Brazil

"Najib has tarnished the country’s image in the world and caused investors to lose faith in the government. Malaysians do not believe in this prime minister."

"It's not the economy... it's the dollar" - That would appear to be the message from the companies of the S&P 500 who have reported in Q3. As FactSet reports, 18 of the 23 companies reporting so far have cited "the strong dollar" as having a negative impact on earnings. Not record domestic inventories (liquidation beginning), the plunge in world trade, not the economic collapse in take your pick of Brazil (depression), China (credit endgame), India (exports/imports crash), and so on...

"The market does not appear to be discounting negative knock-on effects. The outcome for recall costs and fines is unclear and largely depends on the engine performance post repair," said a Credit Suisse analyst in its report on the scandal. Estimates from Credit Suisse peg the costs of Dieselgate at a worst-case scenarios of $87 billion. This would make the VW scandal could be even bigger than Enron Scandal and BP Deepwater Scandal combined.

"In many ways, EM is showing similar symptoms to its DM counterparts of weak economic performance and over- reliance on credit. The outcome is what we call the three EM debacles: de-leveraging, depreciation (or devaluation even de-pegging) and downgrades of credit ratings."

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Central banks are fearful and unwilling to normalize but artificially high valuations across asset classes cannot be sustained indefinitely absent fundamental global growth. Central banks are in a prison of their own design and we are trapped with them. The next great crash will occur when we collectively realize that the institutions that we trusted to remove risk are actually the source of it. The truth is that global central banks cannot remove extraordinary monetary accommodation without risking a complete collapse of the system, but the longer they wait the more they risk their own credibility, and the worse that inevitable collapse will be. In the Prisoner’s Dilemma, global central banks have set up the greatest volatility trade in history.

Brazil's economic recession is likely to be deeper and longer than Fitch's earlier expectations and its performance has diverged materially from those of its rating peers. Medium-term prospects also look weak compared to peers and most other large emerging markets. Fitch forecasts that Brazil's economy will contract by 3% and 1%, respectively in 2015 and 2016 before recording modest growth in 2017, with risks skewed largely to the downside.

As Rousseff fights to keep the Presidency, and has the speaker of the House battles to have her impeached, the country's economy continues to crumble. Retail sales came in below expectations for August and as Bloomberg reports, Brazil's top bankers now fear the combination of overindebted households and soaring unemployment could spell doom.

Back in August, we brought you the story of 1MDB, the Malaysian development bank turned-Najib slush fund with deep ties to Goldman. About a month later, the FBI announced an investigation into the fund after Malaysia arrested a former official who was trying to fly to New York to urge US authorities to look into the whole debacle. Now, as WSJ reports, the FBI and DOJ are looking into Goldman's role.

When China was closed for one week at the end of September, something which helped catalyze the biggest weekly surge in US stocks in years, out of sight meant out of mind, and many (mostly algos) were hoping that China's problems would miraculously just go away. Alas after yesterday's latest trade data disappointment, it was once again China which confirmed that nothing is getting better with its economy in fact quite the contrary, and one quick look at the chart of wholesale, or factory-gate deflation, below shows that China is rapidly collapsing to a level last seen in 2009 because Chinese PPI plunged by 5.9% Y/Y, its 43rd consecutive drop - a swoon which is almost as bad as Caterpillar retail sales data.

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“After careful consideration and analysis, we have decided to close the Fortress Macro Funds and return cash to our investors...  But we have had an extremely challenging two years, and I do not believe the current environment is conducive to achieving our best results."

"I heard time and again this week from governors of emerging-market central banks that it’s not the hike itself that worries them. It’s how much and when it occurs." "Delaying an increase in rates only increases volatility and uncertainty in emerging markets."

The US is in decline. The US government is overloaded with debt. The US financial system is losing is dominance. And even the banking institutions themselves are losing relevance. This isn’t bad news. It’s tremendously exciting.

Though emerging economies’ debts seem largely moderate by historic standards, it seems likely that they are being underestimated, perhaps by a large margin. If so, the magnitude of the ongoing reversal in capital flows that emerging economies are experiencing may be larger than is generally believed – potentially large enough to trigger a crisis. In this context, keeping track of opaque and evolving financial linkages is more important than ever.