Thanks My Ladies for letting us share from your private chatroom
[5:57:38 AM] MY LADIES: GOOD MORNING EVERYONE.. I HAVE SOMETHING IN THE WAY FOR YOU EARLY BIRDS SIT TIGHT
Dave: I like good news ESP on Friday, they musta told YA's
MY LADIES: ME TOO DAVE...FRIDAYS ARE A NO WORK ZONE FOR ME...
OK HERE WE GO..LET’S STICK WITH THIS A LITTLE LONGER
Troubles Loom for Emerging Market Currencies
Currencies in many emerging market nations have been buying less and less for more than a year.
In sometimes turbulent trading, the currencies of Brazil, Russia, Chile, Turkey, Malaysia, Indonesia, and other nations have fallen sharply, in some cases losing 20 percent of their value or even more.
Joshua Brockwell, of Azzad Asset Management, said emerging market currencies have been hurt by the soaring dollar, falling commodity prices, and worries about slowing global economic growth.
MY LADIES: THE STRONGER THE DOLLAR GETS THE MORE DIFFICULT IT BECOMES TO MAKE PURCHASES RIGHT? BUT WHAT IS THE OTHER SIDE OF THAT COIN? WHAT IS THE WHOLE OBJECTIVE HERE?
Impact of currency changes
Experts say a weaker currency makes it more expensive to buy imported items, from gasoline to medications, which can be a source of inflation.
But a weaker currency can also help boost exports by making them less expensive and therefore more competitive on global markets. Stronger exports can help economic growth.
That is why critics accused China of seeking an unfair price advantage when Beijing allowed the value of the Renminbi, also known as the Yuan, to decline recently. Chinese officials said the change was driven by market forces.
MY LADIES: HUMMMM INTERESTING. THE OBJECTIVE IS FOR EVERYONE TO MOVE TO MARKET ECONOMIES RIGHT?
SO WHILE A WEAKER CURRENCY MAKES IT DIFFICULT TO PURCHASE IT MAKES IT EASIER TO SELL. AHA..SO WE ARE STUDYING AND UNDERSTANDING HOW THE ONE BELT INITIATIVE IS GOING TO WORK RIGHT?
HOW EACH COUNTRY MUST USE THEIR OWN CURRENCY RIGHT?
WELL THEN THEY NEED TO CREATE A USE AND DEMAND FOR IT AND TO GROW THEIR ECONOMY
THEY NEED TO DO WHAT? BE ABLE TO SELL THINGS ON THE CHEAP RIGHT?
SO THIS BOTH SIDES OF THE BALANCE SHEET IS WHAT WE’RE WATCHING.
EMERGING MARKETS ARE STRUGGLING TO PURCHASE BUT THEY WILL GET THROUGH IT AND THAT WILL BALANCE ITSELF WITH THEIR EXPORTS AND EVENTUALLY THEIR CURRENCY WILL GROW IN VALUE AS WELL.
DO WE ALL GET IT?? I HOPE SO??
LET’S MOVE ON…
What hurt emerging market currencies?
Several years ago, emerging market currencies began rising in value when record-low interest rates in the United States gave investors disappointing returns. Investors move their money to the place where they get the best combination of return and risk, and fast-growing developing nations looked like a good bet.
But that changed when the U.S. central bank signaled its intention to raise the key interest rate. Economist Joe Brusuelas of McGladrey LLP said U.S. rates will probably go up about two percent over the next three years. That will give people who invest in the United States better returns than other nations that are still holding interest rates at very low levels in a bid to boost economic growth.
Improving U.S. growth means low interest rates are no longer needed.
Brusuelas said the end of record-low U.S. interest rates mean global financial “tectonic plates” are shifting. “You should expect to see capital flow towards economies where it can get better rates of return, and that's exactly what we are seeing.”
Currency values are also affected by risk, which has risen recently as China’s economic growth slowed. Less growth in the world’s second-largest economy means less demand for crude oil and other commodities that are important exports for many emerging markets.
Brusuelas said that sparked "a crisis of confidence among global investors.” When a lot of worried investors sell a particular currency, the decline in demand for that kind of money drives down its price.
MY LADIES: THE END OF US RECORD LOW INTEREST RATES. HUMMM ..WELL MEMPHIS HAS THIS TOPIC COVERED ABOVE
Brockwell said some emerging market currencies have fallen to a level that reflects their current economic fundamentals, while others have dropped even lower.
Brusuelas said many currencies are influenced by the value of the Chinese yuan, which he predicts will fall another three percent, pulling emerging market exchange rates down even further.
MY LADIES: CORRECT… THINGS WILL GET A BIT WORSE BEFORE THEY GET BETTER…. GROWING PAINS OF EMERGING MARKETS… BUT IN THE END THEY WILL ALL COME UP ON THE OTHER SIDE OF THIS IN A MORE UNIFORMED TRANSPARENT WAY OF DOING THINGS WITH NO BULLIES.
MY LADIES: I WANT TO BE SURE EVERYONE UNDERSTANDS EMERGING MARKETS AT THE MOST BASIC LEVEL. BECAUSE ONCE YOU HAVE THE ROOTS THE REST OF THE PLANT WILL GROW.
ALL WE ARE SEEING IS CLEARLY THE NEW BANKING SYSTEM AND WITH IT COMES WHAT EVERYONE IN THIS ROOM IS WAITING FOR.
[6:20:00 AM] MY LADIES: Emerging market debt transformation lowers risk of crisis
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The chaos endured by emerging markets this summer is unlikely to evolve into a credit crisis, according to one of the world’s largest credit rating agencies.
Despite a multiyear debt binge, countries including Brazil and India have transformed their government debt markets, inuring themselves to global economic shocks by turning away from the so-called “original sin” of borrowing in non-domestic currencies.
Across the world’s biggest emerging markets, the share of debt held in a country’s own currency has jumped from just over 50 per cent to just under 75 per cent in the past 15 years, according to research by Moody’s.
Deepening local sovereign debt markets have allowed governments to raise a larger portion of funding in their own currencies making them less vulnerable to foreign exchange moves.
MY LADIES: DEEPENING SOVEREIGN DEBT?? HOW ARE THEY DOING THAT??
HAHA WE’RE WATCHING IT ALL OVER THE MIDDLE EAST FOR STARTERS RIGHT??
“This suggests they will be less susceptible to shocks,” said Elena Duggar, co-author of the research.
When the financial crisis hit emerging markets in 1997, foreign investors rushed to sell emerging market assets and as the domestic currencies of the countries dropped their debt burdens rose.
“In previous emerging market crises these countries had large sums of dollar-denominated debt and suffered because of it,” said Iain Stealey, fund manager at JPMorgan Asset Management.
“So they have been trying to change their debt profiles and that’s why the recent pain has been felt in the [foreign exchange] market, not debt markets.
MY LADIES: WELL THERE ARE 2 BIG SENTENCES RIGHT?
DOLLAR DENOMINATED DEBT! SO THEY’RE CHANGING THAT NOW TO HAVE DEBT IN THEIR OWN CURRENCY. MUCH BETTER PLAN AND MUCH NEEDED STEP.
“It helps that overall debt to GDP [gross domestic product] levels are also still fairly low.”
The increase in local currency debt has been made possible by a growth in local institutional investors such as pension funds and insurance companies.
On average, local investors hold 68 per cent of the sovereign debt issued by their government, compared with 58 per cent in 2000.
MY LADIES: CREATE LOCAL DEBT GOOD IDEA.
However, greater reliance on local currency debt has not meant emerging markets have completely escaped volatility linked to global trends.
There has also been a rise in the number of overseas investors putting money into local currency debt, albeit at a slower pace than domestic investors, as they seek to escape ultra low rates in their own domestic debt markets.
MY LADIES: OVERSEAS INVESTORS PUTTING MORE MONEY INTO LOCAL CURRENCY DEBT. WELL NOVA AND I HAVE BEEN SHOUTING THIS FROM THE ROOF TOPS TOO. GOOD PLACE TO PAR YOUR MONEY!
This increase means local currency debt markets could be exposed to outflows of capital when interest rates in developed markets rise.
Investors wake up to emerging market currency risk
Violent sell-off abates but growth is missing in many countries
Prices for debt issued in countries such as Mexico and India have fallen and yields risen this year as speculation grows that the US is on the brink of raising interest rates.
For investors in local currency emerging market debt, August has been a challenging time.
Deutsche Bank points out that its aggregate local currency EM bond index suffered its biggest monthly fall this year, taking year-to-date losses to 9 per cent.
However, emerging market investors including BlueBay Asset Management believe a 1997-98 style emerging market crisis is a tail risk that investors have largely discounted.
They point to dramatically different fundamentals in the countries, including growth in total foreign exchange reserves of almost $3.8tn compared with less than $0.5tn in 1998, according to the International Monetary Fund and Fitch research.
MY LADIES: SO WE ARE SEEING THIS ALL COME TOGETHER AREN’T WE?
THE GOAL IS TO GET ALL COUNTRIES ON THEIR OWN CURRENCY, GET THEIR DEBT IN THEIR OWN CURRENCY AND GROW THEIR ECONOMIES A BIT QUICKER AND THAT WILL HAPPEN QUICKLY WITH THE NEW ONE BELT ONE ROAD INITIATIVE.
NO ONE WILL BE LEFT BEHIND
ALL COUNTRIES WILL BE CREATING NEED FOR THEIR OWN CURRENCY AND FINDING THEIR WAY IN THIS MAZE. ALL COUNTRIES!
MY LADIES: SO LOOK AT THIS, EMERGING MARKET DEBT IS NOT SUCH A BAD IDEA. HUMMM WHERE HAVE WE HEARD THAT BEFORE?? LOL..
GOVERNMENT BONDS IN LOCAL CURRENCY ARE HOLDING BETTER THAN THE EQUITIES ON FX. INVESTORS ARE NOT PANICKED ABOUT EMERGING MARKET CREDIT WORTHINESS
Emerging market debt steers clear of turbulence http://www.ft.com/cms/s/0/6a7c5e3e-4be5-11e5-9b5d-89a026fda5c9.html#ixzz3kli0Rri4
Emerging market debt is sidestepping a violent rout in global markets despite dire warnings about the risk posed by a surge in EM borrowing since the financial crisis.
A chain reaction triggered by China’s decision to devalue its currency has led to severe movements in emerging market equities and currencies that have yet to be matched by equivalent turbulence in debt markets.
“There is no chatter in trading rooms about a debt crisis,” said David Riley, head of credit strategy at BlueBay Asset Management. “EM bonds have held up relatively well considering the pressures they are already under.”
Although prices for hard currency debt sold by countries including Turkey, Mexico and Indonesia have fallen, sending yields up, year to date the total return on JPMorgan’s emerging market sovereign debt index is minus 0.3 per cent, compared to minus 15.86 per cent over the same period for MSCI’s EM equities index.
The difference reflects the fact that bond markets have long been flagging the risks of stalling global growth and low interest rates, Mr Riley said, while other markets have been more optimistic.
Steep falls in currencies such as the Turkish lira and Brazilian real against the US dollar have pushed down prices for local currency debt further, meaning the total return year to date for EM local currency debt is now minus 12.7 per cent, according to JPMorgan.
However, dollar-denominated bonds sold by EM companies such as Codelco in Chile, Pemex in Mexico and Ecopetrol in Colombia indicate no meaningful levels of distress, say credit strategists Oleg Melentyev and Daniel Sorid at Deutsche Bank.
“What the markets are telling you is that investors aren’t panicked about EM creditworthiness,” said Chris Iggo of Axa Investment Management. “Bonds have weakened but haven’t moved as far as equities or FX.”
Governments and companies in Brazil, China, Turkey and other emerging markets have sold billions of dollars of debt in the past five years as investors sought refuge from low interest rates in the US and Europe.
The World Bank cautioned this year that a storm was brewing in emerging market sovereign debt as growth slowed and government budget deficits expanded to levels not seen in a decade.
Economists at the Bank for International Settlements have also highlighted how quickly dollar-denominated lending to companies and governments outside the US has increased, with emerging market issuers accounting for much of the rise.
Now those EM debt issuers face a perfect storm of China-led growth fears, falling commodity prices, rising political risks and the prospect of capital outflows sparked by higher US interest rates.
However, these concerns have been balanced by a change in the way emerging markets borrow.
Although EM general indebtedness has increased fourfold to $5.8tn, according to Fitch Ratings, much of the increase has been driven by foreign investment in local currency denominated government bonds.
Emerging markets are well-placed to absorb “sudden stops” in capital flows, insists Bluebay, and if necessary fund the refinancing of foreign borrowing by domestic corporations
PrincessDD: ML I have had something on my mind and maybe you can help me understand it more. I see that the flooding of the oil markets is driving oil down and with oil being in the petro dollar that it would basically phase out OPEC and all the new contracts would be in another entity that would be newly made up to include Iran. They would eventually collapse that petro dollar and OPEC at some point in the near future.
MY LADIES: NOT THE NEAR FUTURE AT ALL. AND IN ORDER FOR THE PETRO DOLLAR TO BE PHASED OUT ALL OIL CONTRACTS WOULD NEED TO BE RE WRITTEN. I'M NOT SEEING THAT ON NEAR HORIZON
Buckeye: SO WITH SO MANY COUNTRIES DROPPING USD THAT WOULD MEAN THE FED WOULD HAVE TO RAISE INTEREST RATES TO BRING THE EXCESS USD BACK INTO THE TREASURY CORRECT?
IF NOT WE WOULD SEE MASSIVE INFLATION HERE CORRECT?
SO WILL THE NEW SYSTEM HAPPEN BEFORE THE INTEREST RATES GET TO HIGH HERE LIKE IN THE LATE 70'S ARE BEFORE INFLATION GETS OUT OF CONTROL?
THANKS FOR THE POSTS ML AND MEMPHIS THIS REALLY WAS AN EYE OPENER.