Monday, January 27, 2014

OMG emerging markets DOOOOOM - what you need to know

So on Friday, Argentina's central bank gave up trying to defend the Peso. As a result, their official exchange rate shot up toward the real (black market) exchange rate.

The point forgotten is that Argentina's Peso was fucked to begin with. No new information here. No, it's not going to precipitate a crisis.

Because of that, people all of a sudden became worried about EMs generally, to the point that people are now talking about OMG China shadow banking collapse.

There is no new information there either. The EMs were fucked to begin with because we're in a secular DM bull market. And China hasn't all of a sudden seen massive stresses pop up over the weekend, to the best of my knowledge. They've sucked for a while, the Communist Party is working on it.

So if the freakout continues, it's only because the market had underpriced real-world risk til last week.

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