With the recent events that occurred last week in Argentina, global investors are taking a very close look a the financial health of their portfolio. Just as BRICS and PIGS were fashionable code words in the past, I feel that the new one will be BACTERIA. For those who are still not quick with the analogy, I am referring to Brazil, Argentina; China, Turkey, Egypt, Russia, India and Africa.
For wholly different reasons, each one of these jurisdictions is undergoing some significant political and or economic shifts which, on their own, do not appear to be able to radically alter the positive market sentiment created by the Bernanke/Draghi liquidity infusion.
However, because of the events that occurred in a relatively short space of time and if one extrapolates the consequences of future events, we could have a serious BACTERIA infection on all the markets. Witness the following events which may occur and which are NOTY being considered by most market pundits:
- Brazil will be holding the World Cup for the first time in its history. President Dilma Rousseff may have done a lot for the country’s poor, but here will be a massive influx of foreigners who will visit. The likelihood of a massive civil unrest is not being presently considered by many foreign investors
- Argentina has had its fair share of problems with nationalizations, populists policies and corruption. The events of last week which precipitated a run on the Peso have exacerbated the situation. Unsubstantiated (so far) rumors have it that the President Cristina Fernandez may not return from Cuba, leaving a gaping void in the political legitimacy of the current powers.
- China has been fighting corruption and at the same time wants to have its own way with regards to freedom. Countless examples can be found in the press. Recently, there has been an virulent attack on a few “freedom fighters”. While this is not unusual over the past years, it is finally starting to get more global coverage.
- Turkey has had both political and religious problems within its borders. Most recently, a run on the currency prompted the Central Bank to raise interest rates to over 10% in an attempt to prevent further exodus. Whether this will be successful or not will also depend on foreign investors who had previously massively put money in the currency and the financial markets.
- Egypt’s “Arab Spring”! is now long forgotten and no one knows for sure what is bound to happen next. Whether it is the military who will take over or a rebound by the Brotherhood, the situation remains explosive and can easily go across borders.
- Russia will also be having a first opportunity to show itself to the world of athletics by hosting the Winter Olympics in less than two weeks’ time. The word is out that sexual orientation is in fact a very important topic and that any deviation (excuse the pun!) from the norm is to be addressed harshly. The recent words of the mayor of Sochi could have an explosive effect on the visibility of Russia as an investment opportunity.
- India has been trying to get out of its predicament of corruption. Examples abound from military contracts to highway construction. The tinderbox tension between the haves and the have-nots is growing and could cause massive unrest.
- Africa has been and remains the “continent of the future”. We are seeing internecine wars over oil (South Sudan is a glaring example) and religion (further south in Nigeria) and gross examples of rampant corruption (most African countries rank at the top of this infamous list)
Antibiotics are a very good remedy to this. Stay financially healthy. The next time you look at your portfolio, think that Bacteria is no longer something which can affect your personal health, but your financial one as well.