Consider this the official headsup post. Reasons:1) The panic flight to dollar bills and bonds has likely ended. As best signal, look for the T-Bill yield to jump tomorrow. This will signal the top in the USD.
2) Commodities of all shapes and sizes rebound in dollar terms. South America is the land of commodities, people. From precious metals to base metals to grains/softs to sugar/ethanol, to hydrocarbons...we got the lot.
3) In broadstroke terms, the US bailout package is inflationary and baking higher prices into world economies going forward (unless of course you believe you can create a couple of trillion's worth of money out of thin air and think it won't dilute the pool). This will kick in after the storm has passed.
4) South America is implementing policies that will strengthen currencies right here and right now. The latest (and pretty typical) decision is the lowering of Brazil banks reserve requirement (following on from other regional states). Other tactics likely to be used include asset repatriation and continuing tasty high interest rates.
5) The run on many local currencies has been little short of dramatic, and there is plenty of rebound space in the short term. Check the Brazilian Real, the Chilean Peso, the Colombian Peso, the Peruvian Nuevo Sol, the Mexican Peso for excellent exmaples and trading ideas.
6) There are no, repeat no countires about to default on bonds. Not Ecuador, not Argentina, not Venezuela. we've talked about this one before. Or put another way, if any LatAm state goes down, about a dozen other Eastern European, Asian and MidEast states will have to go down first. And then there are all those currency reserves down here that add strength. Brazil $200Bn, Mexico $80Bn, Argentina $50Bn, Peru $34Bn, Venezuela $38Bn....hell, even Bolivia has over $8Bn tucked away these days. Chile, Ecuador, Paraguay etc etc etc As risk management goes, LatAm offers a logical alternative right now.
These reasons add up to one thing: buy S.Am/LatAm currencies right here and right now. Top of the shopping list should be Chile, Brazil, Colombia and Peru (and that's Otto's order of preference, too). However you need to 1) keep it nimble and be prepared to take profits at any time, and 2) DYODD, dude. It might seem strange to relate South America with financial strength right now, but this is Pachakuti, remember?