https://www.washingtonpost.com/news...480736307081&tid=ss_tw&utm_term=.fef1e390f3eb Larry Summers is very upset about the Carrier episode, yet he didnt seem to mind that the US Treasury targeted the PFE-AGN inversion merger and created rules designed to blow out that merger. That was a move several times larger in relevance than this Carrier thing
Obama didnt even offer an incentive to PFE or AGN, they just flat out blocked them. What Trump is doing (and his latest tweets seem to back that) is to provide incentives in terms of less regulation, lower taxes for companies that stay in the US and tax those that leave. He is changing the risk-reward equation for them. That's a lot better than just witch hunting like Obama did
Daal, I read recently that the political shenanigans in Brazil are weighing on the currency and stock market. Do you reckon that's accurate and where do you see this political situation heading? What was supposed to be a better situation after Rousseff doesn't seem to be panning out that way.
Congress is full of people who know they will lose reelection in 2018 and will soon head to prision after they lose their legal privileges. So they are trying to force the President to help them approve a bunch of bills designed so they avoid prosecution and prison. The President is in a tough spot because if they doesnt go along with that, then Congress wont want to move forward with the fiscal reform but if does go along with that he loses the population, that is mostly outraged about all of this. What will happen? I'm not totally sure but I think Congress will win, they will pass some version of these bills (perhaps removing certain explosive items) and the president will sign them into law. These folks in Congress got nothing to lose, its either that or prision, being critized doesnt matter to them, they know they are cooked in 2018. So thats bad from a moral perspective but if they provide fiscal reform in exchange for it (and thats seem to be their extortion attempt) at least the country will stabilize from that side. And then in 2019 when a new president and congress take over, they can undo this nonsense Its tough because this extortion was supposed to have ended last week when the President of the Senate became a defendant in a criminal case. Before that the Supreme Court was deciding whether a criminal defendant could be part of the Presidential line (in case of death, resignation or impeachment) but one of the court members (a scumbag name Dias Toffoli) used some ridicilous moves and reasons to say that he wasnt ready to vote. By the rules, they got to delay the vote for like 20 days. But he was full of shit, clearly he is involved in some corruption himself (and his name is starting to pop up in plea bargain deals) and he need those bills approved. Those 20 days will help the president of the Senate to stay until the end of his term (feb 2017) because the Judiciary will go into vacation soon. But I dont see this stuff as a reason to sell, a crucial part of fiscal reform is very close to be approved and the pesion reform was going to take quite a while anyway. Also, I do think its likely the pro-corruption bills will be approved and this will help with fiscal reform
Keep in mind that I got quite a bit of my assets in USD and also have USD income. So I'm resonably well hedged against problems in Brazil. I have a very high bar for me to want to get out and avoid Brazil risk, little hicups along the way dont count. I need to clearly see a crisis or big problem before I sell. To the point where if I'm selling, I probably should be shorting. But I'm not seeing that. Shorting 9-10 CAPE ratio markets is very difficult, specially when the central bank is cutting rates (and signaling increases in the cuts), the recession is about to end and fiscal reform could come at any moment
The Brazil fund manager I mentioned in the past has now turned into a daytrader. He is mad at himself for not hedging his Brazil risk right before the dollar soared last week. Dude now is watching every tick in the market and trying to make predictions over which executive minister will fall, what will happen in politics etc. Sounds like a high wire act me As I have talked about in the past, in the 80's Brazil's economy, politics and monetary policy were a huge mess. There was some big dips along the way, yet investors were rewarded very well. They made a lot of money in real terms. With low CAPE I dont think one needs to watch little things, but only the big ones. If Brazil were to become Cuba, that would be bad, so bad the CAPE wouldnt matter. I would pay attention to that, but what I'm seeing is the opposite. Right-wing parties are gainning traction. If Brazil were to become Russia, that would be bad too, but I dont see that at all, the mess is all internal. Becoming Greece too but the central bank is starting to open the spigots. I got a long-term time horizon, I know if I just stick around, I will get a good return
Lot of people missed a 71% rally from the low to the high this year but somehow they think they can time this market. I'm all for timing the market, as a day trader, with quick bets here and there if the right news comes out. But I do in a separate account, with stops and targets. For long-term, timing by selling, hoping to buyback lower (or some variation of that) should be an exception, a very rare exception. Long-term its very hard to beat a good mix of fixed income, stocks, gold, USD assets and real estate. Soon I will conclude my Brazil study and will provide further proof of that. I will publish it both in english and portuguese
I think what the Brazil bears are missing is that even if pension/entitlement reforms get delayed by a 1 year or even 2. Deep fiscal reforms are almost a certainty in 2019 when a new Congress and President will take over. They are highly likely to be right wingers. So a delay can easily be made up by a tax hike here, a spending cut there, an asset sale, etc. The important thing is to get deep reforms done. The difference between sucess and failure wont be a delay, you can make up for the additional hole that a delay causes. Brazil has not had entitlement reform for decades, it wont be an extra year that will make all the difference
A major part of the fiscal reform was already approved in two rounds in the lower house and in the first round in the Senate. The second round vote is scheduled to be on Dec 13. Once that gets approved, I dont think there will be much of a reason to be worried any longer