Jul

29

I see in media and real life so many people from Latam trying to get to the US (or Turkey to Europe). that said, local stocks indices and currencies of those regions perhaps present the better options than the US or European mkts? Check out some of the Brazilian stocks yielding up 20pc and lowly valued (trap?) - also Brazilian Real vs USD (or Turkish Lira vs Euro). Just an idea could be half-baked at this stage.

Hernan Avella responds:

Right now Latam represents a minuscule portion of the market cap of international markets, which itself is about 40% of world equities (float adjusted).

Chile .2%
Mexico .8%
Brasil 1.5%

This becomes a highly idiosyncratic bet, mostly on the currency. Unless you have some special edge, it's not a risk you are compensated for.

Nils Poertner replies:

maybe some of the indices can be looked at, and over time one can develop a bit of expertise, too. I kind of like the idea that Latam as a whole remains in a sort of chaotic state. unpredictable and a bit dangerous too. it works a bit as an entry barrier (not for all, but for some).

William Huggins offers:

jacob shapiro of cognitive investments does a good job following latam markets, which could help build some of that expertise over time. they have a free geopolitical newsletter each week with a macro edge to it. he used to have a latam focused newsletter but there wasn't enough uptake apparently.

sample of recent newsletter:

Brazil’s lower house approved a proposal to overhaul the country’s tax rules. Lawmakers voted 375-113 to advance the bill in a second round of voting. The plan still has many hurdles to clear. As a proposed constitutional amendment, it must win two votes in the Senate, and may have to return to the lower house in the second half of the year if senators make changes to the bill, as Speaker Arthur Lira expects. We expect it will happen. Indeed, I can safely say that we are the only geopolitical and macro sources I know of that has been talking about the importance of Brazilian tax reform — both to Brazilian voters and to the trajectory of the Brazilian economy — with such depth and passion. All credit to @Rob Larity here who has been on this from the beginning. De Gaulle was purported to have said, “Brazil is the country of the future…and always will be.” It’s not clear he ever said exactly that, but more important is that the future looks like it is finally here.

John Floyd comments:

Valuations in equity, Valuations in FX, Idiosyncratic commodity drivers, Brazil softs, etc. Political slide left all around, Monetary cycle was first mover up and now first mover down is a tailwind, reshoring FDI flows in Mexico (I know NA and not LatAm). Low index weights does indeed limit some larger flows.

A few liquid country ETF’s or ADR or local expressions of views available. Always the episodic risk both ways. lets see how Argentina may play out next 6-24 months for example.

Nils Poertner writes:

In a way, those countries are good to study for a number reasons. in a way they remind me of the future of US and Europe (money printing, elites playing ever more shenanigans, ordinary people not sitting in their own seats, completely hypnotized what is front of them, endless distractions). re investing/trading- yes, ever-changing cycles - I agree.


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