Friday, May 04, 2012 11:59:27 PM
Out of curiosity, why do you think the real has been so weak?
It can't be "risk-off", b/c the US market is near the highs (or was until today, with USDBRL already at 1.90). The other EM currencies haven't been nearly as weak.
I think the reason is that the currency has been highly overvalued because the rates have been so high. Where else in the world do you get greater than 10% on short term money?
It may also be pressure from the EZ, because EZ banks are a big lender and investor to Brazil, and they may be selling BRL assets to raise euro and deleverage.
Regardless, s/t I see no reason to think rates will not continue to fall, putting pressure on the currency. L/T I think rates will fall because Brazil will become more productive, more efficient, and more indebted, which all correlate with lower rates.
Bottom line: I'm skeptical. The price action and data in China and Brazil have been bad for a while now, and with all the shit going on in the world, I don't know why we should expect that to change any time soon.
But don't get me wrong, I do want to buy this stuff; it's cheap on a PE basis and you get a nice yield
My "must buy" target for PBR is 18.50, which I think we'll eventually see, and my must buy target for BDORY.PK is 9.50, which I'm not sure. Feel free to press me on those commitments when I chicken out once they get there
Note: as for ccy risk, you might have BRL accounts, and therefore measure your portfolio in BRL, but that doesn't change the fact that when BRL falls, you lose value relative to alternatives, including holding capital in US dollar cash.
It can't be "risk-off", b/c the US market is near the highs (or was until today, with USDBRL already at 1.90). The other EM currencies haven't been nearly as weak.
I think the reason is that the currency has been highly overvalued because the rates have been so high. Where else in the world do you get greater than 10% on short term money?
It may also be pressure from the EZ, because EZ banks are a big lender and investor to Brazil, and they may be selling BRL assets to raise euro and deleverage.
Regardless, s/t I see no reason to think rates will not continue to fall, putting pressure on the currency. L/T I think rates will fall because Brazil will become more productive, more efficient, and more indebted, which all correlate with lower rates.
Bottom line: I'm skeptical. The price action and data in China and Brazil have been bad for a while now, and with all the shit going on in the world, I don't know why we should expect that to change any time soon.
But don't get me wrong, I do want to buy this stuff; it's cheap on a PE basis and you get a nice yield
My "must buy" target for PBR is 18.50, which I think we'll eventually see, and my must buy target for BDORY.PK is 9.50, which I'm not sure. Feel free to press me on those commitments when I chicken out once they get there Note: as for ccy risk, you might have BRL accounts, and therefore measure your portfolio in BRL, but that doesn't change the fact that when BRL falls, you lose value relative to alternatives, including holding capital in US dollar cash.
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