The Trade Trouble Behind the EM Tumble

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Sept. 6 (Bloomberg) -- On today's "Chart Attack," Pimco Executive VP Rich Clarida and Bloomberg’s Adam Johnson look at what’s behind the emerging markets tumble. They speak on Bloomberg Television's "Street Smart." (Source: Bloomberg)

Income side of things.

They will go to an exotic country somewhere in latin america that and say that i can get six percent, i will take it.

It looks just great.

And now we see that this is shifting.

How long will this play out?

When does the start becoming an opportunity?

This is something i am looking at.

The selloff does happen but opportunities always open up.

There will be opportunities opening up here.

But the focus is very selective.

It is clear that you want to look at the macro data.

Eventually, this is what will dominate, especially with trading and growth.

What are these countries doing to fight that?

Different countries are using different strategies.

There was a surprising move from mexico in which the mexicans surprised the markets by cutting rates, even though that would have impact on the currency.

Other countries go in the other direction trying to tighten their policy.

This is a mixed story.

I have a couple of different microphones.

One way or another we will get my voice on this television show.

You were crunching the numbers and this is what you were getting at, the growth and the deficit.

If we could pull this up, let's show everyone what we are talking about.

The current account means you are running a surplus, and currencies are moving up, generally speaking.

Talk us through what we see right there.

The basic point is that when the taper talks began, all of these risk assets sold off.

You have seen some clear patterns within the emerging markets.

The emerging markets countries like so many others that are running surpluses have had very modest moves in their currency.

They will dip down a little bit.

The other countries that began this where large, with trade deficits.

The view that markets are indiscriminate is not really borne out here.

The markets are separating these countries with the trade deficit and those who have surpluses.

The exchange rates are compared to the dollar, so we can necessarily have this with the dollar.

What does this mean for currency investors.

I think that we have seen the repercussions of the taper on these assets.

What this tells me as a macroeconomist is you have to pay attention to the data.

The leading indicators and the budgets in the first half.

This is what we do at him go.

And you do it very well.

As we put all this together, what is your outlook over the next six months he e what are you telling everyone who is investing with you?

Here is what i would say.

You look at the global economy as the u.s. continues to stumble through, europe is finally recovering from a long recession.

We could get a recovery and we see this in europe and the united kingdom.

I think the surprising thing is that compared to the last few years, when the emerging markets were pulling them out -- it is the emerging economies that are slowing down now.

I think that is what i am looking for, sorting out those trends with a durable recovery in europe, and growth in the united states.

We will be watching all of this.

It was great to have you with us.

Which claredon from pimco.

From carnival cruise ships -- we will have the latest.

And zimmerman was thought of as so dangerous he was targeted by the government.

This text has been automatically generated. It may not be 100% accurate.

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