Brazil Stops Falling But Struggles to Climb

14.06.2017 • Brazil

Thomas Schwarzer – Market in Five Minutes (Brazil) –

“After the mensalão, after three years of Lava Jet, the modus operandi continued.” – Luís Roberto Barroso, STF Minister.

Track of the day
The Rolling Stones – Tattoo You

Now you can hear the M5M track on Spotify – Check here

00:35 – If Repentance Kills …


No more inflation in Brazil – June IGP-10 came in at -0.62 percent and was lower than expected (-0.47 percent). In the accumulated index of the last 12 months, the index points to practically zero inflation.

Outside, US inflation also has a lot more bets on Fed more dovish minutes – a 25 bps increase and more by the end of the year.

Some say maybe not even that!

On the treadmill, the dollar loses its strength and, if we do not have any big shocks (internal or external), there is little pressure on the Real – exchange rate back down to 3.30 reais per dollar.

In such an environment and with the consensus that the “Joesley shock” has been deflationary, there is very little argument to step on the brakes of interest cuts.

The LTNs in the middle of the shootout were certainly not a good deal, as the chart below makes it very clear.

LTN – Maturity 2020:

Source: Bloomberg.

We have not returned to pre-crisis levels yet, but we are far from the minimum.

01:25 – Better Buy Cheap?


After so much “warn” that the VIX is cheap, I received an email from many people asking what is the VIX and how to buy here from Brazil.

Come on: VIX is the index that measures the volatility for the next 30 days in the North American market – simplifying, it is an average volatility of the S & P 500 options. Erroneously, it is used as a measure of risk – “Will lower the market VIX.

I, from the top of my mediocrity, think the opposite: the smaller the VIX, the greater the risk. Precisely because when the VIX is low, the assets are also expensive and also because many people start to take more and more risk due to the low volatility of the market.

It is worth noting that shortly after a major crash, with the often exaggeratedly cheap prices, the VIX usually finds its maxims. That is, when the time is right to buy, the VIX signals high risk.

I ask a question: is it riskier to buy something when it is cheap or when it is expensive?

Yeah …

More than that, just when the flight is low, the price of the options is down there, which gives you the opportunity to buy a lot of insurance and pay little for it.

Unfortunately, there is no way to operate VIX directly here in Brazil. S & P Options (buying a buying VIX), but the contracts have very low liquidity and I have my doubts if the homebrokers have this function enabled for individuals Will research).

What can be done for a shock – it is not the tail that shakes the dog. Buying dollar and gold, for example, is a good one. Buying large Brazilian caps puts even better.

But we have got better times for that.

02:45 – CIA councils


Who is preparing for the “mother of all crises” is Jim Rickards. The guy is the CIA’s financial affairs advisor and he knows full well that this lull of markets will not last long.

He wrote a book entirely devoted to the subject: The Road to Ruin.

More than explaining the crisis, it lists eight types of assets that will help you not only survive, but also make money when the broth spills.

Best of all, the book is FREE and you only have to pay the freight.

Check here.

03:20 – Hillary Peace and Love


With the expectation that the Central Bank will reduce its inflation target to 2019, the market will once again flaunt Selic below 9 percent by the end of 2017. Bolsa reacts well, even more with rumors that Palocci’s credit would have saved the financial market More than 3 percent).

As we speak, the interest curve closes quite a bit, especially at the end of points and, with the expectation of a Fed dovish, the appreciations by more than 1 percent.

Outside, markets waited for the Fed’s minutes and in the unsettlement about gunfire in Virginia that injured at least one American Congressman. It appeared that it was politically motivated – a witness said that it was a question of the gunman whether the group was made up of Republicans or Democrats.

Yes, that’s right: the guy did not even know what he was shooting at. The mere fact that they belonged to the other party was enough.

Go well, the world.

Meanwhile, Hillary Clinton says the way to end terrorism is to “understand” other cultures and their food.

It’s easy.

And there are people who wonder how the Americans elected Trump …

-Read more at (Portuguese)-

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