Tag: news

• Currency Probe Widens as U.S. Said to Target Markups (BBG)
• Battle for Iraq refinery as U.S. hesitates to strike (Reuters)
• Ukraine forces battle separatists after truce ‘refused’ (Reuters)
• Fed Dots Ignored as Investors Focus on Yellen’s Message (BBG)
• Retirees Suffer as $300 Billion 401(k) Rollover Boom Enriches Brokers (BBG)
• American Apparel ousts CEO; source says Dov Charney ‘will fight like hell’ (LA Times)
• House Panel Is Subpoenaed as Trading Probe Heats Up (WSJ)
• GM Officials Ignored Alert on Car Stalling (WSJ)
• Russia’s $20 Billion Bond Void Filled by China to Mexico (BBG)
• Ex-Goldman Trader Says Bonus Cut to $8.25 Million Unfair (BBG)
• Markit Raises $1.3 Billion in Expanded IPO (WSJ)
• Poroshenko Plans Talks After Offer of Truce in E. Ukraine (BBG)
• YouTube Clashes With Labels Over Licensing Deals (WSJ)

 

Overnight Media Digest

WSJ

* A General Motors Co employee warned in 2005 that the auto maker had a “serious safety problem” with the design of ignition switches used on the 2006 Impala that could lead to a “big recall,” but the company didn’t recall the vehicles until early this week. (http://on.wsj.com/1uEvjNf)

* American Apparel Inc’s board moved Wednesday to fire founder and Chief Executive Dov Charney, citing an “ongoing investigation into alleged misconduct.” (http://on.wsj.com/1kPDJfo)

* YouTube confirmed plans to launch a long-awaited music-subscription service, but some independent labels are refusing to sign on as the online video company pushes for cut-rate licensing deals. (http://on.wsj.com/1qfS2PV)

* The head of the largest U.S. space company, United Launch Alliance LLC, moved to calm fears among military chiefs and lawmakers about an interruption to supplies of the Russian-made rocket engines used to launch satellites for the Pentagon. The company, a joint venture between Boeing Co and Lockheed Martin Corp, meanwhile is studying a new domestic alternative that industry experts said could take the government and any selected contractor $2 billion and up to seven years to develop. (http://on.wsj.com/1pKE2Q9)

* Digital subscriber line (DSL) companies are lagging behind cable and fiber broadband providers when it comes to download speeds, according to a new report from the Federal Communications Commission. The agency released its fourth annual report on broadband speeds, which showed once again that broadband providers are gradually increasing performance while delivering close to advertised speeds most of the time. (http://on.wsj.com/1ineMx7)

* General Electric Co Chief Executive Jeffrey Immelt is set to meet French Economy Minister Arnaud Montebourg in Paris on Thursday, the third time the executive has visited the City of Light since GE launched its $17 billion bid for Alstom SA’s energy business in late April. (http://on.wsj.com/1ineR3W)

* News Corp on Wednesday extended its shareholder rights plan for another year, giving the media company additional time to evaluate options without potential interference from an outside investor. The shareholder rights plan, which is also known as a poison pill, was set to expire June 28, a year after the company separated from entertainment giant 21st Century Fox Corp. The extension runs through June 18, 2015. (http://on.wsj.com/1nlgSei)

* Owners of Markit Ltd, the Wall Street financial-data provider, raised $1.3 billion in a larger-than-expected initial public offering of shares, according to people familiar with the deal. (http://on.wsj.com/1nQdBFz)

 

FT

Lloyds Banking Group is set to value its newly created TSB offshoot at almost 300 million pounds less than the most recent valuation in its accounts. This will value TSB at about 1.3 billion pounds when pricing its share offer on Thursday.

The U.S. Federal Reserve it cut the monthly pace of its bond buying to $35 billion even as it played down the risk of higher inflation on Wednesday.

The UK Independence party has secured up to 14 million euros of EU taxpayers funding after Nigel Farage, the leader of UKIP, won enough allies in the European parliament to form a group.

Companies chose to boost shareholder returns in the absence of robust revenue growth causing U.S. share buybacks and dividend payments to climb to a record level in the first quarter of 2014.

Amazon made an entry in the smartphone market on Wednesday, launching a handset called Fire taking on big-gun rivals Apple and Samsung.

NYT

* In the face of Detroit’s tumultuous bankruptcy proceedings, in which multiple parties are quarreling to protect their interests, the city and its unions have quietly negotiated a scaled-back pension plan that could serve as a model for other troubled governments. One of the most closely watched issues of the case is whether a government pension plan can be legally cut in bankruptcy. (http://nyti.ms/1kPIo0N)

* Citigroup on Thursday appointed Mark Slaughter, a senior New York banker, as its head of corporate and investment banking for Asia-Pacific, filling a vacancy created last month when Farhan Faruqui left to join the Australia and New Zealand Banking Group. (http://nyti.ms/1nliogA)

* A fierce legal battle between Argentina and New York hedge funds took a new twist on Wednesday when the country offered to negotiate with the funds just hours after announcing measures that would help it avoid a settlement. (http://nyti.ms/1pkELGe)

* One of the most important names in the world of debt trading, Markit Ltd, is poised to join the public stock markets – and generate a payday for the banks that are both owners and customers of the financial data firm. Markit raised nearly $1.3 billion in its initial public offering on Wednesday, valuing the company at $4.3 billion. (http://nyti.ms/1lGMOr1)

* The Securities and Exchange Commission’s insider trading lawsuit against Steven Cohen’s former hedge fund SAC Capital Advisors is finally over. Judge Victor Marrero of the Federal District Court in Manhattan gave final approval on Wednesday to a $602 million settlement that does not require Cohen’s former firm, now called Point72 Asset Management, to admit any wrongdoing. (http://nyti.ms/UOshLY)

 

Canada

THE GLOBE AND MAIL

* Alberta’s beleaguered disaster-compensation system triggered warnings from federal auditors well before the worst flooding in provincial history swamped 30 communities, temporarily shuttered Calgary’s downtown and forced more than 56,000 people to flee their homes nearly one year ago. The warnings, undisclosed publicly until now, stemmed from audits of Alberta government requests for disaster aid in the wake of flooding in 2005 and 2007. (http://bit.ly/1lEhzkL)

* The battle over Northern Gateway could spill into British Columbia’s emerging liquefied natural gas sector if First Nations withdraw or temper their support for LNG projects to press the provincial government to block the Enbridge Inc pipelines. (http://bit.ly/1vWx1fE)

* Clothing retailer American Apparel Inc fired its founder Dov Charney as chairman and chief executive following an ongoing investigation into alleged misconduct and said it had appointed an interim CEO. (http://bit.ly/1sq0cZX)

Reports in the business section:

* Enbridge Inc is hoping to win over Coastal First Nations who adamantly oppose its Northern Gateway pipeline with a claim that the controversial project would actually improve marine safety in the treacherous waters off the British Columbia coast despite the increase in supertanker traffic. (http://bit.ly/1quLq2n)

* The mood of long-suffering Canadian exporters is on the upswing again. Optimism among exporters, who are convinced that the U.S. recovery is for real, has improved for the third consecutive time, and is now higher than it was when the global economy was booming before the Great Recession, according to Export Development Canada’s semi-annual Trade Confidence Index. (http://bit.ly/1uF5gpg)

NATIONAL POST

* Over the past few years, as Vancouverites dramatically ramped up their urban composting, some doomsayers predicted that putting out thousands of bins of rotting food would bring a reckoning of vermin upon the city. Last Friday, their worst fears appeared to be confirmed when children at a downtown daycare showed up to find their playground overrun by compost-eating rats. (http://bit.ly/1pigdvF)

* Former senator Pamela Wallin believed Conservative senators had placed a spy in her office as part of a plot by members of her own party to “get her,” a new book alleges. “Wallin believed, as she told me in October 2013, that hard-core right-wing elements in the Conservative caucus had it out for her because she didn’t ‘have an R branded on my forehead’ – she was not Reform enough,” writes Patrick Boyer in “Our Scandalous Senate.” (http://bit.ly/1njwpdx)

FINANCIAL POST

* A prolonged Iraq crisis could fuel spending in Canada’s energy sector, boosting an already expansionary picture for the oil patch this year, according to global investment bank Barclays Bank Plc. “The Iraq situation is potentially helpful not only to the U.S. but also to Canada,” Barclays Capital analyst James West told the Financial Post during a conference call on Wednesday to launch a new report on global oil and gas spending this year. “It is the quickest market to put capital to work to as prices move up.” (http://bit.ly/T9BIUR)

* U.S. tax authorities are relaxing the rules and lightening penalties to induce American and dual citizens living abroad to comply with tax filing rules in the United States. Michael Danilack, a deputy commissioner at the Internal Revenue Service, said the changes should mean those affected – including up to one million people in Canada – “can sleep at night” knowing that they comply with U.S. rules and no longer face the prospect of financial penalties even if they owe no taxes. (http://bit.ly/1ngMrVn)

 

Hong Kong

SOUTH CHINA MORNING POST

— Passengers who sexually harass staff on Hong Kong aircraft could soon feel the weight of local law after the government announced a bill to clamp down on mile-high sex pests. The bill would make the sexual harassment of flight attendants a civil offence, with offenders liable to be brought before a court for financial damages. (bit.ly/1pJXbBP)

— Hong Kong’s Financial Services Development Council proposed the creation of several new listing boards, including one specialising in companies with unique shareholding structures, in a widely anticipated report which came after the city lost the mega initial public offering of e-commerce giant Alibaba Group (IPO-ALIB.N) to New York. (bit.ly/1spkxi1)

— While Premier Li Keqiang tours Britain, the yuan took another major step on its global journey as Beijing said the currency will start trading directly with the British pound from Thursday. (bit.ly/1spkNO3)

THE STANDARD

— Customs officers have smashed a racket that they believe helped football fans watch World Cup matches live without having to pay TV stations in Hong Kong. A Customs spokesman said a syndicate sold set-top boxes which allowed those who bought them to watch paid TV channels. Each unit was sold for HK$1,700 ($220). (bit.ly/UNIEIO)

— Property conglomerate Lai Sun Group is to invest up to HK$18 billion ($2.32 billion) in its cultural-cum-commercial project on Hengqin island in Zhuhai. Construction of the first phase of development is expected to begin this year, said Chew Fook-aun, deputy chairman of Lai Sun Development and Lai Sun International. (bit.ly/1phnkEt)

— A8 Digital Music confirmed it could be entering a cooperation deal with Chinese phone maker Xiaomi. Such an arrangement would link the digital entertainment provider with one of China’s largest handset makers. (bit.ly/1pjK4FD)

HONG KONG ECONOMIC JOURNAL

— Chinese home appliance retailer Huiyin Household Appliances (Holdings) Co Ltd, which recently announced it would expand into China’s lottery agency sales business, plans to sell lottery through its existing 2,700 point of sales distribution network in the country, said chairman Cao Kuanping.

MING PAO DAILY NEWS

— Tycoon Li Ka-shing-controlled investment fund Horizons Ventures has led a consortium to invest in Modern Meadow and has completed the first round of a $10 million investment into the startup that can grow leather and meat in a lab.

Britain

The Telegraph

BANK OF ENGLAND POLICYMAKERS PREPARING FOR RATE RISE THIS YEAR

(http://bit.ly/1nicpb3)

Nine-member monetary policy committee minutes say there is a risk stronger than expected growth in coming months could drive sharper wage growth and trigger a rate rise to curb inflation

VINCE CABLE WARNS BANK OF ENGLAND: DON’T CHOKE OFF RECOVERY

(http://bit.ly/1pjDAXv)

Vince Cable has warned the Bank of England that raising interest rates prematurely or introducing strict regulation could threaten the economy by choking off business lending.

The Guardian

ZOOPLA FLOAT TO VALUE PROPERTY WEBSITE AT £919M

(http://bit.ly/1lFu0bo)

Zoopla has priced its flotation in the lower half of its proposed range, valuing the property website at less than the £1 billion it was seeking.

ED BALLS REFUSES ANY ROLE IN CURRENCY UNION WITH AN INDEPENDENT SCOTLAND

(http://bit.ly/1uDTsUh)

Ed Balls has hinted that if he were chancellor in a future Labour government he would resign if talks began on currency union with an independent Scotland. He claimed the pact would be “very dangerous” for both countries.

The Times

MIKE ASHLEY JOINS PHILIP GREEN ON MYSALE’S REGISTER

(http://thetim.es/1nkGHeG)

Mike Ashley has taken a 12 million pound stake in MySale and signed a joint venture agreement with the online retailer – just days after it floated on AIM.

AMAZON UNVEILS THE FIRE PHONE

(http://thetim.es/1uDTUSs)

Amazon has unveiled its first smartphone, a device that the world’s largest online retailer hopes will delight users with a groundbreaking new 3-D screen – and nudge its customers into buying yet more of its goods.

The Independent

BANK OF ENGLAND MINUTES HINT AT FRAGILE CONSENSUS OVER INTEREST RATES

(http://ind.pn/UNGOHO)

The Bank of England unanimously voted to hold borrowing cost at 0.5 percent, despite speculation over a split decision after Governor Mark Carney said interest rates could “rise sooner” than expected.But the minutes revealed the consensus is becoming more fragile by the month with Martin Weale – the last current member of the MPC to vote for a hike in July 2011 – giving the clearest sign he is ready to cast the first vote for higher interest rates in almost three years.

RUPERT SOAMES STAMPS AUTHORITY IN SERCO SHAKE-UP

(http://ind.pn/UdcaqT)

Serco’s new Chief Executive Officer Rupert Soames has taken direct control of the outsourcer’s scandal-struck Australian business and is splitting up its rail joint venture with Abellio in a new overhaul.

 

 

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS

Domestic economic reports scheduled today include:
Jobless claims for the week of June 14 at 8:30–consensus 313K
Philadelphia Fed manufacturing index for June at 10:00–consensus 13.0
Leading indicators for May at 10:00–consensus up 0.6%

ANALYST RESEARCH

Upgrades

AngioDynamics (ANGO) upgraded to Buy from Hold at Canaccord
Atlantic Power (AT) upgraded to Sector Perform from Underperform at RBC Capital
Bruker (BRKR) upgraded to Outperform from Market Perform at Wells Fargo
FedEx (FDX) upgraded to Sector Perform from Underperform at RBC Capital
Spirit AeroSystems (SPR) upgraded to Buy from Neutral at Sterne Agee
Starbucks (SBUX) upgraded to Buy from Neutral at UBS

Downgrades

Bill Barrett (BBG) downgraded to Neutral from Buy at Mizuho
Canon (CAJ) downgraded to Hold from Buy at Jefferies
NVIDIA (NVDA) downgraded to Underperform from Neutral at BofA/Merrill
Trulia (TRLA) downgraded to Sector Perform from Outperform at RBC Capital
Vodafone (VOD) downgraded to Neutral from Buy at BofA/Merrill

Initiations

Cisco (CSCO) initiated with a Neutral at Buckingham
Dr Pepper Snapple (DPS) initiated with a Sell at BTIG
ExOne (XONE) initiated with a Hold at Brean Capital
Extreme Networks (EXTR) initiated with a Neutral at Buckingham
F5 Networks (FFIV) initiated with a Neutral at Buckingham
Juniper (JNPR) initiated with a Buy at Buckingham
Keurig Green Mountain (GMCR) initiated with a Neutral at BTIG
Monster Beverage (MNST) initiated with a Buy at BTIG
Monster Beverage (MNST) initiated with an Outperform at Wells Fargo
RCS Capital (RCAP) initiated with an Overweight at Barclays
Rex Energy (REXX) initiated with an Outperform at Imperial Capital
Voxeljet (VJET) initiated with a Hold at Brean Capital

COMPANY NEWS

American Apparel’s (APP) board voted to replace Dov Charney as chairman and notified him of its intent to terminate his employment as president and CEO for cause. Jim Luttrell has been named interim CEO and Allan mayer and David Danziger as co-chairmen
News Corp. (NWSA) extended its shareholder rights plan until June 18, 2015
TE Connectivity (TEL) said it will buy Measurement Specialties (MEAS) for $1.7B
T-Mobile (TMUS) said customers can stream music without data plan impact
Rolls-Royce (RYCEY) announced a GBP1B share buyback, confirmed FY14, FY15 guidance
Red Hat (RHT), which lowered its FY15 EPS view, said recent acquisitions to add to OpenStack effort but dilutive to EPS
Alco Stores (ALCS) reported that CFO Wayne Peterson has left the company
Qiagen (QGEN) received FDA approval of artus CMV RGQ MDx kit

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
IHS Inc. (IHS), Clarcor (CLC), China Cord Blood (co), Red Hat (RHT), Jabil Circuit (JBL)

Companies that missed consensus earnings expectations include:
Pier 1 Imports (PIR), Alder reports Q1 EPS ($5.38)

NEWSPAPERS/WEBSITES

General Motors (GM) employee warned about stalling Impala in 2005, AP reports
Blackrock (BLK), Pimco suing several banks (USB, DB, WFC, C, HSBC, BK) for trustee roles, WSJ reports
GE (GE) plans rail signaling, grid offers to score Alstom (ALSMY), Reuters says
Paris demanding French minority ownership in Alstom (ALSMY) in GE’s (GE) bid, FT reports
CNOOC (CEO) in talks to acquire buy 30%-40% of Aphrodite field, Globes says (NBL, DK)
Facebook (FB) suffers brief outage Thursday morning, FT reports
Amazon Phone (AMZN) will get prominent position in AT&T (T) stores, CNET says
Toyota (TM) announces new voice recognition service, Nikkei reports

SYNDICATE

Abraxas Petroleum (AXAS) 10M share Secondary priced at $5.00
Ardelyx (ARDX) 4.286M share IPO priced at $14.00
Chemical Financial (CHFC) files to sell $70M of common stock
Education Realty (EDR) files to sell 19.8M shares of common stock
Five Oaks (OAKS) files to sell 3.5M shares of common stock
GW Pharmaceuticals (GWPH) 1.7M share Secondary priced at $86.83
Globalstar (GSAT) files to sell $9.94M of common stock for holders
Markit (MRKT) 53.47M share IPO priced at $24.00
Receptos (RCPT) 4.43M share Secondary priced at $40.25
Revance Therapeutics (RVNC) 4M share Secondary priced at $30.50
Seadrill Partners (SDLP) files to sell 6.1M common units
Zafgen (ZFGN) 6M share IPO priced at $16.00

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

She came, she spoke, and she sent stocks to a new all time high. That is perhaps the simplest summary of what Janet Yellen did yesterday when, as a result of her droning monotone, she managed to put the VIX literally to sleep, which closed at the lowest since 2007 and the resulting surge in the S&P was a fresh record high, because despite the “concerns” Fed member have about record high complacency, all they are doing is adding to it. And now that apparently the Fed has a market “valuation” department, and Yellen can issue fairness opinions on whether the S&P is overvalued, the only question is whether today, as a follow through to yesterday’s “buy everything, preferably on leverage, sincerely – the Fed” ramp, the VIX will drop to single digits today.

The post-FOMC market reaction suggested that there was a good proportion who had expected the Fed to be more hawkish. This will likely encourage the search for yield and the low volatility environment to continue for a while yet. Going into the FOMC, UST yields were hovering around 2.63%, but they finished the day at 2.58% (almost 7bp lower on the day). The UST curve bull flattened, perhaps helped by a lowering of the Fed’s longer term rate projection to 3.75% from 4% previously. The CDX IG index was basically unchanged just before the FOMC statement but rallied tighter to close at – 3.5bp on the day – a pretty big move. The S&P500 (+0.77%) returned to record highs after notching its best gain in a month. EM bond markets which were still open during the time (mostly LATAM) saw yields tighten by around 2-3bp.

The market reaction in Asia is largely following the same theme with risk on led by EMFX, credit and Japanese equities. On the currency side, the US dollar has continued its slide today with IDR (+0.55%), INR (+0.75%) and MYR (+0.45%) being the main beneficiaries. Amongst equity indices, the key laggard today is the HSCEI (-0.2%) which is reacting to comments by Chinese Premier Li that China will avoid a hard landing and will therefore limit the scale of any economic stimulus. On a YTD basis, one of the key regional laggards, the Nikkei (+1.5% today) is within a couple of percentage points of being in positive territory for the year. It’s been a remarkable 10% rally from the May lows for the index, helped by headlines around pension fund reform and tax cuts.

Stocks traded higher since the get-go in Europe (Eurostoxx 50, +1.14%), with materials sector outperforming on the back of higher commodity prices, which itself were largely a product of a weaker USD. In terms of notable equity movers, EDF shares traded sharply lower in Europe, trading at its lowest level in 4-months, after the French energy minister Royal blocked a planned tariff hike in August. On the other hand, Rolls Royce shares surged 5% after the company announced GBP 1bln buyback. The Italian and Spanish markets are the best-performing larger bourses, Swiss the worst.

The euro is stronger against the dollar. French 10yr bond yields fall; German yields decline. Commodities gain, with nickel, natural gas underperforming and wheat outperforming. U.S. jobless claims, Philadelphia Fed index, leading index due later.

Market Wrap

• S&P 500 futures up 0% to 1949.3
• Stoxx 600 up 0.7% to 348.6
• US 10Yr yield down 1bps to 2.57%
• German 10Yr yield down 5bps to 1.33%
• MSCI Asia Pacific up 1.3% to 145.5
• Gold spot up 0.3% to $1281.5/oz

Bulletin headline summary from RanSquawk and Bloomberg

Treasury yields from 2Y to 10Y drop overnight, with 5Y leading, after Yellen repeated that the Fed is likely to make further QE reductions in “measured steps”
and that it expects interest rates to stay low after the buying ends.

Treasury five-year notes extended yesterday’s gain, the biggest in 11 weeks, and government bonds from Australia to Spain rose as investors gauged the Federal Reserve’s policy stance will keep global yields low

U.K. retail sales fell for the first time in four months in May as a World Cup boost failed to offset a slump in demand at food stores

Municipal bonds are on pace to outperform Treasuries in total return for an unprecedented 10th straight month and are also beating investment-grade company debt

U.S. prosecutors are broadening their investigation of the foreign-exchange industry as they question salespeople at the world’s biggest banks on their practices, according to two people with knowledge of the matter

The U.S. is distancing itself from Iraqi Prime Minister Nouri al-Maliki, pressing for political change that could help blunt a Sunni insurgency

Sovereign yields lower. EU peripheral spreads mixed with Greece 10Y ~6bps lower. Asian equities mixed; European equity markets, U.S. stock futures higher. WTI  crude, copper, gold higher.

US Event Calendar

• 8:30am: Initial Jobless Claims, June 14, est. 313k (prior 317k)
  • Continuing Claims, June 7, est. 2.6m (prior 2.614m)
• 9:45am: Bloomberg Economic Expectations, June (prior 42.5)
  • Bloomberg Consumer Comfort, June 15 (prior 35.5)
• 10:00am: Philadelphia Fed Business Outlook, June., est. 14 (prior 15.4)
• 10:00am: Leading Index, May, est. 0.6% (prior 0.4%) Supply
• 11:00am POMO: Fed to purchase $2.25b-$2.75b in 2021-2024 sector

EUROPE

• All 19 Stoxx 600 sectors rise
• 84.2% of Stoxx 600 members gain, 14.7% decline
• Eurostoxx 50 +1.1%, FTSE 100 +0.8%, CAC 40 +0.9%, DAX +0.8%, IBEX +0.9%, FTSEMIB +1%, SMI +0.3%

ASIA

• Asian stocks rise with the Nikkei outperforming and the Shanghai Composite underperforming.
• MSCI Asia Pacific up 1.3% to 145.5
• Nikkei 225 up 1.6%, Hang Seng down 0.1%, Kospi up 0.1%, Shanghai Composite down 1.5%, ASX up 1.6%, Sensex down 0.2%
• 10 out of 10 sectors rise with materials, industrials outperforming and energy, tech underperforming

FIXED INCOME

Bund and Gilts traded higher, in tandem with stocks in Europe this morning as risk on sentiment dominated the price action in reaction to somewhat dovish FOMC decision yesterday where the Fed failed to deliver any hawkish surprises and lowered their long run view of the Fed Funds Rate. There was little in terms of tier 1 macroeconomic releases, but the ONS said that retail sales for the month of May were supported by sales of replica football shirts, while lower fuel prices driver overall prices lower.

EQUITIES

Stocks traded higher since the get-go in Europe (Eurostoxx 50, +1.14%), with materials sector outperforming on the back of higher commodity prices, which itself were largely a product of a weaker USD. In terms of notable equity movers, EDF shares traded sharply lower in Europe, trading at its lowest level in 4-months, after the French energy minister Royal blocked a planned tariff hike in August. On the other hand, Rolls Royce shares surged 5% after the company announced GBP 1bln buyback.

FX

EUR/USD and GBP/USD traded higher in Europe this morning, with GBP/USD touching on its highest level since August 2009, inspired by USD weakness as the USD index moved lower the key 200DMA line which follows dovish FOMC decision yesterday. At the same time, AUD benefited from an uptick in commodity prices, with the pair advancing close to 2014 highs.

COMMODITIES

Gold and silver prices benefited from a weaker USD inspired by dovish FOMC yesterday, with silver prices approaching key USD 20 level, which is also the 100DMA line and is the highest level since mid-May.

* * *

DB’s Jim Reid concludes the overnight recap

With the Fed and Fed Chair delivering very little in terms of surprises, the post-FOMC market reaction suggested to us that there was a good proportion who had expected the Fed to be more hawkish. This will likely encourage the search for yield and the low volatility environment to continue for a while yet. Going into the FOMC, UST yields were hovering around 2.63%, but they finished the day at 2.58% (almost 7bp lower on the day). The UST curve bull flattened, perhaps helped by a lowering of the Fed’s longer term rate projection to 3.75% from 4% previously. The CDX IG index was basically unchanged just before the FOMC statement but rallied tighter to close at – 3.5bp on the day – a pretty big move. The S&P500 (+0.77%) returned to record highs after notching its best gain in a month. EM bond markets which were still open during the time (mostly LATAM) saw yields tighten by around 2-3bp.

The market reaction in Asia is largely following the same theme with risk on led by EMFX, credit and Japanese equities. On the currency side, the US dollar has continued its slide today with IDR (+0.55%), INR (+0.75%) and MYR (+0.45%) being the main beneficiaries. Amongst equity indices, the key laggard today is the HSCEI (-0.2%) which is reacting to comments by Chinese Premier Li that China will avoid a hard landing and will therefore limit the scale of any economic stimulus. On a YTD basis, one of the key regional laggards, the Nikkei (+1.5% today) is within a couple of percentage points of being in positive territory for the year. It’s been a remarkable 10% rally from the May lows for the index, helped by headlines around pension fund reform and tax cuts.

Taking a look at other developments, ISIS militants and the Iraqi government battled for control of the Baiji refinery which is Iraq’s largest, sending crude up 0.7% yesterday and another 0.2% today. The WSJ said that the White House is signalling that it wants a change in government in Iraq without Maliki as its head, given the PM has been unable to reconcile differences with the Sunni minority. President Obama has also reportedly told Congressional leaders that he is considering military options to respond to the Iraq conflict and that he will not be seeking further congressional approval for those actions (BBG).

Elsewhere, the FT reports that US share buybacks and dividend payments reached a new record in Q1 2014, paying a total of $241bn to shareholders in the three months to March. This is $8bn more than the previous record set in Q3 2007 according to the FT who cite S&P Dow Jones data. In the first quarter, 290 companies in the S&P 500 reduced their share count year over year – up from 276 in the previous quarter, and share buybacks in the year to March 2014 are up 29% yoy. In another sign of the strength of funding markets, Cyprus returned to the international bond market just a little over a year since it announced a bail-in on bank deposits. Cyprus priced EUR750m of 5yr notes at a yield of 4.75%.

Looking at the day ahead, the focus turns to the data with UK retail sales this morning, followed by the Philly Fed and US jobless claims. The Philly Fed index is expected to slip to 14.0 (vs 15.4 in May). On the corporate side, Oracle reports earning today.

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

It has been a while since both Ukraine, and the ongoing Russian response to western sanctions (which set off the great Eurasian axis in motion, pushing China and Russia close together, and accelerating the “Holy Grail” gas deal between the two countries) have made headlines. It is still not clear just why the western media dropped Ukraine coverage like a hot potato, especially since the civil war in Ukraine’s Donbas continues to rage and claim dozens of casualties on both sides. Perhaps the audience has simply gotten tired of hearing about mixed chess/checkers game between Putin vs Obama, and instead has reverted to reading the propaganda surrounding just as deadly events in the third war of Iraq in as many decades.

However, “out of sight” may be just what Russia’s political elite wants. In fact, as VoR’s  Valentin Mândr??escu reports, while the great US spin and distraction machine is focused elsewhere, Russia is already preparing for the next steps. Which brings us to Putin advisor Sergey Glazyev, the same person who in early March was the first to suggest Russia dump US bonds and abandon the dollar in retaliation to US sanctions, a strategy which worked because even as the Kremlin has retained control over Crimea, western sanctions have magically halted (and not only that, but as the Russian central bank just reported, the country’s 2014 current account surplus may be as high as $35 billion, up from $33 billion in 2013, and a far cry from some fabricated “$200+ billion” in Russian capital outflows which Mario Draghi was warning about recently). Glazyev was also the person instrumental in pushing the Kremlin to approach China and force the nat gas deal with Beijing which took place not necessarily at the most beneficial terms for Russia.

It is this same Glazyev who published an article in Russian Argumenty Nedeli, in which he outlined a plan for “undermining the economic strength of the US” in order to force Washington to stop the civil war in Ukraine. Glazyev believes that the only way of making the US give up its plans on starting a new cold war is to crash the dollar system.

As summarized by VoR, in his article, published by Argumenty Nedeli, Putin’s economic aide and the mastermind behind the Eurasian Economic Union, argues that Washington is trying to provoke a Russian military intervention in Ukraine, using the junta in Kiev as bait. If fulfilled, the plan will give Washington a number of important benefits. Firstly, it will allow the US to introduce new sanctions against Russia, writing off Moscow’s portfolio of US Treasury bills. More important is that a new wave of sanctions will create a situation in which Russian companies won’t be able to service their debts to European banks.

According to Glazyev, the so-called “third phase” of sanctions against Russia will be a tremendous cost for the European Union. The total estimated losses will be higher than 1 trillion euros. Such losses will severely hurt the European economy, making the US the sole “safe haven” in the world. Harsh sanctions against Russia will also displace Gazprom from the European energy market, leaving it wide open for the much more expensive LNG from the US.

Co-opting European countries in a new arms race and military operations against Russia will increase American political influence in Europe and will help the US force the European Union to accept the American version of the Transatlantic Trade and Investment Partnership, a trade agreement that will basically transform the EU into a big economic colony of the US. Glazyev believes that igniting a new war in Europe will only bring benefits for America and only problems for the European Union. Washington has repeatedly used global and regional wars for the benefit of  the American economy and now the White House is trying to use the civil war in Ukraine as a pretext to repeat the old trick.

Glazyev’s set of countermeasures specifically targets the core strength of the US war machine, i.e. the Fed’s printing press. Putin’s advisor proposes the creation of a “broad anti-dollar alliance” of countries willing and able to drop the dollar from their international trade. Members of the alliance would also refrain from keeping the currency reserves in dollar-denominated instruments. Glazyev advocates treating positions in dollar-denominated instruments like holdings of junk securities and believes that regulators should require full collateralization of such holdings. An anti-dollar coalition would be the first step for the creation of an anti-war coalition that can help stop the US’ aggression.

Unsurprisingly, Sergey Glazyev believes that the main role in the creation of such a political coalition is to be played by the European business community because America’s attempts to ignite a war in Europe and a cold war against Russia are threatening the interests of big European business. Judging by the recent efforts to stop the sanctions against Russia, made by the German, French, Italian and Austrian business leaders, Putin’s aide is right in his assessment. Somewhat surprisingly for Washington, the war for Ukraine may soon become the war for Europe’s independence from the US and a war against the dollar.

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

DAILY PRICE

Gold added to overnight gains this morning as the dollar weakened after the U.S. Federal Reserve confirmed ultra loose monetary policies are set to continue despite inflation pressures building. Platinum and palladium rose as new hurdles emerged in settling South Africa’s industrial unrest and doubts remain about the viability of Russian supplies.

Oil prices remain near multi month highs on concerns of supply disruption. U.S. inflation figures were worse than expected Wednesday showing that inflation pressures are building which is bullish for gold. Higher oil prices and slowing economic growth is a recipe of stagflation – economic conditions that gold thrives on.

Gold in U.S. Dollars – 5 Days (Thomson Reuters)

In China, the world’s largest physical gold buyer, gold prices were trading either at a discount of about $1 an ounce or on par with the global benchmark, in a sign that buying interest has waned somewhat.

China’s Largest Gold Company Seeks To Become Kingmaker In Gold Industry
China National Gold Group Corporation or China Gold, China’s largest gold conglomerate with primary interests in mining and also refining, is on the hunt for global acquisitions and partnerships, the company’s president said yesterday.

The state owned Chinese gold miner and producer and retailer of custom-designed gold and silver bars, which was founded in 2003, appears to have designs on becoming a kingmaker in the global gold industry.

China is the world’s biggest producer, importer and buyer of gold, giving the country increasing sway over prices, output and the global gold market in general. The country’s official gold consumption increased to 1,176 metric tons last year while its production was 428 metric tons. This is encouraging overseas acquisitions.

China Gold’s President Dr. Xin Song said he believes that long term demand for gold in China will remain strong as a younger generation buys gold online, even if demand falls slightly this quarter from the first.

Acquisitions by China Gold would revive a mostly moribund market for gold mergers and acquisitions. This has been seen in both the mining and investment segments of the gold market. Indeed, the German refinery and bullion wholesaler Degussa’s acquisition of small UK bullion retailer, Sharps Pixley, in November 2013 was one of the only deals seen in the investment sector in recent years.

Mr. Song said that his company is searching for opportunities in the gold and silver markets. “The growing strategy is very clear: We are going out looking at things globally,” he said through an interpreter. “We have a few opportunities, at different stages.”

He said the company’s current preference is for assets in countries near China, such as Mongolia, Russia and in Central Asia. It also is looking for acquisitions in developed countries such as Canada, Australia and the U.S.

A third option is in developing countries, including in Africa and South America. “The political situation has to be stable,” he said.

?Bullion Coin And Bar Global Price Match Guarantee

Mr. Song said he talked last week with Barrick Gold Chairman John Thornton. Barrick is the world’s largest gold producer. Barrick has placed a priority on establishing long-term relationships with Chinese partners. “Both parties are looking for potential opportunities jointly,” Mr. Song said.

China Gold is working on potential partnerships with both Barrick Gold Corp., Newmont Mining Corp. and Kinross Gold Corp its president said on Tuesday.

If China’s largest gold producing company is successful, the alliance would bring one or both of the world’s largest western gold mining companies closer to China. It could mean an important new source of supply for the insatiable demand that is coming from China.

Zhongyuan Gold Smelter Co Ltd, is the largest gold refiner and bar refinery in China and part of China National Gold Group Corporation (CNGGC), is a subsidiary of China Gold Co Ltd (Zhongjin Gold Co Ltd), which is headquartered in Beijing.

The refinery works closely with an associated company, China National Gold Group Gold Jewellery Co Ltd, which is also headquartered in Beijing and responsible for the design and sale of CNGGC-branded gold investment bars and other bars and products for the retail gold market in China.

Gold Kilo Bar

Sanmenxia City, which is built on the west bank of the Yellow River, is known as “Gold City”, in recognition of the importance of the city and Henan Province to China’s gold industry.

For 53 years the Chinese people were banned from owning gold. But that all changed in 2003, and now the enormous demand by 1.3 billion Chinese over the last ten years is causing an important paradigm shift, as gold and silver moves from the West to the East.

Another factor in the paradigm shift is official Chinese demand from the People’s Bank of China (PBOC) who are diversifying some of their massive foreign exchange reserves, some $3 trillion, into the much smaller physical gold market.

The ramifications of that paradigm shift have yet to be appreciated.

? Owning physical gold in the safest way possible remains vital:  7 Key Gold Storage Must Haves

via Zero Hedge http://ift.tt/Uf78tU GoldCore

Who could have possibly foreseen this?

A year ago we wished TEPCO the best of luck with the construction of the “Game of Thrones”-esque 1.4km giant wall of ice that was designed to surround the exploded Fukushima power plant and slow the movement of irradiated water below the damaged reactors, preventing it from flowing over into the ocean and surrounding land. A plan so idiotic we were at a loss for words trying to list the ways it could go wrong (we didn’t bother with how it could go right because it clearly couldn’t).

And, as it turns out, making a project overly complicated and ridiculous doesn’t assure it will be a success. Quite the contrary. As Japan JIJI reports, Tepco said the project, which remains in its early stages, is experiencing a problem with an inner ice wall designed to contain highly radioactive water that is draining from the basements of the wrecked reactors.

A Tepco spokesman added that “We have yet to form an ice plug because we can’t get the temperature low enough to freeze the water.”

Oh, you mean to say that a he plan whose success relies on freezing water may fail because… it is impossible to get the water to freeze? Truly some of the smartest Japanese scientists must have been behind this brilliant strategy, or at least those who were not involved in the planning of the BOJ’s QE program of course.

The underlying idea was simple enough… on paper.

Trenches are being dug for a huge network of pipes under the plant that will have refrigerant pumped through them. If successful, it would freeze the soil and form a physical barrier, significantly slowing the rate at which uncontaminated groundwater flows into the reactor basements and becomes contaminated.

 

The coolant used in the operation is an aqueous solution of calcium chloride, which is cooled to minus 30 degrees. The ice wall employs the same technology as the trench project and involves the same contractor, Kajima Corp.

Alas, the reality is proving to be far more complicated than theory – just ask the Fed:

The idea of freezing a section of the ground was proposed last year. Engineers have used the technique to build tunnels near watercourses. But scientists point out it has never been used on such a large scale, or for the length of time Tepco is proposing.

 

Coping with the huge amount of water at the plant is proving to be a major challenge for Tepco, as it tries to clean up the mess after the worst nuclear disaster in a generation.

 

As well as having to collect vast quantities of water used to cool the melted down reactors, Tepco has been pumping up and storing water that drains down from inland mountains to the sea.

 

Full decommissioning of the plant is expected to take several decades. An exclusion zone remains in place, and experts warn that some former residential areas may have to be abandoned as settlements because of persistently high levels of radiation.

May have to be abandoned? Can’t Japan just raise the minimum safe radiation dosage as it did back in 2011. That way people can assume they are still safe. And after all the whole exercise is to boost confidence, isn’t it.

In conclusion: “We are behind schedule, but have already taken additional measures, including putting in more pipes, so that we can remove contaminated water from the trench starting next month,” a spokesman said.

Wait, wasn’t the issue the temperature of the water, not the number of pipes. Oh who cares anyway, as long as someone pretends to be doing some work to “fix” the world’s worst nuclear accident in history, having long since surpassed Chernobyl in severity. One can’t have the locals realize the government is hopeless and that the Fukushima situation was a complete disaster from the start, and what’s worse, one which can not be fixed. Especially now that Abenomics has failed, and the Nikkei is still down for the year, thus not providing the required dose of distraction from an increasingly irradiated life.

via Zero Hedge http://ift.tt/1iIp062 Tyler Durden

Many market participants are scratching their head as to whether the low VIX levels are an anomaly or some kind of utopian new normal. JPMorgan's Quant Derivatives shop warns the current environment is not similar to the great moderation of 2004-2007 as volatility appears to be disconnected from fundamentals and pressured by structural effects, including central bank intervention, low trading volumes, and pressure from option hedging. Crucially, based on an examination of 'gamma imbalances', the current (low) volatility regime may change significantly after the June expiry.

As JPMorgan explains…

Low Volatility – Anomaly or a New Normal? Many clients have asked us whether the low VIX levels (1M median: 11.7) are an anomaly or a new normal. We have heard analysts arguing that the low volatility is fundamentally justified and the current environment is similar to the 2004-2007 time period. To assess current levels of volatility, we have analyzed the VIX in light of recent Macro data, Volatility of other asset classes, and various structural drivers. Our view is that the current environment is not similar to 2004-2007 as volatility appears to be disconnected from fundamentals, and pressured by structural effects. In our recent report on the VIX, we analyzed the ability of employment, manufacturing, consumer and housing data to forecast the VIX. Most of these macro series indicate that the VIX is about 3 points too low (historical success rate of these forecasts was 60-70%). During the 2004-2007 time period, these same macro models showed the low levels of volatility at the time were fairly priced.

Volatility in other asset classes such as rates, FX, commodities and credit spreads have also been very low. Some of the measures (such as G7 FX, Rates, and Oil volatility) are in fact at absolute all-time lows (VIX is in the 25th percentile of the 2004-2007 low volatility range). The only exception is credit spreads which are moderately higher now than during 2004- 2007. In addition to low levels, most cross-asset volatility time series (85%) have been declining in the last month – a signal that does not point to an imminent increase in volatility.

To further understand the current low volatility levels and compare it to the 2004-2007 time period, we looked at levels of market activity and structural drivers of volatility. Firstly, there is much less trading activity now as compared to the 2004-2007 time period.

Figure 3 below shows a nearly 50% decline of equity share volumes since 2007. Volume and volatility are highly correlated (Figure 4, current low volumes/volatility are denoted with a red dot). Volatility and volumes are linked by a positive feedback loop (lower volumes lead to lower volatility and vice versa).

Lower market activity is likely due to relative decline in activity of levered investors such as hedge funds and prop desks, and relative increase from less active investors such as corporates performing buybacks, or asset managers increasing equity allocations. Relatively high valuation of equities is also not supportive of higher volumes and volatility, as value-driven investors gradually step away from the market. Low realized volatility and the low yield environment further invite volatility sellers of all shapes and forms which is putting further pressure on implied volatility measures such as the VIX.

In addition to low trading activity and option selling, volatility has been under pressure from the hedging of options. Figure 5 above shows the S&P 500 call-put gamma imbalance that has recently reached all-time high levels. Gamma (per 1% S&P 500 move) of call options was $25bn higher than the gamma of put options last week. As investors on average tend to sell call options and buy put options, hedging of these positions puts pressure on realized volatility and this pressure is higher than it has ever been.

In summary, we see the current market environment as different from 2004-2007. Volatility appears to be too low and disconnected from fundamentals. However, the low yield environment and support from central banks is currently keeping volatility low not just in equities but across asset classes.

Additionally, equity volatility has been held down by low trading activity and option hedging pressure. As we will discuss below, some of the option-related pressure on volatility will abate after the June expiry, which could result in higher realized volatility.

One more thing…

Option Expiration: About $900bn of S&P 500 option notional is expiring this Friday.

The current ratio of Put to Call contracts outstanding is ~2 which is near all-time high levels (98th percentile over the past 15 years). The high ratio of Puts to Calls may on the surface suggest that investors are well hedged and bracing for a market decline. However this is not the case as most of the put options are far out of money and ineffective at current market levels. Figure 9 below shows S&P 500 options open interest by strike. Currently, ~80% of put open interest is below the 1850 strike and would not be an effective hedge for a ~100 point market pullback. This is also illustrated by the directional exposure (delta) of put options that is only ~$40bn (on ~$650bn of June Put notional open interest, i.e. the average delta for all June puts outstanding is only ~6%).

While it is hard to forecast if and how investors will roll these put options, the directional impact of rolling protection to higher strikes could have a negative impact on the market. Assuming naively that clients are long puts and short calls and roll all June options (calls and puts) 3 months out and 100 points higher, this would lead to an incremental change in total delta of negative ~$100bn of S&P 500.

Despite the high put-call ratio, the total gamma of calls is currently ~$15bn larger than the gamma of puts, which is pressuring realized volatility lower. However, about $10bn of this call imbalance will expire on Friday, leaving more balanced gamma positions thereafter. In addition, we think that if a significant amount of June puts (~$650bn of put notional) is rolled to higher strikes, it will further increase the put gamma. This in turn would be supportive of higher realized volatility post June expiry compared to realized volatility over the past month.

via Zero Hedge http://ift.tt/1qu81Mr Tyler Durden

Two things became abundantly clear during today’s Yellen press conference: i) the Fed no longer has any idea what it is doing, or where it is steering the economy, exemplified by the Chairwoman’s response that she has little “confidence” in the Fed’s current set of forecasts (because one can be wrong only for so long about the economy before one indeed loses all confidence in one’s abilities), however since everyone is benefiting for now as the asset bubble is still growing and asset prices are still rising, there is nothing the Fed will change about its current line of action and ii) the Fed has no idea how or why unemployment – as massaged as it may be courtesy of tens of millions of Americans dropping out of the labor force – is as high and as structural as it is.

Of course, all of this should have been quite obvious to everyone else years ago when trillion after trillion in excess liquidity did nothing to stimulate the economy (as can be seen in the -2.0% GDP Q1 GDP is set to print in its final revision), and certainly nothing to boost employment, particularly long-term unemployment – those who are out of work for 12 months or more – to above-consensus levels.

So it appears there is something far more structural with America’s long-term unemployment problem, something not even the “smartest academics in the (Marriner Eccles) room” can diagnose. Surprisingly, earlier today Gallup reported one factor that may be contributing to America’s unemployment malaise – the same problem that is the reason for the insolvent US welfare state coffers: obesity.

According to Gallup, Americans who have been out of work for a year or more are much more likely to be obese than those unemployed for a shorter time. The obesity rate rises from 22.8% among those unemployed for two weeks or less to 32.7% among those unemployed for 52 weeks or more.

How does Gallup keep track of the Body Mass Index of America’s millions of unemployed?

Gallup tracks U.S. obesity levels daily using Americans’ self-reported height and weight to calculate body mass index (BMI) scores as part of the Gallup-Healthways Well-Being Index. Individuals with BMI scores of 30 or higher are considered obese. The Gallup-Healthways Well-Being Index also tracks the percentages of Americans who report that they have ever been diagnosed with various health conditions related to obesity, including high blood pressure, high cholesterol, and diabetes.

 

These results are based on nearly 5,000 interviews throughout 2013 with the long-term unemployed (defined by the Bureau of Labor Statistics as being unemployed for 27 weeks or more) and more than 13,000 interviews with the short-term unemployed (those out of work for less than 27 weeks).

 

Gallup and Healthways also track the percentages of Americans who say they currently have or are being treated for health conditions such as high blood pressure and high cholesterol. In both cases, the differences between the short-term unemployed and the long-term unemployed are striking: Those who have been jobless for 27 weeks or more are nearly twice as likely to say they currently have high blood pressure, and to say they have high cholesterol.

Gallup’s shocking finding: Americans who have been unemployed for less than 27 weeks are somewhat less likely than those with jobs to have each of these conditions.

But is unemployment the cause of obesity, or vice versa, are the obese Americans simply more unwilling to look for work, or are just considered less “attractive”, less hireable, and more of a “health insurance cost” threat to potential employers?

While these results offer evidence of a strong relationship between unemployment and obesity-related health concerns, the causal direction is not clear. Unemployment may cause some people to engage in behaviors that lead to health problems, while pre-existing health conditions may make it harder for others to find and keep work. For many individuals, both dynamics may be at work, perpetuating a negative cycle of declining job prospects and worsening health.

Gallup observes that jobless Americans may be more likely to fall into such a cycle if a higher incidence of health problems hinders their efforts to find a good job. Those out of work for 27 weeks or more report experiencing an average of 4.7 days out of the past 30 when poor health kept them from doing their usual activities. That compares with an average of 2.8 lower-productivity days for those unemployed for a shorter period, and just 1.4 days for full-time workers.

Over the longer term, one of the most worrisome implications of these relationships is that many of those who have been unemployed for a prolonged period may suffer chronic health problems even if they successfully re-enter the workforce. A 2009 study of Pennsylvania workers laid off in the 1970s and 1980s found that even 20 years later, these workers were 10% to 15% more likely to die in a given year than those who had not suffered a job loss.

Gallup’s conclusion:

With record-setting rates of long-term unemployment in most U.S. states, the health consequences of extended periods of joblessness have become a rising concern for policymakers. The Gallup-Healthways Well-Being Index makes it possible to examine health and well-being conditions associated with long-term unemployment more closely than is possible using smaller-scale studies. Importantly, the tracking data can be aggregated to produce the large sample sizes necessary for studying well-being among specific employment groups.

One key concern raised by the current analysis is that employers in industries that require manual labor, such as manufacturing and construction, may be less likely to hire candidates who are clearly out of shape. If so, workers in these industries — who already earn lower wages, on average, than those in knowledge-based sectors — may be even more likely to be caught in a negative cycle of joblessness and poor health.

And there is another aspect, one where Obamacare also comes into play: private employers’ high healthcare costs might lead them to avoid taking chances on those who pose greater health risks, particularly in a tenuous economic climate. As a result, candidates who are obese and who have been unemployed for 27 weeks or more may have two strikes against them even before they sit down for an interview.

So perhaps instead of dumping trillions into the stock market in hopes this record “wealth”, already accruing to the wealthiest 1%, will trickle down to the average American, a far better use of the Fed’s cash would be to launch weight-loss initiatives for America’s record obese population: perhaps offering a monthly prize of $1,000 for every 10 pounds that Joe Sixpack manages to lose, and keep off every month. While it is arguable if this will help solve America’s unemployment (and obesity) problems, it certainly will lower US healthcare costs in the long-run, and will also make for a far more fit population… At least until those who are not obese and also can’t find a job accuse the Fed of discriminating against them.

Of course, considering the efficacy of the Fed’s behavioral experiment this could simply backfire and force ever more Americans to become obese in hopes they too will be “subsidized” by free taxpayer money to lose said weight.

Perhaps, in retrospect, there is no fixing these two intertwined problems. Which leads to a sad conclusion: America’s population may be increasingly unemployed, but at least it’s fat…

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