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Next on the Contagion List – UMS?
I am looking at the tape(s) and it appears to me like everything is
cracking up. The most troubling is the widening of sovereign spreads.
That beat goes on. With that in mind I looked at who might be next on
the list of countries that the wolves (AKA-“Global Bond Investors”)
close in on. To make a big move on the global financial stability scale I
think it would have to be a country whose GDP is north of $1 trillion.
Here’s the list.
Of the 15 names a few (Spain and Italy) are already being pursued by
wolves. Russia is not likely to be a problem in this round. Nor is
Brazil or Korea. That leaves Mexico.
Before considering some of the negatives in the Mexico story I want to
address the one issue that is the most compelling argument against a
Mexico problem. That is their reserves. The Mexican Central Bank is
sitting on $98b of cash. Consider this chart:
While this horde of money would appear sufficient to insure a soft
landing for Mexico I want to draw your attention to where the reserves
were a year ago. From June of 2009 to recently reserves have gone
steadily higher. This $25b of capital was part of the global “risk on”
phenomenon. Money that had left Mexico looking for a safer port during
the 08-09 financial “crisis” came back home. New money came in as
capital began looking for cheap equities. Consider the Mexican Bolsa:
The Peso faired better as the money returned:
But that $25b was hot money. It came in fast; it will leave just as
fast. While Mexican investors could take comfort in the weekly reserve
number in the past, just the opposite will likely happen in the future.
We are in a risk off mode. Some of the money that came to Mexico is
going to be leaving. Looking at a few short-term charts makes me wonder
if the process has not already started:
Mexico is an oil exporter. They are getting killed by the recent drop in
crude. They supply the US with 1/3 of our crude yet they still run a
current account deficit. In 2009 it was a lumpy $10b.
For me, the most troubling number comes from the CIA. They put Mexico’s
external liabilities at $177b.
This number represents both the public and the private sector
liabilities. There are many assets against this that are denominated in
dollars. But I am still troubled. This external liquidity is the issue
of contagion. Global holders of these IOU’s are putting their money back
in the wallet. A contraction of credit for Mexico of 20% would put a
big dent in those reserves.
If the price of oil slips another $10, Mexico’s name is going to come up
with the wolves.
»
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Viva Los Lobos!
Mr. Krasting is not at all likely to share the same sort of hatred for the maggots that wrecked everything. Ever since I ran across Mr. Krasting's posts (before ZH) I posted them on the sane gold site. (rump of olde Kitco, now independent.)
I have warned the frothmouth nouveau goldbugs on ZH that yellow metal is stupefyingly high in purcasing power parity. For the chumba and gecko faction, do some agricultural commodities priced with $gold as the denominator. Things are out of hand in real goods even though the banking system is utterly broke.
I am quite sure that most banks are insolvent as is the world banking entities that have gamed the goomint CB's are hoping to hang on long enough to game the interest rate curve. Feckem. I want a mark to market that I will never get.
The day to day volatility in the currency markets is at a maximum. Big movements of a half percent are geared 10x now.
I am going to bail out from my US domestic manufacturing business soon as I have no forward visibility in FX and even basic materials. I refuse to bring money from home to get gamed in this "system". I have found only one floor level employee that finds the global currency trainwreck more interesting than who got the boot from the amateur hour show. Poor Ted Mack was ahead of his time.
squid suggested shorting the Peso couple of days ago...
Just what is the social utility of speculative currency attacks? Perhaps it is just me, but putting a vacuum cleaner on taxpayer's wallets (worldwide I might add) just does not seem right. In fact it seems akin to theft.
UK is next, and possibly some non EMU east euros to boot.
Nice piece, Bruce.
Big picture, Mexico's oil production has fallen off a cliff. They're going to be an importer in just a few years.
There's revenue source #1. #2 is money sent back from the US. I don't really see a bright future for that, either.
I don't see what holds the peso up. That place is about one black swan from going Mad Max.
Mad Max Mexico. Well, the Pentagon has a plan for going to war with anyone, so they probably have a plan to militarize our southern border. Ought to be easier duty than Afghanistan. The hard part is causing our government to develop a clue of what is important and what is less so, in matters of international relations.
Expect we'll head down south for "national security reasons".
The Isthmus of Tehuantepec is a natural border, about 40 miles Atlantic to Pacific, and Subcommandante Marcos can pacify points south.
My pissed off cousin can beat your wolf: Mad Raccoon!
Don't tussle with a mad coon.
After watching Calderon speak down to our Congress and those morons not realizing what he was doing to (they actually gave him a standing ovation).....couldn't happen to a nice country....
Let's get that wall up and make it quick!
curb,
" (they actually gave him a standing ovation)"
You have to realize WHO was doing the Ovation..............then it makes sense.We are being governed by a 10sq mile population of Idiots,Marxist's,Fascist's,Socialist's,Terrorist's,and unless Americans get control of at least the House in November.............we will have No free future elections.
The left side of the chamber gave an ovation to Calderons whining about Arizona's "new law", which law is pretty much copy paste of existing federal law that isn't being enforced.
TBT,
Never has been , never will be...............GOP/DEMS, both guilty, both in collusion, all with the same agenda.
Dead set on the Amero...............and a Trans National Hwy, due west 20miles from my house.
One thing I see at work here, is this is not a War against Flesh & Blood.
The Powers & Principalities are behind all of it.................if so, look for ONE to come.
Then we will know what's really happening...............think about it, the stage is perfectly set...............for the ONE.
For several days I have been warning of EURUSD buying support as detected by my indicators, and this has been confirmed by the recent break out.
The proprietary indicators I use can identify trend changes before they occur.
http://stockmarket618.wordpress.com
http://www.zerohedge.com/forum/latest-market-outlook-1
How do/did your charts figger in the Swiss intervention? Just wondering 'cause I'm not all that smart when it comes to FX.
++ RR
My golfing friends at Tijuana Country Club tell me that exports are in the shitter (US is the majority customer) and the Bolsa is primarily supported by narcotic business profits.
You don't suppose --
US Gov't "war on drugs" as global commodity price support program??
What would pot really cost if any USian could grow it?
In a similar vein,why doesn't CIA just buy entire Afghan opium crop, win hearts & minds, and put Taliban out of business? Could be done for maybe $5 billion/yr. Am I wrong?
I have seen that idea (buying the Afghan opium crop) put out as well. Seems like a good idea to me.
I really don't know about the cost, but it would be much less than the War on Drugs and the Afghan war.
If $5 billion / yr is about right, that is nothing! Feel free, ZH-ers, to tell me how much money went up in flames today...
The US Gov't "war on drugs" is about driving out the competition and driving up net revenue.
Look up Gary Wells. He committed suicide. He shot himself in the head ... twice.
You better look out for the commodity rich areas (especially oil) if commodities continue to tank. Russia could suffer as well. Bye Bye Dubai. These areas won't welcome $40.00 oil.
Excellent article on the problems with Mexico especially with regards to the growing worldwide conversion of the multitudes to the high holy table of "De-Risking."
-- Another big reason for avoiding Mexico is that its rampant corruption at all levels of government, military/police, and the insidious influence of the various rich and powerful drug cartels is drawing it closer and closer to that of a Failed State.
-- Lastly, as with most corrupt governments who were blessed/cursed with rich natural resources (Russia, Venezuela, the Middle East) these countries have invested less on their people (education and training), private enterprises, nor cultivated other industries sans tourism which Mexico nicely did, but recently overdid to excess just as the U.S. did with real estate in CA, FL, and NV. Now their economies are sooo dependent on their export of natural resources (as lamented by Chavez and Medvedev/Putin). It's interesting that while they depended on private companies to help them develop their oil fields, once they reaped the benefits and became more powerful, the state took over them. Now, many of these countries have dauntingly large and expensive oil infrastructure issues to modernize, lest their field outputs decline precipitously. Unfortunately for them (and this partially includes the better developed but also natural-resources-dependent Canada and Australia) the de-leveraging and de-risking now occurring world-wide will wreak havoc to commodity markets and their national economies.
Plus ?a change, plus la m?me chose. A big no vote on Mexico investments and other "emerging markets," with the possible exception of India.
The bulkheads on the SS European-Titanic are failing one by one and they will also bring down other too-big-to-fail leviathans. A global sinking indeed.
Doc,
-- "Another big reason for avoiding Mexico is that its rampant corruption at all levels of government, military/police, and the insidious influence of the various rich and powerful drug cartels is drawing it closer and closer to that of a Failed State."
I am upper middle age, Mexico has been a failed state as long as I have been alive.( I am native Texan).
The Spanish Royalty, thrives off the Indian Hispanics........and have since their beginning.
Some may consider Mexico family( the Indian/Hispanic peoples yes), the Spanish/Gv't,?Federales,LEO's are so corrupt it's mind boggling.
When the leader of Amexico, can come here, and lecture US on our Immigration Policy,lie thru his teeth about the weapons trade(US supplies the Cartels, Crock of Shite).
While, having policies in place that if Americans (whoever), entered illegally, they get Deported (if lucky), or 2 yrs prison time.
Second time, 10yrs................prison time.
Immigrants( no matter the counrty, can have NO say, no investments there(unless you have a Mexican majority partner).
You cannot own shit............you cannot vote, you cannot hold office, so many YOU cannot's....these hypocritical Bstd's make me sick.
And they have the nerve, to TELL us WE are Racists, and Bigotted?.
Family my ass.
All America has recieved from Mexico from day one, is a good screwing....and so it goes.
***** "Some may consider Mexico family" ***** says you, DosZap...
which I assume (yes I am an ass almost all the time... 8 days a week comes to mind) you wanted my attention... so a dose of reality you will get!
***** "I am upper middle age, Mexico has been a failed state as long as I have been alive.( I am native Texan)." *****
My question is, are you a Steer? or a Queer?... Sorry?! LOVE the movie and the line is such a bur under a real Texan's saddle that I could NOT help myself..
***** "The Spanish Royalty, thrives off the Indian Hispanics........and have since their beginning." *****
Abso-Fucking-Lutely True! And Racist?! WOW! The Spaniards are not very nice to the little Indian peoples of Mexico... FACT!
***** "Immigrants( no matter the country, can have NO say, no investments there(unless you have a Mexican majority partner)." *****
You can get an investor status visa with “X” amount of permanent dollars moved into their banking system, just like in the United States. The property that was purchased in Valle De Bravo was placed into a trust with a Mexican (not a Mexican’t) esquire out front… with no issues. I had more trouble with the exotic land of Canada than I did in Mexico. China, is extremely tuff to deal with though.
***** “All America has received from Mexico from day one, is a good screwing....and so it goes.” *****
Well first off you have… http://en.wikipedia.org/wiki/NAFTA_superhighway the NAFTA Superhighway that raises all kinds of money for Texas… all of it, because that highway runs the long way up Texas… The industrial, storage and services alone are note worthy with regard to generating new lines of revenue in the middle of a desert (that has been pumped dry, almost) http://en.wikipedia.org/wiki/Trans-Texas_Corridor ... You have a hell of a tax base in that super duper highway of yalls! Of course the only reason the highway is there is to service the wage arbitrage benefits found in Mexico, which will become more and more valuable as time marches on and Oil prices start to really get where they should already be.
As for the whole drug thing, well it seems to me the pack mules are jockeying for position? But a pack mule is a pack mule is a pack mule, jockeying or not… Right? Besides all the kidnappings are in Arizona or out west from you. To many guns in Texas for that bullshit to take hold in your wonderful State… Hey, if you see Bush send him to Mexico would ya? Thanks!
Be well Texas, JW
Ditto from another resident Texan.
Ditto as well, from an ex-resident of Texas.
Tks for the thoughts Doc.
I don't hate Mexico... Love Thy Neighbor and all that Jazz...
Super Duper Highway and all that Jazz...
And Mexico has cost controls in place for oil, for the oil they use... in Country.
I see Mexico as a good long play in almost any and all industry sectors...
Affordable wage Arbitrage... (Note Peak Affordable Oil)
As for Mexico internal price mark for oil... I thought it was $50 a barrel just like everyone else who produces? so they are hitting plus par sales numbers beyond that mark, no?
Mexico is family, Europe threw themselves out of Christmas dinner over Iraq and Austerity... Basically whenever Europe could be a prick, Europe has been a Prick... Not Mexico, we like Mexico... we hate spineless, mouthy and / or loose cannon Europe... who refuses to get in the Conga Line http://www.youtube.com/watch?v=zI5mfE9dhFU the never ending Conga Line!
I might add Goldman and Cramer are Bear(ish) on Mexico... what else do you need to buy! Buy!! BUY!!!
So JW, crime is a relative thing to you? i.e. it's not a crime if you steal and murder to run your SUV or boat or generator or whatever? I hope you keep that in mind when the hommies come over to see what's in the fridge or under the mattress. I know. I know. You're gonna shoot them all ... You and John Wayne right?
After what they've been through in the last century, a lot of Europeans value the rule of law. The unprovoked war of aggression in Iraq threw that out the window. You may come to realize it wasn't worth the cost.
Karma man - good luck. You will need it.
The collapse we are going through is not an economic collapse (there will be no economic collapse), that is a political collapse.
Supposedly, the US citizens were supposed to stick to the vision of judging an action, not the doer.
200 years later, anyone with a bit of observation has to admit that commonly, a US citizen will judge the group rather than the action.
The famous unique experiment... What has the US added to the world? Duplicity?
So you hate Europe, because europeans didnt support the illegal iraqi war and because they´re cutting the excessive deficits. Uhmmmm, yes, that makes sense. ....... Or not.
LOL, kaiten said "illegal" war. Is there "international" law on your planet too kaiten?
No, there´s no "international" law on my planet, there´s only international law over here.
The lie, that is our combined reality... would allow for the numbers to speak for themsleves with regard to who is being punished and not...
I don't make the rules, I am just making logical leaps based on the available data...
But to answer your question about Europe, Yes... FUCK THEM! to hell and back a thousand times...
As for the police state that is Iraq?
Got Light Sweet Crude?
Got a 100 year PLUS supply pumping 20m PLUS Barrels? From your wanna be liberal stance, I can assume a LOT! but suffice to say that the World's Energy Needs... with regard to the transportation of Goods manufactured... outwieghs one idiot who would not open up the pipelines.
Global Trade ='s Global Piece (of the pie you most likely will never enjoy, due to your level of education)
Something to sooth your wanna be liberal side... http://www.youtube.com/watch?v=JaF-fq2Zn7I&feature=PlayList&p=C1B06538A32767DF&playnext_from=PL&index=161
this one will offer you some really good information... the forum may allow for you to suffer thru... http://www.youtube.com/watch?v=wYuLjGQQ-jg&feature=PlayList&p=C1B06538A32767DF&playnext_from=PL&index=132
Be well and good luck... let these be your first footsteps into figuring things out for yourself.
Oh, cool, thanks for explanation. Now I understand, IT does make a sense ;p
Mexico is an oil exporter with the biggest oil field, Cantarell, in decline. It does not look like other field replace the declining output fully. http://www.indexmundi.com/mexico/oil_production.html