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Analysis: An Uncertain Future for Eike’s OGX

Posted on May 22, 2013 · Add Comment
Screen shot 2013-05-22 at 3.57.13 PM
According to this Reuters News story , Fitch on May 17 downgraded OGX debt after it agreed to spend about $540 million to buy and develop 13 Brazilian oil and gas exploration blocks that it picked up at a government auction on May 14. The block purchases will put pressure on OGX cash as the [...]
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Developing Euphoria? The consensus expects a better economy later in the year in all regions

Posted on May 17, 2013 · 3 Comments
By Felix Zulauf (via Itau Global Connections). The consensus is expecting a better world economy later in the year in all regions. That is nothing new. The consensus started the year expecting “normalization” of the world economy during the course of this year. Normalization in the consensus sense meant improving economies, rising inflation and interest [...]
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Report: Dollar and Fed could be the triggers to “sudden-stop” risks for Emerging Markets

Posted on May 15, 2013 · 4 Comments
Screen shot 2013-05-15 at 12.11.02 PM
By Stephen Jen (via Itau Global Connections). Bottom line: We are likely to be at least several months too early in writing about the risk of a ‘sudden stop’ undermining some EM currencies and assets. Capital continues to flow into EM, in size, pushing up many of the EM currencies. But we are increasingly worried about [...]
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(Just Beautiful!) Dilma blames monetary policy in developed countries for Brazil’s lack of competitiveness

Posted on May 14, 2013 · 10 Comments
dilma 2
In the 31st edition of the Brazil-Germany Economic Meeting, Brazil President Dilma Rousseff took the opprtunity  to defend the economic policy of her government and strengthen the argument that monetary policy and exchange rate of the rich countries are the main cause of the loss of competitiveness of Brazilian industry. For Dilma, the “monetary injections pressured emerging [...]
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Druckenmiller: “It’s not just a correction, commodity super-cycle is officially over. Short commodity currencies!”

Posted on May 8, 2013 · 1 Comment
Druckenmiller
According to legendary hedge fund manager Stanley Druckenmiller, the commodity party’s over and the decline is just starting. In his Sohn Investment Conference presentation, Druckenmiller said the 2002-2011 gains for commodities were an anomaly and that the declines of the past couple of years are the norm. Why? China, he said, which embarked on an unprecedented [...]
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Roubini is bullish on US stocks… time to sell?

Posted on April 30, 2013 · 4 Comments
roubini
Famous economist Nouriel “Dr. Doom” Roubini is predicting an uptick in stock prices over the next two years as the Federal Reserve continues its stimulus efforts. But buyer beware, Dr. Doom says, because a day of reckoning is lurking at the end of the two-year horizon. But for now, he says, investors might want to [...]
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Capital Economics: “Brazil more vulnerable now to another crisis”

Posted on April 25, 2013 · 4 Comments
brazil real forex
According to Capital Economics, Brazil and India are increasingly vulnerable to another crisis or to the eventual end of the ultra-loose monetary policies in developed economies. Weak demand for Brazil’s exports and the voracious appetite of local consumers for imported goods widened the country’s current account deficit to 2.93 percent of GDP in the 12 [...]
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Chart: Brazilian Bovespa’s the 5th worst out of 77 world markets so far this year

Posted on April 22, 2013 · 1 Comment
country stock markets
Below is a look at the year-to-date performance for the major stock market indices of 77 countries around the world, according to Bespoke. All four of the big BRIC (Brazil, Russia, India, China) emerging markets are down on the year.  China is doing the best of the BRICs with a YTD decline of 1.19%.  India [...]
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Inside Information: Brazil food processor JBS Friboi may have received tips from Finance Ministry about rate hikes

Posted on April 18, 2013 · 4 Comments
mantega
Brazil raised its benchmark interest rate on Wednesday to 7.50 percent from an all-time low of 7.25 percent, in an attempt to tame persistently high inflation. But apparently, this was not the main talk of the day within trading desks. We have said time and time again, inside information in Brazil does not [...]
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Is this the Bovespa bottom? History shows that rate hikes are good for Brazilian equities

Posted on April 17, 2013 · 1 Comment
ibov selic
Last week, the Brazilian Central Bank (BCB) president, Alexandre Tombini, stated the BCB is “carefully” watching all indicators, to decide on the next steps of economic policy. In this sense, most market economists forecast rates to be tightened by an average of 150bp in about three stages. Despite the weak economic activity in Brazil, the [...]
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BofA: Itau’s exposure to Eike Batista is concerning

Posted on April 16, 2013 · 3 Comments
eike neymar
After tough results and difficult operating trends in 4Q12, Bank of America Merrill Lynch expects 1Q13 to be the last transitioning quarter towards better profitability for the Brazilian private large cap banks. Although the bank thinks provisions should decrease in the quarter (except for Santander), it does not expect it to offset the effects from [...]
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Stocks: Sell in May, come back in October?

Posted on April 16, 2013 · Add Comment
1x
By Stephen Jen (via Itau Global Connections). Bottom line: Global equity prices have historically exhibited a strange but powerful seasonality.  The trading performance from May to October has been consistently, persistently, and significantly inferior to the equity returns from the November to April period.  Using a sample of six developed markets and data from the past [...]
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Chinese Auditor: “China’s government debt may cause the next global crisis”

Posted on April 16, 2013 · 4 Comments
china bubble
According to the Financial times, a top Chinese auditor has warned that local government debt in China is “out of control” and could spark a bigger financial crisis than the US housing market crash. Here is what the head of leading Chinese accounting firm ShineWing said after he stopped signing off on bond sales by [...]
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Why the BRICs bubble is popping slowly and how it may become the story of 2013

Posted on April 8, 2013 · 16 Comments
AndyXie
Whisper quietly: the bursting of the BRICS bubble is already happening but few are paying attention… and it might become the main story of 2013. According to a recent article by Andy Xie, the bubble bursting is happening in slow motion, confusing financial markets, because interest rates are low everywhere. As the months pass, the [...]
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Where is the most expensive place to own a car?

Posted on April 4, 2013 · 8 Comments
driving costs
The Economist has recently created a chart comparing the cost of driving in different cities. Petrol prices are just one of the costs of running a car; owners also have to fork out for insurance, road tax and servicing. The chart below shows the total cost of buying a family car (an average of low- [...]
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Mark Adomanis: “The weakest BRIC in the wall isn’t Russia, it’s Brazil”

Posted on April 2, 2013 · 9 Comments
Brazil_Russia_Locator
Foreign Policy’s War of Ideas blog has a headline out that reads: “The Case for Kicking All the Countries Out of the BRICS.” The post collects critiques from a variety of experts questioning the validity of the BRICs as a coherent investing thesis. Along with intervening to tamp down fuel prices, Brazil moved to keep [...]
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Brazil ranks 107th out of 144 countries assessed for the quality of their infrastructure

Posted on April 1, 2013 · 5 Comments
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Everyone knows how precarious Brazil’s infrastructure is. But if Brazil really wants to hold onto its position as a leading emerging market, it must address this structural problem (and education), soon. Here is the issue: according to the World Economic Forum’s Global Competitiveness Report, Brazil ranks 107th out [...]
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Itau: Real Weakening Despite BCB Intervention

Posted on April 1, 2013 · Add Comment
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Here is the latest weekly summary on the Brazilian FX/Capital Markets, by Itau: —– A short but busy week left the real depreciated…  In Brazil, the short Easter week was marked by some inflation-related headlines that influenced currency markets. The real depreciated 0.61%, despite the sale of dollars in the derivatives market by the central [...]
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Analyzing Bovespa’s Chart: Trendlines are confirming a long term down cycle

Posted on March 28, 2013 · Add Comment
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According to market technician Greg Schnell at stockcharts.com, the commodity countries (Canada, Brazil, Australia, Russia) are telling us a significant story. Here is what he had to say about Bovespa’s chart: This Brazil chart lacks all the things we like to see. It failed in late January on the test of the [...]
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World Economics: Brazilian Real’s fair value to Dollar is R$2.80 (41% overvalued)

Posted on March 25, 2013 · 24 Comments
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The World Price Index (WPI) is a monthly index of PPP exchange rates against the US Dollar across the world’s 10 largest economies. Taking inspiration from and building on the concept of the Economist’s ‘Big Mac Index’, the WPI allows for a more timely method of making economic comparisons across countries. Data and conclusions from [...]
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No return to the world that was

Posted on March 23, 2013 · 3 Comments
zulauf
By Felix Zulauf, via Itau Global Connections. Since a member of the FOMC had suggested that quantitative easing of current proportions could be terminated sooner than planned, the investment community seems to feel supported in its belief of a normalizing world economy. Moreover, the German IFO index jumped more than expected, raising the hope in [...]
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Chart: What’s the difference between a blood bath and Bovespa’s performance this year?

Posted on March 20, 2013 · 8 Comments
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Answer: None. Down more than 10% so far this year. And the Deutsche Bank guy said there may be another 10% down to go before reaching bottom. Decoupling???
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The fate of USD/JPY will be determined by Japanese investors, not foreign hedge funds

Posted on March 19, 2013 · 1 Comment
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By Stephen Jen (via Itau Global Connections). Bottom line: Now that the Bank of Japan will be led by a team of super-doves, the mechanism through which a more aggressive BOJ could influence the yen is through capital flows.  We have used the analogy of a two-stage rocket to describe how USDJPY could be propelled.  [...]
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Margin Call! Eike Batista Said to Face Collateral Calls (Bloomberg)

Posted on March 18, 2013 · 5 Comments
eike batista
Eike Batista may be forced to cover margin calls on his debts, said one analyst. According to a recent Bloomberg article, Eike seems to be facing demands from creditors to boost collateral. Among Batista’s biggest creditors is Sao Paulo-based Itau Unibanco Holding SA, with about 5.5 billion reais ($2.8 billion) in loans outstanding, said two of the [...]
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Rank: Cities with the most expensive hotel prices in 2012

Posted on March 15, 2013 · 8 Comments
rio hotels
Check out the most expensive cities in the world for accommodation, according to the latest hotel price index by hotels.com. And the winner is??? 1 Rio De Janeiro $293 2 New York  $278 3 Geneva $251 4 Boston $232 5 Honolulu  $229 6 Dubrovnik $227 7 Paris $227 8 Venice $227 9 Cancun $218 10 [...]
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Profit squeeze is emerging markets: “The deterioration has been both fast and large,” says BNP

Posted on March 11, 2013 · 5 Comments
profits emerging markets
While world stocks have risen more than 5 percent already this year, stock markets in China and Brazil are flat to negative in dollar terms. Seems like EM’s golden era has passed. But why exactly? Reuters’ Sujata Rao explains: “Godet’s calculations show a steep decline in return-on-equity (ROE) in emerging markets to around 12 percent, a [...]
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Buffett in Brazil…

Posted on March 8, 2013 · 16 Comments
warren buffett
The main reason why mega-investor Warren Buffett came to Brazil yesterday was to learn more about Ambev’s asset management model, people close to the situation said. Anheuser-Busch Inbev’s Brazilian unit Ambev is managed according to the prescription of three fund 3G Capital shareholders, Jorge Paulo Lemann, Marcel Telles and Beto Sicupira. Three weeks ago, Buffett [...]
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Valor: Brazil’s Central Bank is in search of lost credibility

Posted on March 8, 2013 · Add Comment
credibility
By Valor International. One of the biggest Brazilian achievements in the last few years was facing a serious global crisis without having to raise interest rates. It was like that in 2008. The crisis arrived, forcing economic activity to stop suddenly in the last quarter of that year and the Central Bank (BC), after normalizing [...]
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Chart: Government intervention on Brazil’s inflation indices

Posted on March 6, 2013 · 1 Comment
brazil inflation
The Brazilian government is using tax cuts over some managed prices to hold inflation. The next six months are expected to feature high inflation, above 6% in the 12-month period. To try and help inflation indices to decline, the government decided to focus its actions on a “surgical” intervention in some prices, whether by cutting [...]
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Itau: Petrobras’ stock may look cheap, but we don’t buy it

Posted on March 5, 2013 · 9 Comments
lemon
Like Forbes’ writer Kenneth Rapoza puts it: “Can this dud of an oil company possibly disappoint investors more? Yes, it can!” A recent Itau report about Petrobras questions how cheap is cheap enough for this under performer stock. After all, in a recent conference call with analysts, Petrobras’ CEO stated that 2013 will [...]
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