Re. Macro Digest: The main conclusion ...sorry....

Forgot the biggest point:

 

The market is re-pricing TAPERING again – this time forward. GS and other spoint to a potential exercise of Fed announcing lower threshold on employment (6% due to two senior Fed economist's recent papers stating need for lower nominal target) as "payment" for starting tapering early in Yellen's reign….

 

Market, however, only sees "tapering" and like in May focus on this as indicating "an exit strategy"…….Again – the point is: It shows how fragile our "more of the same" scenario is……..and how Fed's forward guidance have backfired…

 

S

 

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
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