This was the most telegraphed sell-off of the century. Interest rate hike tomorrow (the market expects 50 to 75 bp) and Jan Selic now getting more sanguine, predicting an 11.75 SELIC by Jan 2011 -- that's a full 3% higher than today!!
Oh yeah, and next month we have the largest secondary EVER in the history of the capital markets coming out of PBR. There's also talk now that they're upping their initial raise from US$ 25B to US$ 40B.
You clowns must be joking if you think this stock is going higher with all the adversities coming down the pipeline. But keep holding your longs in your margin accounts. After all, it's from you that I borrowed to short 1000 shares at 43.55 and 1000 shares at 44.05. Good times...
Congrats, Phil, but I think you got your reason wrong. The rate increase and offering are known and likely priced in.
The huge move down today was because Portuguese debt got whacked by S & P, and they finally officially rated Greek debt as junk. Well, duh!!
Germany decided not to bail out Greece until they have a sensible budget... whatever that means.
So Greece can act sensibly and raise taxes and cut services... okay, you all can stop laughing on the floor now!
Or they default, screw the debtors, and send the European banks scrambling. The Euro and Real are joined at the hip, and they both fell as traders moved into the safety of the dollar.
And with the stronger dollar comes lower oil prices.
Add the losses of oil and the Real, and you come pretty close to the same percentage fall PBR had today.
I hope you are keeping EUO on your radar screen and can give me a time from a technical stand point to dive in. Yes, I know shorting the Euro is a crowded trade, but trust me, just because it is crowded trade doesn't mean it is wrong. The Euro is going to 1:1 to the dollar and probably lower within two years. I expect to see the Real back at 2.5 to 3 in that time frame as well. When that happens, maybe I will make a return trip to Brazil. This weak dollar really messes with my travel plans.
<< The Euro and Real are joined at the hip, and they both fell as traders moved into the safety of the dollar.>>
Reversal of carry trade is not the same as flight to safety.
In order to understand effect, you must look to what the REAL cause is.
As to joined at the hip, give me a break.
Brazil's LT fundamentals are much better than those in Europe and the cream will rise again as soon as the scared carry traders' effect is gone.
We went through this before.
No way the real goes to 2.50 - 3.00. Brazil's more sound fundamentally than the USD and the economy is less leveraged from a government and corporate standpoint. Did you check gold today? It rallied and looks to resume its uptrend. The market is sending a signal that it's willing to go long instruments that pose and alternative to unsound currencies such as the USD and the EUR. I believe the Singapore dollar, the Aussie dollar and the Brazilian real offer currency resilience for the long-term vis-à-vis the structurally unsound economies of Europe and America. As for shorting the euro, it's a stupid trade. Sure, it might go lower, but, in trading, good trades present favorable risk-reward. Where do you set your stop on a chart that looks like a falling knife already? You should expect massive reward to compensate you for your risk. Shorting the euro at this point, for me, presents no identifiable risk-reward.
Something else to chew one: Brazil's SELIC is pricing a 300bp increase by January. From an arbitrage point of view alone, this keeps currency inflows alive.
As for PBR, the interest rate meeting wasn't the only reason I went short. I had mentioned last week that USO was flirting with its 50-day line and would break lower very soon. That, added to the fact that PBR has been underperforming the SP-500 on a technical basis YTD. So, whether you wanna call it an S&P downgrade to Greece or a sell-off in oil, the fact is that my technical reasons for selling the stock paid off.
And, mind you, I took the bet on a day when this stock was up 3% and everyone on this board was calling me a loon.
<<< The rate increase and offering are known and likely priced in. >>>
It ain't that easy doc.
I believe the offering was known about also as the stock dropped to $37, but the share price climbed back to $47. At what share price point was the offering priced in ? That was a large swing.
I was lucky to sell all of my shares between $46.5 & $47.
If these major factors are priced in completely, should Portugal.
The news of the rate increases can be priced in, but the reality of the effect can take more time to play out... as can the dilution. The long term effects could be much bigger thant the news that is "priced in".
BTW- crude oil down 3x NG today.
uncu (from uncle it is down to uncu) phil this POS keeps going down and yes you win but remember it is not may 7, 2010 that's when our bet ends and by that time this POS may even go up. Yes it is a POSSQUARE but let's see what happens in the first week of may'2010.
With best regards .
I suggest you review the terms of the bet:
This was the exact quote: "Now, about PBR, let's strike a deal: if this stock tags $40.50 in the next 15 calendar days (so, by May 7) you leave this board forever. If not, I leave. Deal?
(should be easy for you to agree, given how "obvious" it is that PBR is going to explode higher, right?)"
In other words, this bet isn't about where PBR is on May 7, rather, the question is WILL PBR TAG $40.50 BY MAY 7. Hence, if the stock so much as trades there for a nanosecond by May 7, you lose the bet -- even if the stock is above that price point by May 7. I intend to cover at $40.50 and, of course, kindly thank you for the shares you and other bagholders lent me, in the interim, making my short-sale possible.
"In fact, Brazil has ALWAYS had a higher rate of inflation than the U.S. has."
Exactly, and therefore according to your logic, the real should been in permanent, continuous decline against the dollar. Nonsense.
You're initial statement was that growth leads to inflation, and that inflation "by definition" means a weaker currency. Again, this is total, utter nonsense. You should be embarassed to have ever claimed it.
There is no cherry picking here. The wrongness of your claim is firmly demonstrated not only in the data over the last year, but over the last decade.
One real buys a hell of a lot less in Brasil than it in did in 2004. But it buys a hell of a lot more in terms of dollars.
<His original reason in early 2009 about why the dollar won't go down as a result of huge deficits.>
Again, Rush Ilap, if deficits mattered more than inflation/deflation with regards to currencies, why did the yen appreciate versus the dollar while Japan's debt went through the roof? You do know than Japan's debt to GDP ratio is higher than ours? No, of course, you don't.
With you, the fall of the dollar is due to Obama because that is what the Tea Party guys say. Truth is Obama has been following the same economic policies of Bush, and the Fed has been trying to devalue the dollar. I just don't think it will work long term.
When it comes to domestic items, deflation is still here. Home prices are still in the dumps. Wages aren't going up, and nat. gas is in a funk.
Where the dollar has fallen in value is on international products like copper, oil, and gold, and the reason for that has been unprecedented commodity demand from China. They have been trading in their dollars for commodities.
From Mish today, "The important point, but one that the article did not explicitly make is that China's demand for commodities is hugely artificial, predicated on round after round of stimulus and outright monetary printing that has also fueled massive property bubbles and speculation."
Of course, what does that guy Mish know about anything?
Yes, I know people here believe that China is the place to be. Price:Income ratios of 25:1 in the Chinese housing market must be made up by someone. Maybe it's Soros or his close ally, Chanos. That guy, Andy Xie, who has been in China and first brought China's housing bubble to the market's attention must be on the take from someone.
Brazil's growth was fueled by an incredible surge in demand for commodities mostly from China, so Brazil is in peril if that growth machine slows down.
And on the other end, Brazil has grown because European banks have been shoveling money into Brazil.
So in the real-dollar debate, if commodity demand stays up, that is good for the Real. And if European banks stay strong, that is good for the Real.
We'll see how well the Brazilian economic "miracle" holds up if the Chinese housing bubble bursts and European banks start blowing up as I suspect in the coming months.
"Of course, what does that guy Mish know about anything?"
Obviously not much, if you look at his market performance over the last year. He's been whining about deflation for as long as forever, yet the CPI keeps ticking up. Has no understanding of the global economy, and think's that what happens will necessarily drive prices. Nonsense. The U.S. is 5% of the world's population.
He's not even a legitimate economist. Just a humble layman like yourself.
"The US on the other hand, is like Greece."
It's a slippery slope when everyone is greasing the markets.
Maybe comes down to knowing who is the least like Greece if you're placing a bet and it's not likely the US.
Oh, thanks for enlightening me Rush Ilap. So budget deficits are the cause for a stronger or weaker dollar. Do you mind telling me than why the dollar went down in value from 2004 to 2007 while budget deficits were going down? Let me anticipate your response. Trade deficits, right?
Then how about in the 1980s. We went from $2 trillion total debt to $4 trillion and the trade deficit exploded, so the dollar must have gone down... but it didn't. How could that be?
Now let us see how my inflation theory holds up. In the 1980s, inflation came down which meant the dollar went up in relative value so it got stronger. That works.
And from 2004 to 2007, prices on oil and housing went way up, and the dollar got weaker. And then when we had the massive fall in commodity prices in early 2009, the dollar got stronger. Gosh, so when inflation goes down, the dollar goes up. Who woulda thunk that?
Now look at today. Where is inflation in today's economy? Wages? Nope. Real estate? Nope. Natural gas? Nope. Domestically produced food? Not there either.
It is almost entirely due to China converting money into stuff just like we did from 2004 to 2007. The Chinese are going out of cash and into real estate, copper, oil, and steel. Anything that can be sent to China and stored has gone up. Anything that can't hasn't.
In fact, the Chinese real estate bubble has gotten so dumb, the Chinese government had to step in and stop a sale. See the link: http://www.bloomberg.com/apps/news?pid=20601089&sid=aM5uszh.UBL8
But you knuckleheads here think that the Chinese real estate bubble is contained. I don't know why you guys make so much fun of the U.S. when you all are channeling your inner Bernanke on one of the world's biggest bubbles. China is doing the same damned thing the U.S. did after the dot com bust and Japan did after the Nikkei bust. They are giving out easy money and inflating a housing bubble. China has expanded their money supply more than the U.S. has.
Let me make sure I have this right about what you and the other knuckleheads here think. We are set for inflation. So wages are going up? Real estate is going up? Natural gas is going up?
The current commodity bubble we are seeing is due to China building empty buildings and unsold cars, and storing up commodities. And Brazil selling China iron ore to build empty building is a business model that all the Brazil nuts and China humpers here seem to enjoy. Hey, maybe we should do that too.
Bottom line is that Brazil has always had higher inflation than the U.S. has. For the last few years, the rate of inflation has decelerated much more in Brazil than in the U.S. But let me ask you this: Are you all saying that the U.S. is going to have higher rates of inflation over the long haul than Brazil is?