Saturday, 17 September 2016

Macro and Credit - Broken Arrow

"The seed of revolution is repression." - Woodrow Wilson, American president
While watching with interest unfolding our cross-asset correlation fears with equities, bonds, gold, oil and the lot getting the proverbial "sucker punches" thanks to VaR (Value at Risk) shocks and given Japan's on-going economic predicaments, we reminded ourselves the military code meaning of "Broken Arrow" when selecting this week's title analogy. "Broken Arrow" is a US military code phrase used at the last resort when a ground unit is facing imminent destruction from enemy attack and therefore needs all available air forces assets within range are to provide air support immediately. During the Battle of Ia Drang in Vietnam that took place on November 14–15 1965, as the battle along the southern line intensified, Lieutenant Charlie W. Hastings (USAF liaison forward air controller) was instructed by Lieutenant Colonel Hal Moore of the 7th Cavalry, (based on criteria established by the USAF) to transmit the code phrase "Broken Arrow", which relayed that an American combat unit was in danger of being overrun. When we look at the vicious rise in volatility, which is at the core of any allocation process, which we discussed in our previous conversation and what it entails for Risk Parity Strategies, Vol Control products and balanced funds getting "unbalanced", we do share the same concerns from various pundits such as Mark Spitznagel that, if indeed the Fed decides to "surprise" the market with a rate hike, things could indeed turn "south" very rapidly given that as our quote goes the seed of revolution is in our case "volatility" repression thanks for the actions of "The Cult of the Supreme Beings" aka central bankers. As we re-iterated in our previous rambling, "cash" is a "strategy" and given the potential risks that lies ahead (think Italy and more...), we think that rather than calling for a "Broken Arrow" to defend your positions from being "overrun" due to "herd mentality" and rapid deleveraging, you would be very wise to increase your cash levels accordingly in the current environment. While you might be at the mercy from yet another dovish Fed which would indeed be a catalyst for maybe yet another melt-up in assets, we do think that from our "credit perspective", we are indeed in the last innings of this credit cycle and we would stick with "Smart Alpha" (High Quality Investment Grade) rather than going for "Dumb Beta" (High Yield and High Dividends stocks) at this stage.

In this week's conversation we would like to look again at the dangerous paradigm of "repressed volatility" with "lower liquidity" and what it entails from a risk perspective for supposedly "diversified" strategies. We will also look again at "impaired" banking systems in Europe and why we continue to avoid like the plague "European banking stocks" such as Deutsche Bank due to their Investment Banking franchise being "broken" as well as it isn't only NIRP that is damaging their Net Interest Margins (NIM) on the "retail" side.

  • Macro and Credit - The seed of "repricing" is "volatility repression"
  • Macro and Credit  - Broken Investment Banking franchises in Europe, time for some players to call it a day.
  • Final charts: The business cycle is turning and storm season is coming

  • Macro and Credit - The seed of "repricing" is "volatility repression"
While last week we touched on the rising costs in hedging strategies for insurers in conjunction with the "fast deleveraging" risks for some "leveraged" strategies that doesn't mix well with "herd mentality" when everyone is investing the same way in a poor liquidity environment, we think, that when it comes to the risk of being "overrun" and a case for calling for a "Broken Arrow", no matter how repressed volatility has been, it is bound to go higher which, in the current environment will have a significant impact on supposedly "diversification" strategies. When it comes to raising your cash levels, anything worth doing is worth "overdoing" in this central bank manipulated environment we think. When it comes to the new paradigm of low volatility and poor liquidity, we read with interest Bank of America Merrill Lynch's take in their Securitization Weekly Overview from the 9th of September entitled "The poor liquidity-low volatility paradigm":
"The poor liquidity-low volatility paradigm 
Arguably, the post-Brexit collapse in market volatility is the dominant story in financial markets these days. Many market participants, including the BofAML Quantitative Strategy team, think a pickup in volatility in the fall is likely. The Fed, US presidential election, seasonality, and the principal of mean reversion are some of the factors cited by various market participants as reasons for an increase. Stated somewhat simply, the view on historically low volatility seems to be: “this cannot last; it always goes higher.”
While the arguments for higher volatility are compelling, we explore the possibility that low volatility may simply be the central banker offset to the new, post-crisis regulatory regime that has substantially reduced market liquidity, which we measure using the BofAML Liquidity Stress Index. We note that while volatility has declined recently, liquidity stress remains stubbornly high, which should constrain central bank policy tightening.
This has been a consistent theme of ours for years. For example, published almost three years ago, our 2014 Securitized Products Outlook was titled “Regulatory tightening sustains monetary easing.” The argument has been a simple one: the highly restrictive post-crisis regulatory regime is a primary factor contributing to low global growth (we think ageing demographics is the other big factor), which has forced global monetary policy to remain exceptionally accommodative. In turn, this historic accommodation has reduced market volatility to historic lows.
One always has to be extra careful about positing new paradigms, since oftentimes the mere act of offering the characterization usually marks the end of the conditions that define the so-called new paradigm; but we posit it anyway. In our view, what could end the poor liquidity-low volatility paradigm is a sustained shift to less accommodative policies, such as the Fed tried with its December 2015 rate hike; but such a shift could well be catastrophic.
As we now know, the spike in liquidity and financial stress in early 2016 forced the Fed into a multi-month retreat from further tightening talk, while other central banks eased further. Recent statements make it clear the Fed wants to tighten again, even as the market remains dubious: current probabilities of hikes by September or December are 30% and 60%, respectively. We share the market doubts about September, which tells us volatility can remain low. But the Fed’s surprisingly hawkish Jackson Hole rhetoric makes us cautious about our view.
After strong post-Brexit performance across most securitized products, and the risk of a September Fed hike (the BofAML house view is December), we turn neutral on securitized products credit and agency MBS. Given liquidity considerations on the credit side, we don’t like to shift allocations too often. But, in the wake of Jackson Hole, the risk for the near term is too high for our liking, and remaining overweight seems imprudent." - source Bank of America Merrill Lynch
Indeed, being "overweight", for the time being is, we think fraught with danger in the near term and looking at the recent macro data as of late, if indeed, the markets does suffer again from "optimism bias" and the Fed decides to pull the proverbial rugh under investors' feet by hiking, then markets would indeed face a much more nasty reaction than during Brexit.

The "rate hike" risk remains elevated as posited by Bank of America Merrill Lynch's report while their Financial Stress index remain elevated:
"While the arguments in favor of higher volatility are compelling, and an increase over the near term seems likely, as we discuss below, we think the case for low volatility remains in place. We still believe that the combination of ageing demographics and a restrictive post-crisis regulatory regime (which has substantially reduced market liquidity) forces central banks to remain exceptionally accommodative and that it is this reality that keeps volatility at historically low levels. Periods of heightened volatility are indeed possible, as central banks attempt tightening or cease easing, but the past few years have shown them to be relatively short-lived.
If the Fed hikes in September, at least a modest replay of early 2016 market volatility is possible. This may sound like a change from our recent assertion that the probability of a market-disruptive Fed hike is low. It’s not. It would simply be that the low probability scenario is realized. In other words, the assumption of exceptionally accommodative monetary policy would no longer be valid. The shift to neutral on securitized products is an attempt to balance near term uncertainty on the Fed and the longer term constructiveness on securitized products that we have articulated in recent months. 
The poor liquidity – low volatility paradigm: liquidity stress remains elevated 
One possible reason for a September Fed hike is that financial stress has declined substantially in the post-Brexit period. Chart 2 shows the BofAML Global Financial Stress Index (GFSI) dropping over the past two months, through the 30, 40, and 50- week trend lines, to the lowest level in over a year.

The upward trend that started in mid-2014 appears to have reversed, and seemingly gives the Fed room to hike.
But if we consider a sub-index of the GFSI, the Liquidity Stress Index (Chart 3), the picture is less benign. Liquidity stress has declined in the post-Brexit period, but it is still elevated by historical standards.  

For context, the current level of 0.53 was observed in November 2007. As Chart 4 shows, by that time, the Fed had already begun to cut the Fed Funds rate, and was on its way to zero over the next year.

In other words, the current level of liquidity stress triggered massive easing in 2007, not tightening, as the Fed is now discussing.
The Chart 5 comparison of the Liquidity Stress Index (LSI) with the broader GFSI over the past year and a half shows two things:
First, the current gap between the broad GFSI and the LSI is very high; in other words, although broad financial stress has declined substantially in the post-Brexit period, the decline in liquidity stress is far more modest.
Second, the gap between liquidity stress and broader financial stress has tended to be closed by a sharp rise in financial stress (GFSI). Consider October 2015, when the GFSI of 0.06 was near the current level of 0.08. Over the next 3+ months, the GFSI rose to a peak of 0.85 and closed the gap to the Liquidity Stress Index. 

The takeaway is straightforward. A September Fed hike could quickly reverse the post-Brexit decline in financial stress and cause a surge to the upside, which in turn could create at least a modest repeat of the market sell-off of late 2015-early 2016. The BofAML Economics team, which is calling for a December hike, has repeatedly stressed that the Fed is risk averse and will be very cautious as it goes about raising rates (see The Fed’s cacophony of sound”). Based on this characterization, it seems unlikely to us the Fed would risk a replay of another market meltdown. The more prudent path would seem to be to allow liquidity stress to decline further over the next few months and hike in December. Nonetheless, this is the chart that gives us greatest cause for concern, and pushed us to turn to neutral on securitized products. Post-Jackson Hole, a Fed-induced replay of October 2015-February 2016, where the GFSI rises sharply, seems quite possible.
The volatility-liquidity stress connection 
Chart 6 and Chart 7 provide long term views of liquidity stress relative to rate and equity volatility.

The differences between the pre-crisis and post-crisis data struck as noteworthy. Pre-crisis, liquidity stress was generally quite low, while volatility, especially rate volatility, was generally elevated. Post-crisis, liquidity stress is relatively elevated, while both rate and equity volatility have been relatively low

We believe elevated liquidity stress is a direct result of the highly restrictive regulatory regime implemented in the wake of the financial crisis (higher capital charges, liquidity ratio tests, proprietary trading restrictions, etc.). We also believe this elevated liquidity stress, or poor market liquidity, constrains the ability of central banks to tighten monetary policy (see our 2014 Securitized Products Outlook, “Regulatory tightening sustains monetary easing” for an earlier discussion).
The reaction to the Fed’s December 2015 rate hike, when liquidity stress was already high (about the exact same level as today) and the GFSI and volatility surged in the subsequent weeks, was a recent example of what happens when the constraint is not recognized by central banks – market meltdown. The Fed’s eventual reaction to that volatility surge – shelving additional tightening plans – highlighted the market feedback loop at work: the liquidity constraint will eventually be acknowledged and volatility will have to be forced lower before tightening talk starts again. The coincident surges in both liquidity stress and volatility in 2008 provides insight into what happens when they simultaneously move higher – crisis. We make the assumption that crisis is an unacceptable outcome.
This is our poor liquidity-low volatility paradigm succinctly explained. Due to the post-crisis regulatory regime, elevated liquidity stress is likely here to stay; the system cannot tolerate simultaneous elevation in liquidity stress and volatility; if tighter monetary policy leads to higher volatility, and high liquidity stress is permanent, then tighter monetary policy is not possible. The paradigm hypothesis may soon be tested. " - source Bank of America Merrill Lynch
Unfortunately, for the Fed and other central banks, the higher are cross-asset correlations, the larger will be standard deviation moves, the more unstable financial markets will become due to "Mechanical Resonance" thanks to poor liquidity and heightened volatility. As a reminder, "Mechanical Resonance" is the tendency of a mechanical system to respond at greater amplitude when the frequency of its oscillations matches the system's natural frequency of vibration (its resonance frequency or resonant frequency) than it does at other frequencies. It may cause violent swaying motions and even catastrophic failure in improperly constructed structures including bridges, buildings and airplanes—a phenomenon known as resonance disaster. In similar fashion, thanks to central banks meddling with "risk signals" such as interest rates and "volatility" (which is at the core of any allocation process again), playing with "cross-asset" correlations by messing with the signals will eventually lead to "Mechanical Resonance" at some point and trigger a "Broken Arrow" call from supposedly "diversified" players all having the same allocations and positions on. The trouble is that many pundits do not realize yet how depleted are central banks' ammunition depot. This will lead to more "unconventional" responses from "The Cult of the Supreme Beings" aka central bankers rest assured.

Of course as we posited last week, we are already seeing trouble brewing in "Risk Parity strategies" thanks to "Mechanical Resonance" triggered by a surge in "interest rates" volatility. This is as well clearly indicated in Bank of America Merrill Lynch Liquid Insight note from the 15th of September entitled "Getting unreal":
"Risk parity unwind 
One of the most talked about themes recently has been the impending unwind of levered risk parity portfolios (see here and here). Our equity analysts estimate that the recent moves (bond and equity sell-off) could trigger as much as $50bn in bond selling from risk-parity type investors. While data on holdings is minimal, the influence of risk parity deleveraging on real rates is clear from Chart 1 and Chart 2. 

As the correlation between equities and nominal bond yields turn negative, the risk parity community delevers, resulting in a sustained underperformance of real yields. While it is easy to think this is because risk parity performance mirrors nominal bond yields, our Chart of the day makes the compelling case that this is purely a real rate phenomenon.

If anything, risk parity underperformance has historically meant higher real rates and lower breakevens, with the breakeven beta being about half the real rate beta. This relationship is the primary reason why we would rather be short real rates as opposed to nominal rates for an unwind of the risk parity theme. Further, anecdotal evidence in both the taper tantrum and the China reserve sales episodes also support this view: real rates increased, breakevens declined as average risk parity performance fell more than 5%.
To us, the focus on risk parity unwinds is here to stay even beyond the next couple of weeks. As the polls for the US elections narrow further, higher volatility and increasing likelihood of fiscal stimulus will keep this theme alive." - source Bank of America Merrill Lynch
Now of course, if indeed "real rates" shoot up thanks to "Risk Parity Strategies" forced deleveraging, what is of interest to us has been in 2016 the return of Gibson's paradox. Given Gold price and real interest rates are highly negatively correlated - when rates go down, gold goes up. When real interest rates are below 2%, then you get bull market in gold, but when you get positive real interest rates, which could potentially be the case with a possible rally in the 10 year US government bond if we get a surprise rate hike that is, then of course, gold prices will go down as a consequence of the interest rate impact and gold miners will go down as well. This would lead to further "cross-asset correlations" playing out on the downside that is.

When it comes to additional banking woes in conjunction with the recent surge in volatility in the bond space, the recent large fine imposed on German Deutsche Bank continues to validate our long standing distate for European banks stocks and our much vaunted, yet more stable preference for credit when it comes to having some "banking" exposure. In our next point we will look at that not only NIRP has been a headwind for NIM (Net Interest Margins) as of late, but, European banks versus their American peers are as well facing a risk of "Broken Arrow" when it comes to their Investment Banking franchise.

  • Macro and Credit  - Broken Investment Banking franchises in Europe, time for some players to call it a day.
Many European banks when on to a hiring spree in 2010 following the significant bounce in 2009 as they were saved by central banks and by the suspension of the "mark-to-market accounting rule" as they believed that the "good days" were coming back. On our side we always believed that the changes facing banks were more structural in nature and kept thinking in terms of analogy that the banking industry would be facing a wave of restructuring not to dissimilar to what the Steel Industry went through in Developed Markets (DM) at the beginning of the 80s. As per our conversation "Thermidor" in August, we continue to disregard the "value" argument put forward by some pundits about the "cheapness" of the sector given, for us, a bank is the second derivative play on the economy and as a pure "beta" play, it is tied to changes in "credit impulse" leading to an acceleration of economic growth. As far as we are concerned, the "japanification" process in Europe runs unabated and the restructuring of the banking sector in Europe has only just started:
"We will not re-iterate why we dislike banks stocks and in particular European banks stocks given the "japanification" process and the significant on-going deleveraging. If there is indeed some clear culprits when it comes to "capital destruction" thanks to Zero Interest Rate Policies (ZIRP) and now with Negative Interest Rate Policies (NIRP), the blame is entirely on the shoulders of our "generous gamblers" aka central bankers and their experiments." - source Macronomics, 5th of August 2016
Not only are European banks facing earnings headwinds thanks to NIRP, but, when it comes to their Investment Banking franchises, some players are clearly facing too many hurdles to continue to make a case to maintain highly regulatory capital intensive activities such as Investment Banking. On this particularly subject we read with interest Société Générale's take in their Global Investment Banking note from the 15th of September entitled "Making sense of broken business models":
  • "I-bank sector’s ROE looks set to be only 6.2% in 2016, much lower than the COE (which we deem to be a simple 10%).
  • Most I-bank products achieve lower than 10% COE.
  • The bulk of capital continues to be allocated to the lowest return FICC products. Less capital-intensive equities products have higher profitability. Primary IBD products (especially DCM and M&A) are the most profitable of all.
  • US I-Banks have greater market share and more leadership positions compared with European peers.
  • European I-Banks are deleveraging in order to become smaller but more profitable niche players.
  • JPM continues to strengthen its position as the dominant “flow monster”, pulling away from GS, C, BoA and DBK.
  • Substantial capital can be released back to shareholders from winding down investment banking business, especially FICC.
  • CS has a CHF2.8bn capital deficit, DBK has €12.5bn deficit. Significant deleveraging could more than solve these capital deficits and put the banks in an excess capital position. Realistically, we think CS management is the one most likely to consider further deleveraging at its forthcoming strategy day (which should be on 7 December).

- source Société Générale

It should not come as a surprise that with the on-going "deleveraging" exercise taking place for many players, ROE has come down in conjunction with leverage and rising cost of regulations and new capital rules set up.

But, given recent woes for Germany's banking champion Deutsche Bank, it is interesting to note that, when it comes to its Investment Banking franchise, it is at risk of having a case of "Broken Arrow" as displayed in Société Générale's very interesting report:
  • Very weak capital strength has forced significant deleveraging. Cuts to the bonus pool have also caused significant revenue attrition. Core I-bank ROE is set to be only 2.6% for FY16e. Most products across the board have very weak ROEs.
  • DBK commits the bulk of its capital to FICC. Rates trading should have put DBK in a good position for decent revenue growth in 1H16 (similar to JPM), but it ended up being the third-worst FICC performer over the period. Franchise weakness is a key issue we think.
  • We believe DBK’s I-bank is a broken franchise and needs to be wound up almost entirely, leaving just a minimal platform to service its commercial clients. Doing so would release up to €35bn in equity, which would more than plug its €12.5bn equity deficit." - Source Société Générale
Not only is Deutsche Bank's struggling with legal issues, but, when it comes to the ROE of its FICC franchise at a very low 2.6%, one might wonder how long this will go on, until the music stops.

Furthermore, for pundits still believing in the "relative value" proposal of investing in bank stocks rather than having a less volatile credit exposure, we could add that as displayed by Société Générale, if the trend is your friend, when it comes to investment banking activities, revenues have gone down since 2009:
Total capital markets revenues have been declining since 2009 due to:
  • Tougher regulation (higher CET1 and leverage ratio requirements, Basel 2.5 mRWA inflation) 
  • Central bank QE measures – asset purchase schemes drain liquidity from trading 
  • Deteriorating macro conditions, as over-leveraged countries reach the limit of supply-led GDP growth
We expect modest growth from 2016e due to slightly stronger GDP growth and inflation. There are downside risks, however, from i) further deleveraging of I-banks; and ii) global asset deleveraging causing a recession." - source Société Générale
We do share Société Générale's concerns when it comes to the downside risks and when it comes to our profound dislike for European banks stocks in general, it will continue, rest assured as we continue to prefer the stability of Senior Financial bonds which benefits from the current "implicit" backstop from the ECB.

Still, should you want to have "stocks" exposure to the banking sector, from a cost/income ratios approach, you would be better off with having American exposure than European exposure as posited by Société Générale:
The most efficient banks have:
  • An intense focus on keeping structural costs low
  • A keen eye on integrating technology
  • Revenues with low volatility and steady growth
  • Strong capital adequacy
US banks are more efficient than European banks for most of the above reasons. Looking more specifically to I-bank operations, the US banks also are better than their European peers. A big caveat is that that the CIB operations of the US banks tend to include much more significant corporate banking, transaction banking, securities services and similar (i.e. non-capital markets) activities compared with their European peers, which makes the overall CIB ratios appear lower. We still believe that US I-banks have lower cost/income ratios in pure capital markets activities than their European counterparts." - source Société Générale
But, if you believe, like ourselves, that the US economy is weaker than expected and is slowing down as per the latest raft of macro data points, given the performances of the US banking sector as a whole in 2016, it might make sense from a "risk" perspective, to start trimming your exposure, unless of course, you are a firm believer in the Fed's normalization process (we are not...). As far as Europe is concerned, we already made our case that Southern Europe's credit impulse process is a case of broken credit transmission mechanism thanks to weaker banking players in Europe being capital constrained due to "bloated" balance sheets by unresolved Nonperforming loans (NPLs) as in Italy and Portugal.

There you have it, "japanification" in Europe is still up and running and when it comes to "banking woes", we do have the case of "broken franchises" which could lead to some "Broken Arrow" calls. While we have long been vocal about the lateness of the credit cycle, we do think that regardless of the recent complacency coming from "repressed" volatility, there is indeed a large storm brewing as we will show in our final charts for this week's conversation.
  • Final charts: The business cycle is turning and storm season is coming
 In January 2016 in our conversation the "Ninth Wave" we indicated:
"Whereas we disagree with Bank of America Merrill Lynch is with their US economy views, we believe that the US economy is weaker than what meet the eyes and that their economists suffer from "optimism bias" we think (more on this in our third bullet point), but nonetheless high quality domestic issuers are definitely credit wise a more "defensive" play.We think that for "credibility" reasons, the Fed had no choice but to hike in December given the amount spent in its "Forward Guidance" strategy and in doing so has painted itself in a corner. We ended up 2015 stating that 2016 would provide ample opportunities in "risk-reversal" trades. The latest move by the Bank of Japan delivered yet another "sucker punch" to the long JPY crowd. Obviously, should "risk" decide to reverse course in 2016, there will be no doubt potential for significant rallies in "underloved" asset classes such as Emerging Market equities. But, for the time being, the macro picture is telling us, we think that regardless of how some pundits would like to spin it, not only is the credit cycle past "overtime" and getting weaker (hence our earlier recommendations in our conversation) but, don't forget that there is no shame in being long "cash". It is a valid strategy." - source Macronomics, January 2016
It is time, we think to remember that indeed, cash is part of a "defensive" strategy, given many signs are now clearly pointing, such as CCC issuance being shut down, that there is a storm brewing. On this subject we read with great interest another Société Générale report from the 15th of September from their Global Volatility Outlook series entitled "Make hay while the sun shines (and prepare for the storm)" for our final charts of our conversation:
"US focus 
Business cycle update (the storm is coming) 
The data-based Fed policy has the appearance of a self-correcting system. Poor economic data allows for delaying further rate hikes, which reassures investors in the short term, while positive economic data, theoretically makes it possible for the Fed to gradually normalise policy. But the US central bank has remained so cautious for so long that it is now running late. While the labour market is close to full employment, corporate profits have already embraced the downturn, even without the burden of strong wage pressure. When put into historical context and despite a decent bounce in the last quarter (with the Energy sector recovering on more stable Oil prices), US corporate profit margins still are not growing. They are only decreasing less rapidly. This is exactly what you would expect at this time of the cycle (assuming a recession in mid-2019), making this cycle the longest (10 years) in history, alongside the 1991-2001 cycle.
The joint analysis of profit margins and equity volatility, which we have used widely in the past, tell us that equity volatility should be on the rise at this point of the cycle and not close to lows. While end-2015 and early-2016 led us to believe that the trend was underway, Q2 and Q3 look abnormal with the VIX sub 12%. In our view, central bank policy and the low yield environment are the culprits once again.
By delaying the cyclical forces for so long and keeping rates artificially low, the Fed has created an environment which distorts classic analysis frameworks. US equities, despite trading at very high valuations, look more and more like bonds, posting limited but steady returns with low volatility, while bonds are taking on the role of the risky asset.
On a medium- to long-term perspective, the situation looks too imbalanced and the reversal could prove painful. Also worries are mounting over the fact that central banks in general could be vulnerable to external shocks, leaving them with very limited options. In this environment, the hedging theme cannot be ignored and should be handled with care by investors.
Still, the trigger for a full-blown bear market is difficult to pin down. From a tactical standpoint it is fair to say that this regime has proved robust so far and that staying outside US equities is difficult in this low-yield environment Our equity strategists highlight that a very soft Fed (we forecast an exceptionally slow pace of tightening with the next rate hike likely in December this year, two in 2017 and a peak Fed funds rate of 1.5% in this cycle), more fiscal easing, higher oil prices and accelerating M&A all will be catalysts to push the S&P 500 still higher." - Source Société Générale
While some might enjoy continue "playing" another "melt-up", it is time, we think to start thinking seriously about "hedging" as we risk moving into a new higher "volatility" regime following years of "volatility repression" if one wants to avoid having to make that fateful "Broken Arrow" call we think.
"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." -  Henry Ford
Stay tuned!

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