The following is the recipe for a toxic cocktail: One part a historically volatile, high standard deviation emerging market. One part incompetent president. One part widening corruption probe and scandal. One part bullish leveraged exchange traded.
Adventurous traders can drink up with the Direxion Daily Bull Brazil 3X Shares (NYSE: BRZU), the triple-leveraged answer to the popular iShares MSCI Brazil Capped ETF (NYSE: EWZ). This is how life in the fast lane works with a leveraged ETF tracking a market that does not need leverage to deliver volatility.
When BRZU was last highlighted in this space on March 8, we noted the ETF was “up more than 89 percent over the past month. On a month-to-date basis, BRZU is up nearly 77 percent, a performance exceeded by just one other Direxion leveraged bullish ETF.”
Due to issues tied to Brazilian President Dilma Rousseff, BRZU has seen its one-month gain trimmed to less than 36 percent. Month-to-date, the ETF is up 64 percent, dropping it to third-best among Direxion's leveraged bullish ETFs.
“Volatility in Brazilian shares has surged to the highest in more than a year as investors gauge the prospects for efforts to impeach President Dilma Rousseff and usher in a new government that would be better positioned to pull the country out of its worst recession in a century,” reports Bloomberg in a piece about BRZU.
An expanding corruption probe in Latin America's largest economy threatens to ensnare current President Rousseff and her predecessor, Luiz Inacio Lula da Silva. So Rousseff has proceeded to offer Lula, who was recently questioned by Brazilian authorities for his role in corruption at Petrobras SA (NYSE: PBR), a cabinet position. Oh yeah, Brazilian police reportedly have a recording of Rousseff doing this.
Credit to BRZU for surging 5.7 percent yesterday. Brazilian bonds, equities and the real climbed “on speculation that a corruption investigation was getting closer to the administration, they’ve tumbled this week on signals that Rousseff’s allies are doubling down in their efforts to stay in power,” according to Bloomberg.
BRZU has seen a modest jump in volume in recent sessions. For the five days ending March 15, BRZU's volume was nearly 16 percent above the trailing 20-day average, according to Direxion data.
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