Frontrunning: September 9

• Hedge Funds Cut Back on Fees (WSJ) as we predicted would happen, in May
• Syria's Assad denies chemical weapons use; U.S. presses case for strike (Reuters)
• Unemployment Falling for Wrong Reason Creates Fed Predicament (BBG)
• U.S. tapped into networks of Google, Petrobras, others (Reuters)
• Chinese Zombies Emerging After Years of Solar Subsidies (BBG)
• Monte Paschi doubles planned capital hike to 2.5 billion euros (Reuters)
• Loan Size to Be Cut for Fannie, Freddie (WSJ)
• Japan Growth Revision Opens Door to Sales Tax Rise (FT)
• Inside the End of the U.S. Bid to Punish Lehman Executives (NYT)
• Financial Crisis: Lessons of the Rescue, A Drama in Five Acts (WSJ)
• Time Warner Joins IBM in Health Shift for Retirees (WSJ)
• Mideast Derails Key Issues in Congress (WSJ)
• Americans use the Internet to abandon children adopted from overseas (Reuters)
• Instagram to start selling ads next year (WSJ)
• BoE's Fisher Says May Hold Off On More QE (Reuters)
• Investors Are Poised to Pay $6 Billion for Neiman (WSJ)
• Treasury Official Lael Brainard Considered for Fed (WSJ)

Overnight Media Digest
WSJ
* In a week poised to define his second term, President Barack Obama will mount an intensive campaign to promote a U.S. military strike on Syria as opposition rises in both Congress and across the country.
* Pressure from disappointed investors is forcing hedge funds to roll back their fees, putting the standard charge of 2 percent of assets under management and 20 percent of investment profits on the endangered list.
* The turnaround at real estate brokerage firm Realogy highlights how private equity firms can pull financial levers to keep troubled companies they own afloat and reap profits.
* A team of Ares Management and the Canada Pension Plan Investment Board are in the final stages of talks to buy the luxury retailer Neiman Marcus for around $6 billion.
* At Facebook's Instagram unit, Emily White is the point person charged with turning a billion-dollar acquisition that has never made a cent into a real business. Ad sales, she said, are expected to begin in the next year.
* Japan's economy grew at a much faster pace in the second quarter than initially estimated, data showed Monday, giving more ammunition to supporters of a planned sales tax hike.
* McLaren intends to open its first Chinese dealership, in Shanghai, on Monday. The UK-based supercar maker is seeking to cash in on a growing Chinese taste for ultraluxury goods.
* International Business Machines plans to move about 110,000 retirees off its company sponsored health plan and instead give them a payment to buy coverage on a health insurance exchange.
* A key U.S. committee approved the $4.7 billion takeover of Smithfield Foods by Shuanghui, clearing the biggest purchase of a U.S. company ever by a Chinese firm.
* Johnson & Johnson, which has been shedding slow-growing products and units, is canvassing companies that might be interested in buying its blood testing division, which could be worth around $5 billion.

FT
Chinese e-commerce company Alibaba is prepared to scrap plans for a $60 billion Hong Kong float and instead list in New York if its senior management cannot nominate a majority of board directors, according to people close to the company.
Dell Inc's billionaire Chief Executive Michael Dell is this week set to win shareholder backing for his drawn-out $24.8 billion buyout of the PC company that he founded, barring last-minute intervention from activist investor Carl Icahn.
The British Treasury is planning to request that the European Commission extend Lloyds Banking Group's November 2013 deadline to sell a package of 631 retail branches by up to two years. The request is expected to be submitted by the end of September, according to people close to the process.
Upscale U.S. retailer Neiman Marcus is likely to be sold - rather than listed - to a consortium of Ares Management LLC and the Canada Pension Plan Investment Board for over $6 billion, sources said.
British property website Zoopla has hired Credit Suisse to explore growth opportunities that will likely mean a London stock market listing.

NYT
* President Bashar al-Assad of Syria, who has denied that his government attacked civilians with chemical weapons on Aug. 21, reiterated that denial to the American people on Sunday morning via the television interviewer Charlie Rose.
* The handset market is so brutally competitive that Apple Inc, the most successful smartphone maker, is preparing to step up its game this week by offering two new iPhones instead of one. At an event on Tuesday at its Cupertino, California, headquarters, the company is set to unveil for customers worldwide a new iPhone with a faster processor, along with another model that will be sold at a lower cost.
* China's trade surplus rose in August to its highest level this year, while inflation remained under control, government data released on Sunday and Monday showed, in further signs that the Chinese economy and possibly the global economy are faring a little better as the summer ends.
* The owners of the Neiman Marcus chain are near a deal to sell the luxury retailer to a group led by Ares Management and a Canadian pension plan for about $6 billion, a person briefed on the matter said on Sunday.
* NYSE Euronext is expected to announce on Monday that it has made a minority investment in ACE, a three-year-old start-up that offers companies a centralized platform to privately sell stocks, bonds and other securities. Financial terms of the partnership were not available.
* People magazine is changing its subscription model, adding a tiered plan to what has long been considered the financial backbone of Time Inc's magazine empire. On Monday, the magazine is introducing four new subscription packages.
* Toyota Motor Corp is recalling about 780,000 vehicles for a second time after its first effort to prevent a handling problem did not work, according to a report posted Sunday on the website of the National Highway Traffic Safety Administration.

Canada
THE GLOBE AND MAIL
* U.S. President Barack Obama's top aide pressed on Sunday the case for "targeted, limited consequential action" to degrade the capabilities of Syrian President Bashar Assad to carry out chemical weapons attacks as the White House mounted a major push to win support from a divided Congress and skeptical American public for a military strike.
* An ally of Russian President Vladimir Putin won Moscow's mayoral election on Sunday, nearly complete results showed, but opposition leader Alexei Navalny's unexpectedly strong showing could alarm the Kremlin and fuel the country's flagging protest movement.
* Documents leaked by Edward Snowden indicate the National Security Agency spied on Brazil's state-run oil company, the private computer networks of Google Inc and a company that facilitates most of the world's international bank transfers, a Brazilian TV report says.
Reports in the business section:
* The Canadian Pension Plan Investment Board is in advanced talks with a U.S. private equity partner, Ares Management LLC, to acquire Neiman Marcus Inc for about $6 billion, American news outlets reported on Sunday.
* BCE Inc is heading to court in its battle against Ottawa's strategy for attracting new wireless players, arguing that Canada's Industry Minister James Moore has no right to impose greater obligations on the company to help smaller rivals.
* Bombardier Inc executives are looking to the sky as they await a picture-perfect blue ceiling and winds of less than 10 knots an hour to clear the way for the takeoff of the new C Series. Already nine months behind its original schedule, the first flight of the new commercial aircraft could occur any day now that the aircraft maker ran some high-speed taxi tests on a Mirabel runway on Friday. However, the extended weather forecast for the Montreal area, which calls for storms and rain as of Tuesday, makes the day tricky to predict.
NATIONAL POST
* Canada's Prime Minister Stephen Harper offered to participate in joint efforts with the United States to cut greenhouse gas emissions to win approval of the Keystone XL pipeline, according to a person familiar with the matter.
* Progressive Conservative Leader Tim Hudak says he has removed Peter Shurman from his position as finance critic. Hudak said on Sunday that he met with Shurman to discuss his accommodation expense claims. It was revealed last week that Shurman, a Toronto-area member, billed the maximum C$20,719 (about $20,000) last year after moving to Niagara-on-the-Lake.
* Merit pay and national licensing standards for public school teachers would curb the influence of "entrenched and powerful interest groups" and promote better teaching, says a new study on how to make Canadian teachers more effective.
FINANCIAL POST
* The latest statistics for the Canadian exchange-traded-fund industry depict a more challenging backdrop than investors have become used to. August saw more than a quarter of all ETFs in Canada in redemption mode, according to ETFinsight's data.

China
PEOPLE'S DAILY
-- Vice Premier Zhang Gaoli told senior officials at a meeting on Sunday that China will stick to a policy to improve its economic structure and upgrade its development pattern so as to ensure sustained growth despite a slowdown in the economy.
CHINA DAILY
-- China exports expanded faster than expected in August, according to figures posted by the government on Sunday, with experts predicting the world's second-largest economy will recover further in coming months from its recent slowdown.
CHINA SECURITIES JOURNAL
-- The Shanghai Commodity Exchange has applied to regulators to launch China's first commodity index futures on non-ferrous metals.
-- A survey by China's government-backed securities insurance firm shows investor confidence in the domestic stock market improved in August, buoyed by signs of improvement in the economy.
SHANGHAI SECURITIES NEWS
-- China's government securities clearing house is working on a project that may allow investors trading on the Shanghai and Shenzhen stock exchanges to use one account for the first time next year.
-- In a sign that China's housing market has recovered to some extent this year, major developer Poly Real Estate said January-August sales rose 16.48 percent to 79 billion yuan ($12.9 billion).
SECURITIES TIMES
-- Ping An Insurance said it would buy a fresh stake in its subsidiary Ping An Bank worth a maximum 14.8 billion yuan to boost the lender's capital adequacy ratio.

Fly On The Wall 7:00 AM Market Snapshot
ANALYST RESEARCH
Upgrades
Baker Hughes (BHI) upgraded to Outperform from Market Perform at Wells Fargo
Brocade (BRCD) upgraded to Outperform from Sector Perform at RBC Capital
Cimarex Energy (XEC) upgraded to Overweight from Equal Weight at Morgan Stanley
EOG Resources (EOG) upgraded to Overweight from Equal Weight at Morgan Stanley
Eaton (ETN) upgraded to Overweight from Equal Weight at Morgan Stanley
Estee Lauder (EL) upgraded to Buy from Neutral at Citigroup
FIS (FIS) upgraded to Buy from Neutral at SunTrust
Inter Parfums (IPAR) upgraded to Buy from Neutral at B. Riley
Nanometrics (NANO) upgraded to Overweight from Neutral at Piper Jaffray
NetApp (NTAP) upgraded to Buy from Neutral at UBS
Plum Creek Timber (PCL) upgraded to Outperform from Market Perform at BMO Capital
Quiksilver (ZQK) upgraded to Outperform from Neutral at Credit Suisse
Salix (SLXP) upgraded to Outperform from Market Perform at Leerink
Downgrades
Apache (APA) downgraded to Buy from Strong Buy at ISI Group
Community Health (CYH) downgraded to Neutral from Buy at Citigroup
Fifth Third Bancorp (FITB) downgraded to Market Perform from Outperform at Raymond James
Halliburton (HAL) downgraded to Market Perform from Outperform at Wells Fargo
Hercules Technology (HTGC) downgraded to Market Perform at Keefe Bruyette
HollyFrontier (HFC) downgraded to Equal Weight from Overweight at Morgan Stanley
IAC (IACI) downgraded to Hold from Buy at Canaccord
Multimedia Games (MGAM) downgraded to Neutral from Buy at Janney Capital
Rockwood (ROC) downgraded to Hold from Buy at Deutsche Bank
Initiations
Abercrombie & Fitch (ANF) initiated with a Buy at Nomura
Aeropostale (ARO) initiated with a Neutral at Nomura
American Eagle (AEO) initiated with a Neutral at Nomura
Ann Inc. (ANN) initiated with a Neutral at Nomura
Chico's FAS (CHS) initiated with a Buy at Nomura
DineEquity (DIN) initiated with a Hold at KeyBanc
Domino's Pizza (DPZ) initiated with a Buy at KeyBanc
Express (EXPR) initiated with a Buy at Nomura
Fossil (FOSL) initiated with a Neutral at Nomura
Francesca's (FRAN) initiated with a Buy at Nomura
Gap (GPS) initiated with a Neutral at Nomura
L Brands (LTD) initiated with a Neutral at Nomura
Layne Christensen (LAYN) initiated with a Neutral at DA Davidson
Natural Grocers (NGVC) initiated with an Outperform at Wells Fargo
Oshkosh (OSK) initiated with a Sector Perform at RBC Capital
Precision Drilling (PDS) initiated with an Equal Weight at Barclays
Sally Beauty (SBH) initiated with a Neutral at Citigroup
Signet Jewelers (SIG) initiated with a Buy at Nomura
Sprint (S) re-initiated with an Equal Weight at Evercore
The Buckle (BKE) initiated with a Neutral at Nomura
Third Point Reinsurance (TPRE) initiated with a Buy at BofA/Merrill
Third Point Reinsurance (TPRE) initiated with a Neutral at Citigroup
Third Point Reinsurance (TPRE) initiated with a Neutral at JPMorgan
Ulta Salon (ULTA) initiated with a Buy at Citigroup
Urban Outfitters (URBN) initiated with a Neutral at Nomura
lululemon (LULU) initiated with a Buy at Citigroup
HOT STOCKS
GlaxoSmithKline (GSK) sold nutritional drinks brands to Suntory for $2.1B
Apple (AAPL) said to be close to iPhone deal with China Mobile (CHL), Bloomberg reports
Fitch affirmed McDonald's (MCD) IDRs at 'A/F1', outlook Stable
PNC Financial (PNC) to wind down Market Street Funding
First Solar (FSLR) announced JV with Belectric Holding
EARNINGS
Companies that missed consensus earnings expectations include:
SHFL entertainment (SHFL)
NEWSPAPERS/WEBSITES

• Pressure from disappointed investors is forcing hedge funds to roll back their fees, putting the standard charge of 2% of assets under management and 20% of investment profits on the endangered list, the Wall Street Journal reports
• Time Warner (TWX) plans to move its U.S. retirees from company-administered health plans to private exchanges. The company will allocate funds in special accounts that retirees can use to go shop for coverage, sources say, the Wall Street Journal reports
• A potential landmark case for U.S. regulation of Internet traffic (VZ) goes before a panel of federal judges today, testing whether the Federal Telecommunications Commission has authority to enforce so-called net neutrality rules, Reuters reports
• The U.S. government tapped into computer networks of companies including Google (GOOG) and Brazilian state-run oil firm Petroleo Brasileiro (PBR), according to leaked U.S. documents aired by Globo, Brazil's biggest TV network, Reuters reports
• Las Vegas Sands (LVS) and MGM Resorts International (MGM) are scouting sites for casinos in Japan as Tokyo’s selection to host the 2020 Olympics boosts confidence a law legalizing gambling resorts in the capital will pass, Bloomberg reports
• PetroChina Co. (PTR), mired in a government graft probe, said a media report that more executives were being investigated by the authorities is untrue. PetroChina had earlier suspended its shares from trading in Hong Kong and Shanghai pending the statement, Bloomberg reports

BARRON’S
Lenovo LNVGY) looks to conquer smartphone, tablet market (SSNLF, AAPL)
Microsoft (MSFT) could be attractive if it aggressively returns cash to its shareholders
Caterpillar (CAT), Joy Global (JOY), Textron (TXT), GE (GE) could rise 30%
Bob Evans (BOBE) could rise 30%
EMC (EMC), NetApp (NTAP) could be vulnerable to new companies (DELL)
SYNDICATE
AOL (AOL) files to sell 2.43M shares of common stock for holders
Chesapeake Lodging (CHSP) files prospectus to offer up to $100M in common shares
Sagent Pharmaceuticals (SGNT) files to sell 4.4M shares of common stock
SolarCity (SCTY) files to sell 3.67M shares of common stock for selling shareholder