Since he just started reading the local Brazilian press for us in real-time (in Portuguese), Moshe Silver’s Hedgeyes have recently revealed the following risk management takeaways:
1. Brazil’s central bank just released for 90-day comment period a proposal to regulate bankers’ compensation, based on Group of 20 principles accepted last year. Purpose of the proposed new rules will be to align bankers’ compensation with impact of risk exposure they take on.
2. Lula has been pushing for his right-hand Cabinet Chief, Ms. Dilma Rousseff – a former anti-government guerrilla during the military dictatorship – to become his hand-picked successor. She has now formally accepted, which means she will stand for her party’s nomination during their convention this month. Lula, who can’t run again now, has made his choice plain. Her reported surge in popularity in the last few days maybe “inside information” function of her formally saying she wants the job.
3. Lula was hospitalized for emergency high blood pressure episode on 28 January. His doctors were monitoring him during the day on the 27th. The Brazilian market was down that day – maybe a leading indicator from Lula’s doctors’? concern for his health?
Rousseff is still being treated for cancer that first surfaced in the press a few years ago. She says it’s in remission, but obviously this would be a bad time for both Lula and his hand-picked successor to have severe health crises.
With all of this “news” in the rear-view, it’s easier to understand why the intermediate term TREND line for the Brazilian Bovespa is under assault. That line of support = 66,624. All the while, the long term TAIL of support for Brazilian equities remains intact down at 55,406. We have outlined these risk management levels and durations for you in the chart below.
Moshe and Keith