Friday, January 22, 2016

Short The Swiss (and Luxembourg)

Maybe Liechtenstein too. Never much cared for Doha either. And then there's...
errrmmm, excuse me.
From FT Alphaville:

Capital flow reversals and the Swiss
There’s a been recurring phenomenon at the World Economic Forum in Davos this week. If the global elite have finally found their way to a particular narrative or viewpoint — this year’s core fascinations being tech disruption, Europe’s existential crisis, the sell-off in markets and commodities and Chinese devaluations — you can be darn sure those topics are peaking.

The uncomfortable undertone to the above is that almost no-one was worrying about any of the above this time last year.

Of particular interest in that context: Why did the global elite miss probably the most significant capital reversal flow story of our time? And its effect on oil producer states and emerging markets?

(For context see FT Alphaville here, here, here, here, here, here… and just keep searching eurodollars and petrodollars.)

But also, with global leaders finally awake to the significance of the problem, what’s the key theme happening today which they also probably won’t wake up to until this time next year?
Here’s a thought. Maybe it’s not so much what’s already happening to petro-states, China and EM countries, but rather what might still happen to countries like Switzerland.

For example, here’s a point made by Uday Kotak, executive vice chairman of Kotak Mahindra Bank on the sidelines of the conference on Thursday. Even if EM countries are suffering from the capital flow transition in the short term, in the long term, lower for longer oil prices are good for countries like India:
If you think about the BRICs, the only country which seems to be holding out out of the four is the “I”. If you look at Brazil, Russia, China, they’re all on wrong side of the energy trade.

If you ask me, does India face the backlash from capital flow reversals? I think in the short term yes, but in the long term if India stays its course India has the ability this time round to be a significant sustained beneficiary of what’s happening in the flows....