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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Wyätt Gwyön who wrote (64038)	6/19/2006 12:10:00 PM
From: gregor_us	Respond to of 110194

The Swoon in Emerging Market Equities This Time of course breaks with longstanding tradtion, in that the sell-off does not unmask terrible govt balance sheets. Because of course many emerging market balance sheets are now far, far superior to the USA. But that won't stop people from reaching for the post-war playbook, and asserting the emerging markets are riskier than than the USA. In fact, its the USA that is vulnerable to a shocking re-pricing of risk. It's the USA that is on the verge of having its balance sheet unmasked. But markets always go to the historical trends first, and try those out first, before succumbing to any new landscape. So, "reducing exposure to risk" will result first in tattered playbook moves: stronger USD, weaker emerrging market currencies, stronger US T-bonds. And so on. I think it's hilarious and I especially like it when countries like Australia are temporarily seen as losers in the "reduction of risk" and "flight to quality" intial move. Australia just cleared a whole tranche of domestic debt in April. Best, LP