Car Crash Vectors

Emerging Markets Still Facing Headwinds

The big emerging markets have been fighting inflation within varying degrees of blood, sweat and tears all year. US fund managers have been forecasting an end to the monetary tightening cycle by the second half of the year in at least two of the major developing nations — Brazil and China. It’s now the second half of the year and in Brazil is still raising interesting rates. China is still recording some of its highest inflation in years. Both Brazil and China are likely coming to the home stretch of their tightening cycle, meaning an end to raising interest rates to cool demand for credit. India is somewhere in the middle. Russia is in a world of its own, but still battling very high inflation of at least 8%.

Simply put, a lot of the peak inflation targets forecast by US fund managers have been pushed forward since April. If the global economy slows because of China’s engineered slowdown, debt problems in the eurozone, and a continued sluggish US economy, then commodity prices could decline. If commodity prices decline, then China and India will be faced with less imported inflation. Brazil on the other hand is a big commodities exporter, so the biggest culprit there is foreign direct investment and consumer demand. The central bank of Brazil raised interest rates from 12.25% to 12.5% on Wednesday, the highest interest rate in the world. Right now, the market expects a more dovish stance from Brazil and China central banks, in particular. Barclays said Wednesday that it suspects Brazil is done raising rates for this year. It’s unlikely, though, that those rates will start to come down anytime soon. Higher interest rates finally dragged the popular iShares MSCI Brazil (EWZ) exchange traded fund below support of $70 a share on Wednesday. It’s now trading in the high 60s.

Nomura strategists in New York have even wondered whether or not Brazil’s high interest rate, high taxation, and a possible “labor-bubble” means it is wiser to go short Brazil, then buy and hold. “In our view we do not see a crash in Brazil, but a steady slowdown in growth as a multi-year credit cycle exhausts itself,” says Tony Volpon, a managing director at Nomura.

“The very high interest rates that make Brazil unique, impede the creation of large enough balance sheet imbalances that are necessary for a crash. Brazil will still suffer from high interest (and a weak dollar), an artefact of a suboptimal fiscal policy regime. Until more fundamental reform takes place, Brazil promises to be a more boring, lower growth version of its present self,” Volpon states.

The NHS “car crash” and PMI « samiconsulting

At the time of writing, the BMA were still objecting to the Government’s NHS reforms.  Despite “winning” they seem to want humiliation. Even where we are now was rightly, in my view, described by Alan Milburn as a car crash and here is why.

At local level, we will have clinical commissioning groups (rather than GP consortia) which will commission services for their areas (rather than simply patients registered with them).  The governance of these groups will include a local NHS hospital trust doctor – which will blur the distinction between NHS provision and commissioning.  In parallel with this clusters of Primary Care Trusts, which were to have been abolished, will remain for some considerable time.  They will probably operate like the District Health Authorities of old – by ensuring “integration” (a much used word in the listening exercise) and reducing the commissioning/provision split.  Finally we have Health and Wellbeing Boards which will be set up by local councils.  Their powers have now been increased considerably – to encourage joined up working between health and social care sectors.  In theory this is a good thing – in practice it may mean further raids on health spending to make up for reductions in social care spending and “political” interference in big local decisions about provision of hospital services.

At National level we have the NHS Commissioning Board, the Secretary of State for Health and the Regulators (and in particular Monitor – the financial regulator).  The Secretary of State’s powers to influence the Commissioning Board have been reduced and the power of Commissioning Board itself has been fettered if it wants to intervene to encourage say hospital closures or mergers – it’s now a bit like planning decisions for major infrastructure projects.  As for Monitor, it will now not have a duty to promote competition.  Instead it will only be able to tackle anti-competitive behaviour – and that power is itself fettered by changes to the rules on the National Tariff pricing system (to enforce uniformity, no price competition, no “cherry picking” of easy to treat patients, and no duty to provide access to NHS facilities when someone moves from private to public care).

As for patients and the public, much more power is to be given to the “collective voice of patients and carers” at National (Health Watch England) and local level.  Their views on services will carry much greater weight than at present.  In addition, there will be requirements for public consultation exercises and forbidding NHS Foundation Trusts from having closed meetings.  Patient choice, on the other hand, takes a back seat.  The aim is integration and uniformity.

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