The past week and what to expect ahead.
May 20, 2013 02:48:29 | 0 comments

The third week of May is always a very busy week for Brazilians in NY and for investors interested in Brazil. Several events take place this week, such as the Person of the Year awards, the Itau investment conference, the BTG annual presentation, and more. Last week we had the opportunity to see Paul Volcker and Hillary Clinton talking to participants at those events, which was thrilling, at least for me. I know many people that didn’t find Volcker’s comments interesting but I did. Maybe that’s because he stated the obvious: the American economy is improving, but not enough; the deficit is declining, but there is still a long road ahead in order to achieve a balanced budget; there has been some progress in Spain and Italy but the question remains if the Euro will hold together; the emerging markets ex-China are suffering from disappointing growth, and so on and so forth. The picture of the world economy is evident; at this point there will not be many surprises, and if there are, they will be on the positive side. The question is what can be done with that information . Luc...

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The trend is your friend!
May 08, 2013 02:20:10 | 0 comments

Every time a bear, or someone who still doesn’t believe in the market rally, tries to find an explanation for the recent highs, the argument goes somewhat like this: The economy is not improving, but with the central banks of Japan and the United States pumping money in the markets and, more recently, with the ECB cut on interest rate, the stocks go up. I disagree with that argument mainly because as I wrote in my April newsletter, I think that “not improving at the rate most people would like” is different from recession. If there is no recession on the horizon, asset prices will tend to go up. Regardless, the important point to be noted is that whatever the reason, the stocks are going up, more homes have been built and sold at better prices and people feel more wealthy. That alone is a good reason for stocks to proceed upward, because when people feel wealthier they spend more and the companies do better. So, as I have been saying, aside from the volatility that is inherent to the market, the trend is up and as they say, the trend is your friend. This argument, however, o...

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What now?
April 11, 2013 13:07:40 | 0 comments

In the past year there was a change of heart in regards to the prospects of the Brazilian economy going from an unstoppable optimism to growing disappointment. The more than mediocre growth in 2012 plus the rigidity of inflation rates, combined with the fact that the President already started campaigning for 2014 made the government's commitment to control inflation questionable. The President’s statement, voicing disbelief in the “policies that aim to control inflation at the cost of economic growth”, didn’t help and market sentiment had deteriorated even more. With too much at stake the government decided to act to restore its credibility. That is how I see the meeting that the President and the Finance Minister had on Monday with three very reputable economists, including one former Minister of Finance. The Presidential agenda only showed the meeting with Mantega but they were joined for lunch by the former Minister Delfim Neto, and the Professors Nakano and Belluzzo. They left the meeting saying that the Government is committed to fighting inflation, that there is no ...

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The week ahead
April 09, 2013 00:01:55 | 0 comments

As the stock market gained 10% in the first quarter, investors were wondering how long the rally would last. There was no question that it could not continue at the same path the whole year, which would mean a gain of 40%. Also, the old adage “sell in May and go away” was a reminder that, in the summer, the stock market had historically, underperformed. With the release of the jobs number on Friday it looked like the worst expectations would be granted. Not so fast. I see two reasons for the stock market to continue to over perform other asset classes. First, although there is no question that the number was mediocre, everybody knows that the number will be revised.  Since November, the economy has added an average of 168.000 jobs monthly, which is a very good number. We have to wait and see what will happen in the next revision. Second, let’s not forget the FED. In the last couple of months, as the economy showed some improvements, some FED members were saying that maybe it was time for the FED to stop its program of bond buying. Of course now those voices will be silen...

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Which the worst stock market so far?
March 05, 2013 15:18:22 | 0 comments

The answer is …the Brazilian equity market. In fact the Ibovespa declined 24.97% from February 2012 to February 2013. The S&P increased 10.38%. Those who read my newsletter know that I have been optimist in regards to the US and the opposite in regards to Brazil. In fact, it looks like nothing can alter the move upward in the US. Today it is reaching new highs. The Brazilian Government is looking for funding and partners for its vast and much needed infrastructure program; for that end the Brazilian authorities made a road show last week to present the case for investment in Brazil. That will be a difficult goal to achieve: capital flows in the whole world are diminishing, at least compared to the level seen before the financial crisis. Not only are that, which is a tendency that affect all countries but the uncertainty of the Brazilian policies is not helping investors to feel comfortable. In the presentation, Minister Guido Mantega said that the expected rate of return on those investments would be around 10%, which he thought was great. However, who saw Warren Buffet ...

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Good Bye Pope, hello sequester.
February 28, 2013 17:08:30 | 0 comments

Few minutes ago the Pope was seen probably for the last time. On his last speech yesterday he made it clear that he will not interfere with the new Pope. He is tired of the Vatican politics and will pray and meditate. It would be great if some politicians followed his lead, in the USA, Brazil and around the world. I guess we should not put our hopes up. Tomorrow the sequester will start in the USA and the stock market really doesn’t care about it. After a sell off on Monday, as a consequence of the elections in Italy and fear that Europeans problem would resurface, the stocks have been up. Solid economic indicators are the cause for that behavior. Durable goods were up in January, capital goods orders, excluding defense, have been up and more and more we can see that housing is back, and will bring more and more jobs. This week we had events in NY with the President of the Brazilian Central Bank, the Minister of Finance and other authorities. They of course presented a rosy picture of the Brazilian economy and reiterated their compromise with controlling inflation. They want ...

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Enjoying the pullback..
February 06, 2013 18:35:56 | 0 comments

As I mentioned on my recent post, we could see a pullback in the market triggered by profit taking and that is exactly what is happening this week. With the help of a couple of bad news, such as problems in some European banks and the “fiscal cliff 2” the markets interrupted its trajectory upwards, for now. The agreement reached by the end of the year postponed the mandatory cuts for March, 1st. In the meantime the government should have presented the budget and they should be sorting what to cut, instead of allowing random mandatory cuts. That didn’t happen and Obama speech yesterday was a non- event.  He is against the cuts and wants more income coming from taxes and sends the problem back to Congress. While in Brazil the country stop waiting for Carnival, the White House and the House of Representatives will continue their never-ending fiscal battles. As I am still optimistic about the fundamentals of the American economy I think the pullback is a good entry point. The Brazilian newspapers continue to give us reason to be “pessimistic:  If it wasn’t eno...

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Enjoy the ride......
February 04, 2013 12:49:58 | 0 comments

On Friday, the S&P closed at 1513.08, only 52.07 below the 2007 record of 1565.15. The Dow Jones rose 5.77% in January making it the best January in history.The increase on jobs in January was only 157.000 but the November and December numbers were revised up, adding 86.000 and 41.000 respectively. All in all, the last 3 months numbers show an average of 200.000; that is a mark that separates a slow recovery from a more strong recovery.If that continues in the next couple of months I will be very optimistic. It is worthy to mention that construction was the sector that showed the higher increase in employment in 2012. The China’s PMI reached a 2 year high in January. The inflow of funds to the stock market continues to increase. The yield of the 10 year Treasury bill reached  2.01% on Friday and I believe that we will see 2.5% sooner than later. Notwithstanding   a potential profit taking- today the futures are in negative territory-  the risk for the market is still the geo politic risk, with the increasing tensions in in the Middle East. The potential sequestration th...

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Is the PIB retraction worrisome?
January 31, 2013 22:56:09 | 0 comments

Yesterday the GDP announcement was a big (disappointing) surprise for the market. Instead of growth the GDP for the last quarter shrank -0.1%. That didn’t affect my optimism in regards to the USA stock market in 2013. To be sure, other economic data are positive and the FED meeting didn’t bring anything new to the table. On Friday we will know the employment numbers and the closest to 200,000, the strongest the bullish case will be. It is worthy to remember that the last quarter had hurricane Sandy, elections and the fear of the fiscal cliff. All that together must have had a big influence on investment decisions. Defense expending also fell dramatically last quarter and defense is a very important part of the GDP. At the beginning of the earnings season market expectations were really low. As of yet, 40% of the companies announced earnings and the results are positive, with a growth of 5.4% better that the 3% of last quarter. As I see it, the problem will not come from the economy but from the geo political problems. Today there was news that Israel had invaded the air sp...

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Missing the point.....
January 31, 2013 03:56:33 | 0 comments

Gabby Giffords spoke today at the Senate hearing about gun control. There is hope that the Congress would pass legislation to avoid the massacres, very common in the USA. Some of the proposals include  increase requirements to buy guns- such as universal background check- and ban the assault weapons. Why a civilian need weapons that are designed for the war? Also, it shouldn’t be easy for criminals to buy guns on the internet or in gun shows. Talking about background checks LaPierre, from the NRA, came out with an amazing statement: “ we will never get criminals to go through universal background check”. Wau!! Isn’t that the whole point? If they don’t do it, they will not be able to buy guns!!OMG.

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