Naufal Sanaullah naufal.sanaullah@gm ail.com @naufalsanaullah – January 27, 2014 –...

Nauf a l Sanau l l ah

nau f a l . sanau l l ah@gma i l . com

@nau f a l sanau l l ah

– January 27 , 2014 –

[macrobea t . com]

2014 Global Macro & Cross-Asset Analysis

macro beat.

I. Introduction1 Market themes

2 Executive summary

II. Economic analysis1 United States

2 Europe

3 Japan

4 China

III. Asset classesI. Rates

II. FX

III. Equities

IV. Commodities

V. Volatility

IV. Geopolitics

V. Special thanks

VI. Related reading

VII.Disclaimers

CONTENTS

macro beat.

1 Market themes

2 Executive summary

INTRODUCTION

MARKET THEMES

Bullish Bearish

MARKET THEMES

macro beat.

• US breaking out of deleveraging paradigm

• US housing remains strong with fixed investment & construction returning

• DM capex rebounding, boding well for consumers & workers

• Acceleration in DM labor market recoveries

• Demographic handoff in the US• US fiscal drag materially lessening

& fiscal policy risks diminishing• Yield curve still very steep• to provide a persistent tailwind to

markets and reflect low bubble risk• Eurozone periphery macro rebound

continues• Japanese NGDP rebounding

• Risk of Chinese credit crunch as WMP default risks rise without implicit backstop

• Eurozone inflation decelerating and risking deflation

• US & UK monetary policies are no longer massive headwinds to volatility

• US rates-up impacts DM/global financial conditions

• Challenging forward guidance in 2014 may spark volatility

• EMs facing capital account pressures on the back of DM risk-free rates rising

• Geopolitical risks rising as alliances marginally shift between the US, Russia, Saudi, Iran, & Israel

• Rebound in labor bargaining power may portend poorly for US profits even as economy accelerates

• Low risk premia in credit space could bode poorly for rate-sensitive corporates

• Lack of success of Abenomics in igniting capex-driven inflation feedback loops

Infl ation acceleration in the US & UK and greater CB focus on infl ation relative to employment data

Transition toward millennial labor supply & consumer demand

Tougher year for corporate credit and rising headwinds to corporate profi ts off setting aggregate demand tailwinds, as “earnings fi nancialization” recedes

Eventual ECB submission to counteract defl ation risk Abenomics recovery falters on the back of tax hikes, driving

an asset purchase program increase and declining marginal effi cacy of quantitative monetary policy

Rebound in commodities as US/G4 real yields shift to grinding higher instead of spiking like in 2013, with breakevens off setting some of the rise in nominals

EM rebound with dispersion and diff erentiated performance within the space

MARKET THEMES

1 Market themes

2 Executive summary

INTRODUCTION

EXECUTIVE SUMMARY

2013 marked a signifi cant transition away from the paradigms characterizing the global economy since 2007

US household sector deleveraging is approaching an end, and private sector growth is robust & accelerating

Persistent liquidity hoarding (and fi scal drag) are now waning, while labor markets are materially tightening in the US & UK

For the fi rst time since the fi nancial crisis, we are seeing a shift in relevancy from demand- to supply-side constraints

Infl ation will be much more important to the stance of DM monetary policy at the margin going forward, rather than unemployment, particularly in the US & UK

The US energy boom continues to provide a “dividend” tailwind that should insulate it from external tail risks

The US may have reached “peak inequality” in 2013 and on its way to more equitable national income gains

EXECUTIVE SUMMARY

macro beat.

Europe remains in a wage deflation rebalancing process, but the ECB has succeeded in converging periphery yields down to core, in both sovereign and private sector paper

The ECB’s perception of accelerating disinflation leaves Europe open to Fisherian debt deflation risk, but past policy, nascent political shifts, and guidance about their toolkit make policy-driven crises unlikely, even if the path is uncertain

The biggest risk to Europe remains a shift in Chinese rebalancing from stable to instable; rising deflation risk will drive the ECB increasingly closer to an unsterilized OMT

Barring exogenous shocks from China, there is suffi cient risk premia still extant for the strong rebound in periphery PMIs to translate further into beneficial asset appreciation & capital flows

EXECUTIVE SUMMARY

macro beat.

Japan is ground zero for a massive monetarist experiment, in which the role of expectations wil l be robustly tested

Thus far, there has been signifi cant devaluation-driven infl ation acceleration, but no sign of a capex-l inked feedback loop developing yet

The BoJ is unlikely to have the wil l nor capacity to increase its asset purchases with the JPY at these levels, but a soft patch in growth that drives JPY higher wil l l ikely drive a BoJ asset purchase program expansion later this year

With Japanese yields so low, there is very l itt le risk premia for LSAPs to even remove from the market

2013 was the year Japan convinced JGB investors to increase Japanese infl ation expectations; 2014 is the year Japan validates or invalidates those expectations

Japan faces a sizable fi scal drag in 2014, which should place a material headwind to monetary policy effi cacy

Abe’s nationalist policies should continue to manifest in increased geopolitical tai l r isks involving China

EXECUTIVE SUMMARY

macro beat.

China continues to toe the line between government-assisted growth stability and credit excesses

The policy clampdown on exotic credit products and exporter overinvoicing has sent fi nancial conditions tightening & export volumes underwhelming expectations

Rising tensions with Japan represent a signifi cant tail risk that will likely pervade for a few years to come still

The cessation of Fed-driven hot money fl ows into China are manifesting in periodic bursts of interbank liquidity crunches

If policymakers can continue to navigate China’s fi xed investment/consumption rebalancing in a stable process, asset prices are likely to rebound from their depressed levels

As of now, however, there has been very little actual internal rebalancing and attempts to wean the economy off mini-fi scal stimuli are likely to put policymakers in a precarious position

EXECUTIVE SUMMARY

macro beat.

UNITED STATES ECONOMIC ANALYSIS

US private sector growth has rebounded strongly, while fiscal drags are set to lessen materially in 2014

Consumption growth remains solid, although credit growth will be required for acceleration to prior bull cycle rates

Fixed investment growth has strongly rebounded, and as is explained in forthcoming slides, is set for much more acceleration in 2014-16

Government’s contribution to output growth rebounded in H2 as state & local spending outlooks improved, and set to continue to rebound as federal fiscal drag lessens in 2014

Net exports have gone from the persistent drag in the last cycle to slowly becoming a tailwind, much of which due to the domestic energy production boom since 2011

UNITED STATES

macro beat.

UNITED STATES

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013-10

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Contributions to real GDP growth

Consumption Investment Government Net exports Real GDP

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macro beat.

Real GDP accelerated each quarter from Q1 to Q3 last year

An acceleration in fixed investment and lessening government drag accounted for the growth rate’s uptrend

With the tightening labor market, real wage growth should accrue to credit growth, both of which should help accelerate consumption growth to near 2003-05 rates

We expect 2014 real GDP growth around 3-3.5%

UNITED STATES

macro beat.

UNITED STATES

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Contributions to real GDP growth: consumption

Real GDP Durable goods Nondurable goods Services Consumption

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macro beat.

Consumption growth has been solid, but uninspiring, particularly in services spending

Lack of credit growth has been a critical factor in lower consumption rates

As the household sector moves past the deleveraging stage, spending should start outpacing income again

We expect revolving credit growth to ignite services spending, and drive consumption contributions to real GDP growth to above 2% in 2014

UNITED STATES

macro beat.

UNITED STATES

macro beat.

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013-8

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Investment percent contribution to real GDP growth

Real GDP Nonresidential structures Nonresidential equipment Nonresidential IP

Residential Inventories Investment

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Investment is the most volatile component of real GDP, and although consumption is the largest share of real GDP, investment is the largest contributor to quarterly SAAR real GDP growth, thanks in large part to inventories volatility

The residential investment rebound began accelerating in 2013, but residential investment as a share of GDP is still at very depressed levels

The combination of strengthening labor markets, particularly in young age cohorts, and general low supply on a fl ow basis, should provide a strong tailwind for residential fi xed investment in 2014 and beyond

Nonresidential fi xed investment is also depressed, and its return should ignite various latent feedback loops, as funds fl ow from low-MPC retained earnings cash coff ers to high-MPC consumers

UNITED STATES

macro beat.

Nonresidential structures investment has started to accelerate, and although a soft patch in the architectural billings trend suggests a breather in structures investment for a couple months, a nascent rebound in institutional & commercial/industrial sector construction is likely in the works, given the levels of underinvestment this cycle

The average age of corporate fi xed assets is 21.7 years, two years higher than in 2000 and over a year higher than pre-crash

As consumer demand accelerates, and with global wage diff erentials & balance of payments suggesting a tailwind for domestic production this cycle, the aging asset base should provide an incentive for nonresidential equipment & IP investment to fi nally pick up in 2014

UNITED STATES

macro beat.

Residential investment should have a tailwind from the low 4.6 months of existing housing supply

Given the coming-online of millennials and total population growth, the economy requires approximately 1.5 million new houses per year, according to estimates by Macrofugue’s Matt Busigin and the Federal Reserve’s Andrew Paciorek, compared to the current level of one million housing starts (which Busigin’s model estimates will be closer to 1.3 million in a year)

The Cleveland Fed’s Andrew Dunne estimates a current 2.6 million household shortfall

These factors combine to suggest persistent tailwinds to residential fi xed investment through the completion of the current business cycle

Nonresidential fi xed investment also is running up against capacity constraints, with the total capacity utilization rate having risen materially in H2 2013

The corporate economy is underinvested for the accelerating fi nal demand and demographic handoff to millennials

UNITED STATES

macro beat.

http://www.macrofugue.com/

http://www.federalreserve.gov/pubs/feds/2013/201326/201326pap.pdf

https://twitter.com/mbusigin/status/426717667307687936/photo/1/large

https://twitter.com/mbusigin/status/426717667307687936/photo/1/large

http://www.clevelandfed.org/research/commentary/2012/2012-12.cfm

UNITED STATES

macro beat.

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013-2

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Government percent contribution to real GDP growth

Real GDP Federal defense Federal nondefense

State & local Government consumption & investment

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Government expenditures & investment have been a persistent drag to growth since Q4 2009, with state & local austerity until 2011, and federal austerity since

With the sharp rebound in tax receipts and repair of municipal balance sheets, state & locals became a net contributor to real output growth last year, accelerating into year-end

The sequester was a massive fi scal drag in Q4 2012 to Q1 2013, with federal defense spending cuts driving a cumulative -1.84% drag on GDP growth since Q4 2012

As the state & local recovery accelerates and federal fi scal drag lessens in 2013 and beyond, we expect government to become a consistently net contributor to output growth for the fi rst time since the recession began in 2007

This is another category that exemplifi es the fl ow of funds into marginally higher MPC hands, increasing money velocity

UNITED STATES

macro beat.

UNITED STATES

macro beat.

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013-4

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Net exports percent contribution to real GDP growth

Real GDP Goods exports Services exports Goods imports Services imports Net exports

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After being a persistent drag during the large globalization wave in the late 90s until the recession began in 2007, net exports became positive contributors to growth during the recession, as imports collapsed

Since then, the recovery has been marked by the unique occurrence of fl at net impact from trade on output growth

Much of this refl ects the shale boom since 2011, which has decreased US reliance on foreign energy imports

The global BoP rebalancing continues in force, with incremental gains accruing to future US labor until smaller Ems build up the capacity to absorb the massive production being displaced at the margin out of larger EMs with sharply risen wages, l ike China

Going forward, we expect net exports to be a fl at to slightly negative contributor to GDP growth, as commodity prices rebound and consumer demand lifts imports, but nothing like the naughts

UNITED STATES

macro beat.

The unemployment rate (UER) has declined materially in the last year, from 7.9% in December 2012 to 6.7% December 2013

However, much of this reflects an 80bps drop in the labor force participation rate and going forward, will reflect any expiration of unemployment insurance

This makes the UER a weak metric for monetary policy decision making

The cumulative labor market gains since open-ended LSAPs were announced, along with the low & marginally diminishing effi cacy of quantitative policy for jobs growth and rising risks stemming from volatility suppression, justified the taper

Rate policy, however, is constrained only by inflation (and in a similar vein, credit growth) and so forward guidance is still important to the Fed’s reaction function

UNITED STATES

macro beat.

Given the composition of the UER decline, the FOMC is likely to lower its UER threshold in its rate policy forward guidance

As former chairman Ben Bernanke mentioned in his fi nal press conference last month, once beyond the 6.5% Evans rule threshold, the FOMC will shift its focus from the UER to labor market internals

Concurrently, demand-side data will give way in relevance to supply-side data as supply constraints & infl ation potential gain traction

This makes CPI, wage growth, credit growth, & JOLTS series the most important to watch for rate policymaking

As such, the FOMC may also include a lower-bound infl ation fl oor to its forward guidance, as suggested by St. Louis Fed President James Bullard

UNITED STATES

macro beat.

The LFPR debate is much less meaningful than the journalist & analyst community have made it out to be as of late

Much of the LFPR decline is simply a function of demographics, as the populace ages

There is likely a material cyclical component as well, mainly in lower-age cohorts who have been displaced by the weak economy and low labor bargaining power into more school

And the balance is likely due to hysteresis stemming from unskilled, less educated workers who may be poorly trained for the current labor market, many of which have gone on disability

Going forward, the cyclical component should rebound as the echo boomers enter the labor force, while the unskilled cohort struggles to ever reenter the market

As such, we expect the LFPR to converge near to, but still below, levels implied by demographics, with the balance due to hysteresis

UNITED STATES

macro beat.

The bigger question for the labor market is how much it is tightening and coming up against supply constraints

Jobs growth in the 55+ years old cohort has started decelerating rapidly, and likely to go negative in the next couple years as retirements accelerate, leaving a large gap of labor to be replaced by younger age cohorts

The most important variable signifying tightening labor markets is a declining labor force mean age against a rising population mean age, refl ecting the demographic transition of the labor force as the aggregate labor force’s growth rate goes negative

Meanwhile, the three largest headwinds to labor market strength are set to either neutralize or reverse in 2014-16: The sharp rebound in housing starts (and likely moderation of price

appreciation in 2014) should normalize construction employment, a high-MPC segment of the labor force

State & local municipalities are set to rebuild payrolls as tax receipts continue rebounding and balance sheets move past reparation stage

Federal austerity is set to weaken in 2014, converging public sector labor demand back to private sector levels

UNITED STATES

macro beat.

The lower supply, increased demand, and suffi ciently strong underlying conditions to drive wage growth higher in 2013 despite a material fi scal drag, all point to continued wage gains in 2014 through the end of this business cycle

The labor market tightening we expect derives from nascent feedback loops

As Guillermo Roditi Dominguez has explained, the higher MPCs of the household & public sectors versus the corporate sector, and the higher eff ective marginal tax rates of the household versus corporate sector, make wage income carry much more money velocity than retained corporate profi ts

The rebound in aggregate demand should begin a virtuous cycle, then, as corporate profi ts get redistributed

Corporate capex eff ectively “unlocks” money velocity, especially in the current cycle, in which years of underinvestment will drive a sharp “catch-up” period in capex

All of this points to reduced income inequality and self-reinforcing NGDP acceleration, with infl ation only mitigated by Fed policy tightening

UNITED STATES

macro beat.

Supply constraints are also beginning to show up in industry, as the capacity utilization rate rose by 1.2 points in 2013 alone, thanks to a H2 acceleration

This is infl ationary and likely refl ects a much smaller output gap than extrapolated pre-crisis trendlines imply (due to the nature of solvency crises)

Fixed investment is set to rebound heavily, and this will ignite a much more “normal” business cycle that will continue until monetary tightening triggers the next recession

UNITED STATES

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

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Capacity utilization

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macro beat.

Infl ation spent 2013 consistently surprising to the downside, due to three factors: Public sector wage drag, due to tight state & local finances and

federal austerity Money supply deceleration, due to the payroll tax cut expiration &

sequester Goods disinflation, due to commodity price declines

We expect booming municipal tax receipts, materially lessening federal fi scal drag, and a rebound in commodity prices to alleviate this disinfl ationary pressures against a backdrop of rising endogenous infl ationary pressures from tightening labor markets, rising rents, and rising capacity utilization

Given where the infl ation surprise index is, and the December FOMC projections downgrading 2014 core PCE to 1.5% while infl ation swaps price in about 1.4% CPI, we expect infl ation to surprise to the upside this year

UNITED STATES

macro beat.

UNITED STATES

macro beat.

UNITED STATES

macro beat.

2006 2007 2008 2009 2010 2011 2012 201394

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OECD composite leading indicators: US & OECD + six major NMEs

United States OECD + six major NMEs

The chart on the following slide shows the US real GDP, real DPI, real PCE, NFP, IP, and real retail sales growth rates

After decelerating since H1 2011 as the fi scal stimulus impulse and base eff ect waned, output, consumption, & production all accelerated in H2 2013

The fi scal cliff caused aberrations in the disposable income data, but beneath the noise remains a similar accelerating uptrend

Timely payrolls & retail sales data suggest the consumer entered a mini-soft patch near the end of 2013

But with production accelerating, demand headwinds receding, and material tailwinds coming online, we expect retail sales & jobs data to accelerate as well in 2014

UNITED STATES

macro beat.

UNITED STATES

macro beat.

2009 2010 2011 2012 2013-5.0

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US output, consumption, income, employment, retail sales, & production growth

Real GDP Real PCE Real disposable incomeNonfarm payrolls Real retail sales (rhs) Industrial production (rhs)

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Household net credit creation finally began to accelerate in 2013, as mortgage deleveraging slowly reversed and consumer credit growth drove total credit creation

A rebound in household formation should help drive mortgage debt growth higher, although lower homeownership and higher external debt loads (such as student loans) should keep a lid on how high mortgage debt growth can accelerate

As the labor market recovery accelerates and durable goods demand rises, revolving consumer credit should begin contributing more normal levels of credit creation

Auto & student loans have likely reached their peak contribution on the margin, but should continue to drive ample credit creation during this business cycle

UNITED STATES

macro beat.

UNITED STATES

macro beat.

1981 1985 1989 1993 1997 2001 2005 2009 2013-2.0

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US household net credit creation

Mortgage debt Consumer credit Total

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The rebound in home equity values has considerably declined mortgage leverage, allowing for higher labor mobility and household creditworthiness, pushing the deleveraging process in a healthy way

Large swathes of homeowners regained positive equity in the last two years, which was a major factor in allowing growth to accelerate

Owners’ equity is growing at the highest YoY rates of the postwar era, and although home price appreciation should slow in 2014-15, the benefi t has already accrued and the negative equity situation substantially alleviated

By the end of 2014, mortgage leverage is likely to have normalized to pre-recession levels, allowing for household leverage to grow again at a more normalized pace

UNITED STATES

macro beat.

UNITED STATES

macro beat.

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013-40

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Mortgage leverage & owners' equity growth

Owners' equity growth Mortgage leverage (rhs)

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Wynne Godley’s sectoral balances model highlights how far deficit reduction has progressed since the end of the recession, and accelerated during last year’s fiscal drag

As the shale boom continues, the foreign sector surplus should have headwinds off setting its usual cyclical rise during expansion cycles, providing incrementally more net surpluses for the private sector

The corporate sector is quickly approaching a return to negative net financial balances, as in previous expansions, which should accelerate as capex picks up

These factors should combine to provide a tailwind to household net surpluses, even as residential fixed investment continues accelerating

UNITED STATES

macro beat.

UNITED STATES

macro beat.

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012-16

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Sectoral financial balances

Household Business Government Foreign

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The following slide shows the Kalecki-Levy model of corporate profi t decomposition

Given the government (particularly state & local) and household sectors’ higher marginal propensity to consume/invest relative to corporates, the boom in tax receipts and resulting defi cit reduction should drive fl ows from corporate to household net savings at the margin

This is especially the case given the impact on labor markets of increased demand from government & corporate sector spending & investment, since real wages are already accelerating

If corporates were to ramp up nonresidential fi xed investment to a pace comparable to government & household sectors’, this could off set the above headwind, but would eff ectively serve as a fl ow of profi ts from investing corporates to the corporate supplying the factors of production for the fi xed investment

Applying the Kalecki-Levy model to the current economic environment suggests we are beginning a shift in income from capital to labor, and that corporate profi ts will underwhelm the aggregate economy’s acceleration, mainly due to higher real wages, lower public defi cits, and higher interest expense (which accrues mainly to households)

UNITED STATES

macro beat.

UNITED STATES

21916 23012 24108 25204 26299 27395 28491 29587 30682 31778 32874 33970 35065 36161 37257 38353 39448 40544-15

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Kalecki-Levy corporate profit decomposition

Household investment Business investment Government investment Household saving

Government saving Foreign saving Dividends Statistical discrepancy

Profts Kalecki

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NP

macro beat.

ASSET CLASSES1 Rates2 FX3 Equities4 Commodities5 Volatil ity

We generally favor fading FOMC attempts at strengthening forward guidance, viewing the upside data risks as stronger than reaction function shifts at this point

We expect the FOMC to lower its Evans rule UER threshold and also possibly add an infl ation fl oor a la Bullard to its rate policy guidance, and think rising expectations of that will provide attractive entry points to short Eurodollar reds & greens

If labor markets continue to aggressively tighten as we expect, at some point in Q2 or Q3, whites will get sold as well, providing a buying opportunity to synthetically lock-in any PnL from shorting reds & greens, as we don’t expect any hikes this year as the Fed will use 2014 for “catch-up” infl ation

Such a selloff in whites will likely hit equities as well, providing an attractive entry point for collecting ERP in the right places (more on this in the equity section)

RATES

macro beat.

We expect tightening to commence as early as H1 2015, with 2-3 hikes next year

Current 2015 year-end Fed Funds rate expectations are: Median FOMC: 75bps (as of December SEPs) Mean FOMC: 105bps (as of December SEPs) Median primary dealer: 50bps (as of December PD survey)

We expect inflation upticks this year to pull forward hike forecasts for 2015, and for this to drive front-end term premia higher as well, sending the Z4Z5 term spread back to its 2013 highs

We are targeting low-98s in EDZ5, to be hit some point in Q2 or Q3

RATES

macro beat.

Mean Fed Funds forecasts from the FOMC’s December SEPs imply 33bps year-end 2014, 105bps 2015, & 195bps 2016

105bps by year-end 2015 puts fair value EDZ5 at maturity at around 98.80, implying a negative term premium at present, using rough 15bps estimate for the FF-90d LIBOR spread

These forecasts include forward guidance expectations and are based on economic estimates which assume infl ation doesn’t converge to its symmetrical target until after 2016

An acceleration in infl ation, as is suggested by our macro analysis, should make our Z5 fair value in the low-98s very reasonable, given the implied forward rates in the FOMC SEPs

With so much money long this part of the curve, and the December NFPs shaking out short positioning, we believe short Z5 will be a very attractive position to open in Q1

RATES

macro beat.

This view on the path of infl ation also makes bear fl atteners attractive, particularly in 2s5s or 2s5s10s fl y

The belly off ers appealing carry/roll down, as well as the best relative risk-adjusted E[r]’s in the curve

2s are mispriced relative to our short rate path assumptions, and have l itt le to no term premia even with more conservative assumptions

With 2s5s over 130bps (very wide historically), the fl attener carrying ~6bps/quarter, and spread having widened as the belly sold off , the front-end becomes the more attractive space to short and very rich to the belly

RATES

1990 1994 1998 2002 2006 2010 2014

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2s5s slope

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macro beat.

These hawkish views are supported by a FOMC voting base compositional tailwind, as well

Three dovish 2013 FOMC voters will not be among 2014 voters, off set by three new dovish voters this year

However, on the hawkish side, only one hawkish 2013 voter is leaving, off set by three new hawkish voters for 2014

This is displayed in the graphic to the right, courtesy of Financial Times

RATES

macro beat.

The marginal shift from CB reaction function to policy data sensitivity last year have created an environment in which majors have become bifurcated based on relative CB expectations, particularly with the behavior of front-end forward yields: High/rising: USD, GBP, NZD Low/falling: JPY, AUD, CAD

Because of the nature of this dichotomy, in which persistently-easy money economies are beginning to see NGDP acceleration, while more hawkish ones are seeing labor and infl ation data underwhelm

This has driven persistent fl ows into negative carry trades like GBPAUD, which have started to witness high correlations to general “DM yield” crosses like USDJPY

This dynamic has pervaded across asset classes, and the S&P 500 now has a higher 1mo30min correlation to USDJPY than the Nikkei does

FX

macro beat.

We believe that these trade paradigms wil l be shifting and correlations breaking as the FOMC & BoE lean against unemployment thresholds’ signal value for the path of rates

Meanwhile, we believe the current risk sel loff wil l soon near completion, and set up for outperformance in commodity currencies, whose forwards are already very rich compared to accelerating leading economic indicators

We view carry trades as attractive in FX space for the remainder of Q1, including long AUD & CAD vs GBP & JPY

AUD/NZD is another attractive long, given where forwards have moved to and the technical picture for this pair

Looking further ahead, we expect the eventual infl ation-driven rise in US & UK front-end yields to culminate in a risk selloff once the curve repricing accelerates

Given the Japanese consumption tax hike in Apri l and l ikelihood of DM front-end rates repricing in Q2, we expect the above risk-off scenario to be concurrent to a sharp rise in JPY that washes out the stretched positioning and begins the market’s challenging of the BoJ’s effi cacy at reducing real yields

FX

macro beat.

JPY positioning is extremely stretched at around 180,000 contracts net short, a level only seen once in the last 20 years (at the multi-year JPY bottom in 2007)

The Japanese breakeven curve continues to be inverted, and the impact of fi scal drag is likely to drive infl ation expectations back down, driving real rates higher and making the JPY more attractive

At the same time, given the low infl ation and central bank commitment for catch-up growth (i.e. a behind-the-curve tightening cycle) in the US (as well as the rest of the G4), higher US rates are likely to be driven only by infl ation driving nominal yields higher, as opposed to central bank reaction function surprises driving, making it hard to repeat 2013’s pattern of higher US reals driving USDJPY higher

We favor JPY longs in Q2, expecting a move to below USDJPY 100

FX

macro beat.

The BoJ will likely push back on any yen appreciation with more asset purchases, so we don’t expect JPY to be a great long beyond Q2

However, longer-term, a failure of asset purchases to spark an NGDP feedback loop in Japan will make investors question quantitative monetarist strategy in environments where risk premia aren’t excessively elevated

In the US, QE2 sparked a speculative “refl ation trade” in H2 2010-H1 2011 that drove hot money into buying commodities and shorting USD, which was sharply unwound in H2 2011

Successive rounds of LSAPs had weaker & weaker impacts on infl ation expectations, and the open-ended LSAPs announcement in September 2013 drove a spike in breakevens that had completely unwound by the end of the year

Since Japan has already announced the nuclear option of open-ended LSAPs, and can only increase its purchase sizes, any loss of confi dence in its effi cacy to generate infl ation will likely prevent any success in central bank-driven rise in infl ation expectations

FX

macro beat.

FX

macro beat.

EUR is very path-dependent in 2014 due to the wide range of ECB policy outcomes

As long as the ECB continues with its current stance, the euro should have a tailwind, as infl ation remains low and the continued periphery rebound off ers a rare level of DM risk premia for capital fl ows to chase

However, accelerating disinfl ation and/or a debt shock in France will force the ECB to relent to unsterilized quantitative policy, which would send the euro plunging, as the ECB enters LSAPs while the Fed & BoE begin planning their exits from both unconventional quantitative and rate policies

We expect H1 to see EUR rallying until a repricing in US front & belly rates drives a USD rally

We expect H2 to be path-dependent to the variables above, but lean towards a rally

FX

macro beat.

FX

macro beat.

GBP is vulnerable to a near-term risk correction, as it has become the G4 risk currency of choice and given the recent moves in short sterling forwards

However, we view a correction in GBP to be a buying opportunity, as the labor market is tightening rapidly with December data showing the equivalent of an 800k payrolls print in the US, and inflation likely to be near a cycle low

The BoE reaction function is also more hawkish than the FOMC’s and we expect higher upward pressure in real yields in the UK than the US

The front & belly of the UK curve are likely to face similar headwinds as what we expect in the US curve

FX

macro beat.

FX

macro beat.

AUD positioning has been this net short only twice in the last two years: at its 2012 bottom and during its sharp 2013 selloff

The RBA has been aggressively talking down the dollar, but with the forwards market pricing in no hikes for almost two years, it will likely have to resort to actual intervention for further depreciation, as more dovish rate guidance will likely be insuffi cient to drive down AUD

At the same time, commodities appear cheap and poised to rally in a global growth rebound, which would translate into a higher AUD

We expect AUD to witness a material short-covering rally this year, but beyond that, we expect the RBA to be able to talk it back down, leading to a more or less flat year

FX

macro beat.

FX

macro beat.

CAD has only had positioning this net short twice in the last 20 years: at the 2007 bottom, and at a short-term bottom last summer

2yr Canadian notes yield only 4bps more than overnight rates

Similar to AUD, this commodity currency is facing downward pressure from a weakening labor market, dovish central bank, and low forward rates, causing both AUD & CAD to have become quasi-carry funding currencies

We expect a similar short covering rally and overall flat year in CAD as in AUD, against the backdrop of a commodities rally

FX

macro beat.

FX

macro beat.

Emerging market currencies have been hit dramatically as a result of rising DM real yields, converging DM/EM growth rate diff erentials, and consequent capital flows

However, we expect them to be nearing a bottom, as recent volatility has forced even the most market-unfriendly EM CBs, like in Argentina & Turkey, to begin caving to market demands

We view the nascent FOMC & BoE reaction function shift toward inflation to provide the perfect environment for these currencies to reverse upward

However, longer term, EMFX is a tough asset class to own, as US & UK rates have more repricing ahead, especially in the front-end, and because of the accumulated sums of capital inflows in EMs in the last decade reversing now

FX

macro beat.

EQUITIES

The S&P 500 equity risk premium (ERP) remains historically wide around 300bps

However, much of this is due to the discount rate risk baked into the UST curve

Matt Busigin’s ERP decomposition model estimates the ERP net of the 2s10s contribution to be around zero

This implies that US equity multiples at present are more or less at “fair value”, with future equity returns more sensitive to EPS vs P/E than anytime post-crisis

As such, buying the S&P off ers no real risk premium collection Although ERP will likely go negative as in the past, given the

diff erent demographic & savings allocations dynamics now versus the 1980s/1990s, ERP is unlikely to go beyond -200bps, some of which can come from faster-than expected monetary policy normalization

This sets up for 2014 to be a great year for equity long/short and M&A strategies that rely on microeconomic analysis

EQUITIES

macro beat.

The relevance of earnings power over the discount makes the Kalecki-Levy corporate profi ts equation a valuable macro lens from which to view the current equity landscape

The function states that profi ts are equal to the sum of net fi xed investment and net dividends, net of the sum of household, government, and foreign net savings

With the federal defi cit set to continue rapidly shrinking and household net savings poised to materially grow in 2014, this leaves two large equity classes whose earnings will benefi t from NGDP acceleration: Recipients of fixed investment spending Beneficiaries of a stronger trade balance

EQUITIES

macro beat.

As such, we are bullish materials & fi nancials for 2014: Materials should capture the benefit from global growth accelerating,

as well as receive fixed investment spending flows Financials should continue to have strong earnings power with the

yield curve as it is, particularly smaller, non-traditional financials that are subsuming niche vacuums resulting from regulatory developments

Energy names seem superficially attractive based on the improving US energy trade balance, but the restrictions against exporting domestic energy prevent these tailwinds from accruing to earnings power

We are also bullish EM equities, as: Higher US inflation and rebounding global growth should boost

commodities prices from current low levels Much higher risk premia offer better E[r]’s The combination of the above two factors should help reverse the

persistent capital outflows that began last spring

EQUITIES

macro beat.

COMMODITIES

We expect commodities to have a rebound year in 2014, after a devastating 2013

The long-term outlook for commodities remains bleak, given supply increases, Chinese rebalancing, gradual de-fi nancialization of commodities, and end of the “BRIC” and “commodities-as-an-asset-class” investing themes

However, for 2014, rising infl ation, accelerating DM demand, and a softer rise in DM real yields should provide a boost to commodities from these oversold levels

We especially l ike agricultural commodities, for whom a normalization of crop supplies alone should drive them off their lows

Metals are likely to do well in 2014, as disinfl ation & surging DM real yields risks diminish, but are likely to make new multi-year lows next year, as the Chinese rebalancing accelerates

Crude oil is l ikely to remain rangebound, facing confl icting pressures from rising US supply and demand, with the potential for intermittent geopolitically-driven spikes

COMMODITIES

macro beat.

VOLATILITY

2014 should be a choppy year for volatility, with spikes presenting attractive opportunities to collect income by selling vol

However, with LSAPs (which mechanically, and through investor psychology, drain risk premia and compress volatility) on their way to zero, and real yields on their way up, volatility spikes may be more frequent than in 2013

The reversal of various corporate profi t tailwinds should add to the volatility potential, but these can be seen as opportunities

A lower-Sharpe 2014 for equities, with lower returns and higher volatility, should provide great opportunities for tactical vol sellers

VOLATILITY

macro beat.

1 Levant2 Af-Pak3 Asia-Pacifi cGEOPOLITICS

THE LEVANT

The prolonged Syrian crisis stems from a breakdown in the UN Security Council, in which Russia’s (and by extension, China’s) veto power deadlocked the only UN arm with binding resolution power from Western policy will

Russia’s economic interest in Syria revolve around quasi-SOE energy powerhouse Gazprom, whose strategy in supplying European natural gas markets hinges on: Maintaining influence over the recent large natural gas discoveries in the

Levant Basin, which underscores the importance of maintaining alliances with Syria’s incumbent leadership,

Preventing competitors from gaining European market share, including proposed gas pipelines by Turkey & Qatar (both of whom are Sunni states against Assad), and

Generally reasserting influence over the Middle East, which it lost as the Soviet Union collapsed (much of which due to Sunni Mujahideen Jihadists)

Last summer’s Ghouta chemical weapons attack in Syria renewed the debate over NATO intervention, with President Obama’s appointment of Samantha Power to UN Ambassador and his characterization of chemical weapons use as a “red line” underscoring likely Obama administration plans to intervene

LEVANT

macro beat.

However, Russian President Vladimir Putin brokered a chemical weapons confi scation deal between Syria & the US that prevented Western intervention

The deal isolated Saudi Arabia and other Gulf states, which have been supplying Syrian rebel fi ghters with heavy weapons, ammunition, and funds

This came two months after a failed secret negotiation between Saudi intelligence minister Bandar bin Sultan & Russian President Putin, in which bin Sultan promised, in exchange for Russia ceasing its support for Assad, to: Protect Russia’s gas pipeline interests, Ensure any post-Assad Syrian leadership would be under heavy Saudi

influence, which would be wielded to protect Russia’s interests, Safeguard Russia’s naval bases off the Syrian coast, which are a vital

asset for Russia’s energy interests, and Protect the Winter Olympics in Sochi from attacks from Chechen rebels,

which bin Sultan said are “controlled by [Saudi]”

LEVANT

macro beat.

Putin characterized bin Sultan’s comments about Chechens as a thinly-veiled threat, and talks broke down

Russia’s strategy was to forego a Russian-OPEC alliance that could boost energy prices, in order to focus on European market share and geopolitical leverage & infl uence, especially since Saudi’s infl uence over torpedoing Qatar’s natural gas ambitions is shaky

As such, Russia continues to strengthen its alliance with Iran and other Shi’a/non-Sunni states in the Middle East, who provide a backbone to renewed Russian regional infl uence, as well as logistical allies for Russian energy export ambitions

In December, bin Sultan met again with Putin, softening his conditions for stemming the Salafi st tide in the Levant & Russia, as well as agreeing to the Geneva-2 conference plan

However, bin Sultan also requested a delay in the Geneva-2 conference, an opposition-led interim government to be put in place, and elections to only occur after a new constitution, and Russia appears to have again rejected Saudi deal attempts

LEVANT

macro beat.

These dynamics have come against the backdrop of a massive US energy production boom that has: Reduced US reliance on foreign oil, Kept a lid on energy prices, and Set the stage for potential US entry into the global oil trade after a 40-

year export ban This has diminished Saudi leverage in US geopolicy, just as

the post-Arab Spring rise of the “Shi’a Crescent” has increased Iran’s regional importance

All of this has combined to begin a US “Shi’a pivot” to: Ally with the rising “Shi’a axis” in its struggle to fi ll various Arab

Spring power vacuums Neutralize alliances with Sunni Gulf states, who tend to support

Qutbist, Salafist, & Jihadist elements in the region, and subject global energy to cartel pricing

Help prevent the rise of Sunni insurgencies in Iraq & Afghanistan Check the rising Chinese influence in the region Capture the advantage of rising marginal leverage against OPEC

states

LEVANT

macro beat.

The Shi’a pivot has forged an unlikely alliance between Israel & Saudi, with: Israel now more concerned about Iran & the Shi’a Crescent than

Wahhabist elements in the Levant The Israeli Ambassador to the US recently commenting that Israel

has “always preferred the bad guys who weren’t backed by Iran to the bad guys who were backed by Iran”, in regards to the extremist elements within the Syrian rebels

The proposed US-Iran nuclear deal came with much Israeli & Saudi opposition, as it would ease banking & energy sanctions, help stem Iran’s high infl ation by boosting the Rial, and bring 1.5-2 millions barrels per day of crude oil to the market

As such, last summer’s developments involving Syria appear to have driven the US to taking marginal steps away from Israel & Saudi and toward Iran, in the context of a shift in strategy toward supporting Shi’a elements to bring down extremist Sunni cohorts in the region

LEVANT

macro beat.

The Islamic State of Iraq & the Levant (ISIL / ISIS) has become the preeminent force in northern Syria, while gaining control of large swathes of southern Iraq, including Fallujah, after staging a successful prison break of many imprisoned members from Abu Ghraib

ISIL has been a major contributor to rising sectarian tensions, attacking Iraq’s Nouri al-Maliki administration (which has favored the Shi’a majority) and Syria’s Bashar al-Assad administration (which has favored Alawite, Christian, and Shi’a minorities), with a harsh sectarian stance

ISIL has now entrenched into Lebanon, including a car bombing targeting Hezbollah loyalists that support the Assad regime

LEVANT

macro beat.

ISIL is much more Qutbist than other rebel groups in Syria, imposing strict sharia law immediately after land grabs, focusing on sectarian attacks, and more concerned with establishing rule over conquered territory than defeating Assad

As such, ISIL is likely to become the focal point for the rising sectarian violence in the Levant, and the US & Russia may move to preempt their tide in Lebanon by aiding Hezbollah fighters in Syria

Any Saudi involvement with ISIL remains unclear, although Iranian news has been reporting of a secret meeting between a Saudi intelligence offi cial and a senior ISIL commander shortly before the latter was killed by Iraqi forces

LEVANT

macro beat.

The role of Turkey in the Levant’s confl icts remains signifi cant, as it is a Sunni majority country in NATO

However, recent domestic corruption & economic issues have checked Prime Minister Erdogan’s regional geopolit ical ambitions as of late

The rise in US interest rates and LSAP taper have aff ected EMFX more than any other asset class, particularly the Turkish Lira

With a massive share of corporate debt denominated in foreign currencies, the Lira’s sl ide has had signifi cant impact on the economy beyond just depreciation-driven infl ation

Concurrently, Turkey has massive short-term external sovereign debts to roll over, increasing the risk of the currency crisis evolving into a credit crisis

Erdogan and his party are losing polit ical support amid the currency & corruption crises, and the opposition party’s leader is an Alevi (a sort of Shi’a-Sufi hybrid) who is left- leaning and opposes the Islamist ambitions of Erdogan & his party

A continued rise in opposition party approval ratings could weaken Erdogan’s infl uence (possibly to the point of incumbent AKP party losing 2015 elections), materially strengthen US-Turkish relations, which would be a blow to Sunni Islamists and would be a signifi cant force against ISIL

LEVANT

macro beat.

Looking ahead, these dynamics increase the risk of sectarian confl ict in the Levant and eastward, as the rise of ISIL underscores

The continued US energy output boom, along with the potential return of Iran & Libyan oil exports (and possibly even US in the longer term) and developments in US-Russian & -Iranian relations should drive Saudi to loosening its grip on Sunni extremists in the region

The tail risk of a Chechen extremist attack during the Sochi Games is heightened against this backdrop, particularly with bin Sultan’s comments to Putin last summer; such an attack would likely impact markets as it would bring out harsh rhetoric from Putin against Saudi

Oil supply shock risks are elevated due to rising sectarian tensions across the region, but are mitigated by US production & the eventual return of Iranian & Libyan exports, unless Iraq descends into crisis

Longer term, this could lead to a decline in Islamist terrorism, as Shi’a cohorts gain regional infl uence and Qutbist elements aiming for a pan-Arab caliphate (and their supporters) lose geopolitical & economic leverage and infl uence, materially decreasing oil prices

LEVANT

macro beat.

1 Levant2 Af-Pak3 Asia-Pacifi cGEOPOLITICS

AF-PAK

The future US withdrawal from Afghanistan remains the focal point in the region

The Bilateral Security Agreement (BSA) lays out the terms and timetables for US military disengagement in Afghanistan, and the US set a new year deadline for Karzai to sign it, suggesting the possibility of a “zero-option” withdrawal if he didn’t

Afghan President Hamid Karzai remains skeptical of the US BSA timetable (and its zero-option threat) and is exercising his leverage, including: Ignoring the US’s deadline for signing the BSA Ignoring the Loya Jirga (Grand Council)’s acceptance of the BSA Disinclination to sign the BSA until after April elections, Making signing the BSA contingent upon the elimination of judicial

immunity for American soldiers, peace talks with Taliban leadership, and the release of Afghan detainees at Guantanamo Bay

Releasing 72 high-profile detainees in defiance of US pleas just a week earlier

AF-PAK

macro beat.

Karzai seems to pressuring the US to maintain aid and a military presence in Afghanistan, but with increased Afghan sovereignty

Karzai’s interest in pushing signing the BSA until after the April elections partially lies in preventing US interference in Afghan elections, which former Secretary of Defense Robert Gates alluded to having occurred in an attempted 2009 Karzai ousting in his recently released memoirs

Concurrently, the detainee release off ers Karzai hopes for restarting talks with Taliban leadership and to assert judicial sovereignty to the US

Karzai is aiming for stronger legitimacy with Pashtuns, in an attempt to retain southern Afghan infl uence in national politics after he leaves offi ce, and to cement his legacy

Peace talks with the Taliban, although seemingly unlikely thus far, would help ensure Afghanistan’s sovereignty, diminish the risk of mass insurgencies from Pakistan, limit the need for US involvement, and boost relations with India, a vital regional ally and economic powerhouse

AF-PAK

macro beat.

India has recently started strengthening relations with Afghanistan, including accelerating development of the Chabahar Port in Iran, which allows Indian access to Afghanistan & Central Asia while bypassing Pakistan

The biggest aims of Karzai, Afghanistan’s Loya Jirga, the US, and India involve diminishing the Taliban’s regional infl uence without sparking insurgencies or reactionary confl ict

This marginally alienates Pakistan, which remains the likeliest link from which peace talks with the Taliban can emanate, and which gains relevance, leverage, and aid because of the insurgency threat

The recent US drone killing of Hakimullah Mehsud, leader of Tehrik-e-Taliban (Pakistani Taliban), in North Waziristan, Pakistan, severely disrupted Pakistani attempts to negotiate with the Taliban, and dampened US-Pakistani relations once more

Thus far, it appears little progress has been made in forging a deal with the Taliban, while Afghani & Pakistani concessions keep piling up, and with both parties covertly trying to use the Taliban to weaken the other’s infl uence

AF-PAK

macro beat.

Going forward, instability in Afghanistan remains a notable risk, especially around spring elections, although these are unlikely to impact markets

The post-US withdrawal experience in Iraq (including the rise of ISIL) bodes poorly for Afghan stability without a peace deal with the Taliban

As long as opium production & trade continues to boom, cutting off extremists’ fi nancing will be diffi cult

As the US & India make headway with Shi’a groups and NATO begins its disengagement from Afghanistan, Pakistan is likely to attempt to reassert its regional infl uence and check India’s forays

Pakistan may be a source of geopolitical tail risks in 2014, including threatening to cut off NATO supply routes, moving to limit US drone strikes, rising insurgencies, and acceleration of violence against minority Muslim sects, but such risks are unlikely to impact markets

AF-PAK

macro beat.

1 Levant2 Af-Pak3 Asia-Pacifi c

GEOPOLITICS

ASIA-PACIFIC

Strained China- Japan relations are likely the most signifi cant source of geopolitical tension among global powers

Japan’s PM Shinzo Abe is a staunch nationalist whose yen depreciation program has antagonized China, and to a smaller extent South Korea

Territorial disputes between China and Japan over the Senkaku/Diaoyu islands have accelerated in the last two years: In 2012, Japan purchased three of the islands from their “private owner”,

leading to protests and boycotts in China In late 2013, China declared an air defense identification zone (ADIZ) over

an area including the islands In early 2014, China instituted fishing restrictions in the disputed East

China Sea The islands & surrounding area are home to large undersea oil &

natural gas deposits, underscoring the burgeoning economic rivalry

Abe recently paid homage to the Yasukuni war shrine, a tribute to, among others, soldiers who committed war crimes against China in World War II

These dynamics speak to an intentional Japanese attempt to reassert infl uence in the region, with implicit US backing (perhaps even being a part of the Obama administration “Asia pivot”)

ASIA-PACIFIC

macro beat.

The China- Japan economic confl ict appears to be developing into a diplomatic clash with rising militarism

The ultimate destination of energy deposits in the East China Sea will l ikely materially benefi t whomever gains control over them, but the path toward that destination is likely to be more relevant in the near-term, especially to markets

Just like with its rising support of Afghanistan against rival & China ally Pakistan, India has strengthened ties with Japan against the backdrop of rising Chinese- Japanese tensions

With declining Japanese-South Korean relations (as South Korean exporters are also facing the brunt of exchange rate appreciation against the yen), North Korea becomes a focal point for regional geopolitics, as Japanese action against the North could rebuild lost ground with the South

ASIA-PACIFIC

macro beat.

The US rebounded out of the Great Depression with a massive monetary stimulus campaign (by devaluing the USD) and high-powered fi scal spending including for stimulus and war

Abe has repeated the US’s monetary strategy under FDR, and although he may not actively be pursuing a “war stimulus”, militant nationalism and higher defense spending are cornerstones to his economic & social agenda to revitalize Japan

Many scenarios abound for the future of China- Japan relations, but if tensions continue to rise, Japan may become increasingly vocally aggressive against North Korea

Such a move, whether or not it culminates in military engagement, would likely drive Chinese rhetoric higher as well, to protect its borders from an infl ux of refugees fl eeing crisis and maintain its check against the US

ASIA-PACIFIC

macro beat.

Japan’s postwar constitution is pacifi st and does not al low military engagement beyond self-defense

In a New Year comment, Abe suggested that the constitution could be amended by 2020 to ease restrictions on military engagement

This came a month after Abe’s cabinet moved to boost defense spending to $240 bil l ion between 2014 and 2019

The largest tai l r isk comes from the possibil ity that Abenomics may fail to generate a virtuous cycle of NGDP growth

As discussed in the Japan macro section, the insuffi cient fi scal measures, low extant risk premia in JGBs, and unmitigated demographic headwinds make it diffi cult for BoJ asset purchases to stimulate a capex-driven feedback loop

I f Abenomics fails to l ive up to its high hopes, Abe may be increasingly pressured to pivot to defense policy as a way to unite the electorate

Japan has a material fi scal drag in 2014, and if this becomes a signifi cant obstacle to growth, a renewed fi scal push may be in the cards, and would l ikely revolve around defense spending

ASIA-PACIFIC

macro beat.

Thus far, much of the infl ation in Japan has been due to ris ing energy import costs stemming from JPY depreciation

Combined with the perception of nuclear energy since Fukushima, this makes for r is ing Japanese interest in East China Sea energy reserves, as well as popular support for nationalist defense policy against China

Actual war is unlikely, particularly in the near-term, but the situation is fragile with many possible catalysts for future engagement, such as the increasing military dri l ls ( including joint US- Japan naval exercises)

Continued territorial claiming presents catalysts as well, part icularly if it brings the US-backed Phil ippines into the picture, l ike the recent Chinese threat to seize the disputed Pag-asa/Zhongye island claimed by the Phil ippines

We expect harsher rhetoric from both parties in 2014, and the potential for short-term market-impacting events particularly from Japanese responses to any North Korean threats

Aggression beyond rhetoric is hard to forecast, but is a real tail r isk over the next few years unless the situation markedly changes

ASIA-PACIFIC

macro beat.

SPECIAL THANKS

David Schawel, Square One (@davidschawel) Matt Busigin, Macrofugue (@mbusigin) Guillermo Roditi Dominguez, New River Investments (@groditi) Conor Sen, New River Investments (@conorsen) George “Mac” Robertson (@gmrobertson) Patrick Brodeur, Uncle Goose (@patrickbrodeur)

SPECIAL THANKS

macro beat.

Naufal Sanaullah naufal.sanaullah@gm ail.com @naufalsanaullah – January 27, 2014 –...

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