Deutsche Bank’s Kocic Delivers Stark Warning: Beware Populist “Buyer’s Remorse”

Regular readers will recall that we’re big fans of Deutsche Bank derivatives strategist Aleksandar Kocic.

Back in September, 2015, Kocic penned a hilariously metaphysical assessment of the Fed’s reaction function in the wake of the market turmoil catalyzed by the PBoC’s move to devalue the yuan the previous month. Kocic described the Fed’s dovish tilt in the theatre context as a removal of the “fourth wall,” a reference to the fact that the committee had explicitly acknowledged its own reflexivity vis-a-vis the market.

In short, Kocic is a really good writer, something that doesn’t seem to come natural to most sellside strategists.

Those who frequent these pages are also well aware of how we feel about populism anno 2017. In short, we think the nationalist fervor that grips the US and Europe has been engineered by false political prophets pushing a xenophobic, isolationist agenda that feeds on fear, paranoia and, quite frankly, ignorance.

We’ve gone to great lengths to explain why the perpetuation of this message is dangerous for markets.

Indeed, you needn’t look much further than Marine Le Pen’s promise to take France out of the EMU for evidence of just how disruptive the triumph of populism could ultimately be. A French re-denomination event would almost surely plunge global markets into chaos as everyone from traders all the way up to the ECB governing council would suddenly be forced to negotiate a €1.7 trillion default (which would amount to the largest sovereign credit event in history) not to mention the fallout on the € IG market which is heavily weighted (~23%) towards French corporate credit.

Well on Friday, Deutsche Bank’s Kocic took a stab at explaining why you shouldn’t equate Steve Bannon’s quest to rethink the global political order with “creative destruction” – at least not where “creative destruction” presages something positive.