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Veteran EM Fund Manager Warns "The Youngsters Are About To Be Schooled"
With Emerging Market debt, equity, and FX rates coming under significant pressure once again, 48-year-old veteran EM fund manager Stephen Jen has a message for the new breed of EM fund managers, brace for more pain. As Bloomberg reports, with echoes of 1997-98's crisis at hand, Jen explains, "many [current managers] became EM specialists after the term ‘BRIC’ was coined in 2001 and don’t know any serious crisis," adding "they are about to be schooled."
The hopeful bounce early this year after the Taper Tantrum collapse last year, has once again disintegrated....
Stephen Jen landed in Hong Kong in early January 1997 as Morgan Stanley’s newly minted exchange-rate strategist for Asia.
...
If the 48-year-old native of Taiwan, with a PhD from Massachusetts Institute of Technology, sounds a little jaded now, it’s not without some reason. He says he worries that many emerging-market analysts are too young to remember the late 1990s. Instead they learned the ropes in an era dominated by the rise of Brazil, Russia, India and China -- a supposed one-way bet to prosperity.
“Many became EM specialists after the term ‘BRIC’ was coined in 2001 and don’t know any serious crisis,’’ says Jen, who now runs the London-based hedge fund SLJ Macro Partners LLP.
The youngsters are about to be schooled. Jen says echoes of 1997-1998 may be at hand.
Investors woke up today to Russia’s 1 a.m. interest-rate increase to defend the ruble. There’s the mounting likelihood of a Venezuelan default. Stocks from Thailand to Brazil are reeling. The Fed hasn’t even begun raising interest rates.
Jen is bracing for more pain.
“At some point, the risk of fractures in parts of EM will rise sharply,” said Jen.
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“My long-standing view on EM currencies is that they could melt down because there has simply been way too much cumulative capital flows,” said Jen. “Nothing the EM economics can do will stop these potential outflows as long as the U.S. economy recovers.”
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We suspect this is the case for many fund managers currently who have been around a fe wshort years and experienced nothing but a market where every dip is to be bought...
Every year looks like an EM crisis as we see above, yet ever year it's rescued in the minds of 'young' managers. What Jen fears is the melt-down a la 1997-98 that none of the new breed have experienced.
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Guess what happens when they run out of FX reserves to defend their currencies? They sell gold.
What happens when they run out of Gold?
They realize they've been snookered and looted
goldmaned.
Give the big titted avatar a prize!
just like the bears these last few days. BEARS in here are screaming this is the top and SPX 666 is coming by friday. Too many bears in here,
Normally when you get all the bears screaming, at once, the bus gets full and you get a BIG RALLY LIKE TODAY, we saw.
But the other scary thing for bears right now is THIS CHART here => http://bit.ly/1fMcakI is screaming another BIG ASS rally is just getting started.
All this RUSSIAN drama was a CON JOB and a nice excuse for the smart money to get LONG going into XMAS! :-) Fancy that peepz!!!
They sell more gold.
War
right poncho...........sure they will .......they really wanna defend that POS paper with the only real money so they just give it away......
N/A
They default, bitch!
There is going to be a lot more defaults than Wall St. thinks possible and the knock-on effect will be huge. Time to decde on how to ride the storm out.
I don't know if this is THE precipice, but this is a precipice. Could just be one of many on the way down.
It took over two years for the market to bottom out after 1929 and there were small market bounces as it tumbled. Gravity always wins and the pull is always there.
Riding the storm out is the answer... There will be no place to hide when the derivatives bubble pops and any one of the US's insane policies could trigger the bursting of the bubble... Why else did Congress vote to lay a derivatives burst at the feet of the American taxpayer...
How many glasses of wine have you had tonight?
Not finished with my first, why do you ask?
Agreed. They don't sell gold. However, that makes them "deadbeats", and, as "deadbeats", they might get sanctions, and if sanctions don't work, they might get militarily invaded and THEN have their gold forcibly removed (e.g. Iraq and Libya). However, it takes MSM time to teach the taxpayers and potential enlistees how each little country's leader is yet another Very Great Danger To Us, and that means The Empire can only invade so many little countries at a time. So The Empire might have to bluff sometimes. Should there be a domino of defaulting little countries, The Empire might end up in the position of trying to herd cats.
Try buying war supplies with fiat, and see how far you get.
The US has made it clear its at war with the BRIICTS.
No EM will sell gold from now on, default before any sale of that..
Option 1. Kabooooooooooooom.
Option 2. Sell us your gold. Pretty please with sugar on top.
Amen. In WW1 and WW2 lots of physical gold changed hands between nations that needed supplies and nations that provided supplies.
So you hated gold at $250 oz and you still hate gold years later...
So forgive me if I discount you rubbing your balls to tell me what happens next.
Grapes are better sweet than sour.
Screw DOLLARS and GOLD. I already bought me a stash of those SDRs. Time to live like a King.
I'm telling Darth Vader you said that, Stormtrooper. :-) JUST KIDDING.
Fine, so they become a 'forced' seller.
Forced sellers normally always sell the low of the move, it's how markets work.
And never forget, there are far more WILLING buyers at ever lower prices of Gold, myself included.
I've been warning about this as I live in Thailand. bubble central.....
Still going to be safer in Thailand than anywhere in the west... Thailand is still largely an agrarian society and the local economies will not be effected, other than the knock-on effect of reduced tourism... I'm in Chiang Mai and life couldn't be better... Fuck the west, they've stolen the future from hundreds of millions of sheeple that believe their rhetoric... som nam na....
Stephen - It's all Bullshit!!! Just keep buying the fucking dip like these youngsters are advising. Old Yellen has their back.
I truly hope he's right... my biggest fear is they never get schooled here in the new normal and this goes on forever until price discovery is so utterly destroyed the entire planet is starving.
The sooner these "markets" crash and burn the better...
Are you ready, my fellow bitchez?
That's not the MsCreant "judge" I know.
Are we selling Z/H handles now? ;-D
This guy doesn't understand, it's different now, Janet has our back. Relax, everybody back into the pool, that storm's practically past us now.
Nuh, uh. Too many people peed in it. Not enough chlorine to clean all that up. And those things floating are NOT Baby Ruths like they keep telling me. And hey, what is that at the bottom? And hey, why is it swirling? That sound?
As long as western central bankers control the printing presses they don't give a shit... This has been proven by the overt manipulation of all markets with impunity.... As long as the big banks are beyond prosecution, nothing will change... Congress is nothing but a rubber stamp for the banksters...
2014 BRICS
2020 BIS
2025 S (South Africa has gold and it should still be worth something)
Is this it? That's what it's all about, Manny? Eating, drinking, fucking, sucking? Snorting? Then what? You're 50. You got a bag for a belly. You got tits, you need a bra. They got hair on them. You got a liver, they got spots on it, and you're eating this fuckin' shit, looking like these rich fucking mummies in here... Look at that. A junkie. I got a fuckin' junkie for a wife. She don't eat nothing. Sleeps all day with them black shades on. Wakes up with a Quaalude, and who won't fuck me 'cause she's in a coma. I can't even have a kid with her, Manny. Her womb is so polluted, I can't even have a fuckin' little baby with her!
--investment banker credo
"Scarface"?
Too bad we can't turn Tony Montana loose on Congress with a chainsaw...
Rule #1 - Don't lose money.
Rule #2 - Don't lose money.
Rule #3 - Don't lose money.
The old school book.
Rule #4: spend it while you gots it!
The trend is your friend. I like catfish and mullet, but I don't like to bottom fish.
Yes the long term fundamentals of EM Asia have your backs. When you age there, your backs gone.
Markets are not always efficient and the idea that they are is a myth manufactured by so-called experts such as Paul Krugman in the ivory towers of academia. Disconnected from the real world those responsible with guiding our banking institutions often fail to see potential second and third order effects of debt monetization. In many ways they pose one of the greatest threats to the stability of our economic system.
A policy of blindly trusting anyone who claims to be an expert has disaster written all over it. If the bond market is indeed a bubble ready to pop its collapse will be full of ugly ramifications that will not only effect bond holders but will test the economic foundations of both the country and the world. Not only would bond holders be stripped of wealth but soaring interest rates would magnify the nations debt service and rapidly impact our deficit in a negative way. The article below delves into just how big a problem it could cause.
http://brucewilds.blogspot.com/2014/12/bond-market-bubble-has-ugly.html
Fuck 'em.
these things become a problem because big fund managers use derivatives on FX & interest rates as opposed to buying the underlying.
As an fx trader, i dont give a fuck about an emerging market crisis, im just trying to follow the markets..kinda hard to flip on a dime when you have some exotic derivative book based on a few currency pairs moving a certain amount within a certain amount of time.