tag:blogger.com,1999:blog-31658751828022740322024-03-20T04:25:34.324-03:00The DrunkeynesianCaipirinha fueled musings about economics, financial markets and related themes.Drunkeynesianhttp://www.blogger.com/profile/12125591229308392930noreply@blogger.comBlogger13125tag:blogger.com,1999:blog-3165875182802274032.post-13100039642315699742012-07-02T08:59:00.000-03:002012-07-03T18:00:05.077-03:00Eike Batista and the "X-Factor" going wrong<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgEwNBmVp5VGuqnI9v-ThG1dmZIPxSkV3-fJph1lu_iFkCvk3MiWmCDtfCmky1Rtex4e3Qoz1H97mZnteURRKQOhxuxa63hvyBOtc3H2-I61kOcJpOChE62n10EYeMnVyMSOd0nUtbDzEw/s1600/eike_xiaoping.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgEwNBmVp5VGuqnI9v-ThG1dmZIPxSkV3-fJph1lu_iFkCvk3MiWmCDtfCmky1Rtex4e3Qoz1H97mZnteURRKQOhxuxa63hvyBOtc3H2-I61kOcJpOChE62n10EYeMnVyMSOd0nUtbDzEw/s320/eike_xiaoping.jpg" width="248" /></a></div>
A friend sent me an e-mail asking whether I was going to write something on the bad luck strike (let’s call it that) on the shares of companies controlled by the iconic tycoon Eike Batista, the infamous “group X” - my friend knows I’ve been quite skeptical about those enterprises for a long time. I replied saying I didn’t intend to because, first, I know almost nothing about the oil business - the most salient loss in the market (half of market value, during June) was from oil company OGX, in theory triggered by a cut in production estimates from an important exploration area. Second, it was still too early to declare Eike and his companies a complete fraud. This was while OGX shares were falling “just” 7% during Thursday session. By the end of the afternoon, movement accelerated to a whopping 20% plunge, shares of MMX (Batista’s iron ore mining company) lost another 17% and I got the impression that, as in <a href="http://macromon.wordpress.com/2011/09/19/quote-of-the-day-lightning-speed-economics/">the famous Rudi Dornbusch quote</a>, things might have started to happen faster than anyone could imagine.<br />
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Eike Batista is the archetype of the “rising Brazil” illusion, a country that would get rich in just one generation with a model based in little more than commodity exploration and the belief that terms of trade will never turn worse again. The genius of Eike was perceiving that the world became convinced of those fallacies, and pre-operational companies, with all the risk associated to this stage of business cycle and the idiosyncrasies of commodity exploration, could be sold as mature enterprises, cash cows in full swing. I think the adjustment of market prices in June (which I’m not sure is already over) reflects the end of this illusion and a repricing of the companies to better reflect the reality, instead of a future when everything turned right. A last round of repricing can happen if market convinces itself that some of the projects sold are outright frauds and the investment will be lost. I don’t know these enterprises deeply enough to affirm this will happen, yet it would not be a surprise to me. Echoing in my head are some words I heard from professor <a href="http://cas.umkc.edu/econ/economics/faculty/wray/raymain.html">L. Randall Wray</a> in a seminar few months ago: “nothing is more profitable than fraud”. It’s possible that the madness associated with the Brazil bullish case was taken to a point where the inflated expectation of returns could only be met with scams (and “rational” markets sometimes ask for them). Next couple of years should provide a good test for this thesis.<br />
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Another pernicious aspect of the Eike phenomena is the use of his persona as a role model of visionary capitalist genius - nothing is more illustrative of that than the ludicrous cover of a January issue of the most read weekly magazine in Brazil (Veja). Capitalism, in this case, is the exploration of the primary sector - capital intensive, with very low innovation potential and strongly regulated by the government - using huge volumes of funding at subsidised rates from a state owned development bank (BNDES). Compare with the path followed by truly visionary capitalists (may be Steve Jobs, most obvious recent case) and go find the seven errors. Even the allusion to China case is significative: brutal growth in all senses, also with the possibility of being fed beyond its potential with a <a href="http://brontecapital.blogspot.com.au/2012/06/macroeconomics-of-chinese-kleptocracy.html">myriad of frauds</a>. Is that the model Brazil wants to replicate?<br />
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“Neither we were so bad, nor we became so good”, that’s what professor Eduardo Giannetti <a href="http://drunkeynesian.blogspot.com.br/2009/12/frase-do-dia-eduardo-giannetti.html">stated in an interview</a> in December 2009. Thinking of markets, combining the time while the “we became so good” illusion lasted with the <a href="http://bigpicture.typepad.com/comments/2008/08/bob-farrells-10.html">second rule of Bob Farrell</a> (“excesses in one direction lead to excesses in the opposite direction”), we can expect a long and harsh period of correction, until it looks like we’re very bad again. Maybe we’re watching the beginning of this movement. Hope for the best, prepare for the worst.Drunkeynesianhttp://www.blogger.com/profile/12125591229308392930noreply@blogger.com1tag:blogger.com,1999:blog-3165875182802274032.post-42071261785739581532011-04-29T07:12:00.000-03:002011-04-29T07:12:36.039-03:00Friday Music Fest - Archie SheppAnother jazz giant who will land in São Paulo (May 28 and 29).<br />
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<iframe allowfullscreen="" frameborder="0" height="349" src="http://www.youtube.com/embed/hzJ_OWhmyss" width="425"></iframe>Drunkeynesianhttp://www.blogger.com/profile/12125591229308392930noreply@blogger.com0tag:blogger.com,1999:blog-3165875182802274032.post-30432257164646518132011-04-28T11:04:00.000-03:002011-04-28T11:04:49.632-03:00I'm back (and so Keynes vs Hayek)I'm still struggling to return to blogging; meanwhile, stay with the second part of the amazing MC Keynes vs MC Hayek battle, via <a href="http://econstories.tv/">EconStories</a>:<br />
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<object height="390" width="640"><param name="movie" value="http://www.youtube.com/v/GTQnarzmTOc&hl=en_US&feature=player_embedded&version=3"></param><param name="allowFullScreen" value="true"></param><param name="allowScriptAccess" value="always"></param><embed src="http://www.youtube.com/v/GTQnarzmTOc&hl=en_US&feature=player_embedded&version=3" type="application/x-shockwave-flash" allowfullscreen="true" allowScriptAccess="always" width="640" height="390"></embed></object>Drunkeynesianhttp://www.blogger.com/profile/12125591229308392930noreply@blogger.com0tag:blogger.com,1999:blog-3165875182802274032.post-24030170143026817062011-04-15T16:13:00.000-03:002011-04-15T16:13:44.001-03:00Holiday, oh holiday...I'll not be blogging for a while, for the best of the reasons. I should be back by the end of the month.<br />
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<tr><td class="tr-caption" style="text-align: center;">This picture is from Tulum, Mexico, but I'm not going there.</td></tr>
</tbody></table>Drunkeynesianhttp://www.blogger.com/profile/12125591229308392930noreply@blogger.com0tag:blogger.com,1999:blog-3165875182802274032.post-91428865594209882762011-04-15T08:36:00.002-03:002011-04-15T08:36:28.418-03:00Friday Music Fest - Vampire WeekendComing...<br />
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<iframe allowfullscreen="" frameborder="0" height="390" src="http://www.youtube.com/embed/vraoiVCDdaM" title="YouTube video player" width="640"></iframe>Drunkeynesianhttp://www.blogger.com/profile/12125591229308392930noreply@blogger.com0tag:blogger.com,1999:blog-3165875182802274032.post-79368767925269367262011-04-14T14:37:00.001-03:002011-04-14T14:37:52.345-03:00Chart of the day - music & casual sexData confirms: Nirvana and Metallica are rock n' roll. Source: <a href="http://blog.tastebuds.fm/coldplay-fans-least-likely-to-have-sex-on-first-date/">tastebuds blog</a>.<br />
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<div class="separator" style="clear: both; text-align: center;"><a href="http://blog.tastebuds.fm/wp-content/uploads/2011/04/Tastebuds-fm-coffee-score.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="312" src="http://blog.tastebuds.fm/wp-content/uploads/2011/04/Tastebuds-fm-coffee-score.png" width="580" /></a></div>Drunkeynesianhttp://www.blogger.com/profile/12125591229308392930noreply@blogger.com0tag:blogger.com,1999:blog-3165875182802274032.post-2515393005912502522011-04-13T10:54:00.000-03:002011-04-13T10:54:50.868-03:00Wednesday morning readingsMy creativity is hitting new lows; fortunately there are several better minds around the world deserving a reading:<br />
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- Tyler Cowen is around here, and dares to answer the multimillion dollar question: why real interest rates are so high in Brazil? (<a href="http://marginalrevolution.com/marginalrevolution/2011/04/why-are-real-interest-rates-in-brazil-so-high.html">Marginal Revolution</a>)<br />
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- Wanna raise profits by 67%? Cut provisions for credit losses by 83%. Banks' balance sheets are pieces of fiction (<a href="http://www.bloomberg.com/news/2011-04-13/jpmorgan-chase-profit-surges-67-on-lower-credit-costs-beating-estimates.html">Bloomberg</a>).<br />
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- 120 years of home prices in US (<a href="http://www.ritholtz.com/blog/wp-content/uploads/2011/04/2011-Case-SHiller-updated.png">The Big Picture</a>).<br />
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- Schroders discusses Germany and the future of the euro (<a href="http://www.scribd.com/doc/52918188/Schroders-Germany-and-the-Eurozone">Scribd</a>).<br />
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- <i>The Economist's</i> forum discusses capital controls, their utility and application (<a href="http://www.economist.com/economics/by-invitation/questions/when_if_ever_are_capital_controls_appropriate">Economics by Invitation</a>).<br />
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- Dani Rodrik, his meeting with Saif Qaddafi and the moral dilemma of helping dictatorships (<a href="http://www.project-syndicate.org/commentary/rodrik55/English">Project Syndicate</a>).<br />
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- A good summary of <a href="http://www.themoneyillusion.com/">Scott Sumner</a>'s defense of nominal GDP targets (<a href="http://www.adamsmith.org/files/ASI_NGDP_WEB.pdf">Adam Smith Institute</a>).Drunkeynesianhttp://www.blogger.com/profile/12125591229308392930noreply@blogger.com0tag:blogger.com,1999:blog-3165875182802274032.post-64045135092569338412011-04-12T13:02:00.000-03:002011-04-12T13:02:03.157-03:00Japan - is the sun rising again?Edward Chancellor, author of the quasi-classic <i><a href="http://www.amazon.com/Devil-Take-Hindmost-Financial-Speculation/dp/0452281806/ref=sr_1_1?ie=UTF8&qid=1302624028&sr=8-1">Devil Take the Hindmost</a></i>, provides an unusual bullish view on Japan.<br />
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<a href="http://www.scribd.com/doc/52849621/Edward-Chancellor-Japan" style="-x-system-font: none; display: block; font-family: Helvetica,Arial,Sans-serif; font-size-adjust: none; font-size: 14px; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal; margin: 12px auto 6px auto; text-decoration: underline;" title="View Edward Chancellor - Japan on Scribd">Edward Chancellor - Japan</a><iframe class="scribd_iframe_embed" data-aspect-ratio="0.772727272727273" data-auto-height="true" frameborder="0" height="600" id="doc_19112" scrolling="no" src="http://www.scribd.com/embeds/52849621/content?start_page=1&view_mode=list&access_key=key-1yqx9nwvsvt6aoqggptt" width="100%"></iframe><script type="text/javascript">
(function() { var scribd = document.createElement("script"); scribd.type = "text/javascript"; scribd.async = true; scribd.src = "http://www.scribd.com/javascripts/embed_code/inject.js"; var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(scribd, s); })();
</script>Drunkeynesianhttp://www.blogger.com/profile/12125591229308392930noreply@blogger.com0tag:blogger.com,1999:blog-3165875182802274032.post-30768971530568766172011-04-11T18:41:00.003-03:002011-04-11T18:45:02.847-03:00Subtitle contestI'm short on creativity today, any ideas?<br />
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<tr><td style="text-align: center;"><a href="http://s.glbimg.com/jo/g1/f/original/2011/04/11/bono.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="300" src="http://s.glbimg.com/jo/g1/f/original/2011/04/11/bono.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">I still haven't found what I'm looking for...</td></tr>
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From G1 (in Portuguese), <i><a href="http://g1.globo.com/u2-no-brasil/noticia/2011/04/mantega-recebe-bono-em-sao-paulo.html">Mantega meets Bono in São Paulo</a></i>.Drunkeynesianhttp://www.blogger.com/profile/12125591229308392930noreply@blogger.com0tag:blogger.com,1999:blog-3165875182802274032.post-27768246467186790382011-04-11T13:44:00.000-03:002011-04-11T13:44:03.824-03:00Monday morning readings- Trend has been a friend since David Ricardo (<a href="http://www.automated-trading-system.com/eighteenth-century-trend-following-and-more-history/">Au.Tra.Sy</a>).<br />
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- PIMCO is net short U.S. Treasuries (<a href="http://finance.yahoo.com/news/PIMCO-goes-short-US-rb-3790514655.html;_ylt=AnUs8XV8AauZ7PkTa4xFTp67YWsA;_ylu=X3oDMTE1MTJrM282BHBvcwMzBHNlYwN0b3BTdG9yaWVzBHNsawNwaW1jb2dvZXNzaG8-?x=0&sec=topStories&pos=main&asset=&ccode=">Yahoo! Finance</a>).<br />
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- Barry Ritholtz updates his great list of trading books, rules, and aphorisms (<a href="http://www.ritholtz.com/blog/2011/04/updated-trading-rules-aphorisms-books/">The Big Picture</a>).<br />
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- Commodities behemoth Glencore to make a record listing in London (<a href="http://www.ft.com/cms/s/0/d3f20718-639d-11e0-bd7f-00144feab49a.html">Financial Times</a>).<br />
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- Barry Eichengreen believes in a more stable world, but possibly only after three more crises (<a href="http://www.project-syndicate.org/commentary/eichengreen29/English">Project Syndicate</a>).<br />
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- Raghuram Rajan and the three paths for indebted democracies. None of them looks particularly sanguine (<a href="http://www.project-syndicate.org/commentary/rajan16/English">Project Syndicate</a>).<br />
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- Globo TV's Glória Maria went to Singapore to interview the legendary Jim Rogers. It's priceless to watch a multimillionaire bringing the kids from school cycling in the rain while some in Brazil say it's "impossible" to grow a child without a full-time nanny (<a href="http://g1.globo.com/globo-reporter/noticia/2011/04/bilionario-da-dica-para-ficar-rico-invista-so-naquilo-que-voce-sabe-fazer.html">Globo</a>, audio in Portuguese).<br />
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- New economic thinking = reading old books (<a href="http://economistsview.typepad.com/economistsview/2011/04/re-kindleberger.html">Mark Thoma</a>).<br />
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- Iceland rejects another deal to compensate Icesave creditors (<a href="http://online.wsj.com/article/SB10001424052748704641604576254661016938274.html">WSJ</a>).<br />
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- The tight race for Peru's presidency (<a href="http://elcomercio.pe/elecciones/resultados/presidenciales">El Comercio</a>).<br />
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- Another great director leaves the world without winning an Academy award: Sidney Lumet. His most famous works (<a href="http://www.youtube.com/watch?v=AbjAjQptyjM&feature=player_embedded">Telegraph</a>) and his paradoxical connection to the Reaganism (<a href="http://www.newyorker.com/online/blogs/movies/2011/04/in-memoriam-sidney-lumet.html">New Yorker</a>).Drunkeynesianhttp://www.blogger.com/profile/12125591229308392930noreply@blogger.com0tag:blogger.com,1999:blog-3165875182802274032.post-7260931619625152152011-04-08T16:10:00.000-03:002011-04-08T16:10:53.662-03:00Comrade Renato, tortured and banker<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjd6PIZ1BQEedz2AJMN7ex8Q4NU98mzNyXL180tFLADWHJjfkVJQfA1XDw73LUfQAJCNGIXWVmhRkPXj25zIlI1gGaJZJAOBj0qGLmdU4DjrVG6y_IQ3O6UsI6VySJ7pGQtoGV4QhXeJFg/s1600/persio.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="186" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjd6PIZ1BQEedz2AJMN7ex8Q4NU98mzNyXL180tFLADWHJjfkVJQfA1XDw73LUfQAJCNGIXWVmhRkPXj25zIlI1gGaJZJAOBj0qGLmdU4DjrVG6y_IQ3O6UsI6VySJ7pGQtoGV4QhXeJFg/s320/persio.jpg" width="320" /></a></div><span class="Apple-style-span" style="color: #333333; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13px; line-height: 16px;">Meet the second most famous former VAR-Palmares guerrilla (the first is called Dilma Rousseff and is president of a country south of the Equator): Persio Arida, one of the greatest Brazilian economists, former president of Brazil Central Bank and one of the main partners of BTG Pactual bank. At 18, in 1970, Persio was arrested and tortured by the military dictatorship. The thrilling story (though I didn't like the style), totally unknown till now, is the chapter of an autobiography to be released yet this year, and fills a good part of the latest <i>piauí</i> magazine. It's not yet on the <a href="http://revistapiaui.estadao.com.br/">website</a>, it'll probably appear there soon (in Portuguese), and it's definitely a worth reading.</span>Drunkeynesianhttp://www.blogger.com/profile/12125591229308392930noreply@blogger.com1tag:blogger.com,1999:blog-3165875182802274032.post-11258877062900618412011-04-08T16:04:00.000-03:002011-04-08T16:04:02.171-03:00Friday Music Fest - Gal Costa<span class="Apple-style-span" style="color: #333333; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13px; line-height: 16px;">Some 40 years ago, long before twitter and people who use it to huff the air conditioning repairman who missed an appointment, Gal Costa was the queen. This song is often quoted in the crazy (and superb) novel <i><a href="http://www.livrariacultura.com.br/scripts/cultura/resenha/resenha.asp?nitem=2788489">Pornopopéia</a></i>, by Reinaldo Moraes.</span><br />
<span class="Apple-style-span" style="color: #333333; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: x-small;"><span class="Apple-style-span" style="line-height: 16px;"><br />
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<iframe allowfullscreen="" frameborder="0" height="390" src="http://www.youtube.com/embed/13389UquLZ0" title="YouTube video player" width="480"></iframe>Drunkeynesianhttp://www.blogger.com/profile/12125591229308392930noreply@blogger.com0tag:blogger.com,1999:blog-3165875182802274032.post-13819097077985670332011-04-08T15:33:00.000-03:002011-04-08T15:33:52.574-03:00Carlos Slim and Eike Batista are out<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEim5osw6olRLwuhjsP7A614ibpsExnVgMtcswjHJcwWyQE9Jj2gcBplgTUMADuZqENrntR6dV-VUg7w2AjOl1wAXWD4Cou42bfZRs4LlEEsxwQpvSifHwvJe0BVq9w5j8K-Bf0UCCMpt4c/s1600/BarksScrooge.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEim5osw6olRLwuhjsP7A614ibpsExnVgMtcswjHJcwWyQE9Jj2gcBplgTUMADuZqENrntR6dV-VUg7w2AjOl1wAXWD4Cou42bfZRs4LlEEsxwQpvSifHwvJe0BVq9w5j8K-Bf0UCCMpt4c/s320/BarksScrooge.jpg" width="251" /></a></div><span class="Apple-style-span" style="color: #333333; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13px; line-height: 16px;"><b style="color: #336699;"><a href="http://www.forbes.com/lists/fictional15/2011/forbes-fictional-15.html">Scrooge McDuck is back at the top of <i>The Forbes Fictional 15</i></a>.</b></span><span class="Apple-style-span" style="color: #333333; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13px; line-height: 16px;"> Well... depending on the criteria, mr Eike could be at that list, too.</span>Drunkeynesianhttp://www.blogger.com/profile/12125591229308392930noreply@blogger.com0