Short ideas from Argentina

According to reports in the Argentine press this weekend (example here) the Klishtina government is considering imposing a windfall tax on companies that make big profits. It is being dressed up in ribbons and bows, of course, going by the name "Anticrisis Enterprise Fund", or FEA for its initials in Spanish (coincidentally, "fea" is the word for "ugly" in Spanish....if you believe in coincidences, that is).

According to legal beagles attached to the main CGT union, what it amounts to is a "tax on extraordinary profits", as it rankles the unionist rank and file that banks, steelmakers and telephone companies (amongst others) are making what they consider exorbitant profits.

The politics and ideology of this move are one thing, but leaving that debate aside the practical is what interests us here. And what this means is that there are definite shorting opportunities on offer amongst the Argentina ADRs and otherwise Argentina exposed companies. Here are four candidates with their price charts. There are other Argentine exposed stocks traded in the USA, of course, but these below seem likely choices as they fit the "high profit" profile and offer reasonable-to-good trading volume and liquidity. The rest is up to you, so DYODD, dude.

Telecom Argentina (TEO)

Tenaris (TS)

Banco Macro (BMA)

Banco Frances (BFR)

Argentina: The Merval Index changes its name.....

.....to "The Tenaris Index".

Chart courtesy of here

Here's a new chapter in the ongoing saga we know as 'Only In Argentina'. Every quarter the headline Merval index of the Buenos Aires Stock Exchange (BCBA) changes its composition. Normally the bigwigs at the BCBA change the percentage weighting of the companies on the list, and sometimes they add or take away companies.

The new composition starts tomorrow (the beginning of the 2nd quarter) and as well as removing three minor-weighting companes from the index (Mirgor, Molinos Rio and Aluar) the sages have decided to raise the weighting of seamless tubemaker Tenaris (US-listed as TS) from 35.22% to 46.48%. Or in other words, nearly half the index is now dependent on a foreign company*. Add the 13.69% weighted to second placed Petrobras, another non-Argentine entity, and over 60% of the supposedly Argentina index is made up of two non-Argentines that happen to do a minor part of their business in the country.

How Argentina still manages to get a seat at the G-20 summits is quite beyond me.

*Sorry guys, we've been through this before; whatever Argentines might try to tell you Tenaris is most definitely not an Argentine company. I've won money betting on this line item.