For Rousseff-hating investors, a bullish trade becomes personal

[Judi Lynn]

For Rousseff-hating investors, a bullish trade becomes personal

Raymond Colitt, Julia Leite and Anna Edgerton

Bloomberg News

Published Monday, May 09, 2016 4:41PM EDT
Last updated Monday, May 09, 2016 7:25PM EDT

The mood in Brazilian financial circles has been bordering on euphoric. The real is the best-performing currency in the world this year, stocks have soared more than 30 per cent, and bond yields are plunging. All this in a country with unemployment at a four-year high, a ballooning budget deficit, inflation near 10 per cent and a credit rating that puts the government on par with Guatemala.

There’s a certain danger, as Alan Greenspan might say, of irrational exuberance here. And behind it all is the glee in Sao Paulo and Rio de Janeiro that the impending impeachment of President Dilma Rousseff will pave the way for a slew of austerity measures and reforms to stabilize the ailing economy. In private conversations with wealthy investors, it becomes clear that the extreme conviction that better times are ahead stems in part from their distaste for the leftist Ms. Rousseff and her Workers Party, a stance that risks underestimating how difficult it will be to pull Brazil out of its worst recession in a century.

“The market priced in that Vice President Michel Temer will be able to do everything he needs to fix the economy,” said Carlos Thadeu de Freitas, a former central bank director and current chief economist at the National Confederation of Commerce. “It assumes the political world is based on common sense.”

The risk of Brazil’s political turmoil making a transition anything but smooth was on full display Monday as the head of the lower house called for a new vote on Ms. Rousseff’s impeachment, a surprise move that prompted a selloff across local markets. Stocks and the real pared losses later in the day as analysts said the decision won’t be enough to save Ms. Rousseff’s mandate, but the drama highlights how vulnerable the process is to legal challenges that could keep Latin America’s largest economy in limbo for a while longer.

More:
http://www.theglobeandmail.com/globe-investor/investment-ideas/rousseff-ouster-will-not-fix-all-that-ails-brazils-economy/article29943832/

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[Lucky Luciano]

1. Of course Brazil's economy was routed due to the turn in commodities.

Since commodities bounced violently in February from the lies, this may help Brazil's economy if the bounce sticks. It will then make Temer look good even though an improvement would have been due to extraneous forces.

[MisterP]

2. investing based on hysterical hatred for one pol: yeah, that'll perform well

Last edited Sat May 14, 2016, 03:13 PM - Edit history (1)