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Raphael Kassin: markets in the line of fire

Raphael Kassin: markets in the line of fire

The Citywire Global columnist Raphael Kassin runs the consultancy firm Mirage Capital and advises on emerging market investment.


The eurozone soap opera continues, Latin style. Mario Draghi showed us he is well versed in the art of drama by suggesting the euro is ‘irreversible’. When central bankers begin using such words, my faith in bureaucratic creativity is restored to some degree.

But, I begin to fear the ship’s captain has lost control and is now ‘talking’ rather than ‘doing’.

Markets have calmed down, at least until the next weakest link breaks or tighter conditions prove too harsh. The move to EUR/USD 1.30 in the last few sessions does not take the precarious condition of the Greek and Spanish economies into account and most of those who were short the euro remain that way.

They are just waiting for the German line in the sand to be reached – and then what? How about George Soros’suggestion that Germany leave the euro?

Clearly, currency speculation is still in his DNA but this is as likely as him beating Bolt in the 100m. Why would Germany give up the golden eggs? For emerging bonds, more QE and fuel to the fire translates into renewed risk appetite, so let the party continue.


October promises to be festive in Venezuela, politically speaking. Hugo Chavez remains the likely winner of showing in the polls up to now. It is important to remember that polls in Venezuela are hardly the most reliable, so let’s take them with a pinch of salt.

We should note instead that Venezuela is on a high. The country was admitted to Mercosur in July and is rated among the best in income equality in the Americas. The government’s use of oil profits to fund health and educational programmes guarantees many votes from classes D and E.

So, if Chavez wins, the party continues, unless supporters of Capriles attempt some type of‘Venezuelan Spring’, which I would not recommend.

Stability would be good for the country. If Capriles wins, one would hope that he does not rock the boat, so as to avoid revolutionary  excitement. The best outcome remains peaceful elections, with all parties accepting the result as being legitimate. Bonds remain well bid.


In Brazil, another festive event is likely to bring us soap-opera-like entertainment this month. Judgement of the ‘Mensalão’ scheme has been going on for a couple of months. In the first stage of the court analysis, a few members of the Workers’ Party were found guilty by the Supreme Court as expected.

Next, the Court will begin judging the top echelon of Lula’s government, including Jose Dirceu, for their involvement in the alledged vote-buying scheme. Not finding them guilty would be a surprise, so let’s stay tuned in.

If the Court judges them guilty and they are given strong sentences, then justice would be partly served. A logical next step (already being rehearsed) would be for the political class to request investigation of the man in charge at the time of the infractions, Lula himself.

That would complete the proper application of judicial law. Will Brazil’s Court take that less travelled road, or will it miss the golden chance? I will be on the edge of my seat…

South Africa

Moving on to South Africa, I am a bit surprised with fund managers’ recent comments on workers’ strikes.

Everyone knows that emerging economies offer profit opportunities partly because of cost distortions. That is clearly the case in South Africa, where the recent 20% agreed-upon increase in workers’ wages hardly amounts to a hill of beans compared with profits generated by the businesses they work for.

So why the brouhaha among the investment community, followed by statements such as ‘we are out of that country forever’?

Recent events do not alter the country’s investment case and if your favourite fund manager has left South Africa, you should leave him, so he can focus on doing his homework better before investing your valuable assets.


I have been waiting a long time to comment on India’s eventual opening of its retail market to outsiders. I thought I would have the chance to do that this year but fear local politics and potential profits will delay that.

The doors were about to open but coalition partners changed their minds and further complications arose at the local level, delaying
implementation of the law. Until then, it seems the opening remains ‘on hold’. This is to be expected and can only benefit local businesses. Nothing new there.

Middle East

There were no such delays in reaction to a film, supposedly created by Americans denigrating Islam. We almost had a holy war! It is shameful that world leaders let it reach that level but it’s unlikely to change the investment landscape.

Do we know who really produced the movie? Doesn’t the name Sam Bacile, the supposed producer, sound like ‘is an imbecile’?

The more important question is who stands to benefit most from heightened tensions just now, before a US election? So, before freezing Egypt’s USD 4.8 billion IMF loan, letting people burn flags, invade embassies, I suggest politicians investigate the incident carefully and
talk to people on all sides.

Peace in the Middle East is good for markets.

This article was originally published in the October 2012 edition of Citywire Global magazine.

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