Starsigns aligning

Bit by bit pieces are falling into place to get new events triggered.
1) Im thinking about the link between the western world yield curves, forced to a downhill speedskiing slope by imploding domestic demand and recapitalisation need for the financial sector. In turn linked to similar needs found in most Emerging market countries. I am mainly thinking about Russia, CEE, Turkey and South Africa here. So far, these countries have not altered their monetary plocy in the wests direction. However, in this environment with correlations increasing, the deflation variable should push them closer to the western yield curve world, (IMF may not necessarily agree). This evening, Turkey cut their rates by 50 Bp to 16.25%. MPC will have a very fine line to walk from here between avoiding a currency collapse and a domestic demand one. If they had to choose, I would have to think that they would sacrifice the currency, after all, deflation is the main concern now, right?
If Turkey sets any precedent for other emerging markets ( which I think they do), others will follow, moving towards flatter yield curves and potentially, positive ones.
2) This will lead to weaker ditto Emerging currencies, increasing credit losses both locally and with western corporations. Any country with a deficit stuck in a currency regime is bound to devalue. One area that comes to mind and that you will be all too bored to hear about for the fiftyeleventh time, are the Baltics. Timeschedule for a devaluation should, if the politicians there come to their senses of which one of two very high cost alternatives (deflation nuclear meltdown or devaluation debt blowup) is the lowest.
3) This has repercussions for Scandinavian banks as they might stand to loose perhaps 25% of what theyve lend in the Baltics. (Total is about 400 Bn SEK for the Baltics). Add to that Poland and the Ukraine. Admittedly these numbers are not that big on an international scene, but will be enough to take down one, perhaps two Swedish banks. In the end, the Swedish banks are guaranteed by the Swedish government, but so far the Swedish Riksbank and other authorities have continously underestimated how much the Baltics will cost and what the consequences will be for the Swedish banking system and currency. Austrian banks are the number one though and heavily exposed to the CEE area and will be in the frontlines when the creditloss barrage is fired at them. Another issue is that the Austrian banking sector corresponds to 85-100% of Austria GDP. A few Austrian banks will go bankrupt=state ownership with equity going to zero. This could mean that not only the PIGS (Portugal,Italy, Greece and Spain) countries would be the ones with unsustainable deficits, Austria could potentially join the club? Not good for the Euro if so. And yes, I am concerned about the sustainability of the Euro. More about that at another time though.
4) Hence, I suggest staying short Swedish banks via put options, mainly SEB and Swedbank. Staying short the SEK via options. Staying short Try, Zar, Pln and Huf, even Czk, preferrably via options, but pricing and liquidity is such that it could be difficult for anyone not running a book on it. Spot is the alternative. Light feet needed, but they are a trending and in this market, the trend is definitely your friend. Traders, enjoy.