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Little to dispute on EPS recession, liquidity tighter than ever, CBs wallowing in the dark, equities could still be expensive and at minimum are correcting

VIX remains elevated and should be bought below 20

The Dollar was properly thrown off the most crowded trade list but will not set fresh highs despite being recently way oversold

Markets will not be freed from macro fears and realities anytime soon but we will largely sideways in a range that could be 1680-2250 on the tails but most likely 1810-2030; these wide ranges are appropriate based on the tail risks, extreme positioning and liquidity sucked out of the mkt

Total earnings yield of equities have a floor in an environment where bonds earn nothing and many companies have pristine balance sheets. Many sectors have already priced in recession

Short term however I would call for a pullback in equities

Market Core Views

China and EM have credit issues but they may not be as bad as you think

Credit will get worse and you can position for that but we are not going into 2008 again and worse doesnt mean it bleeds across the entire credit curve; I argue for more bi-furcation

Commodities are at the cross roads of supply discipline emerging, capital investment has over-adjusted, demand never really fellSORRY

Consumer is structurally weaker than they have ever been based on nature of labor market, negative real rates, financial oppression get used to it. Labor market has not rolled overyet?

Credit, Commodities, China, Consumer are the obsessions

CEW (basket of 15 EM Currencies) is -16% vs USD in last 2yrs, versus -20% for Canadian Dollar, Australian Dollar and Euro

Is flat against most crosses ex-USD

EM FX better than you think:

EM FX better than you think:

Euro

EM FX better than you think:

Mexican Peso

Wont be successful as long as credit markets remain steady

Capital flight is being addressed with renewed soft capital controls (QDII frozen) while $3 trillion reserves are still ample to cover repayments of external dollar debt.

While the change from a dollar-peg to a currency basket (similar to that of Singapore) has created some volatility, the new regime will be heavily guided by PBOC with a smaller than anticipated depreciation this year.

Didnt China basically stop the global devals in their tracks back in August with their threat to devalue??? Maybe this alone was enough to stop the flight the Dollar China stole the game from the Fed/ECB/BOJ

China:HFs ready to pounce but will it work???

EM selloff has begun to morph from concerns about growth to broader concerns about creditworthiness.

Why has EM corporate credit's been relatively resilient?

Much of EM debt (35%) is quasi sovereign with much higher representation in worst credit sectors energy (70% of debt in this sector is quasi sovereign)EM corporates have a big brother in the government (credit market microstructure in EM v DM very different)

EM debt is why EM Equities have sold off so hard:Help from the sovereign may bolster a company's ability to pay back debt, but raises the cost of equity for other sectors.

RoE fallen more in EM than in DM, but this has happened despite EM companies levering up

Credit transmission in EM equities is different than DM equities

EM Credit Monsoon? Maybe, or maybe only for some.

Why is EM Credit Not So Bad? Because Much is Not Local Currency Debt

The big issuers in EM are companies, typically in the commodity sector, with external revenues. Currency weakness certainly hits their profitability as commodity prices are strongly negatively correlated with the USD. However, this weak profitability does not immediately impact the balance sheet, as it does for external issuers with no external revenues.

Many Debtors Are USD Exporters, Buffering Their Losses

Is the basic idea of low rates in bonds (rising TLT) simply that people are selling stocks and shifting into bonds? Is it that simple or is there more to the purported "wisdom" of the bond market than that? - Greg

To me, the reason underlying the market malaise is DEFLATION.All the negatives seem to stem from prices on virtually everything going down. Is this also why the German banks are under such intense pressure? - Robert

Record global $ debt + 70% reduction in petro $ creation = increasingly strong $, right? - Paul

BK: Asset managers' largest clients are pension funds. Does the risk of asset managers spread to pension funds, public and private, causing the Gov't to step in, albeit in a different way than in 2008-09? - Robert

With US Global companies such as $AAPL keeping cash off shore for tax reasons. Does the China devaluation impact these companies cash directly? Or just indirectly in lower revenue? - Don

I would love to hear thoughts on why USD/JPY FX rate seems to influence global markets more so than GBP, EUR, or even Yuan - Mark

Tim: Which EM market would you dip your toe in and at what price or market event? - Richb) Tim what are your targets for EEM - Kim

Your Questions