FT : Extreme oil bears bet on $40 crude

The oil market rout has made some investors so bearish they are buying contracts that pay out if prices drop below $40 a barrel — a level last traded during the bleakest chapters of the financial crisis.
Extreme market scenarios are playing out in put options for crude, which give holders the right to sell oil above a set price by a certain date.

The number of options to sell US crude at $40 a barrel by December 2015 was equivalent to 880,000 barrels, after more than quadrupling in the past two weeks, according to CME Group exchange data. Similar options with a $35 a barrel strike price climbed to 669,000 barrels from none.
The option buying took place as West Texas Intermediate crude tumbled almost 40 per cent from its June high to hit $66.74 a barrel on Thursday, hastened by Opec’s recent decision to stay the course on supply.
“It’s a punt, a shot at the worst-case scenario for the oil price,” said Raymond Carbone, president of broker Paramount Options in New York. “You’re a genius if you’re right. And if you’re wrong, it won’t ruin your lifestyle.”
US benchmark WTI futures last settled below $40 a barrel in February 2009.
The appearance of the bearish positions does not mean the market will go that low again. Brokers and bankers said the trades were probably low-risk, low-cost “lottery tickets” for a prospective windfall.
Still, the inability of commodity markets to neatly match rising supplies with lukewarm demand raises the chance of further price declines until drillers cut back.
Potential factors which could drive the oil market towards $35-$40 a barrel include a warm winter in the northern hemisphere that would curb heating fuel demand, or high rates of refinery maintenance in the US Gulf of Mexico oil hub, which would temporarily slow demand for crude, said Jan Stuart, global energy economist at Credit Suisse.
“It’s no longer terribly far-fetched to see a scenario that could create, briefly, such a low price,” Mr Stuart said. Credit Suisse forecasts WTI at $75 a barrel a year from now.

Industry executives said it was highly unlikely that an oil producer bought the put options, as it would be paying a premium to lock in a loss. Instead they pointed to a speculator such as a hedge fund.
Whoever bought the options has already realised a gain: prices of both the $35 and $40 options contracts have doubled since late November.
In aggregate, money managers still held three bullish positions for every bearish one in WTI futures and options, according to the Commodity Futures Trading Commission.
The commission took its latest snapshot on November 25, two days before the Opec decision.

FT : Investing in event-driven hedge funds looks like a lose-los

Not really agree that but worth reading...Journalist don't really get it


FT Article
“I recommend the BlackRed event-driven hedge fund.”
“BlackRed? Don’t you mean BlackRock?”
“No, BlackRed. It’s relatively new but follows a time-honoured strategy. All terribly clever.”
“Really? How does it work?”
“Well, like most event-driven hedge funds, it uses a proprietary screening methodology to evaluate a range of investment opportunities ahead of corporate transactional events – such as mergers and refinancings – that may include arbitraging various debt securities, as well as taking equity positions to gain selective exposure to acquisitions, consolidations, restructurings, bankruptcies and liquidations. Its managers continually scour the market for potential valuation anomalies surrounding these events. Then they make a high-conviction asset allocation call and generally place 100 per cent of investors’ capital on Noir.”
“Noir?”
“Oui. Or rather, yes. But not always. In certain market conditions, they might allocate cash to Impair.”
“As in impaired credit?”
“No, Impair. You know: French for 1, 3, 5, 7 etc, up to 35. You probably call it ‘odd’.”
“I certainly do.”
“Would you rather they put it on 19-36?”
“Hang on. Are you trying to tell me they just bet people’s money at a roulette table?”
“Oh, no, no, no. Sometimes they use a revolving credit facility.”
“Revolving?”
“Well, more like spinning – although that brings some tail risk.”
“Tail risk?”
“Mmm – the coin could come down heads.”
Some investors might wish real-life, event-driven hedge funds offered this risk/return profile. Their actual bets this year – on politically sensitive pharma deals and US mortgage settlements – have proved scarcely more profitable than putting everything on black.
According to Bloomberg, “billionaire John Paulson posted a 14 per cent loss in his firm’s event-driven hedge fund” in October alone – after events at drugmaker Shire and lenders Fannie Mae and Freddie Mac took a turn for the worse. Shire’s shares lost a quarter of their value after AbbVie pulled out of a takeover that would have cut its US tax bill; and holdings in Fannie and Freddie more than halved when a US court rejected shareholder payout claims. These losing bets took the total hit for investors in Paulson’s fund to 25 per cent in 10 months.
Nor was this an isolated run of bad luck. This year, several high-profile funds, including Bill Ackman’s Pershing Square and Richard Perry’s Perry Capital, also placed their chips on Fannie, Freddie and Shire. Tyrus Capital – a $1.4bn event-driven hedge fund based, appropriately enough, in Monte Carlo – lost 10 per cent of its value on the Shire bet alone.
Nor is this unusual. Earlier in the year, so many event-driven hedge funds placed disastrous bets on takeovers of Time Warner and T-Mobile that traders described their attempts at “merger arbitrage” as “#arbageddon”.
By October 31, the average event-driven hedge fund was on a -3.6 per cent losing streak for 2014, as measured by the Hedge Fund Research index – and getting closer to 2011’s annual loss of 4.9 per cent.
Wealth managers who choose hedge funds for clients point out that, in other years, gambling on mergers has paid off. That same index recorded a 13.8 per cent gain last year, and 6 per cent in 2012. You win some, you lose some, they suggest.
Kirsten Boldarin, a director of Stonehage Investment Partners, says: “All strategies can suffer extended fallow periods where an approach doesn’t add value, despite the manager exhibiting long-term competence.”
Pau Morilla-Giner, chief investment officer at London & Capital, reckons investors in hedge funds just need to hedge their own bets. “Equity-focused hedge funds represent just one section of the hedge fund industry and we advise that they are combined with other strategies to better diversify,” he says.
Investors, however, might ask themselves two questions.
First, why are we bankrolling so many managers to play out dodgy hunches? In the third quarter, Hedge Fund Research found that $11.4bn of new capital flowed into event-driven strategies, taking the total invested to $756bn – more than a quarter of all hedge fund assets.
Second, why are we paying managers – including “the billionaire John Paulson” – up to 2 per cent of all their losing bets and 20 per cent of all winnings? Forbes estimates that this fee structure allowed the world’s 25 best-paid hedge fund managers to earn $24.3bn last year.
Some institutions have already decided “rien ne va plus!” Calpers, the largest US pension fund, has taken $4bn off the table, claiming that hedge funds are too complex and costly.
In the meantime, this column can offer a cost-effective insurance policy for all concerned readers: $1,000 to correctly predict the outcome of any corporate event. Or your money back.

Reuters - Battle for Club Med tests regulator's patience

Battle for Club Med tests regulator's patience {http://reut.rs/1zYzAyS}
* Regulator AMF seen unlikely to use sealed bid process yet

* Seen continuing with accelerated auction procedure

* Club Med tussle is France's longest takeover battle


PARIS, Dec 4 (Reuters) - France's financial regulator is speeding up the auction for Club Mediterranee in an effort to end the uncertainty for shareholders, but is likely to hold back from asking for sealed bids for now due to legal risks of a possible tie, lawyers said.

There have been six offers from two rival bidders for the French holiday company. The first dates back to May 2013, and the latest was on Dec. 1.

Including a long period of legal wrangling that froze the process, the battle between Chinese billionaire Guo Guangchang and Italian tycoon Andrea Bonomi is the longest in French stock market history.

Regulator AMF's rules, aimed at making sure the interests of shareholders are served, allow it to intervene after 10 weeks have elapsed. It has two tools at its disposal -- shortening the period one party has to make a counterbid, and calling for "final counterbids" on a given date, with the highest winning.

"This threat has often been brandished but I don't think AMF will want to use the final counterbids procedure given legal risks," said Aline Poncelet, partner at law firm Paul Hastings.

Uncertainty over the outcome is weighing on the business of Club Med, which is already struggling with losses and a weak economy in Europe, its management has said.

Guo and his Fosun group on Monday offered 23.50 euros a share, topping Bonomi by 50 cents, and valuing the all-inclusive holiday pioneer at 897 million euros ($1.1 billion).

Using its accelerator tool for the first time on Nov. 13, the AMF gave Fosun only 12 working days to decide whether to bid again, down from 20 normally. Bonomi now has a matching 12 days, until Dec. 17, to sweeten his offer.

If Bonomi responds, legal experts expect the AMF to stick with its accelerated process, possibly cutting the counterbid period further. Its rules show it can go as low as three days.

Lawyers say one reason the AMF is reluctant to call for sealed bids is the risk of two offers at the same price. Bidders may then have to disclose additional and often sensitive information on their business plans to convince minority shareholders to tender their shares, they say.

"The process becomes a bit of a lottery, a bit angst-creating," said another lawyer, who asked to remain anonymous.

Poncelet said there should also be a natural end to the auction, once offerors see the price go to a level where their business plan sums no longer add up.

"There is no need to use the last auction process," she said.

Aside from the damage the uncertainty may yet cause to their investment, shareholders have done well from the battle to date. Club Med shares are up 70 percent since the saga began.

An AMF spokeswoman said that the regulator was "at this stage" still looking at one offer at a time.

(JPM) U.K. Water M&A More Likely After Ofwat Decision Next Week

U.K. Water M&A More Likely After Ofwat Decision Next Week: JPM
- U.K. water companies’ new PTs include 60% probability of M&A, says JPMorgan.
  • Ofwat determinations due next Friday should offer inflation-linked regulation, allow for financing and operational outperformance
  • Regulatory clarity to “clear the pipe” for M&A
  • See 14% upside to United Utilities (reinstated overweight), 10% to Severn Trent (reinstated overweight) and 3% downside to PNN (reinstated neutral)
  • Takeout valuations give 29% upside to UU, 26% upside to SVT
  • Would sell SSE (UW) and buy into UK Water: JPM
  • NOTE: Ofwat final draft determinations on water and wastewater charges due Dec. 12. Link to Aug. draft determinations

>>> Portugal Telecom: Isabel dos Santos likely to withdraw EUR 1.21bn bid if Oi

Portugal Telecom: Isabel dos Santos likely to withdraw EUR 1.21bn bid if Oi sells PT Portugal 

Isabel dos Santos, the Angolan entrepreneur, will probably withdraw her EUR 1.21bn bid on Portugal Telecom (PT) if Oi proceeds with the sale of PT Portugal, reported Diario de Noticias. The Lusophone daily quoted Mario Silva, an executive in dos Santos' holding company Terra Peregrin, as saying the Angolan investor's EUR 1.35 per share PT bid will most likely be withdrawn if PT Portugal is divested by Oi, the Brazilian telco.

Oi is in exclusive negotiations with Altice on the sale of PT Portugal, the Brazilian group's Portuguese businesses, for EUR 7.4bn. PT holds a 24.6% stake in Oi and could reportedly stymie the sale of PT Portugal by its Brazilian partner.


Source Diario de Noticias

(The Telegraph) Vodafone chief denies bid for Virgin Media owner Liberty Global

Vodafone chief denies bid for Virgin Media owner Liberty Global {http://bit.ly/1vUF2TW}

Speculation of possible takeover of cable giant unfounded, Vittorio Colao tells investors

Vodafone chief executive Vittorio Colao has denied he is planning a colossal takeover of Liberty Global, the owner of Virgin Media, following mounting speculation that a move for the cable giant was in the works.
In a marathon meeting with major shareholders earlier this week, Mr Colao sought to dampen claims he will respond to BT’s efforts to acquire a mobile network by swooping for fixed-line assets across Europe such as Liberty Global.
According to a telecoms analyst present at the summit Mr Colao said he would “happily” look at an acquisition of Liberty Global’s German cable network, if controlling shareholder John Malone wished to sell. Many of Liberty Global’s other assets, such as its networks in Switzerland and Belgium, were not relevant to Vodafone, he added.
Investors balked at speculation a takeover was in the works this week, sending Vodafone shares down 3pc on Monday. Analysts have estimated the cable group would cost Vodafone around £40bn.
“It is clear that banks are positioning themselves and that more than anything is creating noise,” said Nick Delfas, an analyst at Redburn, the broker, in a note to clients.

Mr Colao’s soothing comments were made over the course of a four-hour meeting days after the claims emerged, apparently from the United States.
Such a deal would be too expensive for Vodafone while Liberty Global believes its networks can compete in the mobile market via wholesale deals, said Mr Delfas. Virgin Media’s mobile customers, for instance, are served by reselling access to the EE network.
Mr Colao predicted that Liberty Global will also eventually offer access to its networks on a wholesale basis, a move that in the UK would mean Vodafone, Sky and TalkTalk could offer broadband via Virgin Media’s cables rather than using BT’s.
Mr Delfas said: “Vodafone thinks John Malone’s price would just be too high, while he believes that he can build a mobile business with hardly any capital commitment.
“Vodafone is highly rational about [mergers and acquisitions], does not need to do anything, and indeed Liberty may find it needs to own mobile just as BT appears to be discovering.”
According to Deutsche Bank research, the thought of Vodafone being forced into a takeover of Liberty Global to defend itself against BT was “surreal”, as the UK is expected to account for only 1pc of its earnings before interest and tax next year.
BT is in takeover talks with the owners of both EE and O2. Mr Colao told investors that a deal would be good news for Vodafone, because it would mean BT is less likely to spark a price war in the mobile market.
Under earlier plans, the former state monopoly was planning to enter the fray via a wholesale agreement with EE and radically undercut rivals.
In the speculation that has gripped the telecoms sector since BT’s talks emerged last week, Vodafone has been linked with Sky and TalkTalk, as well as Liberty Global.
Mr Delfas said that both those combinations were also unlikely.
TalkTalk’s value-seeking customer base and low margins would not match Vodafone’s efforts to target the top end of the market and increase its margins. Sky customers are wealthier, but its business remains heavily reliant on satellite broadcasting, a content distribution method that is seen as increasingly outdated as superfast broadband rolls out and consumers turn to more on-demand services.

(BFW) Gap Negotiates Spain Entry With El Corte Ingles: Confidencial

Gap Negotiates Spain Entry With El Corte Ingles: Confidencial
2014-12-05 07:16:15.527 GMT


By Charles Penty
Dec. 5 (Bloomberg) -- Gap is in talks with retailer El
Corte Ingles to enter Spain, El Confidencial reports.
* Gap may start selling its clothing in El Corte Ingles store
in Las Ramblas, Barcelona, news website says, citing people
in the industry it doesn’t identify by name
* For link to story, click on: {http://tinyurl.com/ljxa7wd}

Link to Company News:{1082Z SM <Equity> CN <GO>}
Link to Company News:{GPS US <Equity> CN <GO>}

For Related News and Information:
First Word scrolling panel: {FIRST<GO>}
First Word newswire: {NH BFW<GO>}

To contact the editor responsible for this story:
Charles Penty at +34-91-700-9654 or
cpenty@bloomberg.net

>>> What to look at today - 5th of December 2014

US Market closed lower, with Small caps underperforming, Market is waiting for NFPR after Draghi...mkt are stimulus dependant...china bounced on noise of PBoC new stimulus (Shanghai +18,3% since 20th of Nov), mkt was expecting for news of a potential sovereign QE program, but nothing was announced and mkt closed lower...Eight sectors finished in the red with energy (-0.9%) spending the day at the bottom of the leader board. The sector slumped as crude oil surrendered 0.8% to $66.75/bbl, but despite the decline, the energy sector will enter Friday with a week-to-date gain of 2.4% versus a slim 0.2% uptick for the S&P 500, financials (+0.1%), materials (+0.3%), and technology (+0.1%) registered modest gains...Volume were below average @ 780mil shares...VIX @ 12,38 -0,9%...US After Hours SYNA +9.6%, ULTA +6.2%, GPS +3.6%, FIVE -11.6%, SPWH
-9.0%, AEO -7.0%, SWHC -0.5% following earnings/guidance...A late US session report from renown Fed watcher Hilsenrath pointed to a research note from senior Fed economists declaring that the best time to start raising interest rates is right now. The study anticipates fed funds rate reaching 1.4% by the end of 2015, 2.6% in 2016 and 3.5% in 2017 - all of these are within 25bps of the latest median FOMC staff projections for fed funds made with the Sept 17th meeting....Asian Market mixed & Very Volatile ahead of US Eco numbers today and after poor US performance...After posting its biggest gain since Dec 2012 overnight, Shanghai Composite is down marginally in the afternoon session. Trading in A-shares has been volatile in morning hours, rising and then falling by over 2.5%, helped by financials...Speculation regarding further easing is also keeping the overall bullish sentiment high, with CASS researcher calling for a RRR cut and UBS forecasting another 40-50bps in interest rate easing by the end of 2015. China focus will turn to economic data for November next week, beginning with the expected release of trade figures on Sunday....see some flows from Retail investors...Nikkei +0.19% Hang Seng +1.14% shnaghai +1.32%...

Eur$1.2374 S&P -0.01% EuroStoxx +1.10% Dax +0.74% SMI +0.46%

Macro :
- Fed watcher Hilsenrath (WSJ): According to research from senior Fed economists, the "optimal" path for short-term rates is to start raising soon and complete the process quickly 
- China Nov. Retail Auto Sales Rise 5% on Year, PCA Says

Keep an eye on :
- Defense Industry : France to Spend EU5b to Modernize Armed Forces: Les Echos
- Pharma : CDC Says U.S. Flu Season May Be Severe, Vaccines May Not Work
- French Infrastructure : France May Consider Renationalizing Highways, Le Parisien Says
- Luxury : PRADA PREVIEW: 3Q Results May See Further Weakness on H.K. Sales --> -1.77% in HK
- ACS SM : ACS Explores Listing for Mexico Unit Avanzia: Expansion
- AA US : Alcoa Unveils Next-Generation Aluminum Materials
- ALO FP : France’s Hollande, GE CEO Immelt Discussed Alstom Alliance
- ATC NA : Oi Poised to Approve Altice’s EU7.4b Offer for Portuguese Assets
- ATL IM : Generali Sells ~11.6m Atlantia Shrs at EU19.26/Shr
- AZA IM : Alitalia Gets EU100m in Financing From Investors: Sole
- BBY LN : Balfour Beatty Rejects John Laing’s GBP1b PPP Portfolio Offer
- BBRY US : BlackBerry CEO sees deals with Chinese bidders unlikely due to government scrutiny - Reuters
- BMW GY : Brilliance (1114 HK) +4.7%
- BKG LN : Berkeley Group Says On Track to Meet First Dividend Milestone
- EN FP : Bouygues Telecom Needs Structural Change, CEO Says in Tribune
- ENX FP : Euronext Joins SBF 120, CAC Mid 60 Indexes
- ERICB SS : Ericsson Gets Mixed Ruling in D-Link Wi-Fi Patent Case
- FCA IM : Fiat Chrysler Files to Offer 87m Shrs --> *EXOR TO BUY FCA CONVERTIBLE SECURITIES TO MAINTAIN 31% STAKE
- GSK LN : Glaxo Won’t Sell Established Products After Reviewing Bids
- GTO NA : Gemalto CEO Wants Ban on Short Selling, La Tribune Reports
- ICL IT : Potash Corp could increase stakes in four companies to gain control - Reuters
- ISP IM : Intesa Sanpaolo’s Messina Sees EU8b for Expansion, Standard Says
- QIA GY : Qiagen to Distribute Altons’s Realstar Ebolavirus RT-PCR Kit
- LEO GY : Leoni Says Dieter Belle to Become CEO in May
- MC FP : TAG Heuer Said to Plan Intel-Powered Smartwatch: BusinessInsider
- NUO NA : Nutreco Says SHV Offer Has High Deal Certainty for Shareholders
- RDSA NA : Shell to Seek Shallow Offshore, Onshore Deals in Mexico: WSJ
- RIO LN : Rio Chief Says Glencore’s Trading Philosophy Would Hinder Merger
- SAN FP : Sanofi’s Merial Buys Merck & Co. Plant in Puerto Rico; No Terms
- SBD LN : Songbird Says QIA, Brookfield Offer Doesn’t Reflect Full Value
- STM FP : Raises quarterly dividend 17.6% to $0.10/shr from $0.085/shr (implied yield 5.3%) - Div to be paid in December 23 2014 to shareholders of record on Dec 16th.
- TSCO LN : MORE: Tesco Seeks to Sell 5-6 Discount Stores in S. Korea: Daily
- UBSN VX : UBS France to Cut Jobs at CCR Asset-Management Unit, Echos Says
- UNA NA : Unilever contemplating buying high-end personal care brands - Reuters
- UCG IM : UniCredit May Close Sale of UCCMB Dec. 29: Messaggero
- VWS DC : Vestas CEO Sees Warranty Provisions Staying Low: Borsen
- VOW3 GY : VW Said to Conduct Formula One Team Feasibility Study: BBC
- YAR NO : Yara to Invest $220m to Expand Capacity at Swedish Site