Gustavo Ballvé on March 30th, 2011
Food for thought, Home, Mental models, Portfolio Management, Risk management

The Financial Times has been on a tear recently with articles about Brazil – from the much-commented “Brazil could annex Portugal” LEX piece (more on this inside) to yesterday’s strong LEX note saying Brazil should “grow up”. Their point is that piecemeal solutions, such as the yesterday’s tax rate hike on the borrowing abroad by Brazilian companies, won’t be enough to address the larger issues such as lax government spending, poor labor and tax regulations and so on. As they say, “The teenage prodigy has ridden the commodity horse admirably. An adult will find it easier to dismout.” – Nicely put, it’s just a shame that we need the Brits to tell that to our faces.

The second note is an Economist quick story on the growing investor interest to “hedge tail risk” – we suspect Nassim Taleb, author of “The Black Swan” and many times highlighted here, must have cringed reading some parts… In fact, in a footnote to a picture of an actual black swan in the middle of a pack of regular swans, the author wrote: “Is it a bird, an extreme event or a cliché?” – it pretty much sums up the problem with the overuse of the “black swan” expression.

The LEX piece suggesting that Portugal be annexed by Brazil obviously offended many Portuguese citizens, so the author posted a video “defending” his ideas (unfortunately the FT defends its content and doesn’t allow embedding their videos).

This FT beyondbrics blog post sees Brazil’s measures as but one piece of a larger puzzle, and highlights the “shadow banking” (such as direct lending by retailers) that isn’t affected by the measures.

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