I mentioned a tweet in yesterday's post by Ryan Detrick, statistical analyst, the number of 2% moves in the last 11 sessions was 7. There is definitely a degree of uncertainty hanging around and if you not careful you could be caught on the wrong side of it.
What to do when you hit a significant drawdown ? http://t.co/FWnD0PMXtF #trading #stockmarket $SPY $DJIA $SPX $DIA $EURUSD
— CadeTradeR (@CadeTradeR) September 9, 2015
Following tensions building over the past weeks , Brazil has been hit with a downgrade from S&P to junk bond status. The government has been battling high debt levels coupled huge pockets of poverty , but the real dagger in the soul of its economy came from the downturn in commodities prices. I've been speaking about this for a number of weeks now and it would seem the casualties are beginning to be counted.
Only yesterday JPMorgan announced it would be removing Nigerian bonds from its Government Bond Index. What we are seeing now is a perceived risk within emerging market economies which is resulting in huge capital outflows into safer havens.
The impact of low #oil and #commodities prices: S&P cuts #Brazil to non-investment grade http://t.co/D5lpZ5bmP3 pic.twitter.com/EYJpCe5Vzk
— Javier Blas (@JavierBlas2) September 10, 2015
These outflows are creating a dire situation from most emerging market currencies. The tweet below shows the probability of Brazil defaulting on its debt which has surged to over 20%. Thinking about the Brazilian government's capital expenditure over the past decade we would notice huge infrastructure due to the result of winning the hosting rights of both the Soccer World Cup and Summer Olympics.
The cracks were already showing last year when the Soccer World Cup was being hosted. At the time Brazilians took the street in sign of protest against the current government's lack of spending on priority sectors within the economy.
The Summer Olympics are set to take place next year July and one does wonder at what cost. The government has overburdened its balance sheet , taken on too much debt which means Brazilians will be indebted for a long time after these events have taken place. This once again calls into question the real value added by such events which remains unanswered by the various sport bodies who stand to make billions just by awarding these rights.
#Brazil cut to junk by S&P. Mkts already priced country as junk. 5y default probability >20% http://t.co/IFyqvEgHuv pic.twitter.com/kGRHzhUIya
— Holger Zschaepitz (@Schuldensuehner) September 10, 2015
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