Intervention Risks Rise In Latin America

FX intervention is certainly in the air this week for Latin America. Brazil stands out as the most aggressive, of course, as the central bank intervened in the forward market Friday and in the spot market Monday

Protecting wealth in a world of recurring crisis

Happy Wednesday. I know the news is ‘less good’ today than it was when I last wrote you but writing these weeklies always puts me in a more positive frame of mind. Nevertheless, today’s topic is about downside risk. My hope is to frame the economic scenario globally and then to offer some strategies of mitigating what I believe is significant downside investment risk

Can Brazil’s economic boom last?

I thought I would flag this video by the BBC because I think we are seeing Brazil slow along with China and India as the three largest emerging economies that people care about

Byron Wien’s Ten Surprises for 2012

As always, I present you Byron Wien’s Ten Surprises for 2011. He is bullish yet again – on both the US and emerging markets

On the ECB’s Long-Term Refinancing Operation and 2012 macro ideas for investors

The end of year is usually a good time for markets. There was a lot of angst about the European situation a few weeks ago, but there is less of that now because we’re hitting year-end (tape painting). Does that mean the credit crisis situation is stable? No, but it has stabilised somewhat. 2012 will be a different story though. I talked about the European sovereign debt crisis and my themes for 2012 with Howard Green of BNN and Ryan Avent of the Economist yesterday. The link to the video is below but let me say a bit more, particularly about today’s LTRO by the ECB. I’ll try to be brief

News Links: Is Denmark on Verge of Icelandic Style Crash?

Financial news links for 8 December 2011 including stories on Denmark and Danish bank capital, the European sovereign debt crisis and Spanish banks

Brazil: Outlook Vulnerable To Developed Market Developments

Brazil stands out now for being one of the few in EM to be cutting rates. We think most in EM will be cutting rates by Q1 2012 due to the deteriorating global growth outlook, and so BRL will still likely continue to enjoy a big yield advantage over other EM currencies next year. The current account and budget deficits remain very manageable, with inflows of FDI more than covering the former. There are many reasons to remain constructive on BRL, but the DM story unfolding suggests that we are months away from clear sailing for

Chart of the Day: Operation BRIC Twist

Operation Twist didn’t work in Russia, India or Brazil and it’s not working in the

BRICs to the rescue

Turning to foreign sources of capital will only aggravate the problem from which Europe already suffers. Even assuming that developing countries are willing to take on risks that Europeans find prohibitive, their help will not improve prospects for Europe. On the contrary, it will hurt growth prospects and make the ultimate resolution of the debt crisis more difficult than ever. BRICs should be exporting more demand, not more capital.

It is important that the desperate short-term funding needs of certain governments do not lead to an overall worse outcome for Europe. If Europeans do not want to fund credit-impaired European governments, they should not ask foreigners to do so. Slower growth and foreign debt will not help resolve the problem of insolvency

Continued Policy Mistakes in Brazil

BRL is one of the worst EM performers today, and continues a string of underperformance (-10.8% vs. USD) that began with the unexpected 50 bp rate cut August 31. Since then, only HUF has done worse at -11.5%. It’s really a confluence of factors, but markets are clearly punishing Brazil for its continued efforts to weaken the currency, which have distorted markets there. Besides the countless FX measures, of which Friday’s was only the latest in a long line of poorly communicated policy shifts, we are now seeing even more distortions added into the economy with the imposition of import tariffs to help protect domestic manufacturers. Not only is this inefficient from pure trade theory, but it will also likely add to already high price pressures

ECB: A Shift from Hawkish to Neutral?

BoE holds steady, with markets awaiting the ECB press conference; European stocks firmer. Important speeches from Bernanke and Obama; Bernanke likely to signal potential measures. Brazil swaps and futures market pricing in significant rate cuts; BoK left rates on hold at 3.25%

Brazil has more monetary policy space in the event of global crisis

Frederick Searby says that Brazil has the opposite problem of the developed economies in that it is dealing with overheating and inflation while the developed economies have a serious deflationary undertow. His view is that if there is a crisis like in 2008, Brazil can cut rates and probably will start doing so. That gives it more policy space than we see in the US where rates are zero percent