Brazil’s Recent Slide was Predictable

September 28, 2011


If all 40 of these fund managers are bullish on Brazil, who is left to buy? This combined with a credit bubble, as mentioned here, here, here, here, here, here, here and probably elsewhere made it obvious.

The recent 20% down move after these posts should not be a surprise. These guys will face redemptions and justifiably will lose the right to manage capital, at least for a while.

This is why I’ve been long puts on Brazillian Iron Ore Manufacturer since the Spring. Hat tip to James Chanos.


The latest rosy report came Tuesday from J.P. Morgan, which released a survey of 40 institutional investors in North America and Europe, finding them upbeat about investment opportunities in Latin America over the next three years and applauding improvements in investor relations.

A majority of these investors, who together hold approximately $57.3 billion of actively managed equity in Latin American companies, view Brazil as the country with the highest investor-relations standards. Mexico, along with Peru, ranked last, partly because of the disparity in investor relations standards between blue-chip companies (which make it easy to find and obtain information for investors and shareholders) and smaller companies (which tend not to be as open with their information).
Survey participants named Brazil and Colombia as the most promising countries for investment opportunities over the next three years; Brazil’s rapidly expanding middle class promises to yield tremendous growth, while Colombia’s pro-business government is attractive to investors. Argentina and Venezuela were viewed as the least promising, because of the perception of unstable or unpredictable governments.

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