Getting ready for the Big Short

The Fragile five! We have a new class in the global portfolio:
Fragile five: The new focus of currency wars

Forget the BRICS: what's really concerning investors now are the "Fragile Five". The spectre of "global contagion" from Brazil, Indonesia, India, Turkey and South Africa is looming, Alan Ruskin, global macro strategist at Deutsche Bank has warned. The phrase "Fragile Five" seems to have been first coined by Morgan Stanley analyst James Lord in August. Since then, the phrase has gained increasing traction as a catch-all for the most concerning emerging market economies - which together represent around 7 percent of the world's economy.

OK, give them a tiny spot on the yield curve to match their trade flows. A wormhole to pass thru when we do the Big Short

The Fragile Five's currencies saw a massive sell-off when it looked as though the U.S. Federal Reserve was going to gradually wind down its bond-buying program known as quantitative easing. As QE meant more readily available cash for investors, emerging markets have been benefiting with increased investment. But worries about the Fed "taper" to the QE program led to currency traders pulling their money out.

That was sort of a test run.

The Brazilian real (Exchange:BRL=) is now a "buy today, sell tomorrow" story because of the likelihood that the rise in interest rates may hit the country's economy, according to Bloom. Earlier this month, Brazil's outlook was downgraded from positive to stable by ratings agency Moody's amid concerns about slowing growth in one of the world's biggest exporters.

The Big Short requires a quick adjustment to terms of trade. The Fragile Five needs to adjust to lower trade flows real soon. Once Janet signals the Big Short, its duck and run as the market wobbles and wiggles its precarious way down. There is a rumor that Bubbles will remain true to form throughout the next business cycle. Don't think its possible.