Is This The Top? HFT Firm Files For IPO

Having sold his 7-bedroom NY mansion, the CEO of Virtu Financial (the high-frequency-trading firm that accounts for 5% of US equity trading volume) appears to believe investors are ripe for him to IPO his firm. As The FT reports, New York-based Virtu is aiming to raise between $250-$350m from a listing that would make it the first electronic trading business that trades with its own funds to launch an IPO. The question, of course, is, will Virtu be the top-ticking, greater-fool-finding IPO of this bubble that Blackstone was for the last one?

 

Via The FT,

Virtu, a global proprietary electronic trading company that employs high frequency strategies, is aiming to raise around $300m from a listing that would value it at around $3bn, as it too seeks a market debut around that time, some of these people and others added.

 

…filed confidentially under a provision of a recent US securities reform act which allows companies with revenues of less than $1bn to keep the process confidential until nearer the time of an IPO.

 

 

New York-based Virtu is aiming to raise between $250-$350m from a listing that would make it the first electronic trading business that trades with its own funds to launch an IPO.

 

Goldman Sachs is leading the listing along with JPMorgan Chase and Sandler O’Neill. The banks and Virtu, which is part-owned by Silver Lake Partners, declined to comment.

 

Virtu’s prospectus will provide a rare glimpse into the world of a secretive high-speed trading firm. The company, which employs about 150 people, had earnings of about $275m before interest, taxes, depreciation and amortisation last year, up from about $240m a year before, one person added.

 

Its listing will be a milestone for Vinny Viola, an Army sergeant and former chairman of the New York Mercantile Exchange, who founded the business in 2002. Virtu’s board includes General John Abizaid, the former commander of the US Central Command, this person added.

 

Mr Viola, presently chief executive, will assume the role of executive chairman upon the listing and Douglas Cifu will take on the chief executive role, one person said. Chris Concannon, a former Nasdaq executive who joined the company in 2009, will become chief operating officer.


    



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

HAA HAA: Will Another Creditanstalt Be Revealed Once The Hypo Alpe Aldria “Black Box” Is Opened?

Recall that the bank which precipitated the first Great Depression was Austria’s Creditanstalt, which declared bankruptcy on May 11, 1931 and which resulted in a global financial crisis, after its failure waterfalled into the chain-reaction of bank failures that marked the first systemic financial collapse. As part of CA’s rescue, Chancellor Otto Ender distributed the share of bailout costs between the Republic, the National Bank of Austria and the Rothschild family (and as a bit of historic trivia, following the Austrian Anschluss to Nazi Germany in 1938, Creditanstalt-Bankverein was targeted for a variety of reasons, leading to the arrest of Louis Nathaniel Rothschild and his imprisonment for the losses suffered by the Austrian state when the bank collapsed. Aggrieved, he emigrated to the US in 1939 after more than one year in custody).

A little over 80 years later, while the world is knee deep in explaining how snow during the 4th warmest January on record is the culprit for an abrupt and dramatic slowdown in world growth, and is following the geopolitical developments out of Crimea with great attention, the real action may once again be taking place in the small, quaint and quiet central European country, where yet another bank may be sowing the seeds of further financial mayhem.

Presenting Hypo Alpe Aldria (or “HAA” although certainly not funny as in funny HAA HAA: more shortly), a bank which in reality has been in the news for years following its nationalization in 2009 by the Austrian government to prevent a bank collapse. In fact, just last week, Austrian Chancellor Werner Faymann said the government is right to avert the collapse of Hypo Alpe-Adria-Bank International AG, as he cited the precedent of Creditanstalt, whose crash helped trigger the 1930s depression. “The crash of Creditanstalt in 1931 caused economic meltdown,” Faymann told parliament’s lower house in Vienna today. “There was a consensus in 2009 to act where necessary, to avoid the mistakes of the 1930s, to avoid a collapse by nationalizing and by installing protection measures at the European level.”

As a follow up, as Bloomberg also reports, the fate of HAA – whatever it ends up being – may have significant political consequences for the Austrian government. Again Bloomberg reports that “support for Austria’s ruling coalition is slipping five months after it won a narrow majority as inaction over the nationalized Hypo Alpe-Adria Bank International AG lifts backing for protest parties. Latest polls suggest voters are losing trust in Social Democratic Chancellor Werner Faymann and People’s Party Vice Chancellor Michael Spindelegger and warming to the euro-skeptic Freedom Party before May’s European Parliament elections. The Green and Neos parties also stand to gain, said Hubert Sickinger, a political scientist at the University of Vienna.”

“The ruling parties have a problem,” Sickinger said in an interview. “They postponed the Hypo Alpe ‘dead bank’ problem hoping that the economy would change but they’ve known since early 2013 that this wouldn’t help.”

One party that has been quite vocal on the issue of HAA is the Austrian Freedom Party nationalists, who seek to restrict immigration, and which has the most to gain from detouring the status quo as they would finish first in the EU parliamentary election, according to a Feb. 14 Gallup poll commissioned by the Oesterreich newspaper. The Freedom Party under deceased leader Joerg Haider helped build Hypo Alpe from a regional lender into one of the biggest banks in the Balkans.

“The European elections will be payback day” over the government’s handling of Hypo Alpe, said Franz Schellhorn, director of Agenda Austria, a Vienna-based research group.

“Anger is growing,” Schellhorn said in an interview today. “This black box has to be opened to see what is going on inside.”

It is the “opening of this black box” that suddenly has the entire investment community on edge, even if most of them hope the story simply goes away as it has for the past five years. Only this time it may be impossible to once again kick the can, er, box.

And while the legacy story of the post-bail out HAA may be known, it is the recent developments that are largely unknown and where the risks lie. This can be seen in the recent dramatic drop in HAA bond prices.

So why should people care about HAA? Bank of America explains:

The real surprise of the Hypo Alpe Adria (HAA) situation is not that bondholders may lose money, but the sight of the third richest country in Europe by per capita income apparently looking for ways out of paying what are clearly guaranteed debts of a 100% nationalized bank, for HAA debt is guaranteed by the Austrian State of Carinthia under a deficiency guarantee. The Austrian Finance Minister may be targeting a contribution from bondholders, according to reports on Bloomberg on Friday, We would consider it an astonishing turn of events if this actually ever came to pass, with wide-ranging negative implications for investors in not just Austria but potentially Europe as a whole.

What are the other implications from a potential HAA fallout? Here are the cliff notes:

  • Direct impacts: other Austrian banks?

Erste Bank and RBI will likely trade as proxies in any negative newsflow which could pressure their spreads. They aren’t really affected, though, in our view.

  • Indirect: negative for marginal banks

The Carinthia guarantee is a throwback to a very different banking world – when banks enjoyed implicit and explicit institutional support. Those days are over. We underline
that we have moved to a bail-in regime where investors will contribute to the costs of bank clean-up. This has implications for other very marginal banks e.g. the Cooperative Bank in the UK which we think is struggling.

  • Why the fuss? Who pays for HAA?

The European Commission in its decision on State Aid (dated 3rd Sept 2013) puts the capital need at €5.4bn in a stressed scenario. Liquidity needs are put at up to €3.3bn, meaning that the total outlay could be as high as an extra €8.7bn, in addition to the billions that have already been committed by the current and former shareholders. HAA’s total assets as of June 2013 were ‘only’ €31.3bn, recall.

  • What kind of outcomes for HAA?

We struggle to see how those positing bondholder losses get around the guarantee from Carinthia and all that implies. However, with lower cash prices in many of the bonds, perhaps the way forward opens up for e.g. substitution (of Austria for Carinthia) at a discount. There may also be the time value of return of principal to factor in.

  • Negative outcomes: maybe tough to do

If the Austrian Government decides to be tough, then the negative scenarios for HAA bondholders are potentially many. The Government may be somewhat hampered however by the fact that HAA bonds under the 2006 Prospectus are issued under German Law.

* * *

For the extended, and must read, notes on what Hypo may lead to, here is the full note from Bank of America’s Richard Thomas:

Funny HAA HAA or funny peculiar? Implications of Hypo Alpe Adria

HAA – the implications

The emerging crisis re: how to resolve Austria’s Hypo Alpe Adria (HAA) looks like it’s already one destined for the textbooks.

It has been rumbling around in our ‘bank peripheral vision’ for years as a problem child but now seems to be coming to a head because of what appears to be increased political pressure for a solution that potentially involves the imposition of senior bondholder losses in the mix. As such, we need to look at it to see what read-across, if any, there is to other European banks, as it seems to represent a hardening of attitudes to bank resolution amongst one of Europe’s richest countries.

We do not express an opinion or investment recommendation on the securities of HAA itself. Using conventional bank analysis, we believe that HAA is potentially uninvestable not only because of its evident non-viability and the lack of appetite to save it but also because of the allegations of past misconduct, as widely reported in the press, and what appears to be ongoing incompetence e.g. leasing invoicing ‘irregularities’ in Italy provided against as recently as in 1H13 numbers. The outcome for bondholders will ultimately be based on Austria’s view of its obligations and how it deals with the Carinthia guarantee, in our view. We expect that prices will therefore trade according to the last comment from someone important – highly unpredictable. For example, they were down on Friday following comments from the Austrian FinMin, but up this morning on comments over the weekend from the Head of the Austrian Central Bank. A final decision on what happens could be many months out.

For us, the shock of the current situation is not so much about bail-in being applied in the case of a failed bank – like most credit investors, we are used to this by now. The real surprise of the situation is the sight of the third richest country in Europe by per capita income apparently trying to manoeuvre out of paying what are clearly guaranteed debts (HAA debt is guaranteed by the State of Carinthia). We would consider it an astonishing turn of events if this actually ever came to pass, with wide ranging negative implications for investors in not just Austria but Europe as a whole.

Direct implications?

The read across from HAA to other banks is weak, in our view. However, there are a few implications to highlight which may impact spreads.

  • The most directly impacted bank would seem to be Bayerische Landesbank (BYLAN), former owner of the bank and where there is still some outstanding exposure. BofAML analyst Jeroen Julius talked about this in his note on BYLAN last week here. We remain Underweight-70% the BYLAN 5.75% T2 bonds. There is still an outstanding line of €2.3bn from BYLAN to HAA of which we understand €1.8bn was due at end 2013 – by March (if not sooner) then this will need to move to an impaired classification. HAA is saying that these monies are an equity substitute and are trying to claw back €2.3bn already repaid. Our view is that BYLAN may sacrifice some of the outstanding amount in  any settlement but seem unlikely to have to pay back the repaid amount. In the meantime, it seems that they do have a say in some of the levers which Austria may want to use in resolving HAA, so their negotiating stance looks solid.
  • Other widely traded banks where spreads could come under pressure are Erste Bank and RBI. We will likely see these banks trade as proxies in any negative newsflow which could pressure their spreads – their illiquid CDS is probably already trading some 10-15bps wider in senior and ~13bps wider in sub CDS. These banks should be much more sensitive to negative news from Central and Eastern Europe rather than Austria though, in our view, given their focus on emerging economies.
  • RBI’s exposure to Austria reflects its domicile and the corporate ties between Austrian companies and the EE corporates where most of RBI’s operations are placed. It does not have direct exposure to the Austrian complex in the way that e.g. BAWAG or Erste Bank have. The RBIAV 6% is probably down a point from its highs in the last week or so. We see the impact on RBI as quite tangential: if Austria takes a tough stance with bondholders, it’s more negative for sentiment on the banks, given that it implies a reduced sovereign exposure – so hardly negative for the sovereign from e.g. higher debt levels, albeit lower contingent liabilities.
  • About half of Erste Bank’s credit risk exposure is to Austria. It is therefore more of an ‘Austrian’ bank than RBI but that’s not really the problem here, in our view.
  • We are still very comfortable with RBI at this point, especially given the recent capital increase. However, we recommend reducing risk by switching into lower cash priced bonds versus higher cash price bonds. That means out of e.g. the 6.625% bond with a cash price of about €113 into lower cash priced bonds like the 6% (€106.5) or the 5.163%, though this is a much more illiquid security. We downgrade the 6.625% bonds to Underweight-30%.

Indirect implications?

The wider implications of what happens in the HAA case include:

  • If we do move to some kind of forced loss imposition from Austria on these bonds, then it probably isn’t a good moment for bank risk (or indeed European risk). However, as we explain, in this case loss imposition is rather tricky to do, given the existence of the guarantees from Carinthia.
  • Whatever happens, we see the HAA situation as reflecting a growing impatience with marginal and near-failing banks and that a hard line is likely to be followed in resolving them. It underlines that we have moved to a bail-in regime where investors will contribute to the costs of bank clean-up. This has implications for other very marginal banks e.g. the Cooperative Bank in the UK which we think is struggling. Underweight-70% the 11% T2 bonds of the Coop Bank at £123.
  • The Carinthia guarantee is a throwback to a very different banking world – when banks enjoyed implicit and explicit institutional support. Those days are over. Such support often allowed excessive expansion on the back of cheap funding – we can point to the continued need for adjustment in the Landesbank sector for evidence of that.
  • One final point: in our view there would be a negative read-across to the German Landesbanken more generally if a way was found around the deficiency guarantee in this case. The Landesbanken heavily rely on State guarantees. For example, HSH Nordbank has a €10bn guarantee (that helps its capital position) form Hamburg and Schleswig- Holstein.

Funny HAA HAA or funny peculiar?

A special case?

We think there is a good argument for saying that HAA is a special case amongst European banks. One can read its downfall and subsequent full nationalization as a familiar juxtaposition of overexpansion (in the former Yugoslavia) without sufficient risk controls being in place as a result of too cheap funding, owing to its funding guarantee from the Austrian State of Carinthia (currently rated A2 by Moody’s). Yet the narrative is worsened by allegations of serious past misconduct involving money laundering, fraud and possibly murder. See for example The Economist, Sept 9th 2010 or the New York Times, October 20th 2010.

Whilst mismanagement may well have been a feature of some European banks before the crisis; we would hesitate to attribute this level of alleged misconduct, however, to even many of the most stressed European banks. The nature of the allegations, in our view, serves to underline Austrian public antipathy for taxpayers having to pay for the continuing losses at the bank. It also differentiates it sharply from other European, and of course Austrian, banks. HAA’s situation and alleged misconduct is simply too severe to have systemic implications for other Austrian banks, in our view.

Could there be a haircut? Wait!

Bloomberg reports that two thirds of the Austrian public is against the use of further public monies being used to prop up the bank. With such a powerful consensus against such a move and elections next year, it’s not surprising that recently the rhetoric has turned firmly towards finding solutions for HAA that involve imposing losses somewhere – anywhere – other than at the door of the Austrian taxpayer. Hence, the comments from the Finance Minister Spindelegger on Feb 21 that Austria was looking at ways to get bondholders to contribute.

So far, so straightforward: the only problem is that the bulk of HAA senior bonds enjoy a deficiency guarantee from the State of Carinthia. This complicates the burden sharing. We note, by the way, that the EC ruling on State Aid for HAA made no mention of senior bondholder losses at all. Is it really possible to get around the deficiency guarantee and impose losses?

Our understanding is that the deficiency guarantee is not quite like other guarantees. It’s this ‘gap’ that allowed Moody’s to downgrade HAA to Baa2 from A1 on Feb 14. It means that a creditor must have attempted in vain to satisfy his or her claims against (in this case) HAA first before he can use the guarantee, though not if bankruptcy proceedings were already started. Non-payment alone may not be sufficient to invoke the guarantee, absent due process. Even so, it still looks to us that it’s just a matter of time before creditors could ask Carinthia to satisfy their claims. It seems doubtful that the State could afford to perform on the guarantee however with the €12.3bn or more of bonds being many multiples of Carinthia’s income, according to Moody’s. It seems hardly credible that we could be looking at bankruptcy of a Federal State of one of the richest countries in Europe.

Hence, the dilemma. This really would be a new departure for a European country – we’ve had bondholder haircuts before, but not on instruments guaranteed by a governmental entity like Carinthia.

What’s the size of the hole at HAA?

The European Commission in its decision on State Aid (dated 3rd Sept 2013) puts the capital need at €5.4bn in its stressed, or worst case, scenario. Similarly, the liquidity needs are put at €3.3bn in the stressed scenario, assuming that the above capital is provided in cash, meaning that the total outlay could be as high as €8.7bn, in addition to the billions that have already been committed by the current and former shareholders. HAA’s total assets as of June 2013 were ‘only’ €31.3bn, remember, and of this, €3.5bn was already earmarked as for disposal – giving a pro forma number of €27.8bn. To put this in further context, existing capital resources at HAA (equity plus sub debt) are €3bn, and provisions existing already are €3.5bn. Loans net of provisions are ~€17bn.

The now former Chairman of the Bank, Mr. Liebscher, has previously commented that HAA could require up to €4bn of further capital (‘only €400mn a year over 10 years’). Capital needs could vary considerably if assets were transferred out of the regulatory capital environment e.g. to an asset management company, since these require much less capital. We note too that Weiner has reported that the loss for the year at HAA may have grown to €1.8bn (from the €0.8bn at half year 2013) – we think it’s likely that is already reflected in the EC’s numbers though we’re not completely sure.

The €5.4bn of capital needs calculated by the EC could be higher or lower therefore but let’s use it as a basis for thinking about outcomes. Are there any offsets? Certainly,
HAA believes so. It is claiming that €4.6bn of funds extended to the bank in 2008 by BayernLB is an equity substitution under Austrian Law. €2.3bn of this is still outstanding (it’s not being serviced by HAA) but HAA has applied to the Munich Regional Court for a return of amounts that they’ve already paid back. Our core case is that BayernLB will lose some of this money (if only to settle the case) but we have no real idea how much they and HAA would settle at, of course, or if they will settle at all.

How (much) could bondholders pay?

Is it conceivable that the senior bondholders could be expected to contribute a sizeable chunk of the €5.4bn? As of end-June 2013, issued bonds at HAA totaled €11.1bn (we exclude Pfandbriefe); we don’t have data for any redemptions in 2H13. We do however know that there is a very substantial redemption of senior debt on March 17th of €750m (the HAA 3.75% bond). Again, the interim financials showed a cash balance of €2.6bn at the bank which on its own should comfortably cover the repayment. We are more skeptical about HAA’s liquidity, given the continued deterioration of its financial position implied by the reported further €1bn loss in 2H13. Perhaps it is this that is focusing the attention of Austrian policymakers on bondholders.

Repaying this bond would be a substantial cash outflow from the bank and bondholders would be getting par – these bonds are currently quoted at a mid-cash price of ~€96 but the bid/offer is something like 5 points, underlining the huge uncertainty. But it would also probably be taken as a pointer towards future treatment of bonds and so, if repaid, would likely positively impact prices.

The €5.4bn additional capital need would imply a forced senior bondholder haircut of anything from 20% upwards in our view depending on what is considered the pool of bailin-able liabilities, though admittedly we find it quite hard to believe this will be the actual outcome at this point. This number could be kept down not least by any  settlement with BayernLB – and we can’t really imagine that Austria will make a zero contribution here. Even the €5.4bn total capital needs number calculated by the EC is ‘only’ about 2% of Austrian GDP.

We also struggle to see how those positing bondholder losses get around the guarantee from Carinthia and all that implies. It’s this, we think, that is the really interesting part for European bank bondholders. We have seen headlines suggesting that the Republic of Austria would substitute itself as guarantor for the bonds, subject to bondholders agreeing to a substantial haircut. When the bonds were at par, that looked really unlikely, but with e.g. the 2016 and 2017 bonds having traded down so dramatically in the last few days (currently quoted with a cash price at around €85-86), perhaps the conditions are beginning to evolve for this type of liability management.

Ultimately, we think it’s unlikely that Carinthia could pay back bondholders and remain solvent itself – as Moody’s highlights in its downgrade of the State on Feb 14 2014, the debt outstanding is some six times Carinthia’s 2013 budgeted operating revenue. Recall that HAA is 100% owned by the Republic of Austria – it seems unlikely that the shareholder would enforce the insolvency of a regional State without acting itself.

We also wonder if there is some leeway in terms of the timing difference implied by the final payment under the deficiency guarantee – how prompt might this be? Months? Years? Longer? If it could be demonstrated that bondholders would have to wait many years before getting any of their principal back, then perhaps there is the basis for an offer that gives investors liquidity today, albeit at a discounted price.

What could induce bondholders to agree to any changes?

We suspect that this is currently under consideration – there likely is little limit to the scenarios that could be conceived, but it all depends on the view the Republic takes of itself in the markets and its concerns about any likely fallout from its actions. Freezing the liabilities of the bank and the guarantee? Rescission of the guarantee? Anything is possible but perhaps some of these worst scenarios are not the most probable. However, what is clear is that the outcome for bondholders, as we have seen before in these haircut scenarios, is highly unpredictable and politicized.

In spite of the Austrian Finance Minister’s comments to the contrary, we are of the view that most HAA bonds are still with the original, investment grade, investor base. We believe that the rotation into ‘trader’ or ‘hot money’ hands is probably only still at the beginning – only recently have we heard that blocks of bonds have been coming out, rather than the trading of very small amounts. This could change rapidly in the coming weeks if Austria decides to step up the bondholder loss rhetoric of course but at this point, it would be ordinary money managers, we think, who would be absorbing most of the losses, not hot money or speculators.

As an added twist, we note that HAA bonds issued under the August 2006 Prospectus are under German Law (rather than Austrian). Again, this points in the direction of either repayment of the bonds under the guarantee, or a negotiated settlement with bondholders, rather than the imposition of an arrangement by the Austrian Government, since legally they may not have the flexibility to do much else.

* * *

In conclusion all we have to add is that it would indeed be supremely ironic if the “strong” foreign law bond indenture would be tested, and breached, not by Greek bonds, as so many expected in late 2011 and early 2012, but by one of the last contries in Europe which is still AAA-rated. We would find it less ironic if the next leg of the global financial crisis was once again unleashed by an Austrian bank: after all history does rhyme…


    



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

“The Stock Market Is A Mood Ring For Faith In The Fed”

Submitted by Monty Pelerin’s World blog,

Debt is the great palliative that has enabled the US and other major economies to escape reality, at least for a time. Ayn Rand described such behavior:

You can avoid reality, but you cannot avoid the consequences of avoiding reality.

It is possible to steal from tomorrow to improve today but only at the cost of having less of a future. That is what both nations and citizens have been doing. The ability to continue doing so has about run its course. The damage done to the future is real and will result in substantially lower living standards for those who foolishly believed that spending beyond one’s income was a miracle created by John Maynard Keynes.

The ability to continue the debt charade is nearing its end. As it slows down and reverses, the poverty and hardship that is covered up will surface.

 

When that occurs, another Great Depression, likely to be known as The Great Depression or The Greater Depression in the history books yet to be written will emerge.

For those wanting to learn more about the emergence of debt as an economic palliative and its implications for markets, a refreshing interview with Fred Sheehan. Here is one of Mr. Sheehan’s observations:

All asset markets are disengaged from their foundations. They have been elevated by governments and their central banks. Central banks have done so by prodding savers into stocks and bonds. They have set artificially low borrowing rates. These artificially low rates are the source of so many perversities that are not immediately evident but have fractured the structure of companies, industries and the stock market. With Treasury rates so low, the issuance of investment grade, junk, covenant lite, PIKs and almost every other category of sloppy finance that met its maker in 2007 set new world records in 2013.

 

The present and future consequences should be obvious.

Mr. Sheehan captures in one sentence my opinion of today’s markets:

The stock market is a mood ring for faith in the Fed.

Read this article if you want to learn some history and honest economics and understand the risks inherent in today’s financial asset markets.


    



via Zero Hedge http://ift.tt/1ebIYY6 Tyler Durden

Russia Fires First Retaliatory Salvo, May Limit Ukraine Food Imports

Russia represents over 25% of Ukraine's exports and is the divided nation's largest trade partner. As Ukraine remains deep in its self-described "pre-default" state, the economy languishes vainly in the hopes of a trade deal with 'someone' and a bailout from 'someone' else. However, the IMF's first move to bail the nation out has now been met by a subtle punch to the country's kidneys as Interfax reports that Russia threatens to limit food imports on the basis of "veterinary and phytosanitary risks."

 

Via Interfax,

Russia and the Customs Union could temporarily limit increased-risk food imports from Ukraine, given fears of loose safety control, said Sergei Dankvert, head of the Russian veterinary and phytosanitary oversight service Rosselkhoznadzor.

 

"My Belarusian colleague and I are extremely concerned about the situation in Ukraine. We do not rule out that curbs could be introduced on the imports of products of high veterinary and phytosanitary risks from Ukraine," Dankvert told Interfax after talks with his Belarusian counterpart Yury Pivovarchik in Bryansk, and telephone talks with Ukraine's Deputy Agrarian Policy Minister Ivan Bisyuk.

 

Restrictions could also be imposed on transit shipments, he said.

 

The conditions in which Ukrainian experts are working arouse queries and doubts that their work is being done properly, especially amid reports of African swine fever infections, he said.

 

Cooperation between veterinary and phytosanitary experts is largely based on trust, Dankvert said. If the conditions in which the Ukrainian service is working do not improve, moreover, if its leadership is replaced, the business contacts, built over the past few years, may be affected," he said. "They were not always cloudless, but our Ukrainian colleagues were trying to work for expanding trade between our counties," he said.

It might seem like an odd reason to suddenly do this but of course the timing is perfect – especally as the anti-Russian provinces tend to be the most agricultural and farming based – as opposed to the eastern (more industrial) regions that are wealthier and more pro-Russia.

 

But as a reminder, a great deal of the nation's wealth resides in non-pro-Europe eastern Ukraine


    



via Zero Hedge http://ift.tt/1fiY1L5 Tyler Durden

Oil Spill Shuts New Orleans Port & Mississippi River

A 65-mile stretch of the Mississippi near New Orleans remained closed Monday after two vessels collided and caused an oil spill on Saturday in foggy conditions about 30 miles west of New Orleans. As NBC news reports, the Lindsay Ann Erickson crashed with the Hannah C. Settoon, which was pushing two barges carrying barrels of light crude oil that spilled into the river. Clean-up efforts are underway.

In this aerial photo, river traffic is halted along the Mississippi River between New Orleans and Vacherie, La., due to a barge leaking oil in St. James Parish, La., Sunday, Feb. 23, 2014. The collision happened Saturday afternoon near Vacherie.

 

Via UPI,

The U.S. Coast Guard said the source of an oil spill was secured but 65 miles of the Mississippi River including the Port of New Orleans remained closed Sunday.

 

The Coast Guard said in a news release the oil spill occurred Saturday when a barge collided with another vessel near Vacherie, between New Orleans and Baton Rouge.

 

“Lightering operations on the damaged barge concluded early Sunday morning and the source of the spill was secured,” the release said. “Oil spill response vessels and recovery equipment are deployed in the river.”

 

The Coast Guard said the Captain of the Port closed the river from mile marker 90 to mile maker 155 “to avoid possible contamination of passing vessels and to reduce the amount of oil spreading further down the river.”

 

 

A unified command including the Coast Guard, the Louisiana Oil Spill Coordinator’s Office, the environmental cleanup company ES&H and the Louisiana Department of Environmental Quality was cooperating on the response to the spill, the Coast Guard said.


    



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

Oil Spill Shuts New Orleans Port & Mississippi River

A 65-mile stretch of the Mississippi near New Orleans remained closed Monday after two vessels collided and caused an oil spill on Saturday in foggy conditions about 30 miles west of New Orleans. As NBC news reports, the Lindsay Ann Erickson crashed with the Hannah C. Settoon, which was pushing two barges carrying barrels of light crude oil that spilled into the river. Clean-up efforts are underway.

In this aerial photo, river traffic is halted along the Mississippi River between New Orleans and Vacherie, La., due to a barge leaking oil in St. James Parish, La., Sunday, Feb. 23, 2014. The collision happened Saturday afternoon near Vacherie.

 

Via UPI,

The U.S. Coast Guard said the source of an oil spill was secured but 65 miles of the Mississippi River including the Port of New Orleans remained closed Sunday.

 

The Coast Guard said in a news release the oil spill occurred Saturday when a barge collided with another vessel near Vacherie, between New Orleans and Baton Rouge.

 

“Lightering operations on the damaged barge concluded early Sunday morning and the source of the spill was secured,” the release said. “Oil spill response vessels and recovery equipment are deployed in the river.”

 

The Coast Guard said the Captain of the Port closed the river from mile marker 90 to mile maker 155 “to avoid possible contamination of passing vessels and to reduce the amount of oil spreading further down the river.”

 

 

A unified command including the Coast Guard, the Louisiana Oil Spill Coordinator’s Office, the environmental cleanup company ES&H and the Louisiana Department of Environmental Quality was cooperating on the response to the spill, the Coast Guard said.


    



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

Ron Paul: “Leave Ukraine Alone”

Submitted by Ron Paul via The Ron Paul Institute,

Last week Ukraine saw its worst violence since the break-up of the Soviet Union over 20 years ago. Protesters occupying the main square in the capitol city, Kiev, clashed with police leaving many protesters and police dead and many more wounded. It is an ongoing tragedy and it looks like there is no end in sight.

The current conflict stems from a divide between western Ukraine, which seeks a closer association with the European Union, and the eastern part of the country, which has closer historic ties to Russia.

The usual interventionists in the US have long meddled in the internal affairs of Ukraine. In 2004 it was US government money that helped finance the Orange Revolution, as US-funded NGOs favoring one political group over the other were able to change the regime. These same people have not given up on Ukraine. They keep pushing their own agenda for Ukraine behind the scenes, even as they ridicule anyone who claims US involvement.

A recent leaked telephone conversation between two senior government officials made it clear that not only was the US involved in the Ukrainian unrest, the US was actually seeking to determine who should make up the next Ukrainian government!

Senator John McCain, who has made several trips to Ukraine recently to meet with the opposition, wrote last week that the US must stand up to support the territorial integrity of Ukraine, including Crimea.

Why are US government officials so eager to tell the Ukrainians what they should do? Has anyone bothered to ask the Ukrainians? What if might help alleviate the ongoing violence and bloodshed, if the Ukrainians decided to re-make the country as a looser confederation of regions rather than one tightly controlled by a central government? Perhaps Ukraine engaged in peaceful trade with countries both to the west and east would benefit all sides. But outside powers seem to be fighting a proxy war, with Ukraine suffering the most because of it.

If you asked most Americans how they feel, my bet is that you would discover they are sick and tired of the US government getting involved in every crisis that arises. Certainly the American people want none of of this intervention in Ukraine. They understand, as recent polls have shown, that our interventionist foreign policy is only creating more enemies overseas. And they also understand that we are out of money. We could not afford to be the policemen of world even if we wanted to be.

And I bet if we asked the Ukrainians, a vast majority of them would prefer that the US — and Russia and the European Union — stay out their affairs and respect their sovereignty. Is it so difficult to understand why people resent being lectured and bribed by foreign governments? All we need to do is put ourselves in the place of the Ukrainians and ask ourselves how we would feel if we were in the middle of a tug-of-war between a very strong Canada on one side and a very strong Mexico on the other. We would resent it as well. So let’s keep our hands off of Ukraine and let them solve their own problems!


    



via Zero Hedge http://ift.tt/1k4YeX5 Tyler Durden

Ron Paul: "Leave Ukraine Alone"

Submitted by Ron Paul via The Ron Paul Institute,

Last week Ukraine saw its worst violence since the break-up of the Soviet Union over 20 years ago. Protesters occupying the main square in the capitol city, Kiev, clashed with police leaving many protesters and police dead and many more wounded. It is an ongoing tragedy and it looks like there is no end in sight.

The current conflict stems from a divide between western Ukraine, which seeks a closer association with the European Union, and the eastern part of the country, which has closer historic ties to Russia.

The usual interventionists in the US have long meddled in the internal affairs of Ukraine. In 2004 it was US government money that helped finance the Orange Revolution, as US-funded NGOs favoring one political group over the other were able to change the regime. These same people have not given up on Ukraine. They keep pushing their own agenda for Ukraine behind the scenes, even as they ridicule anyone who claims US involvement.

A recent leaked telephone conversation between two senior government officials made it clear that not only was the US involved in the Ukrainian unrest, the US was actually seeking to determine who should make up the next Ukrainian government!

Senator John McCain, who has made several trips to Ukraine recently to meet with the opposition, wrote last week that the US must stand up to support the territorial integrity of Ukraine, including Crimea.

Why are US government officials so eager to tell the Ukrainians what they should do? Has anyone bothered to ask the Ukrainians? What if might help alleviate the ongoing violence and bloodshed, if the Ukrainians decided to re-make the country as a looser confederation of regions rather than one tightly controlled by a central government? Perhaps Ukraine engaged in peaceful trade with countries both to the west and east would benefit all sides. But outside powers seem to be fighting a proxy war, with Ukraine suffering the most because of it.

If you asked most Americans how they feel, my bet is that you would discover they are sick and tired of the US government getting involved in every crisis that arises. Certainly the American people want none of of this intervention in Ukraine. They understand, as recent polls have shown, that our interventionist foreign policy is only creating more enemies overseas. And they also understand that we are out of money. We could not afford to be the policemen of world even if we wanted to be.

And I bet if we asked the Ukrainians, a vast majority of them would prefer that the US — and Russia and the European Union — stay out their affairs and respect their sovereignty. Is it so difficult to understand why people resent being lectured and bribed by foreign governments? All we need to do is put ourselves in the place of the Ukrainians and ask ourselves how we would feel if we were in the middle of a tug-of-war between a very strong Canada on one side and a very strong Mexico on the other. We would resent it as well. So let’s keep our hands off of Ukraine and let them solve their own problems!


    



via Zero Hedge http://ift.tt/1k4YeX5 Tyler Durden

Weekly Sentiment Report: The Smart Money is Bearish

In an interesting and sudden turn, the “smart money” has turned bearish.

I say “interesting and sudden” because our “smart money” indicator (see figure 3 below) was quasi bullish just a week ago and this past week, the numbers are coming in bearish. Furthermore, equity prices (i.e., SP500) were fairly flat for the week putting a degree of caution into the data. Typically, the “smart money” will be sellers as prices rise, so it is reasonable to ask why were insiders selling when prices weren’t up?

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So how should we interpret this going forward? From my perspective, this is bearish. Higher equity prices will bring in greater number of insiders selling their shares, and this will push the indicator to an even more extreme level. This is a headwind we shouldn’t ignore. In essence, if company insiders are selling their shares presumably because the prospects for the underlying business don’t support the valuations, then why should you be buying them?

Ahh, but do what you want.

Over here at TacticalBeta, we have been NEUTRAL on the equity markets for 2 weeks now. Our equity model turned bearish 2 weeks ago, yet the technicals remain constructive. We sold our equity positions 2 weeks ago, but we recognize we are in a NEUTRAL investing environment that historically (i.e., 23 years of data) has had little edge. However, over the past 2 years such environments have been kind to investors as QE announcements and Fed jawboning have seem to come during these periods after the bullish market mojo has fallen, but prior to a sell off in prices. This is just another way of saying that the dips have been shallow as investors have learned to anticipate Fed intervention and that the equity markets really haven’t sold off for quite some time. I don’t believe this is healthy bull market action, and I am sure that I am in the minority opinion on this one, but then again, I don’t whine or angst on every 2-3% correction.

Let’s return to our NEUTRAL investing environment. So what does it mean? One, it defines a market environment where the SP500 has underperformed over the entirety of the data, and there is no predictable edge to the price action. Two, the price action tends to be ruled by overbought and oversold signals. Three, it gives investors an opportunity to reduce – -as opposed to being all in or all out like a light switch — their allocation to equities. With little predictive edge, why be in the markets full throttle? Look at investing this way. You are a card counting black jack player. You cannot predict the next winning hand or cards that come out of the shoe, but you can determine (and this is the sole purpose of card counting) when is the best time to bet heavy. A neutral market environment may or may not produce a winning trade, but it is not a time to be betting heavy. Got it?

To summarize, the “smart money” indicator has turned bearish. This is more in alignment with the other sentiment indicators, which have been showing too many bulls for quite some time. These indicators, like the “dumb money” (figure 2 below) and the Rydex data (not shown), have been un-winding for several weeks now. Higher prices should see more corporate insiders selling, and this is a headwind.

The Sentimeter

 

Figure 1 is our composite sentiment indicator. This is the data behind the “Sentimeter”. This is our most comprehensive equity market sentiment indicator, and it is constructed from 10 different variables that assess investor sentiment and behavior. It utilizes opinion data (i.e., Investors Intelligence) as well as asset data and money flows (i.e., Rydex and insider buying). The indicator goes back to 2004. (Editor’s note: Subscribers to the TacticalBeta Gold Service have this data available for download.) This composite sentiment indicator moved to its most extreme position 10 weeks ago, and prior extremes since the 2009 are noted with the pink vertical bars. The March, 2010, February, 2011, and February, 2012 signals were spot on — warning of a market top. The November, 2010 and December, 2012 signals were failures in the sense that prices continued significantly higher. The current reading is neutral.

Figure 1. The Sentimeter

fig1.2.22.14

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Dumb Money/ Smart Money

The “Dumb Money” indicator (see figure 2) looks for extremes in the data from 4 different groups of investors who historically have been wrong on the market: 1) Investors Intelligence; 2) MarketVane; 3) American Association of Individual Investors; and 4) the put call ratio. The indicator shows that investors are NEUTRAL.

Figure 2. The “Dumb Money”

fig2.2.22.14

Figure 3 is a weekly chart of the SP500 with the InsiderScore “entire market” value in the lower panel. From the InsiderScore weekly report: “Market-wide sentiment has shifted demonstrably, moving from Neutral into Slight Sell Bias territory. This past week, there was a significant increase in the number of sellers while the number of buyers fell by more than -20%. The Healthcare sector is showing the weakest sentiment and two closely-watched industries — Transportation and Semiconductors — are showing very weak sentiment. Additionally, there’s been a slowdown in buying within the Banking industry.”

Figure 3. InsiderScore “Entire Market” value/ weekly

fig3.2.22.14

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via Zero Hedge http://ift.tt/1hitQbg thetechnicaltake

Hedge Funds Most Short Into Latest All Time High Ramp Since September 2012

As we have repeatedly pointed out, the one surest way to generate profits in these manipulated, broken markets is to take advantage of the one legacy trade that makes zero sense in a world in which the global central banks are the ultimate providers of downside risk protection: i.e., going long the most shorted names. We did just this most recently past Friday, when we listed the latest hedge fund long hotel, as well as the names most shorted by the “sophisticated” investors, saying “anyone going long these names is virtually assured to outperform the market over the next year.” One day later and this “strategy” is already generating outsized alpha, with the most shorted names solidly outperforming the market.

And as the case may, this latest bout of “most shorted” outperformance is set to continue for one main reason. As the CFTC reported last friday, institutional investors using Standard & Poor’s 500 Index futures turned bearish this month for the first time since September 2012.

As Bloomberg reports: “Hedge funds and other large speculators have been net short for the last two weeks, wagering that the S&P 500 (SPX) will decrease in value, according to data compiled by Bloomberg and the U.S. Commodity Futures Trading Commission.”

This is how the net HF exposure looks like:

Bloomberg adds:

“Everyone made a ton of money last year being long and they may be hedging their portfolios in the S&P 500 futures market,” Eric Green, director of research and fund manager at Penn Capital Management, said by phone on Feb. 21. The Philadelphia-based firm oversees $7.5 billion. “The bad economic data and the emerging-market news that broke in January have all contributed to more negative sentiment.”

Negative sentiment which, however, this time is being “explained away” with the weather. Because remember: it is never the economy’s fault, and whenever we get bad data, it is the snow, or the rain, or the sun’s fault. When we get good data, it is always the economic recovery, never the trillions in liquidity injected by the Fed.

Sure enough:

Investors have dismissed worse-than-forecast U.S. economic data over the past two weeks, speculating that harsh winter weather explains the weakness in reports such as housing and hiring. The Bloomberg ECO U.S. Surprise Index, which measures how much recent data has beaten or missed economists’ estimates, fell to minus 0.429 last week, the lowest since August 2011.

One would have to ignore the fact that “harsh winter weather” apparently impacted housing data in California, or that the recently reported Dallas Fed, where snow was just a little scarce this winter, also scapegoated the weather. Or that the “recovery” momentum of the entire world’s macro data has reverted to multi-year lows – apparently it snowed everywhere, despite what we noted last night, namely that it was the fourth warmest January on record.

Of course, we did preface this post with “most manipulated, broken markets”, so little surprise there.

As for the real reason why markets continue to surge higher:

Bearish bets against the S&P 500 shrank to 12,085 contracts in the week ended Feb. 21. Based on the price of the futures contract, that amounted to a notional value of about $5.6 billion in bets against the index.

 

Investors were net long S&P 500 futures by 30,000 contracts on Jan. 10, for a swing of about 40,000 contracts in the past five weeks. That’s the biggest bearish move since August 2011, when hedge funds went from being net short 4,400 contracts to net short 107,913 contracts, according to CFTC data that started in 1997. That move preceded a 9.8 percent retreat in the S&P 500 as investors sold stocks amid Europe’s government debt crisis.

In other words, every time even a modest threat of a downside correction reappears, momentum ignition across key FX carry pairs sends the Spoos and other equity indices higher triggering upside stops, which in turn forces even more hedge funds to cover short positions, once again sending the S&P too all time highs. And so on. Until the volume in the market is so low one block of E-mini futures sends the whole thing limit up, and everyone can just sit back and laugh.


    



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