks help to fight off potential takeover bidA mystery investor has built up a stake of close to 5 per cent in Burberry, prompting Britain’s best-known luxury fashion brand to seek help from its financial advisers to defend it against any potential takeover bid.Burberry, with a market capitalisation of £6bn, sought aid after its board could not determine the identity of the stakebuilder.A person close to the company said that it had attempted unsuccessfully to ask HSBC, which is listed as the custodian for the position, to reveal its client.The fashion company, which has seen its market value drop by more than a quarter amid a slowdown in Chinese demand, has called on its existing bankers at Robey Warshaw to help, according to people close to the situation. The group’s corporate broker, Morgan Stanley, is also looking into the matter.Analysts suggested that rival luxury goods groups such as LVMH, or private equity investors, could be behind the transaction with a view to launching a takeover. In a takeover, Burberry could be valued at £8bn, or £17 a share, according to analysis from Macquarie.“Burberry is one of the few luxury brands without family interest and thus an easier target for acquisition,” said Macquarie analyst Daniele Gianera.Burberry, headed by Christopher Bailey, the brand’s longstanding creative director who also became chief executive in May 2014, is also concerned that an activist investor may be behind the stake, according to one person familiar with the matter.The buyer’s stake first went over the 5 per cent disclosure threshold on February 11, with HSBC reporting a total holding of 5.4 per cent to the market four days later.Whereas UK transparency rules usually require reporting of any shareholding over 3 per cent, investment managers are given partial exemption that requires them to disclose at more than 5 per cent. The stake has since been reduced to under that level.Burberry, Robey Warshaw and Morgan Stanley declined to comment.In recent weeks, Burberry has embarked on a £20m efficiency drive, cutting costs such as hiring, travel and expenses. The brand said last month that it would axe half its fashion shows, and eliminate the customary six-month waiting period before consumers can buy the latest designs.Mr Bailey insisted at the time that saving money was not the objective of the revamped calendar. But he added: “Responsibly, looking at this, we have to make sure there is some kind of a saving.”Burberry makes 25 per cent of its sales in China and a further 10 per cent in Hong Kong, making the brand more reliant than most of its rivals on Chinese buyers — whether in the region or as tourists.A slowing economy, together with a corruption crackdown initiated by President Xi Jinping in 2012, have damped spending on luxury items such as monogrammed ponchos and cashmere scarves and contributed to a dip in sales last summer.However, Burberry returned to growth in China in the last three months of 2015, as military-inspired rucksacks helped draw customers into its stores.“The investments into the IT platform and the innovation in digital make Burberry the leader in exploiting new technologies to better manage operations and capture growth,” said Macquarie’s Ms Gianera. “We believe this represents attractive know-how for an eventual buyer of the business to be replicated on other brands.”
Fed’s Fischer sees ‘first stirrings’ of rising inflation
The US may be seeing the “first stirrings” of a long-awaited increase in inflation as the impact of a strong jobs market works its way through the economy, according to the Federal Reserve’s second-in-command.
In a speech to a group of business economists in Washington on Monday, Stanley Fischer, the Fed’s vice-chairman, dismissed critics within the profession who have pointed to wage stagnation in the US as evidence that the traditional link between strong employment and inflation “must have been broken”.
“I don’t believe that. Rather the link has never been very strong, but it exists, and we may well at present be seeing the first stirrings of an increase in the inflation rate — something that we would like to happen,” he told the National Association of Business Economists.
The comments were Mr Fischer’s final ones in public before the March 15-16 meeting of the policy-setting Federal Open Market Committee, during which markets and Fed observers widely expect the US central bank to hold rates steady thanks to rising concerns about the global economy.
They also came alongside more downbeat remarks from another FOMC member that highlighted what is likely to be the debate inside the policy-setting committee when it gathers next week.
While Mr Fischer in his speech defended the so-called “Phillips Curve”, which describes the link between employment and inflation, as a resilient and longstanding element of economic theory, others on the committee have expressed greater scepticism.
The issue is critical because inflation has consistently been coming in below the Fed’s 2 per cent target rate even as the jobs market has recovered, although there have been signs of an acceleration. In January, the US’s core PCE consumer price inflation rose to 1.7 per cent. February figures are due out on March 16, the same day that the Fed will announce the result of its latest deliberations.
Speaking across town to a group of bankers on Monday, Lael Brainard, a member of the Fed’s board of governors who has emerged in recent weeks as one of its most vocal doves, said the Fed still needed to be mindful of “weak and decelerating foreign demand”. It meant policymakers should not take “the strength in the US labour market and consumption for granted”, she said.
“Tighter financial conditions and softer inflation expectations may pose risks to the downside for inflation and domestic activity,” she said. “From a risk-management perspective, this argues for patience as the outlook becomes clearer.”
She also warned that the FOMC “should put a high premium on clear evidence that inflation is moving toward our 2 per cent target” and that “inflation has persistently underperformed relative to our target”.
“Given the currently weak relationship between economic slack and inflation and the persistent, depressing effects of energy price declines and exchange rate increases, we should be cautious in assessing that a tightening labour market will soon move inflation back to 2 per cent,” she said. “We should verify that this is, in fact, taking place.”
In his speech, Mr Fischer on Monday pointed to other lingering problems in the US economy, including a dramatic fall in the rate of productivity growth in the US “and in much of the world” over the past 20 years. “There are few issues more important for the future of our economy, and those of every other country, than the rate of productivity growth,” he said.
But he also said the Fed and other major central banks still had the capacity to respond to any slowing in the global economy, despite concerns in some quarters about the impact on monetary policy of negative interest rates in Japan and the eurozone on quantitative easing. “I believe that central banks still have the capacity through QE and other measures to run expansionary monetary policies, even at the zero lower bound,” he said.
Burberry seeks help to fight off potential takeover bid
A mystery investor has built up a stake of close to 5 per cent in Burberry, prompting Britain’s best-known luxury fashion brand to seek help from its financial advisers to defend it against any potential takeover bid.
Burberry, with a market capitalisation of £6bn, sought aid after its board could not determine the identity of the stakebuilder.
A person close to the company said that it had attempted unsuccessfully to ask HSBC, which is listed as the custodian for the position, to reveal its client.
The fashion company, which has seen its market value drop by more than a quarter amid a slowdown in Chinese demand, has called on its existing bankers at Robey Warshaw to help, according to people close to the situation. The group’s corporate broker, Morgan Stanley, is also looking into the matter.
Analysts suggested that rival luxury goods groups such as LVMH, or private equity investors, could be behind the transaction with a view to launching a takeover. In a takeover, Burberry could be valued at £8bn, or £17 a share, according to analysis from Macquarie.
“Burberry is one of the few luxury brands without family interest and thus an easier target for acquisition,” said Macquarie analyst Daniele Gianera.
Burberry, headed by Christopher Bailey, the brand’s longstanding creative director who also became chief executive in May 2014, is also concerned that an activist investor may be behind the stake, according to one person familiar with the matter.
The buyer’s stake first went over the 5 per cent disclosure threshold on February 11, with HSBC reporting a total holding of 5.4 per cent to the market four days later.
Whereas UK transparency rules usually require reporting of any shareholding over 3 per cent, investment managers are given partial exemption that requires them to disclose at more than 5 per cent. The stake has since been reduced to under that level.
Burberry, Robey Warshaw and Morgan Stanley declined to comment.
In recent weeks, Burberry has embarked on a £20m efficiency drive, cutting costs such as hiring, travel and expenses. The brand said last month that it would axe half its fashion shows, and eliminate the customary six-month waiting period before consumers can buy the latest designs.
Mr Bailey insisted at the time that saving money was not the objective of the revamped calendar. But he added: “Responsibly, looking at this, we have to make sure there is some kind of a saving.”
Burberry makes 25 per cent of its sales in China and a further 10 per cent in Hong Kong, making the brand more reliant than most of its rivals on Chinese buyers — whether in the region or as tourists.
A slowing economy, together with a corruption crackdown initiated by President Xi Jinping in 2012, have damped spending on luxury items such as monogrammed ponchos and cashmere scarves and contributed to a dip in sales last summer.
However, Burberry returned to growth in China in the last three months of 2015, as military-inspired rucksacks helped draw customers into its stores.
“The investments into the IT platform and the innovation in digital make Burberry the leader in exploiting new technologies to better manage operations and capture growth,” said Macquarie’s Ms Gianera. “We believe this represents attractive know-how for an eventual buyer of the business to be replicated on other brands.”