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from Stories I’d like to see:

How Boehner can save his speakership, JPMorgan’s lawyers, and the TV economics of the World Series

1. How Boehner can save his speakership:

Conventional wisdom is that House Speaker John Boehner has been afraid to defy the Ted Cruz-inspired House members who have insisted on closing the government and holding the debt ceiling hostage unless President Obama agrees to delay or defund Obamacare. The assumption is that Boehner fears that the most zealous Republicans in his caucus would turn on him and remove him as speaker. With that in mind, there’s one story I’ve been waiting for and still haven’t seen: Why haven’t the Democrats offered to protect Boehner if he runs into trouble by allowing the full House to vote to reopen the government and extend the debt ceiling?

If you think the speaker of the House is chosen only by the majority Republicans, you’re wrong. Under the Constitution, the speaker is elected by a majority of all the members of the House. Traditionally, the majority party will caucus and choose one of their own as the speaker, for whom all, or most, of the majority party will then vote, assuring that he or she gets a majority of the full House and becomes speaker. (The minority party all votes for their favorite, who of course loses, but becomes the Minority Leader, a post chosen by the party, not the full House.)

But it doesn’t have to be that way. So here’s a scenario Politico, the Washington Post, the New York Times, Roll Call or other news organizations that swarm Capitol Hill ought to explore: To get Boehner to take a more moderate stance, House Minority Leader Nancy Pelosi, with President Obama’s encouragement, could offer Boehner enough Democratic votes to keep him in power through the 2014 Congressional elections, even if members of his own caucus rebel and introduce a motion that he be removed.

Under the House’s rules, if a member proposes the removal of the speaker, it would require a majority vote to pass. So even if more than half of the Republicans wanted to remove Boehner, the Democrats could provide the votes to keep him -- which would not be much of a sacrifice for them because they don’t have the votes to put one of their own in the speakership and the alternative would be, by definition, a Republican more to the far right’s liking than Boehner.

from Global Investing:

Frontier markets: past the high water-mark

By Julia Fioretti

Ethiopia's plans to hit the Eurobond trail once it gets a credit rating are highlighting how fast frontier debt markets are growing.

IFR data shows that sub-Saharan Africa alone issued $4.2 billion of sovereign debt in the year to September, compared to $3.6 billion in the same 2012 period. And returns on frontier market bonds have outgunned their high-yield emerging sovereign peers this year.

from Global Investing:

Rich investors betting on emerging equities

By Philip Baillie

Emerging equities may have significantly underperformed their richer peers so far this year (they are about 4 percent in the red compared with gains of more than 6 percent for their MSCI's index of developed stocks) , but almost a third of high net-worth individuals are betting on a rebound in coming months.

A survey of more than 1,000 high net-worth investors by J.P. Morgan Private Bank reveals that 28 percent of respondents expect emerging market equities to perform best in the next 12 months, outstripping the 24 per cent that bet their money on U.S. stocks.

from MacroScope:

Priceless: The unfathomable cost of too big to fail

Just how big is the benefit that too-big-to-fail banks receive from their implicit taxpayer backing? Federal Reserve Chairman Ben Bernanke debated just that question with Massachusetts senator Elizabeth Warren during a recent hearing of the Senate Banking Committee. Warren cited a Bloomberg study based on estimates from the International Monetary Fund that found the subsidy, in the form of lower borrowing costs, amounts to some $83 billion a year.

Bernanke, who has argued Dodd-Frank financial reforms have made it easier for regulators to shut down troubled institutions, questioned the study’s validity.

from Global Investing:

Mexico manufacturing its way to investors’ hearts

By Stephen Eisenhammer

Mexico appears to be the new Latin American darling for investors. With Brazil stalling, Latin America’s second largest economy is back in, after nearly two decades out in the cold.

Rising transport costs and higher wages in China are tipping manufacturing competitiveness  back in favour of Mexico for the first time since the Asian giant joined the World Trade Organisation in 2001.

from MuniLand:

The end of muniland interest-rate swaps for Pennsylvania?

Pennsylvania may have suffered more damage from municipalities using interest rate swaps than any other state in America. Many cities and school districts were sold these “hedging” instruments after former governor Ed Rendell pushed legislation allowing their use in 2003. The fallout for the state has been devastating.

Small communities, large cities and school districts have suffered substantial losses from their use. Bloomberg reported in March 2008 how a school district suffered deep losses:

from Global Investing:

Record year for global bond markets in 2012

How good was 2012 for bond markets? Very good, by the look of the many records broken.

2012  was the strongest year for global high yield and investment grade debt on record, new issuance of corporate debt from emerging markets issuers was also the strongest since records began in 1980 and activity on global debt capital markets were overall up 10 percent from 2011, Thomson Reuters data shows.

from Unstructured Finance:

While you were sleeping (the China ISM number came out)

By Katya Wachtel

For Omega Advisors' Steve Einhorn, the window of sleep-able hours is narrowing.

"One needs to know whats going on around the world. I turn in around midnight so I can monitor what's going on in China and Japan," Einhorn, vice chairman at Leon Cooperman's $7billion fund, said at the Reuters Global Investment Summit last week.  "A decade ago, did I and most others focus on what's going on in China? No. Now we wait for the November manufacturing index for China to come out. The day is longer because of that. I am up around 6 in the morning; I review what has gone on overnight in Asia and in Europe. I spend an hour in front of the machine at home, going through data and news releases" before he's out the door.

This was undoubtedly the most common refrain when we asked some of Wall Street's savviest money managers and investors how they begin their day, and with what must-read literature, during the week-long summit.

from Global Investing:

Tide turning for emerging currencies, local debt

Emerging market currencies have been a source of frustration for investors this year. With central banks overwhelmingly in rate-cutting mode and export growth slowing, most currencies have performed poorly. That has been a bit of a dampener for local currency debt --  while returns in dollar terms have been robust at 13 percent, currency appreciation has contributed just 1.5 percent of that, according to JP Morgan.

 

 

The picture could be changing though.  Fund managers at the Reuters 2013 investment outlook summit this week have been unanimously bullish on emerging debt, with many stating a preference for domestic debt. So far this year, dollar debt has taken in three-quarters of all inflows to emerging fixed income.

from Global Investing:

And the winner is — frontier market bonds

Global Investing has commented before on how strongly the world's riskiest bonds -- from the so-called frontier markets such as Mongolia, Nigeria and Guatemala -- have performed.  NEXGEM, the frontier component of the bond index family run by JP Morgan, is on track to outperform all other fixed income classes this year with returns of over 20 percent., the bank tells clients in a note today. Just to compare, broader emerging dollar bonds on the EMBI Global index have returned some 16 percent year-to-date while local currency emerging debt is up 13 percent.

That appetite for the sector is strong was proven by a September Eurobond from Zambia that was 15 times subscribed. Demand shows no sign of flagging despite a default in frontier peer Belize and shenanigans over the payment of Ivory Coast's missed coupons from last year. Reasons are easy to find. First, the yield. The average yield on the NEXGEM is roughly 6.5 percent compared with  just under 5 percent on the EMBIG.

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