POSITION: Long Brazilian Equities (EWZ)
After outperforming US equities for the better part of the last week and trading up for the last 4 days, consecutively, the Bovespa in Brazil is taking a bit of a breather today. We’re going to stay long Brazil via the EWZ etf.
Moshe Silver did his usual translation of the Portuguese press this morning and had the following insights on what Latin America is starting to cautiously refer to as a boom:
“Fundacao Getulio Vargas, Brazil’s leading social and economic policy research university, working with Germany’s IFO institute, says the Latin American Economic Climate Index rose from 5.6 to 6.0 points between April – June of this year. According to FGV, the combination of positive current readings, together with current projections, suggests that Latin America has entered a boom for the first time since July 2007, though the decline in projections leads FGV to characterize this as “a cautious boom.”
The current measures component of the index rose from 4.7 to 5.8, while the expectations component declined from 6.4 points to 6.2. The FGV report said “the historical series of the economic climate index, going back to January 1990, shows that an economic climate index reading of 6 should be read as very favorable.”
For Brazil, the current measures component rose from 8.1 to 8.4, while expectations declined from 6.4 to 6.1, resulting in an unchanged reading of 7.3 points. Argentina, Chile, Paraguay and especially Mexico showed higher readings.
The FGV report said “the situation in Latin America – as in the rest of the world – suggests caution. In the Latin American countries studied, expectations started to decline from October 2009 through January 2010. Nonetheless, analysis of current measures showed a reverse pattern. The experts expected the worst, which did not come to pass. Then they got better results out of current measures. Still, they are not sure of how solid the recovery is.”
The intermediate term TREND line of support for the Bovespa is now 64,290.
Keith R. McCullough
Chief Executive Officer