Macro
The Financial Times had a piece about Greece’s woes on August 24th – and how Brazil’s fiscal policy presents an alternative. We feel it’s our duty as Brazilians to inform the FT that they’re basically right: Greece can borrow pages from the playbook of 2002 Brazil (or Lula, since the article mentions him). 2010 Brazil’s fiscal policies, however, should not be copied. What a difference a few years make.
Gustavo Loyola, a former Brazilian Central Bank chief, writes an op-ed today about the increasingly irresponsible legislative pieces enacted or proposed by our Congress. He goes back to the ages-proven concept that success breeds failure and vice-versa and applies it to Brazil’s current situation. We’ve been mentioning these risks in our latest reports and it’s part of our reasoning to keep a relatively high cash stake. While it has been somewhat tempered since our last report, some prices still imply a “blue-sky” scenario that we’re not comfortable with.
Read more about Brazilian Congress vs. fiscal responsibility
We see two key points in BC’s move to simplify the rules governing foreign exchange transactions: one conceptual and the other practical. The conceptual is that it’s one more relevant step for Brazil towards a greater insertion/ fluidity in the global markets. The practical is that scraping some 380 rules is something that warms the heart of any entrepreneur. K.I.S.S. at its best.
Official immigration decreasing, previously “hot” areas with unprecedented swings, NY’s staggering numbers… Sure, a data point does not a trend make, but demographics are too powerful to ignore as a long-term driver. And it’s hard to argue that the US is well-positioned. This WSJ story has lots of interactive charts and features, and here’s the primary source.
Dilma Rousseff was profiled twice by the Piauà magazine (in portuguese). The first piece explains how she came to be Lula’s candidate, how she runs things, her day-to-day relationship with the president and is therefore much more interesting. The second piece is listed for completeness’ sake.
It’s been 20 years since the “Confisco”, the seizure of assets from current and savings accounts designed (so to speak) to deter then-rampant hyperinflation. Brazil was then in default on its external debt and had precious little reserves… But the point here is not to judge decisions taken under extreme distress. Twenty years. The very fact that it seems like ancient history shows how far we’ve come, yet it still serves as a fresh warning.
A rare but always welcome interview by Charlie Munger embedded inside, courtesy of an attentive reader and the Stanford Law School. Some highlights inside as well. The main theme is the economic/ financial crisis (what else?).
Buffett used the Thriftsville vs. Squanderville metaphor in this brilliant article back in 2003. Now it’s Charlie Munger’s turn with a parable on the wealth of a nation and how to lose it. It’s a fun read.
We worried about implied expectations for 2010 in our Q4 2009 report and said that we were increasing the percentage of cash in our funds. Enter Greece and other European peripheral countries. Macro issues are not our core by any measure, and our point is just that volatility, that friend of the long-term investor holding a lot of cash, is on the rise. The post collects, as food for thought, interesting FT articles on Greece’s and Europe’s woes.
The first 4-5 pages in GMO’s Q3 2009 letter are entertaining for their irony, but it’s hard to disagree with Mr. Grantham’s conclusion: concentrate your portfolio in quality U.S. stocks with a global earnings mix. We’d extend that to some non-US quality stocks with diversified earnings sources, of course.
