“Government debt hits x% of GDP…”. Ignore these “news” pieces, they mean nothing…

The government's debt as a % of GDP means absolutely nothing. There is no correlation between the two, no cap on government debt issued in its own currency. It does not create "debt for our children to pay". Ignore any news article or economist who says otherwise. Dívida pública brasileira sobe para 90% do PIB e bate novo recorde

Continue Reading “Government debt hits x% of GDP…”. Ignore these “news” pieces, they mean nothing…

…and here comes stagflation! Thank you Guedes! Superjob there buddy!

The financial media is now asking for higher interest rates in Brasil. They claim it is needed to hold back inflation. Its like no one understands how money really works. Well, the big money will win, and interest rates will go up. When that happens, usually the stock market goes down. So stockholders beware! On the plus side, the Real should go up in value against the US dollar. Everyone will be too broke to take advantage of that though... This is messy. With high unemployment, low GDP, devalued currency, high inflation, to increase interest rates is almost suicidal. It will hurt whatever was left of the economy, creating your typical stagflation. With Guedes in power, there won't be any countercyclical measures, there will be procyclical ones, meaning digging ourselves…

Continue Reading …and here comes stagflation! Thank you Guedes! Superjob there buddy!

Why Brazilians are so poor today and cannot afford to go to Disney World

  • Post author:
  • Post category:Blog

It is very simple, really: Because the rich and powerful are back in power. The rich and powerful do not like Reais, they stash their money and profits away on tax havens. Let's say you are rich and powerful, your money is all hidden away in the Cayman Islands, and now you run Brazil again. What would you do? Well, it makes sense to devalue the Real as much as possible. This makes you much richer in Reals, and allows you to buy anything you want, including the dumb competitors who forgot to stash their money somewhere else. Also, if you are one of the smart rich folks, you don't dabble in the internal Brazilian economy, that is too small, its better to be an exporter. As an exporter, once…

Continue Reading Why Brazilians are so poor today and cannot afford to go to Disney World

The Evil Plan is doing just fine…

  • Post author:
  • Post category:Blog

Guedes Plan status update: Install a gringo-loving president that is absolutely bonkers, controversial, and vocal. This will keep the media and the opposition busy trying to prove each one of his false assertions are incorrect. As they say: it takes ten times more energy to prove something is stupid than it takes to say it in the first place. Tricks to get this fool elected: make him pretend he is religious, that he caters to the working class, that he will get rid of corruption (Other people's corruption, not ours!), etc. We can use that fool Moro for a bit to get elected then we get rid of him or he will arrest us too... Use all weapons of mass disinformation available to spread fake news and attack any opposition.…

Continue Reading The Evil Plan is doing just fine…

Why interest rate cycles matter, a LOT!

Summarized version for now, I'll try to enhance it more in the future:  Increasing or high interest rate phase: Costs for corporate investments go up or are higher reducing their IRR, increasing payback periods, or just making them unprofitable a lot of corporate investments get shelved during a period of high interest rates Costs to buy house go up Higher interest rates = Higher monthly payments Higher revenue required to buy a house of same price Lower home affordability Less houses built, or lower priced houses built due to market conditions Lower demand drives down house prices Borrowing costs to invest in stock market go up Lower demand decreases stock prices Fixed income markets become more interesting than stock markets Less risk, guaranteed returns Stock prices go down Options pricing…

Continue Reading Why interest rate cycles matter, a LOT!

Watch out for reductions in the foreign reserves by the Government

  • Post author:
  • Post category:Blog

While it is true that the Brazilian Government has only a very small amount of debt issues in dollars, states, cities and companies have a lot of dollar denominated debt. The dollar reserves, even unused, have more of a psychological effect, a certain assurance that the country in general would find dollars if it needed to. Venda de reservas está no cardápio para redução da dívida, mas decisão é do BC, diz Waldery Reducing the reserves is bad news, unnecessary, and quite frankly, very dumb. It shows the Central Bank does not understand how their own money works, and that the government can issue any amount of money it needs to pay its Real denominated debt. To ignore that is downright stupid, and very, very worrying. Just the fact that…

Continue Reading Watch out for reductions in the foreign reserves by the Government