BRKB going bonkers. Wish I had bought more. Going to continue to roll over put writes as well keep my shares I bought at $125 and $146
I used russia ETFs finally, but yes, while EMs outside South America didn't get get hammered as heavily, they seem struggling since US market open yesterday, wonder what Middle East will look like when it reopens on sunday. Russia sold off as well, just after I increased my position there unfortunately.
EMs and EWZ tanking some more, today and perhaps over the next few days that is likely to be that last opportunity for folks who missed the rally to get in, specially because the risk of a currency decline has decreased, given that it already happened. Trump is trumped by the catalysts that Brazil has down the line: -Interest rate cuts, from a current 14% down to perhaps even 8-9% -Significant bills that will stabilize the fiscal situation -GDP (along with profits and dividends) bounce next year -2018 elections that will move the country to the right. That will be Brazil's Trump moment when a business friendly administration and congress take over and implement very needed reforms to make the country more business friendly I wish this was more asset driven instead of currency based. I have a certain allocation to BRL and USD, the amount I believe is prudent. I dont really consider their fluctuations gains or losses, only the movement ex-FX. Bovespa is still above 60K I believe (market not open yet) so it isnt super low yet
With regards to gold, I might have to re-buy IF the Trump disruption starts to give gold a bid. Will have to play it day by day, a lot of what is going on is the market trying to sort things out, it might take a while for things to catch a trend and people to figure out how things should be priced
In the US we saw real rates collapse a lot since 2006/2007/2008 to today. Both risk free and risk rates. The same potential exists now in Brazil, especially when you consider that Brazil is still with a lot of fat to burn left in terms of Dalio's 'long-termdebt cycle'. So a lot of borrowing can happen (leading to economic growth) and a lot of asset levitation can happen as real rates decline. The S&P500, NY real estate and UST bond prices are all in the sky in terms of valuations because of this move in real rates. Brazil could have a similar effect. Not saying it will go as high (or as low in terms of real rates) as that but there is so much juice that the risks are to the upside. Especially when you move away from left wing guided populism. The potential for asset levitation with nominal and real rates materially lower from here is huge
In terms of borrowing, I'm referring to private sector borrowing. The public sector is reaching its limit, thats why they are pulling back. But the private sector could still borrow a lot more, the biggest impediment is the high cost of borrowing. If you implement reforms that cut down those costs (nominally and in real terms), that amount of borrowing that can happen is huge. I recall from Greenspan's book a warning from a newspaper article saying americans were too deeply into debt to continue to borrow, and that warning was from 1966. Its 2016 and they borrowed a crapload more. In Brazil, that applies even more, given lower personal leverage ratios and debt avoiding due high interest costs. I'm not necessarily predicting anything with regards to that, I'm simply saying that risks are to the upside and with the stock market at a 10 Shiller PE, it just makes a lot of sense to bet on that. The payoff is so asymetrical
If I'm right about the 2018 presidential and congress elections, where the Bovespa will be in 2023 (the end of the first term) could be something so ridiculously high, you would look like a madman if you said that in public. But that was the same thing in 2003 in Brazil (7 bagger) or 2009 in the US (no one dreamed the S&P500 would quadruple with dividends in like 7 years)
Added some more EWZ today, I will wait till markets calm down to give a breakdown of my exposures again. FX is moving around so much I dont even know what is going on there anymore
I could think of some real reasons for BR stocks to fall. This trump thing is like the most ridiculous one. The Brazil story has been so internally driven (because of politics, real rates, economy) that I dont think this will matter at all
The problem, and you know it, is the markets can remain irrational longer than you can be solvent. I agree, it is all very stupid, but my opinion doesn't change that. I've set a 15% stop loss on my EM holdings. With my luck it will reverse at 16%, but I have no way of knowing where the bottom will be. In 2009 I saw well managed companies with full order books trading below book value. I wasn't trading then, just professional curiosity, so no benefit.