Markets As the fall comes….

Fall season nears as news come from several different fronts.

Sweden calls for a tight election on the center right with an extremely weak krone on the run where immigration plays a key role;  Argentina hardly recovers from peso run with very few reserves on the tank, the USD near the 40 pesos mark ( it was 1 to 1 not long ago), markets down 50% on the year; and finally, as US mid term elections approach, fears of change in congress and cautious evidence of nearing recession bring further uncertainty into the equation.

After some hectic weeks, Argentina takes fewer headings on this one. Probably a good sign after the ran on the peso depleted part of its foreign exchange reserves and “cute” yet ineffective moves like the issue of a 100 year bond (for Argentina) proves again the irrationality of western markets, encouraged again by key investment banks, always pushing when handsome fees are at stake.

Money that was raised when there was clearly no need for it. Going for 100 years in Argentina is one heck of an investment horizon for our great grandchildren!  Miscommunications, droughts and inherited mismanagement of course didn’t help. According to The Economist, at 40 pesos to the USD, the currency is not that undervalued! Now it is up to the IMF again to pick up the pieces, but this time old prescriptions – privatizations and free currency – will not work and will need to be updated.

Midterm elections are much awaited since it seems that this time around there will be no interference from dubious social media players and will be a great reference for what there is to come. Latest polls as published by The Economist show a change in opinion driven mainly by a deeply deceived white young college voter. Effects on tariff levies and uncertainties are beginning to be felt.

Shifting back to Spain. It seems we are clearly dragging our feet again.

Another short cycle with clear signs of slowdown with employment numbers at three year lows. Too much focus on “fake masters” and too little on reforms. Sanchez turns out to be a huge disappointment, and PP does not deserve any better. Latest PP departure turning to the private sector for handsome board fees. Only Ciudadanos remains firm and cautious on this  spiral of events. Still wondering why Rajoy gave the power to Sanchez and did not call for free elections, potentially turning the power to Ciudadanos.

Markets remain at all time highs, especially in the US. Stable currencies, significant arbitrage between the Swedish and Danish krones, and oil reaching the $80 barrel (sanctions on Iran probably play a factor) which somehow looks as fairly valued, are the most noteworthy news to highlight.

On the corporate sphere, JPM’s Dimon is now showing signs of stepping to the side…

We will remain vigilant on new events.

Rafael Salama

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