The Amerikan Dream comes to Peru

CONSUME MORE! is the answer to all our prayers these days, and the fact that a reader yesterday sent me this link to the great Janis Joplin singing 'Oh Lord won't you buy me a Mercedes Benz?'......

..... fits nicely with the story below.

Peru's Minister of Production, Mercedes* Araoz, spent yesterday exhorting her minions to "drink more Peruvian coffee" as per capita coffee consumption in Peru is around 0.25kg a year, which compares to 5kg in Brazil and about 14 metric tonnes in Colombia**. In her words:

"If we in Peru consumed 5kg per person we would consume all our exportable supply. So we could double national production for the grain."

Mercedes Aráoz said that if a person gets up early the best thing to do is to have "a little coffee. It's a healthy drink, a good antioxidant and energizing. I drink it pure. Also, it's not true that it stops you from sleeping", she said.

So next we'll have Peru Chamber of Aviculture wheeling out Aráoz for its "Eat More Chicken" drive, the sugar cane people with their "Sweeter The Better" and "Diabetes Is Not A Problem, Oh No" campaigns, then the national council for chocolate cake and its "Stuff Your Face and Get Fat Your Country Will Thank You For It" promotional tour. And so the emerging market countries raise their GDP and are applauded as they aspire to the model offered by all those developed world wondercountries.

The more you consume the better your life is.

Then comes the fitness club sector and diet foods....more GDP! And healthcare! And insurance! Ahh, ain't life wonderful?

*shome coinshidensh, shurely, ossifer
**well....8kg in fact, but I like a laugh

Brazil carry trade redux?

Your humble correspondent is not fond of putting question marks in title lines, but this time it's there because it's just an idea worth floating. The markets are taking Bernanke's announcements of yesterday as a new chapter in this ongoing trainwreck, so maybe it's time to shake off some of the convential wisdom about Brazil and the Real in particular and LatAm in general. The concept is based on four points:

1) Commodity price reflation due to the newly-cat-out-the-bag cheap dollars and credit. All LatAm will benefit from this of course (see previous Hugo caption) but Brazil is in the vanguard for purposes of investment.

2) Renewed strength of the Brazilian Real versus the US Dollar. Here's the chart....

...... and apart from one isolated downspike related to the Christmas demand period, today's BRL2.24 to USD1 is a new recent low.

3) The yawning gap between Brazilian interest rates and the USA. Even though Brazil's benchmark Selic rate was slashed 150 basis points last week (and there's probably more to come), the 11.25% rates on offer still look mightily juicy.

4) Emerging market money flows have not suffered this year. Here's a chart from the guys at EPFR that shows how EM hedge fund flows have held up in the year to date compared with the indutrialized nations.


For sure the absolute amounts of money depicted by those flows are not equal, with the (they-still-kid-us-into-believing-it's-the) developed world nations moving far more money around.

These four points, along with a few very tentative whispers in the investment world about how Emerging Markets are the new safe haven (I don't buy that one at all..not in lands of fast-shifting political landscapes and soft currenies , but a hedge play they certainly are) all aim at the same place: Is it time to think of LatAm anew and find a spot in your portfolio for some Latino exposure? I'm using Brazil's currency as the spearhead play here and the argument applies to other sectors and places as well. This is only for practical reasons as the market tends to use Brazil's Real as its entry point.

The counterargument to all the above can be summed up with the phrase "Ben's plan ain't gonna work", but it begs the question whether the Bernanke China Put will flat out not work, will work for a while then explode, or whatever. The carry trade idea here isn't a long term retirement play, after all. You be the judge. DYODD.

Another one for the Mark Mobius collection

Oh dear, very bad news for emerging markets. The evermore ridiculous and desperate EM permabull Mark Mobius is headlined as saying this today:

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Mobius Says Emerging Markets Bottoming, Poised for Bull Market

By Francine Lacqua and Michael Patterson Dec. 19 (Bloomberg) -- Emerging-market stocks are “bottoming” and will begin a new bull market next year as interest-rate cuts spur economic growth in developing nations, investor Mark Mobius said. “We’re beginning to see this bottoming situation,” Mobius, who oversees about $26 billion in emerging-market stocks as executive chairman of Templeton Asset Management Ltd., said in a Bloomberg Television interview from Hong Kong. “I sincerely believe that next year we’re going yada yada continues here

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Why bad? Well, if you remember back to this post dated October 9th, we had Mark Mobius saying the following at the following dates this year:

Mobius Looking at Brazil, China, Russia After Rout (Update1)

By Daniela Silberstein and John Dawson

Oct. 9 (Bloomberg) -- The global financial crisis won't last long and emerging-market stocks are a ``wonderful opportunity'' for investors after their record rout, said Mark Mobius, executive chairman of Templeton Asset Management Ltd yada yada CONTINUES

On September 15th
Templeton's Mobius Says Merrill Deal Signals Bottom (Update2)

"....The decisions will ``go a long, long way to stabilize the situation,'' Mobius said. ``We're probably now at the bottom and it'll be a build up of confidence from here on in, if these decisions are made.''"

On August 20th
Emerging-Market Retreat Is `Overdone,' Mobius Says (Update2)

"...Mobius said he's buying as many consumer shares in emerging markets as he can."

On July 22nd
Mobius Sees `Good Bargains' in China, India Stocks (Update2)

Mobius added that he favors shares in Brazil and Russia because the two markets can still benefit from the demand for energy and other raw materials.

``Russia and Brazil are pretty much in the same position,'' Mobius said. ``Both of those areas are swimming in excess liquidity, which will drive consumer prices as well.''

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At least people aren't laughing behind his back any more. They're laughing straight at his face. Your time is up, Mobius. Any fool looks good in a bull market.

Mark Mobius and Brazil (and some Shakespeare)

Thus conscience does make cowards of us all,
And thus the native hue of resolution
Is sicklied o'er with the pale cast of thought,
And enterprise of great pitch and moment
With this regard their currents turn awry,
And lose the name of action.

Hamlet, Act 3, Scene 1 LL91-94

On reviewing headlines over at Bloomberg a few minutes ago, this one jumped out at me:

Mobius Looking at Brazil, China, Russia After Rout (Update1)

By Daniela Silberstein and John Dawson

Oct. 9 (Bloomberg) -- The global financial crisis won't last long and emerging-market stocks are a ``wonderful opportunity'' for investors after their record rout, said Mark Mobius, executive chairman of Templeton Asset Management Ltd yada yada CONTINUES

It didn't jump out due to happy thoughts, either. It was more a sense of deja vu. Another line from the same play as above came to mind; "The lady doth protest too much, methinks." So one quick search in the Bloomie system later, and we have the following (and there are more, believe me):

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On September 15th
Templeton's Mobius Says Merrill Deal Signals Bottom (Update2)

"....The decisions will ``go a long, long way to stabilize the situation,'' Mobius said. ``We're probably now at the bottom and it'll be a build up of confidence from here on in, if these decisions are made.''"

On August 20th
Emerging-Market Retreat Is `Overdone,' Mobius Says (Update2)

"...Mobius said he's buying as many consumer shares in emerging markets as he can."

On July 22nd
Mobius Sees `Good Bargains' in China, India Stocks (Update2)

Mobius added that he favors shares in Brazil and Russia because the two markets can still benefit from the demand for energy and other raw materials.

``Russia and Brazil are pretty much in the same position,'' Mobius said. ``Both of those areas are swimming in excess liquidity, which will drive consumer prices as well.''

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Otto sez: Frankly, Mobius can "add" anything he likes to all that. Otto adds that he's screwed and desperate. The next blood on the street you see may be his.