Saturday, 3 January 2009

Follow Them ... And Lose Your Shirt

I was reading O Estado de S. Paulo last night and stumbled across this story. One friend of mine told me New Year´s Eve that my blog was missing the point because I was lashing out at the way reporters wrote their stories. BBRRRR!!!! Wrong, wrong! She is the one missing the point. The real purpose of this blog is to tell people who have little or no idea how markets work how the media reports market events. And how bad or good (in my opinion) they do that.

Well, the same specialists that have for years (and only shifted direction until after the global credit crisis messed things up in Brazil) defended long-term investment in stocks, no fundamental analysis required, because Brazil was headed for years of grandeur are now backing off and praising fixed-income as an alternative to navigate through this difficult moment. Funny. According to Bloomberg, half a hundred out of 7,000 Brazil-based funds it tracks posted returns above the benchmark interbank rate (CDI) this year. Sad. Awful. Bad. Crap! These are the same guys who told millions of Brazilians to put their money in stocks, promising returns will come magnificent, quick, regardless of the crisis. The country´s president, the finance minister and the capital markets community told Brazilians that ''the crisis wouldn´t reach the shores of Copacabana´´ (this was literally said by Finance Minister Guido Mantega in Feb. 2008. I was there, covering him at the Copacabana Palace. By his side were Deutsche Bank CEO Josef Ackermann, Itau CEO Roberto Setubal and a number of financial industry heavyweights.)

Brazilians have short memory. I don´t. (And by the way, Mantega should win the Banana Prize for the worst, most pedant, most unimaginative and politically-irrelevant emerging-market finance minister.) Bloggers should unite and create prizes for the worst government officials, the most embarrassing CEOs for shareholders and all that.

Then I read these two professors saying that the dollar and the euro will be volatile, that no possible price range for stocks is easy to forecast (and they are sure that for fixed-income the reality is different,) that it might be time to buy stocks because prices have reached a ''tempting´´ level. I wonder whether these people are really taking into account fundamentals analysis, whether they are discriminating stocks by industry, sector, financial position, degree of insertion into the global economy, regulatory aspects, etc. Is Cia. Vale do Rio Doce stock cheap, compared to ... uhhmm, let's say, GP Investimentos? Both companies are great, well managed, but mining is going through a crisis of its own, and private equity is a sector that may have to rethink itself to survive. Are these analysts telling their investors that type of thing? These two in the Estado story are surely not.


Read the last paragraph: recommended investments are CDI-linked funds, term deposits and fixed-income, plain vanilla instruments if possible. ''When the facts change, I change my opinion, what do you do, Sir?,´´ the famous quotation by John Maynard Keynes (Mantega's darling economist, photo) has become the favourite sentence of all these economy gurus. My question for them is, ''If the facts were changing more than a year ago, why didn´t you warn the public about that?´´

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