October 02, 2013

Untitled Document

I don’t know where September went. I always heard that when we get to the months that end in “ber”, the year is finished. It certainly looks that way. I have the feeling that it went even faster because we had so many events and we were busy trying to figure out what would happen next.

Brazilians were anxious waiting for the Supreme Court decision in regards to the “mensalão”- cash for votes scheme- the biggest corruption scandal that has been dragging for almost 10 years. With the Supreme Court decision to “re access” the case, we sadly found out that the Supreme Court in Brazil is not Supreme, that its decisions can be reverted. Theoretically, the Court’s decision is final but as almost everything in Brazil, there was a loophole, a way out so that the law is not enforced. Impunity is in fact the biggest problem in Brazil and with the “mensalão" ruling we can put a face on impunity and a precedent was created: the Supreme Court rules economic, criminal, financial cases. Now we learned that everything can have a second round, everything can be contested. This was a disturbing decision, one that discredits the Brazilian judicial system once and for all.

Then the Americans spying on the Brazilian government and on the Brazilian president became public. Without discussing the merit, the Brazilian reaction was poor. The President cancelled her visit and meeting with Obama, a populist gesture, aimed to satisfy the PT electorate and to stimulate the “hate” towards the USA. Then President Dilma Roussef came to the USA for the UN meeting. Instead of using the privilege of the opening of the UN assembly to reiterate Brazilian standing on important issues such as  wars, intervention on chemical weapons, climate change, and poverty, she went on and on in her critique of the USA. She opted to talk to Brazilians, this time using an international pulpit, and ignore the audience. Very sad. In the meantime, we have daily surprises in the Eike Batista’s saga: on October 1st, OGX missed a US$44, 5 million interest payment, one of the biggest defaults in Latin America history. One can just hope that the CVM ‘investigation (equivalent to SEC) shed some light on what really happened and how so many investors lost a lot of money while managers and others made a lot of money.

In the USA, it was painful to watch President Obama dealing with the Syrian crisis: all the back and forth, all the uncertainty, made it look like he was thinking out loud about what to do next. The stock markets mimic each of the announcements coming from the White House, with increased volatility. To end the month on a high note we had the battle of the budget that ended with the Government shutdown. Beyond the economic impact in the short term, I think this threatens the American legal and democratic system in the long term and it is disturbing. The Affordable Care Act (ACE, aka Obamacare) is a law. It is a law that was approved by the Congress, signed by the President, upheld by the Supreme Court and, in a way, voted by the American population. For those who don’t remember, one candidate – the loser- promised to repeal Obamacare if he won, and the other- the winner- promised to keep it. So, those members who want to change the law now either don’t believe or respect the democratic system, the legal system, or both. You cannot change the result of a game after it was played. Move on, stop being sore losers.

To my surprise, the market didn’t react negatively on the first day of the shutdown. Given that the economic fundamentals remain the same, it looks like either the market believes that the impact in the economy won’t be big or that there will be a fast resolution. To be sure, the loss for the economy of the shutdown is estimated in US$300 million a day, or 1, 6 billion a week or 5 billion per month, against a GDP of more than 16 trillion, which is really small. The market probably believes that the resolution will come before a major damage to the economy is done. Maybe my disbelief in the politicians is greater. As long as the shutdown continues, companies will not be able to IPO- once the SEC is not working- consumers will not be able to buy houses as they won’t be able to access their income report because the IRS will be closed and so on and so forth. Friday there will be no jobs report since the labor department will be closed. How will the market react to that?

In two weeks, the stakes will be higher: when the Government reaches its debt limit and Congress doesn't act, the US government, like Eike Batista, will miss payment of its obligations and will set a horrible and shameful precedent in the history of the country.

I will finish with a history, a real one, for those who missed it: Jimmy Kimmel went on the streets of LA asking people if they prefer Obamacare or the ACE. As seen on TV, they said they didn’t like Obamacare but liked the ACE!!!! Disturbing…..

November 23, 2015
Much ado about nothing
October 27, 2015
Brazil, we can only pray (or hope)
August 18, 2015
Looking back, looking forward
June 30, 2015
Lack of good news
April 14, 2015
What if...
February 24, 2015
What to expect in 2015
November 17, 2014
The American conundrum or just plain stupidity?
October 27, 2014
What is next?
September 09, 2014
Lessons we should have learned
August 12, 2014
US and Brazil: 2014, what to expect next
June 26, 2014
Headwinds ahead but still optimistic
April 26, 2014
Roller Coaster
March 14, 2014
Brazil in perspective
February 07, 2014
Stay the course. Change the course.
January 17, 2014
Diversification. Or not.
November 25, 2013
Who buys a US$ 500 pillow?
September 03, 2013
What a mess...
July 31, 2013
Of Protests and Stocks
June 19, 2013
Betting in the future
April 30, 2013
Nowhere else to go
March 26, 2013
Cyprus: not enough to stop the US market
February 25, 2013
The Sequester
January 23, 2013
2013: what is ahead for investments
December 07, 2012
Brazil: uncertainty and mixed signals
November 05, 2012
It is not about the economy!
September 20, 2012
The Country is better off
July 05, 2012
The New Normal
May 30, 2012
Half empty, half full
April 30, 2012
How to restore prosperity
April 21, 2012
Brazil became poorer
February 27, 2012
Romney, Obama and the American Imbroglio
January 25, 2012
On storms and calmness, waiting for next round
December 22, 2011
Happy Holidays!
November 23, 2011
Impasse and Paralysis
October 24, 2011
The rally has legs. Or not
September 23, 2011
Preparing for the crisis
August 24, 2011
Kicking the can down the road: is there an end in sight?
July 24, 2011
Can the politicians be rational?
June 24, 2011
Global Economy: where are the world leaders bringing us?