Month: June 2014

Will volatility become a policy tool? The PBOC decided that enough was enough with the ever-strengthening Yuan and are trying to gently break the back of the world’s largest carry trade by increasing uncertainty about the currency. As Citi’s Stephen Englander notes, this somewhat odd dilemma (of increasing uncertainty to maintain stability) is exactly what the rest of the world’s planners need to do – Central banks will need more FX and asset market volatility in order to provide low rates for an extended period… here’s why.

Via Citi’s Stephen Englander,

Will central banks need volatility to restrain asset prices?

• Cyclical and trend growth pessimism is leading central banks to guide expectations of rates downward
• The more credible the guidance, the more risk will be bought
• To prevent asset market overheating while keeping rates low, central bankers may have to introduce more volatility into asset markets…
• …emphasizing risk and vigilance and central bank readiness to raise rates if needed

Central banks will need more FX and asset market volatility in order to provide low rates for an extended period. The argument goes like this:

1) Low realized and implied volatility have come as a surprise to investors

 

2) Investors are underinvested out of skepticism that the low rates, low volatility environment will persist

 

3) If the central bank mantra of “low rates, low vol forever” persists in asset markets, investors will buy high beta assets and add leverage

 

4) Asset prices will respond much more to rates incentives than (so-called) rates sensitive sectors of the economy

 

5) Central banks want to keep the low rates without creating an asset bubble and will purposely induce volatility to calm speculation

The big surprise this year is the reduction in FX and asset market volatility (Figures 1, 2) Realized USDBRL volatility over the last month is where EURUSD vol was in Q1 2013. Since it was unexpected, investors were underinvested and even wrongly positioned as volatility declined.

Investors were not convinced on low yields for well into the year. On April 28, US 5-year yields were 1.74%, much closer to the 1.80% year high than to today’s 1.52%. Two year yields were within 2bps of 2014 highs. Conversations with investors suggest that they are still underinvested in risk because they are afraid that a) the low rates, low vol environment will not persist and b) they are petrified that liquidity will disappear in EM and G10 carry trades if a negative shock hits. The image of picking up nickels in front of a steamroller is often invoked.

Fear is fading as carry trades have looked better and better. The correspondence between currency returns and higher yield has improved dramatically (Figure 3). Over the last month, the top five currencies appreciated 1.8% on average and had a carry return of 0.62%, the weakest currencies fell an average of 1.7% and had a carry return of zero. Put the other way, the highest yielders had a carry return of 0.8% and an FX return of 1.2%, the lowest yielders had a zero carry return and fell 0.7% on average.

High yield will go some way to convincing investors that carry is the way to avoid underperformance. We have already seen some turnaround in return indices, but most remain negative YTD (Figure 4). The sharp run-up in the HFR macro index suggests that leveraged investors may have recently shifted positions dramatically.

A very slow moving steam roller – Central banks are seducing investors into carry trades. The choice of words may be more elliptical but if G4 central bankers are committed to the view that policy rates and growth rates will be far below historical norms and converge to these new norms slowly, they are hardly screaming fire in the carry trade cinema. If there is a steam roller threatening the nickel grabbers, it is by implication a very slow moving one.

Many investors still have the asset market blow up of 2008-09 on the radar screen, but the decline of volatility combined with central bank guidance makes it hard to resist the high beta siren song. The 1.6% pickup in the HFR index of macro returns in the last couple of weeks suggests that some investors are getting the message. You may disagree with the message (as I do), but if central banks are either correct or strongly committed to using low and stable rates as the ticket to stronger growth, investors will respond by ramping up risk.

The definition of insanity

A catchy section title and I do not think central bankers are insane. The combo of low rates and QE seems to have helped asset markets a great deal (Figure 5). GDP continues to disappoint, so it is hard to argue that the upside surprise has been on the activity side. So the question is why lower terminal rate expectations and slower rate normalization should have a bigger impact on activity relative to asset markets than over the past five years. We expect that if investors buy into the central bank view of where and how fast rates will move, we will continue to see gains in asset prices that will look at odds with the underlying pessimism on growth that is driving the policy message.

Will vol become a policy tool?

Central banks are guiding investors on the terminal points on policy and long-term rates and the speed at which they get there. They may be left with volatility around that path as the way by which asset market froth is discouraged. If they fear overheating but need the low rates for growth, generating uncertainty around that path will be a potential way of discouraging undesired leverage and yield grabs. We are assuming that higher volatility will discourage yield grabs in asset markets more than it discourages activity. We suspect this is the case, but do not yet see a clear way to proving it empirically.

Figure 6 shows the 52-week correlation of AUD and non-AUD G10 FX volatility (see note to Figure 6). We do not want to use AUD volatility because vol is likely to be higher if AUD is falling. Using non-AUD volatility means that we are safe from the criticism that AUD spot moves are causing AUD vol moves as much as vol moves are causing AUD spot to move. In a multiple regression framework we find that a 1-unit rise in non-AUD G10 volatility has about the same impact as a 20bps shift in 2-yr rate differentials, so higher volatility can discourage carry trades. This is very likely true for other yield trades as well.

Hence, it may be the way forward for central banks to mitigate the asset market implications of successful forward guidance.

*  *  *

And with the world and his dog short volatility (as the following chart of VIX futures shows)…

It is clear that while the CNY carry trade was China’s problem (and funded the world), financial fragility (or stability) in Western asset markets is dependent on the “sell Volatility” carry trade… and maybe it’s time for the central banks to break the back of that massive one-way bet…

 

That might be a problem… given the last time the market was this net short volatility, VIX explode higher…

Source: Citi and Bloomberg

via Zero Hedge http://ift.tt/1pLTrgd Tyler Durden

While we await today’s US Manufacturing ISM number (expected to rise from 54.9 to 55.5), here is how some 23 of the world’s most important countries fared in May in their manufacturing data. In brief: as the below table shows, out of the 23 countries that have reported so far, 8 reported improvements in their manufacturing sectors in May, while 15, or two-thirds, recorded a weakening in mfg data from April. That’s the bad news, and an indication that the latest upswing in the global manufacturing economy may be ending. The good news: despite the modest decline, there were only 7 countries “contracting” or in negative territory (below 50) and 16 in positive. In particular, France, Korea, and Norway moved from expansion to contraction.

Some drilldown on the data from Bank of America:

China: Manufacturing PMI came in at 50.8 in May up from 50.4 in April and above consensus expectations of 50.7.

Italy: Manufacturing PMI came in modestly weaker than expected in May, falling to 53.2 from 54.0 in April with expectations at 53.6. However, the decline only reverses half of the strong gain in the previous month, so over 2Q 2014, the PMI is still notably stronger than 1Q.

France: In May, the final Manufacturing PMI was revised up a touch to 49.6 from 49.3 initially, though notably below 51.2 in April.

Euro: In May, the final Manufacturing PMI was revised down to 52.2 from 52.5 initially and down from 53.4 in April. Expectations were for a slightly higher 52.5. The May print may be explained by the small upward revision for France being more than offset by the downward revision to Germany and weaker than expected releases for Spain and Italy.

UK: In line with market expectations, the Manufacturing PMI edged down to 57.0 in May from 57.3 in April. Still, the UK PMI data are at very strong levels and above the pre-crisis average of about 51.

via Zero Hedge http://ift.tt/1oNqnaI Tyler Durden

With Eric Holder suddenly playing hardball with the banks (most notably not US banks), it has not gone unnoticed among the largest European newspapers. The potential $10 billion penalty for BNP Paribas – France’s largest bank – for alleged dealings with a sanctioned Iran has been called a “masterful slap,” by Le Monde and Le Figaro said the U.S. was making an example of BNP to deflect criticism it had been “lenient with the American banks responsible for the financial crisis.” This could make for an awkward week for Obama, not only facing Putin as he visits Europe to celebrate D-Day but as the allies themselves turn on him with France’s Hollande likely to raise the matter and, as Bloomberg reports, newly elected National Front party called on the French government to “defend the national interest” in the case.

 

As Bloomberg reports, following Eric Holder’s plan to fine BNP Paribas $10 billion over dealings with sanctioned nations,The French are crying foul…

Le Monde in its May 31 edition called the possible fine a “masterful slap.” Le Figaro newspaper said the U.S. was making an example of BNP to deflect criticism it had been “lenient with the American banks responsible for the financial crisis.” Hollande may raise the matter with Obama this week, Les Echos reported today, without citing anyone.

This would be the largest criminal penalty in US history – which some are claiming is unfair…

“If this results in a guilty plea, it is likely to increase debate in France and the rest of Europe about the essential fairness of U.S. criminal procedures,” said Frederick T. Davis, a lawyer at Debevoise & Plimpton LLP in Paris and a former U.S. prosecutor.

Europe is not happy…

“This affair is part of Washington’s hegemonic ambition in law and commerce,” said Jacques Myard, a lawmaker from Former President Nicolas Sarkozy’s UMP Party. “Washington has the annoying habit of trying to apply its laws outside its jurisdiction and use its strength for commercial ends.”

 

…

 

“Megaphone diplomacy is not what’s called for here,” Le Guen said on BFM television. “The United States can’t treat its allies like this.”

 

…

 

In a statement on its website, the National Front accused the U.S. of “racketeering,” in an effort to weaken BNP and aid its American rivals. “We demand that the French government not stay idle,” the statement said.

It seems this week might be a busy one for Obama as he visits Europe…

“It would be unacceptable for the French government to do nothing at a time when the European Union is negotiating a free-trade accord with the U.S.,” he said.

And as if that was not bad enough, just this week, Goldman Sachs has downgraded the French bank from “conviction buy” because a potentially meaningful financial penalty in the US curtails the
outlook for capital return.

On excess capital optionality, the Wall Street Journal reported (May 29) that the
US Department of Justice is seeking more than US$10 bn for the alleged violations of US economic sanctions for US$ transactions with certain countries. If this were the case then the hit to CET1 from additional provisions would reach c.110 bp of RWAs and lower the CET1 ratio to 9.5% pro forma on 1Q14. The company has provisioned US$1.1 for a potential penalty; however the final impact could be significantly larger than this.

 

For purposes of our analysis we incorporate additional provisions in expectation that BNP will face a US legal penalty in the amount of US$7.5 bn, based on the midpoint of the latest two amounts reported in the press (US$ 10bn, WSJ, 5/29/2014; US$ 5bn, Reuters, 5/21/2014).

 

Recent reports have introduced wide-ranging outcomes. Other examples suggest that settlements can reach the top end of the range (e.g. media put Credit Suisse litigation charge at $1bn, rising to $2.5bn. The settlement on May 20 was $2.6bn). This reduces our 4Q14 CET1 capital estimates to 10.2%.

So – sell French banks and… buy US banks? Seems like the Treasury’s Terrorism unit is working full-time these days.

via Zero Hedge http://ift.tt/1iLeryL Tyler Durden

The main news to watch this week in DMs are various PMIs (for May), ECB MP Decision (expect downward shift in interest rate corridor and targeted credit measures), US Nonfarm Payrolls (consensus 215K) and Unemployment (expect 6.4%), and MP Decisions in Australia and Canada (expect both on hold). Among other releases, next week in DMs includes [on Monday] expanding US ISM Manufacturing and Construction Spending, PMI in Canada and European countries; [on Tuesday] US factory orders and firming vehicle sales, Euro area CPI, Australia MP Decision; [on Wednesday] US ADP Employment Change and ISM Non-Manuf. Composite, Canada MP Decision, Euro area Composite PMI and 1QP GDP, UK Composite PMI; [on Thursday] MP decisions by ECB (Goldman expects a shift down in the interest rate corridor by 15bp to a deposit rate of -0.15% and an MRO rate of 0.10%, in addition to targeted credit measures) and BoE (expect no change in policy), German factory orders; and [on Friday] US Nonfarm Payrolls (consensus of 215K), US Unemployment (expect 6.40%), and Japan Leading Index.

This week’s busy calendar starts off with today’s global PMIs and ISMs. On Tuesday, President Obama begins a four day European trip ahead of the G7 meeting which starts on Wednesday. This G7 meeting is replacing the G8 meeting that was originally scheduled in Sochi but was cancelled after Russia’s annexation of Crimea. Tuesday’s data docket is important with Euroarea data releases including inflation and unemployment expected to further cement the ECB’s resolve in easing policy come Thursday.

The Reserve Bank of India meets on Tuesday where rates are expected to remain on hold in the first RBI meeting since the new government took office. Wednesday features the global services ISMs and PMIs. Other data releases scheduled for that day includes the ADP employment report, which will provide an important preview to Friday’s NFP, and US trade. The Fed releases its Beige Book on Wednesday too and the second estimates of Euroarea GDP will be published on Wednesday as well.

Apart from the ECB on Thursday, we also have the BoE policy meeting. Elsewhere in the UK there will be a by-election held in the seat of Newark, central England – this will be interesting to see whether the recent successes of the UK Independence Party can translate to the party winning its first ever House of Commons seat. The Conservatives currently hold that seat. Datawise, we have US jobless claims, Euroarea retail sales and German factory orders.

Friday sees the release of US payrolls where consensus is expecting gains of around +200k in the headline. The unemployment rate is expected to pick  up 0.1ppt to 6.4% due to rising participation. Moody’s updates sovereign ratings for the EFSF and ESM while S&P will update its rating view on Italy.

CALENDAR

Monday, June 2

• Events: Speeches by Fed’s Evans, ECB’s Mersch, Nouy, and Linde; EU releases country-specific recommendations in Brussels; WEF Japan Meeting.
• United States | ISM Manufacturing (May): consensus 55.5, previous (r) 54.9
• United States | Construction Spending MoM (Apr): consensus 0.70%, previous (r) 0.20%
• DMs | Markit Manufacturing PMI (May F): US previous (r) 56.2, Euro area previous (r) 52.5, France previous (r) 49.3, Germany previous (r) 52.9, Japan previous (r) 49.9
• DMs | Markit Manufacturing PMI (May): Canada (RBC) previous (r) 52.9, Italy previous (r) 54, Norway previous (r) 51.2, Spain previous (r) 52.7, Sweden previous (r) 55.5, Switzerland previous (r) 55.8, Denmark previous (r) 60.4, UK previous (r) 57.3
• EMs | HSBC Manufacturing PMI (May): South Korea previous (r) 50.2, Russia previous (r) 48.5, Turkey previous (r) 51.1, Poland previous (r) 52, Hungary previous (r) 54.6, Indonesia previous (r) 51.1, Czech Republic previous (r) 56.5, South Africa (Kagiso) previous (r) 47.4, India previous (r) 51.3, Indonesia previous (r) 7.25%, Brazil previous (r) 49.3, Mexico previous (r) 51.8
• Germany | CPI EU Harmonized YoY (May P): Consensus 1.20%, previous (r) 1.10%
• United Kingdom | Mortgage Approvals (Apr): Consensus 64.0K, previous (r) 67.1K
• Japan | Capital Spending YoY (1Q): Previous (r) 4.00%
• Japan | Vehicle Sales YoY (May): Previous (r) -11.40%
• Australia | Building Approvals MoM (Apr): Consensus 2.50%, previous (r) -3.50%
• Thailand | CPI YoY (May): Consensus 2.53%, previous (r) 2.45%
• Chile | Minutes from MP Decision (May meeting)
• Also interesting: [DM] Germany regional CPIs; Denmark Unemployment; Australia Business Indicators and RPData House Prices [EM] Trade Balance in Brazil, Hungary and Indonesia; Mexico IMEF Manufacturing and Non-Manufacturing Index.

Tuesday, June 3

• Events: Speech by Fed’s George; Some US states hold congressional primary elections.
• United States | Factory Orders (Apr): consensus 0.50%, previous (r) 0.90%
• United States | Total Vehicle Sales (May): consensus 16.1M, previous (r) 16.0M
• Euro area | CPI Estimate YoY (May): consensus 0.70%, previous 0.70%
• Euro area | Unemployment Rate (Apr): Consensus 11.80%, previous (r) 11.80%
• Australia | Retail Trade MoM (Apr): consensus 0.30%, previous 0.10%
• Australia | MP Decision: Consensus expects rates on hold (at 2.50%), but it will be interesting to see how the RBA balances early indications that growth held up relatively well in 1Q2014 against the more recent worrying deterioration in consumer sentiment and iron ore prices.
• South Korea | CPI YoY (May): consensus 1.60%, previous (r) 1.50%
• Various countries | Manufacturing PMI (May): Singapore previous (r) 51.1, China (final) previous (r) 49.7, Taiwan previous (r) 52.3
• India | MP Decision: Consensus expects rates on hold (repurchase rate at 8.0%).
• Poland | MP Decision: Consensus expects rates on hold (at 2.50%, same as consensus) and that the MPC will sound more dovish.
• Turkey | CPI MoM (May): consensus 0.75% (10.50% yoy), previous (r) 1.34% (9.38% yoy)
• Also interesting: [DM] US Domestic Vehicle Sales, ISM NY; Unemployment in Italy, Norway and Spain; Sweden CA; UK PMI Construction and Nationwide House Prices; Japan Monetary Base; Australia BoP; NZ Terms of Trade and Construction Work Put in Place; Hong Kong Retail Sales [EM] China Non-manufacturing PMI; Romania Retail Sales and PPI; Turkey PPI.

Wednesday, June 4

• Events: US Fed Beige Book June FOMC; Speeches by BoJ’s Sato and ECB’s Nouy; EU’s Van Rompuy and Barroso hold pre-G7 press conference.
• United States | ADP Employment Change (May): consensus 215K, previous (r) 220K
• United States | Trade Balance (Apr): consensus -$41.0B, previous (r) -$40.4B
• United States | ISM Non-Manf. Composite (May): consensus 55.5, previous (r) 55.2
• Canada | MP Decision: Consensus expects rates on hold (at 1.0%)
• Euro area | Markit Euro area Composite PMI (May F): previous (r) 53.9
• Euro area | Markit Euro area Services PMI (May F): consensus 53.5, previous (r) 53.5
• Euro area | GDP SA QoQ (1Q P): Consensus 0.20% (0.90% yoy), previous (r) 0.20% (0.90% yoy)
• United Kingdom | Markit/CIPS UK Composite PMI (May): previous (r) 59.2
• Japan | Markit/JMMA Japan Composite PMI (May): Previous (r) 46.3
• Australia | GDP SA QoQ (1Q): consensus 0.90%, previous (r) 0.80%
• EMs | HSBC Composite PMI (May): India previous (r) 49.5, Russia previous (r) 47.6, South Africa previous (r) 49.4, Brazil previous (r) 49.9
• Czech Republic | GDP YoY (1Q P): Consensus 2.00%, previous (r) 2.00%
• Romania | GDP YoY (1Q P): Previous (r) 3.80%
• Hungary | GDP SA QoQ (1Q F): Previous (r) 1.10% (3.50% yoy)
• Brazil | Industrial Production MoM (Apr): previous (r) -0.49%
• Also interesting: [DM] US Markit Composite and Services PMI, Nonfarm productivity (revision); Canada International Merchandise Trade; Euro area PPI; Composite and Services PMI in France (F), Germany (F), Italy, Spain; Sweden IP and Services Output; UK Services PMI; Japan Services PMI; NZ ANZ Commodity Price Index [EM] Hungary Retail Sales; Colombia PPI and exports; Argentina Vehicle Domestic Sales.

Thursday, June 5

• Events: ECB’s President Draghi holds press conference after rate decision; Speech by Fed’s Kocherlakota.
• Euro area | MP Decision: Goldman expects the ECB to shift the interest rate corridor down by 15bp (to a deposit rate of -0.15% and an MRO rate of +0.10%) and also to announce targeted credit measures. it does not, however, expect any signal that the Governing Council is pondering in earnest a large-scale asset purchase programme.
• United Kingdom | MP Decision: Consensus expects no change in policy at the BoE, and expects the committee to vote unanimously to keep rates on hold (bank rate at 0.50%, asset purchase target at £375B).
• Germany | Factory Orders MoM (Apr): Consensus 1.10% (4.20% yoy), previous (r) -2.80% (1.50% yoy)
• South Korea | GDP SA QoQ (1Q F): Previous (r) 0.90% (3.90% yoy)
• China | HSBC China Composite PMI (May): Previous (r) 49.5
• Hungary | Industrial Production WDA YoY (Apr P): consensus 7.2%, previous (r) 8.10%
• Taiwan | CPI YoY (May): Consensus 1.70%, previous (r) 1.65%
• Philippines | CPI YoY (May): Consensus 4.10%, previous (r) 4.10%
• Brazil | Minutes from MP Decision (May meeting)
• Colombia | CPI MoM (May): consensus 0.30% (2.73% yoy), previous (r) 0.46% (2.72% yoy)
• Also interesting: [DM] US Jobless Claims; Euro area Markit Retail PMI and Retail Sales; France ILO Unemployment; Australia International Trade [EM]
• Czech Republic Retail Sales; Hungary Real Average Wages; China Services PMI; Mexico Consumer Confidence; Chile Economic Activity; Brazil Vehicle Production, Sales and Exports.

Friday, June 6

• Events: Speech by ECB’s Constancio; Hungarian PM Orban to present members of his new government; Sovereign Debt Ratings may be published for EFSF (Moody’s), ESM (Moody’s), Finland (Moody’s), Ireland (S&P) and Italy (S&P).
• United States | Change in Nonfarm Payrolls (May): consensus 219K, previous (r) 288K
• United States | Unemployment Rate (May): consensus 6.40%, previous (r) 6.30%
• Germany | Industrial Production SA MoM (Apr): Consensus 0.50% (2.90% yoy), previous (r) -0.50% (3.00% yoy)
• Switzerland | CPI MoM (May): Consensus 0.20% (0.10% yoy), previous (r) 0.10% (0.00% yoy)
• Japan | Leading Index CI (Apr P): Previous (r) 107.1
• Mexico | MP Decision: Consensus expects rates on hold (at 3.50%) and to reiterate the broadly neutral near term policy bias. The MPC likely feels that the economy does not need more monetary stimulus at this juncture, given that monetary and fiscal policy are already stimulative and the authorities remain confident in the assessment that the economy will pick up forward momentum in the near-term. Additional rate cuts in Mexico to offer extra support to activity against a backdrop of likely gradually rising Dollar yields in the near term would run the risk of tightening the domestic-foreign interest rate differential excessively and destabilizing the MXN and investor appetite to remain engaged in local markets.  continues to widen.
• Brazil | IBGE Inflation IPCA MoM (May): previous (r) 0.67% (6.28% yoy)
• Czech Republic | Industrial Output YoY (Apr): consensus 7.20%, previous (r) 8.70%
• Ukraine | CPI MoM (May): Previous (r) 3.30% (6.90% yoy)
• Also interesting: [DM] US Change in Private and Manufacturing Payrolls, Average Hourly Earnings; Canada Unemployment; Trade Balance in Germany and France; Denmark CA; Spain Industrial Output; Norway IP; Switzerland FX Reserves and Industrial Output; UK Trade Balance [EM] Romania Wage Statistics; Trade Balance in Czech Republic, Hungary, and Malaysia; Mexico Leading Indicators

And a chart summary:

Source: Goldman, DB, BofA

via Zero Hedge http://ift.tt/1ki5BxZ Tyler Durden

Submitted by Pater Tenebrarum of Acting Man blog,

Reuters reports that UKIP's Nigel Farage has held talks with the leader of Italy's 5-Star movement, Beppe Grillo, to explore the idea of the two parties teaming up in the European parliament.

Farage made it clear that UKIP doesn't wish to be associated with European far-right parties, which as a rule have a protectionist and statist outlook.

“The leader of Britain's anti-European Union UK Independence Party (UKIP) said on Sunday he hoped to form an alliance with Italy's anti-establishment 5-Star Movement in the European Parliament.

 

UKIP's Nigel Farage met with 5-star leader Beppe Grillo earlier this week after both parties performed strongly in European Parliament elections earlier in May.

 

[…]

 

"I met Beppe Grillo last week … I am hoping we can do a deal with him and our group will sit bang in the middle politically of that parliament with a strong Euro-skeptic agenda," Farage told the BBC in an interview.

 

Forming a political group would give its members more power to support or block legislation, greater access to funding and the right to sit on committees. To form such a group in the 751-seat Strasbourg-based parliament, 25 members of parliament from seven states are needed.

 

In the new legislature, UKIP will have 24 seats and 5-Star will have 17 seats.

 

Farage repeated previous comments that he would not work with France's National Front leader Marine Le Pen, who this week struck a deal with four other Euro-skeptic parties.

 

"They come from a different political family," he said. "We want nothing to do with that party at all."

We're not surprised to hear that Farage is ruling out a coalition with Marine Le Pen's FN, but it it should be noted that the European and US mainstream media have displayed a tendency to lump all these parties together under the label 'far right'. As Justin Raimondo remarked to this:

“The "far right" meme is based on the results in France, where the National Front of Marine le Pen has for the first time won a plurality of seats in the European Parliament, and this news is usually coupled with panic-stricken reports of UKIP’s sweep across the Channel. Yet the two parties have nearly nothing in common except for opposition to the euro and the European project. The French Front is statist, protectionist , and carries red banners in the streets on May Day. UKIP is a quasi-free market split from the Tories, pro-free market and vaguely Little Englander. They aren’t opposed to immigration per se: they just want immigrants with assets, as opposed to the poorer variety.

 

The only thing these two movements have in common is opposition to the rule of Brussels, but that is quite enough for the Eurocrats and their journalistic camarilla to cast them in the role of volatile "extremists," dangerous "populists" out to tear apart the "social fabric" of Europe. One prominent Eurocrat, the former Prime Minister of Luxembourg, foresees a replay of 1914: "I am chilled by the realization of how similar the crisis of 2013 is to that of 100 years ago," intones Jean-Claude Juncker.

 

While there aren’t many Archdukes left to assassinate, whatever the similarities to 1914, the so-called right-wing populists have little to do with it. Indeed, it is the EU, in seeking to assert itself as an international power, that has ratcheted up the war danger by challenging Russia in Ukraine, allying with Washington to push NATO to the very gates of Moscow. In opposing the EU’s very existence, these parties – whatever their other characteristics – are taking on the forces that make war more likely.

Indeed, it is those striving for more centralization and a 'Federated Europe' whose  efforts are likely to end up increasing the probability of Europe getting tangled up in wars. With respect to the Ukraine and Russia, Martin Schulz, the president of the EU parliament since 2012 (soon likely to be replaced by JC 'I lie when things get serious' Juncker, a bureaucrat-politician who is a fixture in Brussels), recently said in a TV interview that the EU had nothing to offer in terms of military aggression that could be directed against Russia, so it had to make do with sanctions. To his credit, it didn't really sound as though he regretted this fact, although we cannot be 100% sure whether we interpreted his body-language and tone of voice correctly.

And yet, there are those who dream of a 'European Empire', a socialist super-state that sooner or later very likely will be deemed to need to throw around its  weight militarily as well. After all, it is all about being 'taken seriously on the world stage'. There are already a number of papers floating around which are inter alia bemoaning the 'EU's defense deficit' ('defense' meaning 'war-making capability').

The problem of the EU's political elites is that the average citizen couldn't care less about their 'weight on the world stage' and instead worries about more tangible and immediate problems that are far removed from the political elite's concerns. Hence the electoral success of parties like UKIP (and due to lack of alternatives, FN in France).

Anyway, the upshot is that if UKIP and 5-Star can form a coalition, their move will likely undercut David Cameron's reported attempts to cut off UKIP's EU funding by trying to poach  UKIP allies which hitherto were said to be 'unacceptable' to the Tories.

Lastly, the future entertainment value of the European parliament has surely been vastly increased by the election result, and that is just about the best one can hope for anyway.

 

Grillo and Farage have a laugh (presumably at Cameron)

via Zero Hedge http://ift.tt/1rC7fyo Tyler Durden

If April was supposed to be the best month of the year only to leave everyone scarred, bruised and battered, another confirmation that in the Fed’s New Normal all the folksy old aphorisms no longer work came with the last trading day in May when we learned that the old adage of “sell in May and go away” has not yet paid off with broad gains for most asset classes in the past month. Equities, Rates, Credit and EM were all generally stronger. Commodities delivered the key underperformance largely led by a sell-off in softs and precious metals.

And while the best performer in May was by far the Russian stock market (which may have crushed Jay Carney’s hopes for a macro hedge fund career in his post-White House life), the highlight has certainly been the global rally in DM rates. Indeed the global rally saw nearly all (except for Denmark, Iceland and Greece) the 10-year yields of developed government bond markets finish the month lower.

 

Other observations on the past month’s performance from Deutsche:

The strong performance in US rates has definitely provided a boost to EM and spread products across the world. This has trumped good or bad data/fundamentals as the driver of assets in the last few weeks. Having said that, a strong election outcome in India and some emergence of stability in the Russia/Ukraine stand-off were also helpful for EM sentiment. EM bonds were up nearly 2.5% in May bringing their YTD gains to 5%.

 

Away from EM fixed income, DM spread products also did well with positive total returns seen across IG and HY indices on both sides of the Atlantic. Given the performance in rates, IG has generally outperformed HY but much of this is due to the longer duration of IG indices. It’s worth noting that European and US IG/HY credit benchmarks have yet to have a negative month so far this year.

 

Turning to equities, the MSCI EM equity index added 3.5% in May. The ongoing market chatter around Chinese stimulus has also helped sentiment in the Hang Seng (+5.4%), which posted its best gains in 8 months. Staying in the region, Japan’s Nikkei (+2.3% in May) also enjoyed its best month this year although the index is still down 9.4% YTD. Away from Asian equities, the S&P 500, the DAX, and the Stoxx600 all recorded their best performance since February although overall European markets (especially the peripherals) are still outperforming their American counterparts so far this year.

 

Soft commodities were the worst performers in May largely driven by an improving supply outlook for grains. Wheat (-12%) posted its worst monthly drop since 2011 as better rainfall across the Great Plains in the US has apparently improved crop conditions. Away from softs, WTI Oil (+3.0%) and Copper (+3.1%) have been doing better though with the latter posting its best monthly performance this year on talks of Chinese stimulus. Let’s see if we see further momentum on the back of the better-than-expected Chinese manufacturing PMI print that was released over the weekend!

Looking at returns YTD:

YTD gains (including dividends) for the Stoxx600 and the S&P 500 are 7% and 5% respectively. These performances are being overshadowed by gains in Portugal, Ireland, Italy and Spain which are up by +13%, +9%, +16% and +11%, respectively this year.  Overall it has been a pretty good ride for Fixed Income so far this year, across both rates and credit, with total returns in DM credit ranging between as low as 3.3% (USD Fin Senior) to as high as +7.9% (Spanish bonds).

And visually:

via Zero Hedge http://ift.tt/1wTg86J Tyler Durden

• Unstoppable $100 Trillion Bond Market Renders Models Useless (BBG)
• Afghan president fumes at prisoner deal made behind his back (Reuters)
• Spain to Unveil $8.6 Billion Stimulus Package (AP)
• Obama to Urge European Allies to Stay Tough on Russia (WSJ)
• How fracking helps America beat German industry (Reuters)
• Frenchman ‘admits’ Brussels shooting in video (AFP)
• Heloc Payment Jump to Take Bite Out of Consumer Spending (WSJ)
• Obama Said to Propose Deep Cuts to Power-Plant Emissions (BBG)
• Lehman Lesson Lost as Bank Lobby Gains Clout (BBG)
• WSJ reports that WSJ reporting on Icahn insider trading probe may have killed it (WSJ)
• U.S. would face hurdles bringing case against Icahn, Mickelson (Reuters)
• For World Cup, Betting Flows Through Banker-Turned-Bookie (BBG)
• KKR liquidates former Goldman Sachs traders-run hedge fund (Reuters)
• McDonald’s murder in China sparks outrage (Reuters)
• Investors Rewarded for Trek Into Little Known Markets (WSJ)
• Thai oil tanker recovered, cargo taken by hijackers (Reuters)
• Google Invests in Satellites to Spread Internet Access (WSJ)
• U.K. Mortgage Approvals Drop as Housing Boom Cools (BBG)

 

Overnight Media Digest

WSJ

* The Environmental Protection Agency will propose a draft rule on Monday seeking a 30 percent reduction in carbon dioxide emissions by 2030 from existing power plants based on emission levels from 2005, according to two people who have been briefed on the rule. (http://ift.tt/1pLEkTS)

* News of the insider-trading probe of investor Carl Icahn, golfer Phil Mickelson and sports bettor William “Billy” Walters has derailed government efforts to secretly deploy wiretaps, which have been key components of many successful insider-trading cases. Criminal and civil investigators are examining whether Icahn tipped Walters about his plans relating to stocks of several companies, including Clorox Co, according to people briefed on the probe. (http://ift.tt/1pLEieP)

* Hillshire Brands Co Chief Executive Sean Connolly is weighing escalating bids from two of the world’s biggest meat companies Tyson Foods Inc and Pilgrim’s Pride Corp , a unit of Brazilian meat giant JBS SA. Tyson’s $6.1 billion offer – topping Pilgrim’s offer of $5.5 billion – values the Chicago-based company at 35 percent above its share price before the bids. (http://ift.tt/1wTbRQQ)

* On Friday Time Inc will become a stand-alone public company as its spinoff from Time Warner Inc is completed. It is going out on its own at a brutal time for print media, as advertisers have shifted spending to online media. Time Inc’s ad revenue fell 6 percent between 2011 and 2013, while circulation revenue fell 11 percent, bringing total revenue down 8.8 percent to $3.35 billion. (http://ift.tt/1pLEkTX)

* Google Inc plans to spend more than $1 billion on a fleet of satellites to extend Internet access to unwired regions of the globe, people familiar with the project said. Details remain in flux, but the project will start with 180 small, high-capacity satellites orbiting the earth at lower altitudes than traditional satellites. (http://ift.tt/1pLEieT)

* Apple will announce iBeacon plans, its latest product to carry the ‘i’ prefix, at the Worldwide Developers Conference in San Francisco. Apple’s iBeacon allows apps to locate a user within a few inches, so that a phone can direct a driver to the nearest open spot in a parking garage or the shortest hot-dog line in a crowded stadium. (http://ift.tt/1wTbPIT)

* Online music-streaming companies like Sweden’s Spotify AB and France’s Deezer Inc said in interviews they remain committed to investing for growth instead of pursuing immediate profits, an indication they have no plans to change course after Apple’s blockbuster acquisition of Beats. (http://ift.tt/1wTbPZ9)

* Forstmann Little & Co sold 24 Hour Fitness Worldwide Inc on Friday to a group of investors, the last step in the more than two-year process of winding down the pioneering buyout firm. A small group of Forstmann Little employees and a Washington, DC, lawyer have been selling the firm’s holdings since the November 2011 death of co-founder Theodore Forstmann. (http://ift.tt/1wTbRR0)

* The Federal Trade Commission on Friday granted antitrust clearance to the planned tie-up of suit sellers Men’s Wearhouse Inc and Jos. A. Bank Clothiers Inc, saying the deal is unlikely to harm consumers. (http://ift.tt/1pLEkU1)

* The U.S. has grown more attractive as a destination for foreign investment, while Russia and some other emerging markets have faded, according to a survey by A.T. Kearney, a Chicago-based management-consulting firm. (http://ift.tt/1pLEivf)

* The debate over who deserves to profit from work that originated at a law firm that collapsed comes to a head on Wednesday when New York’s highest court will hear arguments in cases stemming from the bankruptcies of Coudert Brothers LLP, which went under in 2005, and Thelen LLP, which closed in 2008. (http://ift.tt/1wTbPZf)

 

FT

GlaxoSmithKline Plc has agreed a deal worth more than $350 million with UK biotech company Adaptimmune to develop cancer drugs.

The owners of German firm Rocket Internet aim to list the venture capital company behind online brands such as retailer Zalando for a market valuation of up to 5 billion euros ($6.82 billion), and have hired banks Berenberg, Morgan Stanley and JPMorgan to review a potential listing on the Frankfurt exchange.

The world’s largest hotel operator Hilton Worldwide is aiming to launch upscale boutique hotels in the United States and Europe in an attempt to beat competition, and is expected to make an announcement on Monday.

An investment of 750 million pounds ($1.26 billion) in the upgrade of its Plant Oxford has led to the BMW Group’s Mini building unit to have most advanced car production techniques with robotic workers.

Lastminute.com’s Brent Hoberman is to return to the stock market after a nine-year absence with the flotation of Made.com. Hoberman, the chairman of the online furniture retailer, has hired a trio of banks to bring it to the public market.

 

NYT

* Voices inside and outside Scotland warn of the implications of independence, even as its supporters say Scotland would be better off by itself. (http://ift.tt/1pLEkU3)

* The Obama administration on Monday will announce one of the strongest actions ever taken by the United States government to fight climate change, a proposed Environmental Protection Agency regulation to cut carbon pollution from the nation’s power plants 30 percent from 2005 levels by 2030. The regulation takes aim at the largest source of carbon pollution in the United States, the nation’s more than 600 coal-fired power plants. (http://ift.tt/1pLEivj)

* The revelation that Carl Icahn has become a focus of an insider trading investigation into trades made by the golfer Phil Mickelson and a prominent Las Vegas gambler threatens to leave a mark on a record that Icahn has called “unblemished” and his rivals have called enviable. (http://ift.tt/1wTbPZh)

* As the first chief executive of a major publishing house to negotiate new terms with Amazon.com Inc since the Justice Department sued five publishers in 2012 for conspiring to raise e-book prices, Michael Pietsch, chief executive of the Hachette Book Group, finds himself fighting not just for the future of Hachette, but for that of every publisher that works with Amazon. (http://ift.tt/1pLEivl)

* “Fireman Sam,” a cartoon aimed at preschoolers, has long been a hit overseas. Now Mattel Inc and Amazon.com Inc are teaming up to sell the yellow-hatted hero to American children – a potentially controversial experiment that, if successful, could create a new model for marrying television shows with related merchandise. (http://ift.tt/1pLElah)

* Lewis Katz, an owner of The Philadelphia Inquirer, died along with six other people when a private jet erupted into a ball of fire as it took off outside Boston. (http://ift.tt/1wTbQfJ)

* Along with operating system updates for mobile and desktop machines, Apple Inc plans to introduce a new health-tracking app at its annual developers’ conference on Monday, according to a person briefed on the product. The app for mobile devices will track statistics for health or fitness, like a user’s footsteps, heart rate and sleep activity. The health app will most likely be able to connect with a smart watch that Apple is widely expected to release this year. (http://ift.tt/1pLEivn)

* After more than five months of negotiations, Etihad Airways of Abu Dhabi confirmed on Sunday that it was nearing an agreement that could lead to a sizable investment in Alitalia . In a joint statement, the airlines said Etihad would formally submit a letter to Alitalia’s board in the coming days detailing the conditions of a nonbinding offer for a stake of up to 49 percent of the money-losing Italian airline. (http://ift.tt/1pLEivp)

 

Canada

THE GLOBE AND MAIL

* Quebec Finance Minister Carlos Leitao will unveil on Wednesday what he calls a “transition budget” that will provide a foretaste of the nasty medicine the province needs to swallow to balance its books by 2015-16. (http://ift.tt/1pLEiLD)

* Thousands of commuters in the Greater Toronto Area can breathe a huge sigh of relief. A strike that threatened to shut down GO Transit bus service has been averted after a tentative contract agreement was reached between Metrolinx and Amalgamated Transit Union Local 1587. (http://ift.tt/1wTbSnT)

Reports in the business section:

* Pay for Canada’s top executives is on the rise as companies put years of economic downturn firmly behind them. Canadian chief executives saw their total compensation climb by 11 percent in 2013, which marks the fourth straight year of pay gains after a decrease and plateau in 2008 and 2009. (http://ift.tt/1pLElal)

NATIONAL POST

* The sparring between Ontario’s three main political camps continued on Sunday, with the Liberals accusing Tim Hudak of adopting the policies of “right-wing extremists” and the Progressive Conservatives demanding Kathleen Wynne “come clean” on the MaRS controversy. The Progressive Conservative party urged Liberal leader Wynne to release all the documents relating to the apparent bailout of the MaRS innovation and research complex in Toronto. (http://ift.tt/1wTbSo0)

* One week before the Boko Haram terrorist kidnapping in which nearly 300 students were taken from a girls school in northern Nigeria, a similar incident across the border in Cameroon saw an elderly Canadian missionary nun taken hostage with two Italian priests. News broke on Sunday that Sister Gilberte Bussiere, 74, has been freed after nearly two month’s captivity along with Father Gianantonio Allegri and Father Giampaolo Marta, both of Vicenza in the northeast of Italy. (http://ift.tt/1wTbSo2)

FINANCIAL POST

* Whether it’s an iPhone or an Android, smartphones are ubiquitous these days and basic cellphones with just texting and calling capabilities are a dying breed. However, there is still demand for basic cell phones with simple voice calls in emerging markets and among frugal consumers in developed markets such as Canada that have little or no need for data on their cellphones. (http://ift.tt/1pLElap)

* The mood of small business operators in Canada has taken a decidedly positive turn. In fact, their optimism is at the highest point in more than two years – and just shy of levels consistent with steady economic growth, according to the most recent survey. (http://ift.tt/1wTbQwb)

 

Britain

The Telegraph

SEARCH FOR SHALE GAS HEADS EAST AS IGAS PLANS FRACKING IN EAST MIDLANDS

(http://ift.tt/1kgPl0a)

Andrew Austin, IGas Energy Plc chief executive, told the Telegraph it was preparing to submit planning applications to drill and frack to test the flow of gas at two new locations, one either side of the Pennines.

LDC ENTERS INTO EXCLUSIVE TALKS FOR MINI AUTODATA

(http://ift.tt/1iJWa4W)

The private equity arm of Lloyds Banking Group has entered into exclusive talks to acquire car data firm Clifford Thames in a deal that could value the business at up to 50 million pounds.

The Guardian

UK EMPLOYERS EXPECT TO HIRE ’18 PCT MORE GRADUATES IN 2014′

(http://ift.tt/1kgPil7)

Employers expect to hire 18 percent more graduates in 2014, up from the modest improvement of 4.3 percent in 2013 – with the finance sector planning to be the most aggressive recruiter as it increases intake by 42 percent.

ENERGY UK: TIME TO RETHINK ‘GREEN’ POWER POLICIES IN BRUSSELS

(http://ift.tt/1kgPl0e)

Energy UK will on Monday use electoral successes made by Eurosceptics to call for a rethink on “green” power policies in Brussels. The lobby group headed by former Conservative MP Angela Knight says it is time to move away from “an emotion driven and expensive agenda.”

The Times

SHIRE SECURES $5 BLN FUNDING FOR US BID

(http://ift.tt/1kgPl0g)

Shire has lined up a $5 billion credit facility from banks led by Citigroup to finance a takeover offer for NPS Pharmaceuticals, an American developer of a new drug for sufferers of a debilitating bowel condition.

BAE SAYS SCOTTISH INDEPENDENCE WILL “DAMAGE STABILITY”

(http://ift.tt/1iJWa54)

The boss of Britain’s biggest defence group BAE Systems Plc has become the latest business figure to speak out against Scottish independence after declaring that a “yes” vote would damage the “certainty and stability” necessary for investment.

Sky News

WORKPLACE PENSIONS SHAKE-UP ‘COULD BOOST FUNDS’

(http://ift.tt/1kgPlgy)

Radical changes to workplace pensions are set to be unveiled in the Queen’s Speech this week, with supporters claiming the shake-up could boost retirement incomes by thousands of pounds.

GOVT ACCUSED OF ‘HYPING UP’ FRACKING HOPES

(http://ift.tt/1kgPiBr)

Shadow energy and climate change secretary Caroline Flint told Sky’s Murnaghan programme gas was an “important part of our energy mix” but “more stringent benchmark testing” a year before drilling starts was needed.

 

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS

Domestic economic reports scheduled today include:
ISM manufacturing index for May at 10:00–consensus 55.5
Construction spending for April at 10:00–consensus up 0.7% for the month

ANALYST RESEARCH

Upgrades

Advantage Oil & Gas  (AAV) upgraded to Outperform from Sector Perform at RBC Capital
Alcoa (AA) upgraded to Neutral from Underperform at BofA/Merrill
Century Aluminum (CENX) upgraded to Neutral from Underperform at BofA/Merrill
Consolidated Water (CWCO) upgraded to Buy from Hold at Brean Capital
Diamondback Energy (FANG) upgraded to Buy from Neutral at SunTrust
Magnum Hunter (MHR) upgraded to Buy from Hold at Stifel
Microsemi (MSCC) upgraded to Buy from Neutral at Goldman
NorthWestern (NWE) upgraded to Buy from Hold at KeyBanc
Synovus (SNV) upgraded to Outperform from Market Perform at Raymond James
TripAdvisor (TRIP) upgraded to Outperform from Sector Perform at Pacific Crest

Downgrades

BNP Paribas (BNPQY) downgraded to Neutral from Conviction Buy at Goldman
Big Lots (BIG) downgraded to Equalweight from Overweight at Barclays
Express Scripts (ESRX) downgraded to Market Perform from Outperform at Cowen
Infineon (IFNNY) downgraded to Neutral from Buy at Citigroup
Microchip Technology (MCHP) downgraded to Neutral from Buy at Goldman
Quiksilver (ZQK) downgraded to Neutral from Buy at B. Riley
STMicroelectronics (STM) downgraded to Sell from Neutral at Citigroup
Sprague Resources (SRLP) downgraded to Neutral from Overweight at JPMorgan
Theravance (THRX) downgraded to Neutral from Outperform at RW Baird
Universal Electronics (UEIC) downgraded to Neutral from Buy at B. Riley
Volvo (VOLVY) downgraded to Sell from Neutral at Goldman
Xilinx (XLNX) downgraded to Neutral from Buy at Goldman
Zillow (Z) downgraded to Sector Perform from Outperform at Pacific Crest
Zillow (Z) downgraded to Sector Perform from Outperform at RBC Capital

Initiations

Akorn (AKRX) initiated with a Neutral at Goldman
American Realty (ARCP) initiated with a Buy at BofA/Merrill
Ashford Hospitality Prime (AHP) initiated with a Buy at BofA/Merrill
Brookdale Senior Living (BKD) initiated with a Buy at Jefferies
Dorian LPG (LPG) initiated with a Buy at UBS
GasLog Partners (GLOP) initiated with a Buy at Citigroup
GasLog Partners (GLOP) initiated with a Buy at UBS
GasLog (GLOG) reinstated with a Buy at Citigroup
K2M Group (KTWO) initiated with an Outperform at Wells Fargo
K2M Group (KTWO) initiated with an Overweight at Barclays
K2M Group (KTWO) initiated with an Overweight at Piper Jaffray
NOW Inc. (DNOW) initiated with a Neutral at RW Baird
Orbitz (OWW) initiated with a Hold at Deutsche Bank
Pacira Pharmaceuticals (PCRX) initiated with a Buy at Goldman
Physicians Realty Trust (DOC) initiated with a Buy at BofA/Merrill
SCYNEXIS (SCYX) initiated with an Outperform at JMP Securities
Starz (STRZA) initiated with a Neutral at Goldman
Theravance Biopharma (TBPH) initiated with a Neutral at RW Baird

COMPANY NEWS

Marathon Oil (MRO) said it will sell its Norway business to Det norske oljeselskap ASA for $2.7B
Ventas (VTR) to acquire American Realty Capital (HCT) for $2.6B in stock and cash
Biota Pharmaceuticals (BOTA) said it will reduce workforce by two-thirds in restructuring plan
Roche (RHHBY) acquires Genia Technologies for $125M in cash
Novartis (NVS) appointed Merck’s (MRK) Bruno Strigini as president of Novartis oncology

EARNINGS

MasTec (MTZ) lowers Q2 EPS view to 40c from prior view 53c, consensus 52c
Bridgepoint (BPI) sees Q1 EPS (11c)-(9c) and Q1 revenue $155.0M-$159.0M. On May 12, the company previously reported Q1 EPS of (10c) and Q1 revenue of $160.5M
Bridgepoint (BPI) restates FY13 earnings results
Actuant (ATU) will not provide guidance with Q3 earnings report

NEWSPAPERS/WEBSITES

Dai-ichi Life said to be in talks to buy Protective Life (PL) for $4.87B, WSJ reports
Shire (SHPG) secures $5B credit facility for NPS Pharma (NPSP) bid, Times of London says
Regulators probe trading of Carl Icahn, Billy Walters, Phil Mickelson, WSJ says
Lawyers say U.S. up against obstacles bringing case against Icahn (IEP), Reuters reports (CLX, DF)
Icahn calls insider trading report ‘irresponsible,’ Bloomberg says
ARM Holdings (ARMH) looking to get into wearables market, WSJ reports
Boeing (BA) sees 777 sales to remain strong, WSJ reports
Intel (INTC) TV creator, Erik Huggers, departs Verizon (VZ), Reuters reports

BARRON’S

Cliffs Natural’s (CLF) fight with Casablanca won’t help stock rebound, Barron’s says
Dick’s Sporting (DKS) recent insider buys appear bullish, Barron’s reports
Gannett (GCI) could be worth $34, Barron’s says
AmTrust Financial (AFSI) shares could be vulnerable, Barron’s says
RLJ Lodging Trust (RLJ), Alexandria Real Estate Equities (ARE), American Tower (AMT), and EPR Properties (EPR) have growth potential, Barron’s reports
Apple (AAPL), Oracle’s (ORCL) free cash flow could be driving shares higher, Barron’s says

SYNDICATE

Neonode (NEON) files to sell 5M shares of common stock
Tiptree Financial (TIPT) files to sell 31.5M shares of Class A common stock for holders

via Zero Hedge http://ift.tt/RXaIXM Tyler Durden