Almost Daily Grant's

“Almost Daily” is the end-of-day delectation from Grant’s.

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Monday, October 29, 2018

Pile up

Courtesy of Raoul Pal, co-founder of Real Vision, via Twitter:


What’s the return policy?

Bolso would

There’s a new sheriff in town. Over the weekend, Brazilians elected Jair Bolsonaro, a 63-year old congressman and former army captain known for his far-right leanings and populist rhetoric, as its new president.  Bolsonaro, who defeated the left-wing candidate Fernando Haddad by a 55% to 45% margin in the second round of the election on Sunday, seems to enjoy at least provisional approval from investors. After Bolsonaro was stabbed in a campaign event in early September, an event which boosted his popularity, the Bovespa Index has rallied by 13% in nominal terms and 27% in dollar terms.  During this period, the iShares MSCI Emerging Market ETF has declined by 7%.  
The potential for an improved budget outlook figures prominently the recent run-up in asset prices. In his victory speech, Bolsonaro promised that Brazil “will break the vicious cycle of growing debt,” in place of a “virtuous cycle of smaller deficits, falling debt and lower interest rates.”  
In hopes of reining in a budget deficit that footed to 7.19% of GDP at the end of September, the president-elect and his University of Chicago-educated finance minister, Paulo Guedes, will attempt to pass pension reforms. Those budget shortfalls have contributed to rising government debt which is expected to jump to nearly 96% of GDP by 2022 from 87.3% at year-end 2017, according to the World Bank, up from 62.3% in 2014. 
Those reforms have proven elusive, as three fifths of congress will need to vote in the affirmative to amend the constitution and pass the reform. A 2016 congressional effort to do so failed, while Bolsonaro’s predecessor Michel Temer was forced to abandon his attempts to overhaul Brazil’s social security system earlier this year. 
Luiz Portella, founder at Novus Capital in Rio De Janiero, judges the likelihood of achieving success to be “difficult, but not impossible.” Portella, who is bullish on Brazil, tells Grant’s that “the bar is very low,” for Bolsonaro, coming on the heels of a “bear market in politics” lowlighted by the 2016 impeachment of Dilma Rousseff for corruption, followed by highly unpopular Temer regime and bribery conviction and subsequent jailing of former president Lula da Silva in April.
The bear market in Brazilian politics contrasts with a sunny outlook from investors. Brazil’s Ibovespa trades at 13 times consensus 2018 earnings, well above the 10.9 times for the MSCI Emerging Markets Index, 10.3 times forward earnings fetched by the Shanghai Composite, 8.8 times for Argentina’s Merval Index, and 5.3 times for the MOEX Russia Index. Beyond a premium valuation, Mr. Market is expecting big things; earnings per share within the Bovespa are expected to jump by 75% over the next 12 months, according to estimates tabulated by Bloomberg. 
Then, too, the populist factor can produce unwelcome surprises. Today, Mexican asset prices took a dive after incoming president Andr?s Manuel López Obrador, (AMLO for short), scrapped plans to build a $13 billion airport in the Mexico City suburbs after a four-day referendum showed that almost 70% of voters opposed the project. By way of response, AMLO commented: “Our decision is to follow the referendum mandate. The citizen’s decision is rational and democratic.” Last week, AMLO remarked of the project (which is already one-third completed according to Bloomberg): “There won’t [be] macro imbalances, problems with the stock exchange, or devaluations.”
As for Brazil, an Ibope poll conducted in January showed that 14% of respondents answered in favor of pension reform while 44% were opposed.  The balance were thinking it over.

Recap Oct. 29

Another wild day saw the S&P 500 lose nearly 4% from intraday peak to trough before a late rally left the broad average in the red by less than 1%, while the NYSE FANG+ Index lost nearly 4%.  Treasury yields ticked slightly higher across the curve, while commodities were hammered with WTI crude sinking below $67 a barrel. 
- Philip Grant

Friday, May 22, 2020

Angel eyes
Misery loves company.

Recap May 22

Thursday, May 21, 2020

Yellow ledbetter

Wishing well
These coins must have fallen through the couch cracks.

QE progress report

Recap May 20

Wednesday, May 20, 2020

Risk management 2.0

Paper pushers

Northern exposure
Now they tell us.

Recap May 20

Tuesday, May 19, 2020

Pounded dough
The mouse is out of the house.

57 days later
The undead are dancing.

Recap May 19

Monday, May 18, 2020

Noises off

Depreciation day
Grading on a curve, writ-large.


Recap May 18

Friday, May 15, 2020

Shelf life
Today, biotech company Sorrento Therapeutics, Inc.

King me
Debt monetization is here.

Recap May 15

Thursday, May 14, 2020

She said it

Rock center
It's good to be king.

QE progress report

Recap May 14

Tuesday, May 12, 2020

Some type of synergy

Liquid courage
A brave new world.

Recap May 12

Monday, May 11, 2020

Bed check

A ripple in the desert
This morning, the Kingdom of Saudi Arabia announced

Recap May 11

Friday, May 8, 2020

He said it

Break on through
A step closer to the other side.

Recap May 8

Thursday, May 7, 2020

Mr. Market's Wild Ride

QE progress report

Recap May 7

Wednesday, May 6, 2020

Learning by doing

Solar city
From the counter-cyclical chronicles:

Pressed juice
What's old is new again.

Recap May 6

Tuesday, May 5, 2020

Green thumb
A closer look at "whatever it takes."

Just add water
The Mortgage Bankers Association

Recap May 5

Monday, May 4, 2020

Model X
Call it Uber diets.

Recap May 4

Friday, May 1, 2020

Thanks for nothin'

Codependency credit
Torrents of red ink down Mexico way.

Recap May 1

Thursday, April 30, 2020

Credit check

Security master
This morning, the Federal Reserve announced it will expand the scope

QE progress report

Recap April 30

Tuesday, April 28, 2020

State of nature
Yesterday, New York governor Andrew Cuomo

Recap April 30

Monday, April 27, 2020

Liquidity check

Something shiny

Smoke 'em if ya got 'em
On April 17, Howard Willard, CEO of tobacco giant Altria Group

Recap April 27

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