Brazil

[winston]

THE EMERGING-MARKET TRADE IS ON by Brian Hunt

It's official: The emerging-market rebound trade is on...

In early December, we introduced three assets with enormous potential to rebound in 2009... gold stocks, infrastructure stocks, and emerging-market stocks.

Gold stocks are up over 50% since our mention. Our infrastructure trade has nearly doubled. Emerging-market stocks were the only laggard of the group. Until last week...

Today's chart shows an updated look at the "breakout" in Brazilian stocks. Brazil is a prime destination for folks looking to put money in emerging markets. It's loaded with arable land, fresh water, iron ore, and oil deposits. This makes the iShares Brazil ETF (EWZ) a "bell cow" of emerging-market investments. As you can see, last week's trading brought EWZ to its highest level since October. It took a while, but the emerging-market trade is on!

[winston]

A PICTURE OF THE EMERGING MARKET REBOUND by Brian Hunt

Just as we predicted back in December, emerging markets are the place to be in a market rebound.

Countries like Brazil, Indonesia, and Russia fall into the "emerging market" category. They're in the early-to-mid stages of building a 21st-century economy.

Most emerging markets struck a bear-market bottom in November. They've rallied off those lows by 20%-50%. Meanwhile, most "developed" stock markets – like the U.S., the U.K., and France – haven't gained a bit since November.

As we mentioned in our December write-up, the assets that get beaten down the most in bear markets are the ones that rally the hardest when the market turns around. Our friend Jeff Clark likens this situation to a basketball pushed down to the bottom of a swimming pool. The farther it gets pushed down, the harder it comes back up.

If you're looking to play a rebound in stocks, look to emerging markets like Brazil instead of laggard developed markets.

[winston]

A BIG DEVELOPMENT IN THE EMERGING MARKET STORY by Brian Hunt

Update on that emerging market trend we covered a few days ago: Brazil – one of the "bell cows" of the emerging market herd – just staged a big "breakout" yesterday...

What the heck is a breakout? Nothing complicated. It's simply when an asset punches through to a new price, high or low. Watching for breakouts can make you a heck of a lot of money.

You can make the case for a stock, market index, or commodity to enter a big price move... but if the market doesn't agree with you and heads in the opposite direction, you can't fight it. You have to put your ego and hopes aside. You have to wait for the market to "break out" a bit in your favor. This amounts to waiting until the market agrees with your analysis.

As you can see from the chart below, the market agrees with our emerging market rebound thesis. The popular Brazil fund just "broke out" to a new six-month high yesterday. The market likes this trade. And it's the only opinion that counts...

[winston]

Economies on the Planet Brazil is Finally Living Up to Its Promise By Jason Simpkins, Money Morning

Brazilians used to joke that their country was the country of the future - and always would be because a new crisis seemed to crop up every time the economy came close to fulfilling its potential.

But given the economy’s strong performance following the financial meltdown that crushed economies the world over, it looks like Brazil’s time is now.

http://www.moneymorning.com/2009/08/12/brazil-economy/

[winston]

So is this the start of the drop in Emerging Markets ?

Brazilian Stocks Tumble on Global Economy Concern; Bolsa Slides
By Alexander Ragir and Emily Schmall

Aug. 17 (Bloomberg) -- Brazilian stocks dropped the most in eight weeks, led by commodity producers, after economic reports in China and Japan reignited concerns that the global recession may persist and a rally in equities was overdone.

The Bovespa index dropped 2.5 percent to 55,218.37, the most since June 22. The measure last week capped its fifth straight weekly gain for a 15 percent surge since July 10.

http://www.bloomberg.com/apps/news?pid= ... ht3heeQzg0

[winston]

A STUNNING REBOUND IN BRAZIL by Brian Hunt

It's like 2008 never even happened... at least for Brazil.

This year, the question for almost any country's stock market isn't "if" it is rising, but "how much." Brazil answers with, "So much that we're near an all-time high."

As you can see from today's chart, Brazil's benchmark stock index has rebounded to pre-crash spring 2008 levels... and is close to its all-time peak reached last May. It's an amazing rebound few countries can claim.

It's a rebound driven by a big rally in commodities this year. Brazil is home to Petrobras, one of the most successful major oil firms of the past decade (up 100% this year). It's home to Vale, the world's largest iron ore producer (up 113% this year). And Brazil has a unique agriculture "kicker." It has vast quantities of rich farmland and fresh water... which make it a major producer of coffee, livestock, orange juice, soybeans, and sugar.

Brazil's "it's like 2008 never happened" rebound leads us to tag the country the "Ferrari of emerging markets." If commodity prices remain robust over the coming years, this market will double from current levels and double again.

Source: Daily Wealth

[winston]

GOLDMAN SACHS: IGNORE BRAZIL AT YOUR OWN PERIL

Goldman Sachs believes Brazil is in the long-term sweet spot in terms of economic competitiveness. In addition to a young and rapidly expanding population, Brazil is at the heart of the commodity boom and is likely to see massive injections of government stimulus as they prepare for the 2014 World Cup and the 2016 Summer Olympics in Rio (see here for more on the implications of Brazil’s Olympic win).

In addition to these strong fundamental growth drivers, Goldman also says valuations and risks in Brazil remain relatively low in comparison to other markets:

http://pragcap.com/goldman-sachs-ignore ... -own-peril

[winston]

Brazil

Investor's Daily Edge's analyst Ted Peroulakis has just come back from a trip to South America. He's normally a pretty grounded guy. But this trip turned him into a raving enthusiast. The country he's raving about?

Brazil.

Ted and his wife spent a few days on a sugar plantation, visiting friends. "Huge tracts of land are reserved for agriculture, and Brazil has some of the best farmland in the world. We drove around in an ethanol-fueled car. The ethanol comes from processed sugar."

The cities impressed Ted as much as the countryside. The restaurants, cafes, boutiques, and malls were bustling. "The air of optimism is amazing. There's a feeling that Brazil's economy is over the hump, and they're never looking back."

Brazil is the "B" in the "BRIC" countries (Brazil, Russia, India, and China) countries -- the fastest-growing economies in the world.

Until recently, Brazil was considered the weakest of the four, Ted says. But not anymore.

Brazil's middle class is smaller than China's, but much more affluent. Like Russia, Brazil is resource-rich -- but it is not nearly as dependent on oil and arms exports. (In fact, a recent discovery may soon make Brazil an oil-surplus country.) And while India has a larger population than Brazil, it is constrained by greater overall poverty.

Brazil is the largest country in South America, and has the world's eighth-largest economy. It also boasts some great manufacturing companies, including jet-maker Embraer and steelmaker Gerdau.

Ted loves Brazil's natural resources, agricultural production, offshore oil potential, growing middle class, and expanding industrial base. Brazil is now the king of the BRIC countries, he says enthusiastically, and will continue its reign for years to come.

Source: ETR

[winston]

Forget China... It's Time to Bank on the Brazilian Consumer by Louis Basenese

Hundreds of millions of Chinese citizens are on a crash course with the middle class.

A study from The McKinsey Quarterly supports this well-documented phenomenon, which estimates that it will take two decades before the Chinese nouveau riche reaches its full spending potential.

I'm not about to refute that claim here. But instead, I want to caution you: Don't be blinded by the euphoria over Chinese consumers and overlook an equally compelling opportunity in another emerging market.

Let's head down to Brazil and I'll explain why - along with the best way to profit, of course...

Sizing Up the Profits in Brazil

Okay, I get that the scale of the Chinese opportunity - a population of 1.31 billion people, compared to Brazil's 192 million citizens - dwarfs Brazil's. But that doesn't mean the profit potential is any less.

On the contrary, in fact... I'd actually say it's greater when it comes to tapping into a blossoming middle class. In this regard, Brazil boasts several notable advantages over China...

* It's a democratic nation, not a communist one.
* Its population is much younger - the median age is 28.3, compared to 33.6 in China.
* Brazil is far less reliant on exports. Only 14% of Brazil's GDP comes from exports, compared to 35% from China.
* It already possesses all the natural resources necessary (and then some) to support its booming economy. Meanwhile, China needs to go out and gobble up foreign assets to ensure it can keep feeding its economic machine with enough oil, gas, coal, iron ore, etc.

But most important of all is the cultural difference. The Chinese are notorious savers, yet Brazilians love to spend, spend, spend. And don't just take my word for it. As Illan Goldfajn, Chief Economist at Brazilian bank, Itaú, reveals, "If the world is looking for savers, Brazil is not much good... But if it's looking for consumers, then we might be able to help."

Conspicuous Consumption, South of the Equator

Like China, Brazil's economy is also expanding at a healthy clip. GDP growth this quarter is expected to check-in at a tidy annualized rate of 9%.

As a result, unemployment is falling and incomes are rising. And that's leading to an explosion in the middle-class.

Over the last four years alone, Brazil's middle class has swelled by 24%, lifting roughly 20 million people out of poverty, according to Brazil's Census Bureau.

Furthermore, PriceWaterhouseCoopers Consultancy expects this rapid increase to continue. So much so, in fact, that it will propel Brazil's largest city, São Paulo, from the forty-sixth spot on the world's wealthiest city list to fifth place in a little over a decade.

And I have no doubt all that newfound wealth will quickly be spent. Because it already is being spent! Consider this...

* High-end jeweler Tiffany & Co. (NYSE: TIF) boasts more stores in São Paulo than anywhere else in the world.
* Handbag maker, Louis Vitton earns some of its highest profits per square foot in Brazil.
* And consumer credit use is up roughly 30% per year for the last three years.

And despite all this, Brazil's consumer-spending boom is still in its infancy. Thanks to a surging economy and stable inflation, we can expect more and more Brazilians to be able to afford their first mobile phones, cars, even homes in the years to come.

And if you want to know the hands-down, best way to profit from this trend, here it is...

Go with small caps.

I say that because the majority of the companies in Brazil's small-cap sector cater to domestic consumers (either directly or indirectly).

We're talking about businesses like...

* Banks
* Homebuilders
* Department stores
* Telecoms
* Airlines

These industries are destined to profit the most - and in turn, witness the most appreciation in stock prices, as conspicuous consumption takes root south of the equator.

And for you naysayers and China lovers out there, the stats back up my claim that Brazil is a better place to profit right now. Brazilian stocks are up 128% this year, compared to a 62% rise for Chinese stocks, based on the MSCI/Barra indexes.

Momentum is squarely on our side. So don't fight it... embrace it!

Source: Investment U

[winston]

Chris Mayer, Editor of Capital & Crisis, who also anticipates rising food and energy prices over the long-term, believes Brazil is in a great position to benefit:

The world continues to deplete its base of arable land. Though it's been going on for some time, the dramatic blows are only now showing their effect. In East and North Africa, in the plains of India all the way to Turkey, the story is the same. Some of it is just human carelessness about the land. Some of it is climate driven: the declining snowmelts of the Himalayas and more frequent crop-killing heat waves in places such as India...

China, you may recall, is now the largest net importer of soybeans in the world. A mere 15 years ago, it made more than it needed and exported soybeans. Now India may import rice. Some think that India could import as much as 2 million metric tons, the most in the world. Traditionally, India has been the world's third largest exporter. (It's already banned overseas rice sales in an effort to keep rice at home.)

The Philippines, thanks to typhoon damage, will also be a net buyer of rice this year. South America will produce less, and there is potential trouble with the crop in the Mississippi Delta. Yes, Thailand and Vietnam appear to have healthy rice supplies. But it won't be enough.

All of this puts Brazil in the catbird seat, as more people are starting to figure out. "Superpower Is Ready to Feed the World," reads a Financial Times headline. You may quibble with the FT's exuberant labeling of Brazil as a superpower. But Brazil is now the top exporter of chicken and beef, orange juice, green coffee, sugar, ethanol, tobacco and the soya complex of beans, meal and oil. It is No. 4 in maize and pork. It is, agriculturally speaking, deserving of the superpower label.

Source: Daily Reckoning