You can tell it's a quiet newsday when hacks start kicking Venezuela

So the news comes out that, unsurprisingly, the PdVSA dollars bonds issue that had more strings attached than Pinocchio fell flat. Bloomie does an fair job of summing up the need-to-know bits in this note.

But then the idiot hacks start chiming in and showing that their little knowledge really is a dangerous thing. Step forward Tyler Bridges, painfully anti-Chavista McClatchy hack and manic depressive, stuck in Caracas and yearning to be back in Lima. He picks up on the deal and uses it to wade into the whole subject of the Venezuelan Bolivar Fuerte (VEF) parallel exchange rate. Bridges dixit:

"The current situation can only mean bad news for the Chavez administration. It seems to show that Venezuelans have little faith in the country's economy and in the bolivar.

"Any further weakening of the Bolivar will mean problems for Chavez."

However, once again Tyler is talking bollocks. What Bridges doesn't bother to give you are two rather basic and useful things:

1) The truth
2) Any context

Here's a table showing how the main traded LatAm currencies and the VEF have performed against the US dollar in the last two months, the period before and after the PdVSA sale.

For those not into forex code, BRL= Brazilian Real, COP= Colombian Peso, VEF = Venezuelan Bolivar Fuerte, CLP= Chilean Peso, MXN= Mexican Peso, ARS= Argentine Peso, PEN= Peruvian Nuevo Sol

So in the period (and ignoring the one-day -0.7% downmove in the VEF that Tyler Bridges seems to think signifies the end of the freakin' world) we have four currencies that have become stronger against the dollar (BRL, COP, VEF, CLP) and three currencies that have lost ground against the dollar (MXN, ARS, PEN).

I'm not here telling you that the VEF is some paragon of stability and investment value. It's not. I'm just saying that all that guff directed at Venezuela should apply to nearly all the region if true context were taken. And as the VEF has beaten out a currency like the Peruvian Nuevo Sol by a wide 6.2% in the period, our pal Bridges should be more worried about his yearned-for Peruvian shores far more than the country he's unduly whacking into once again.

Or put simply, he's a dumbass.

Regional currencies update

With Bloomie blasting silly headlines about Chile's Peso (CLP) being "the world's best currency this week" and Colombia's "the worst", I thought it was high time to revisit the evolution of local currencies versus the dollar and get a bit of perspective. This one year chart....

.....shows the various rises and falls (or in Argentina's case rises and rises) against the dollar for the major locally floated currencies (not much point in featuring the Vzla Bolivar Fuerte here, and Paraguay's Guaraní.....well, it's never going to attract the attention of George Soros, is it?).

The main takeaway? Some currencies are strengthing back more quickly than others. But in the end, when push comes to shove and despite all the worldwide handwringing about Helicopter Ben and his printing presses, the dollar is still the daddy. Every single major trade currency in LatAm is down against the dollar YoY, even the economic miracle packaged up for saps with a bow and labelled Peru. And with base lending rates dropping fast all over the region as countries try to stimulate growth, the attraction of parking cash at higher risk is lessening, too.

Anecdotally, if you ever need a lesson in what the term "reserve currency" really means come down here with a thousand British Pounds, or Euros, of Aussies or Loonies or even an ounce of gold in your pocket and try to exchange them for the local currency of your choice and at the same time get the same fair deal you'd get for the equivalent amount of USDs. They say travel broadens the mind..................

So how were the markets down here today?

I'm not into doing these "stock market roundup" kind of posts, basically because if you care enough you can plug your keywords into Reuters or Bloomie or DJNW or whatever else and find it all out easily enough. But just for once won't hurt because it's not every day you get returns on main regional indices such as...

Brazil up 14.66%
Chile up 13.01%
Peru up 15.88%
Mexico up 11+%

(Colombia and Argentina were closed because some dude sailed over here in 1492; those bourses get their fun tomorrow)

....and other moves such as the Brazilian Real upping 8.2% against the greenback (from R$2.326 Friday to R$2.146 at the official close today), the Mexican Peso up 5.79% and other suitably massive currency moves in all the other LatAms (which is exactly as I mentioned this morning in this post...ahem)

Amongst the stocks, check out the moves in SQM (yes J.A.!), TEO, all the Brazilian Banks, PBR (the ADR finished up 30%), RIO and all the other big boys. And that shiny new ADR from Colombia, Ecopetrol, has a sparkling day, too. So all in all, though the "record points score" on the Dow will catch the morning headlines we had our own full-on relief rally down here, too.

As for myself, I'm still in whuss mode and didn't buy or sell anything today...I'm certainly not going to chase this crazy market. As mentioned before, I'd much prefer to play it safe, miss the first part of a true bull run (if that's what this turns out to be, which I doubt) and pick up the safer returns. As it happens I'm going to be a bit of a killjoy and say I expect a sell-off at some point, and then afterwards look for some trading opportunities. In fact, if we don't get a re-test it wouldn't be very healthy for the longer term. However, I am cautiously optimistic that the worst of this mess is now past; today was a classic "just what we want to see" bigboy rally off of the previous day's panic/forced selling. I'll be looking for a significant move in the three month T-bill tomorrow which should hopefully add real liquidity to the market.

Final point to squeeze in; the wider economy is still a mess. Don't confuse what happened today with the blue funk that will be hanging round the world in six months' time; totally different subject.

Exclusive: We Leak Calderon's TV Speech to Mexico tonight

Calderón: On the quiet, a talented dude

After using U$6.4Bn in international currency reserves to prop up the Mexican Peso today (and a total of U$12Bn over the week), Incakola can reveal that President Felipe Calderón will appear in a 10 minute TV address to the Nation tonight. And as a further revelation, IKN has gotten its grubby little hands on the tapescript of the speech Calderón uses to explain this drastic financial move to his electorate.

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"My fellow citizens. Today I, along with the directors of the Central Bank, decided to screw up the future for your children...NOOOO!!! I DIDN'T SAY THAT!! CUT! Start again...."

"My fellow citizens. Today the gringos up North begged us to sell our hard-earned reserves in order to save their fractured economic model ...DAMN!!! CAN'T SAY THAT!! Trying again...."

"My fellow citizens. Because we have been stupid enough to rely on the USA as destination for 85% of our exports....OHHHHHHHHH NOOOOOOOO......AGAIN.... AGAIN......"

"My fellow citizens. Today the Central Bank intervened in the foreign exchange markets and sold U$6.4Bn in international reserves in a very short space of time. I'm not going to explain why because economics and finance are very difficult subjects, and as most of you are peasants you wouldn't understand anyway. All you need to do is believe me when I, your elected President, say, "It's for the best". ¡Que Viva Mexico!

Ok, cut...I think we can go with that.....what?....this isn't a recording...................?"

Mexican Peso to US Dollar forex, five day chart

The days of the weak Argentina Peso are finished, that's official now

I was going to use a picture of BCRA head Martin Redrado, but as his wife
Ivana is much prettier, here's her snapshot instead.

To borrow a line from 'Allo Allo', "Leesern very carefullee, I shall say zis only once."

In this post back in August, I told you what was happening at the Argentine Central Bank. Here's an excerpt:

"However, this time ArgyBizDude might have to lump it. Word is that Martin Redrado, anglophile and big cheese at the Argentine Central Bank (BCRA) is pushing los Kirchner to finally...FINALLY allow the peso to revalue. In off-the-record-third-party gossip (that's from a normally pretty accurate source), Redrado is reported to have said to his inner circle that the weak Peso has had its day and that monetary policy must be changed to attack inflation."

Yesterday, things suddenly moved forward on this issue. Wife of the leader of Argentina, Klishtina Fernandesh de Kirchner, said this:

"A very high exchange rate (i.e. a weak Peso) is inconsistent with anti-inflation policy."

That, dear reader, is a big shift in official rhetoric. It means that Los Kirchner have

1) Listened to Martin Redrado
2) Listened to reason
3) Finally learned a bit about basic economics. It took 'em five years, but better late than never I suppose....

But the real jawdropper hit my screen this morning, because the President of Fiat Argentina, Cristiano Rattazzi, said the following referring to the above remarks:

"The President made a tremedously sensible and logical speech. Often things are done that are inconsistent with the medium-term and are simply good for today."

If you know about the Argentine business scene, that one is a knock-down statement. Along with the cereal producers, the auto industry has been the loudest voice all this time for keeping the weak Peso. This simply because their exports (mainly to Brazil) have been greatly benefitted from this policy. This therefore means that:

1) The auto industry now sees inflation as its biggest problem, too
2) Los Kirchner have had a quiet word in the ear of the auto people and have told them to get ready for the change and to support it (I'm not joking on this one...that's how Argentina works)
3) The big move to a stronger Peso is just around the corner.

A stronger peso will also give the Kirchners sweet revenge against the troublesome agro boyz, it must be remembered. That'll be even more reason for the country to let the Peso appreciate! Otto therefore goes on record and says, "Buy the Argentine Peso, with an initial target of P$2.80 to the dollar and a 10% profit coming to you very soon."

You heard it here first, dudes.