Macro Digest: A world of simple rules...

 

The market right now is sending a strong warning signal and like in May it comes from EMG – and more specifically MXN and BRL…:

 

See chart below but here is a few points:

 

#1 :  USD /EMG never came even close to its break-out levels in May….

#2:  The current account trends in BRIC's continues to go to ZERO and even negative – increasing cost-of-capital for deficit countries….

#3:   Market liquidity is SIMPLY overrated considering the present FX investigation, the end-of-year, the decrease in proprietary capital due to BIS III and general new higher capital requirements…

#4:  Today EU Commision outlook is classic pretend-and-extend…. But singling out France as in CLEAR non-compliance even in 2015 will only increase stakes for EU Com. Two-pack and Six-pack financial examination…… (EU Com. Sees France deficit @ -3.7% in 2015 vs. promised 3.0% maximum deficit…)

 

Conclusion:

 

Add long volatility to your portfolio, our models still indicate more upside in risk, but personally, this is one time where I for once may want to walk away from model and focus on preservation of capital – the risk is increasing day by day and not only

 

 

 

USD-Brazil this morning….

 

 

USD-Mexico this morning….

 

 

 

& Now… back to May 21^st – When Bernanke first mentioned the "tapering word"….

 

http://blogs.reuters.com/anatole-kaletsky/2013/09/19/the-markets-and-bernankes-taper-tantrums/

 

The same chart now including May 2013 and Tapering..

 

 

 

 

Med venlig hilsen  |  Best regards
Steen Jakobsen  |  Chief Investment Officer

 

Saxo Bank A/S  |  Philip Heymans Allé 15  |  DK-2900 Hellerup
Phone: +45 39 77 40 00  |  Direct: +45 39 77 62 23  |  Mobile: +45 51 54 50 00

 

Research: http://www.tradingfloor.com/traders/steen-jakobsen

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