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The Dollar bubble

Weekly investor research

26 January 2015

The ECB appears to be waking up to the urgent need to get inflation going, but its measures so far are inadequate, in our view. By contrast, the US has gone much further towards creating the inflation required to convert its 644% of GDP debt problem into an inflation problem. This means of course that the market’s assumption that what is good for the US economy is also good for the USD is wrong. Even so, investors will focus on flows rather than fundamentals to help inflate the USD Bubble even further. In Saudi Arabia, we expect a smooth transition and no change of course on oil decisions following the death of the King. In Brazil, the bitter medicine is being dispensed, but we believe the patient will eventually recover full strength. For yet another year China defied the shrill cries of the hard-landing crowd to clock up 7.4% growth in 2014. We also discuss some interesting index news and provide updates on Argentinian politics, adjustment ‘Venezuela style’, an upcoming GDP revision in India, fiscal cuts in Malaysia, positioning for talks in Donbass, the Russian current account surplus in Q4 and Turkey’s rate cut. Plus, the usual snippets.

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