Paul, thread
A few thoughts on what things could go wrong in the world and send the Dow south...
1. China devalues
2. HK$ peg goes. Merrill Lynch survey states that 50% of Asian fund managers expect the peg to go by next year. I think they're a bit optimistic.
3. Argentina peg broken (in fact just add all pegged currencies to this list - that's what Druckenmiller has done)
4. Italy/Portugal/Spain get caught up in the emerging markets contagion and the market doubt whether they will qualify for Euro
5. Euro fails to get off the ground. Ireland had better hope this happens as that's the only way it'll get out of the mess it has got itself into. It reminds me of Malaysia in 1995.
5a. Russia invades Germany
6. Political/Military turbulence in Myanmar, Indonesia, Cambodia, China, Malaysia (now Mahatir has decided to become a fully fledged dictator), Africa, Iran, North Korea vs anyone who'll listen, etc etc
7. Large derivatives default by an Asian/Russian party threatens the survival of a global bank (say UBS for arguments sake!)
8. Citicorp needs to raise capital to offset capital write-off from emerging market debt
9. Coca Cola announces that volume sales overseas are down 20%
I agree that Brazil is a very likely casualty. Huge re-financing needs, seeing US$1bn of capital outflow per day, overvalued currency, high interest rates crushing the economy, already spent 15% of its reserves defending the currency. Going, going....
Whatever way I look at it I can see 100 ways that the world can get worse and about 1 in which it can get better. Now the cut in interest rates has been discounted I think that's down to 0.
Any comments? |
