Brazil

Did Australia's Prime Minister Tony Abbott just lose his job because of fears that a probe and audit of the "data" and "statistics" behind global warming could threaten to destroy Goldman Sachs' best laid cap-and-trade, emissions trading scheme and carbon tax plans?

Forget currency collapses, capital outflows, crashing confidence, and current account carnage, there is one major reason why Brazil - no matter what - will not bounce back quickly...

It appears there is one 'currency' worth holding on to when a nation's fiat fraud is exposed...

Holding gold is simply recognition that the Fed’s actions over the last 30 years have potentially severe consequences that pose threats to the value of most financial assets, the almighty dollar and ultimately your clients’ purchasing power. Owning gold is in effect not only a short on the dollar and on the credibility of the Federal Reserve, but most importantly a one of a kind asset that protects wealth.

When will the “nothing is happening” crowd finally wake up?

“There’s a saying that helps explain our mood around here. When the sea is this turbulent, the only thing you can do is sit on the sand and watch. It’s not time to get in a boat."

• Global Markets Rebound on Yellen Speech (WSJ)
• Obama and Putin to meet; Syria and Ukraine vie for attention (Reuters)
• Obama to host China's President Xi amid simmering tensions (Reuters)
• Don't Fall for It, Xi! Chinese Take to Web to Scorn U.S.—and China, Too (BBG)
• Yellen Confirms Fed Still on Track to Raise Rates This Year (BBG)... but is still China dependent?
• Abe's New Economic Plan Confounds Analysts (BBG)
• It's All `Perverted' Now as U.S. Swap Spreads Tumble Below Zero (BBG)

It just keeps getting worse, and worse, and worse...

There is blood on the streets wherever you look in Brazil today, but probably of most interest to the hundreds of US asset managers (the ones managing your mutual funds) is what happens to Petrobras as it remains so widely held. As we noted below, bond prices are collapsing and default risk is soaring, and with the nation's currency collapsing amid the lower-for-longer oil prices, $90 billion of dollar-denominated debt could soon potentially be too burdensome for the company to repay.

Having cited China and EM concerns, The Fed's chickening out from a rate-hike was 'supposed' to provide some support from the drastically derisking emerging markets of the world... it did not. In fact, MSCI Emerging Market FX index just crashed to its lowest since September 2009 with Brazil, South Africa, and Indonesia seeing the biggest plunges post-Fed.

The BRL is plunging anew, puntuating the largest five day drop in four years and hitting fresh record lows agains the dollar.

"Softer growth prospects for the People’s Republic of China (PRC) and India, and a slow recovery in the major industrial economies, will combine to push growth in developing Asia for 2015 and 2016 below previous projections."

The negative feedback look between Brazil's political and economic crises is serving to make each day worse than the last. Tuesday was no exception...

It's no secret that Brazil was long expected to be the epicenter of any future EM crisis just as it was, in many ways, the picture of EM success during better times. That said, even we’ve been surprised with the pace at which the situation has deteriorated and in the wake of the S&P downgrade the market is now left to ponder just how much worse things can get. According to Goldman the list of obstacles is laughably long.