It's all EM is it? You sure?


It's all EM is it? Taking the two favourite stress indicators of ZAR and TRY as barometers of EM deficit country woes we can see how they linked to the fall in S+P500 futures. But once their job was done in tipping over DM equities they have delinked.

Here we have a cluttered chart of the last 20 days in S+P500 futures, ZAR/USD and TRY/USD.



And a clearer one with just the ZAR showing



If you think it's all EM there is an obvious trade there for you.

But perhaps this isn't all EM and once again a correlation makes a nice story while it fits, until it doesn't, at which point you need to go and find a new one.

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admin
February 5, 2014 at 12:12 PM ×

I thought this a decent story...until it isn't.

http://video.ft.com/3151641403001/Too-early-for-US-bottom-fishing/Markets

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Anonymous
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February 5, 2014 at 12:38 PM ×

C says
I don't suppose some people might have simply woken up about 3 or 4 years too late to exactly what global rebalancing might mean for where growth rates might be going forward?
For example ,are some of our global tech leaders really growth drivers with high P/E's ,or are they becoming more like cash cows?
Is China still a double digit growth river ,or is it trending down to become closer and closer to a DM in terms of it's growth sustainability?
Did monetary policy succeed in recreating an inflationary world ,or does the data suggest the opposite?
Appears to me that at a very late juncture there are still a lot of people who simply failed to understand the implications for what exactly global rebalancing would mean for growth rates in this business cycle as opposed to those now behind us.

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Anonymous
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February 5, 2014 at 12:53 PM ×

C Says
Indeed ,have we just seen inflationistas throw in the towel as to the expected outcome of monetary policy post 2008?

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Otto
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February 5, 2014 at 5:46 PM ×

1) Plenty disinflation news from company reports recently (layoffs, problems hiking prices), 2) EM unrest/rebalancing disinflationary as well, 3) Fed tapering despite disinflation prompts doubts re: inflation target, and a related 4) markets may be discounting the end of QE3? (QE1 & QE2 "cold turkeys" sent stocks down by 15-20%).

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Leftback
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February 5, 2014 at 6:26 PM ×

Media jackasses are still actively pumping US equities, while encouraging punters to flee the emerging markets as though they were all located inside reactor #1 at Fukushima.

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abee crombie
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February 6, 2014 at 1:42 AM ×

The problem with the fragile 5 is that it's a very reflexive situation. If the markets decide they are ok, outflows slow down and the situation improves. Likewise the opposite way. Values are already tempting there, if you believe in reforms but generally on a PPP basis not cheap yet. So what do most ppl do, well they step aside and leave the problem to those who know better. Problem is fast money hf have only one goal, so can't really rely on them to be stabilizers in this situation. Not yet at least.

But aside from those really involved in that space the question is contagion risk. ISM seemed to be more with weather. But the stock market itself is a leading indicator and influences PMIs. But generally I don't think problems in any of the 5 have the potential to de-rail the developed world. .....famous last words perhaps.

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