EMs in the crosshairs: Between war games, fake news and bonds

From military exercises to trade wars, the fury is intensifying. At the same time, global liquidity is compressing while rates are rising. Growing uncertainty, contracting liquidity & rising cost of capital will continue to place non-US assets (and in particular EMs) in the crosshairs.

“Wag the Dog” showed the power of ‘fake news’ but…

In the 1997 movie ‘Wag the Dog’, a spin doctor was hired to help distract people from sex scandals by staging a televised ‘fake war’ in the lead-up to the Presidential elections. It was the first time that Hollywood described what has recently become known as meddling or convincing people that ‘white is black’. These days there are far more efficient and potent ways of targeting voters & disseminating fake news than Brean (spin doctor) could ever have imagined.

Ever since then the life has been imitating art. From John Kerry’s swift-boat controversies in ’04 to data dumps and fake accounts in ’16, the avalanche of bots and news (fake or otherwise) has become so overwhelming that people have no chance to process it, and separate the wheat from the chaff. As societies no longer agree on what truth is, there is no need for verifiable facts.

…it could all go badly wrong while liquidity continues to tighten

This brings us to the latest news that the US Seventh fleet might conduct military exercises in the South China Sea. Although there are real issues at stake (freedom of navigation), there is clearly considerable room for accidents and unexpected turns. 

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