Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
How to Use Price Cycles and Profit as a Swing Trader – SPX, Bonds, Gold, Nat Gas - 13th Nov 19
Morrisons Throwing Thousands of Bonus More Points at Big Spend Shoppers - JACKPOT! - 13th Nov 19
What to Do NOW in Case of a Future Banking System Breakdown - 13th Nov 19
Why China is likely to remain the ‘world’s factory’ for some time to come - 13th Nov 19
Gold Price Breaks Down, Waving Good-bye to the 2019 Rally - 12th Nov 19
Fed Can't See the Bubbles Through the Lather - 12th Nov 19
Double 11 Record Sales Signal Strength of Chinese Consumption - 12th Nov 19
Welcome to the Zombie-land Of Oil, Gold and Stocks Investing – Part II - 12th Nov 19
Gold Retest Coming - 12th Nov 19
New Evidence Futures Markets Are Built for Manipulation - 12th Nov 19
Next 5 Year Future Proof Gaming PC Build Spec November 2019 - Ryzen 9 3900x, RTX 2080Ti... - 12th Nov 19
Gold and Silver - The Two Horsemen - 11th Nov 19
Towards a Diverging BRIC Future - 11th Nov 19
Welcome to the Zombie-land Of Stock Market Investing - 11th Nov 19
Illiquidity & Gold And Silver In The End Game - 11th Nov 19
Key Things You Need to Know When Starting a Business - 11th Nov 19
Stock Market Cycles Peaking - 11th Nov 19
Avoid Emotional Investing in Cryptocurrency - 11th Nov 19
Australian Lithium Mines NOT Viable at Current Prices - 10th Nov 19
The 10 Highest Paying Jobs In Oil & Gas - 10th Nov 19
World's Major Gold Miners Target Copper Porphyries - 10th Nov 19
AMAZON NOVEMBER 2019 BARGAIN PRICES - WD My Book 8TB External Drive for £126 - 10th Nov 19
Gold & Silver to Head Dramatically Higher, Mirroring Palladium - 9th Nov 19
How Do YOU Know the Direction of a Market's Larger Trend? - 9th Nov 19
BEST Amazon SMART Scale To Aid Weight Loss for Christmas 2019 - 9th Nov 19
Why Every Investor Should Invest in Water - 8th Nov 19
Wait… Was That a Bullish Silver Reversal? - 8th Nov 19
Gold, Silver and Copper The 3 Metallic Amigos and the Macro Message - 8th Nov 19
Is China locking up Indonesian Nickel? - 8th Nov 19
Where is the Top for Natural Gas? - 7th Nov 19
Why Fractional Shares Don’t Make Sense - 7th Nov 19
The Fed Is Chasing Its Own Tail; It Doesn’t Care What You Think - 7th Nov 19
China’s path from World’s Factory to World Market - 7th Nov 19
Where Is That Confounded Recession? - 7th Nov 19
FREE eBook - The Investment Strategy that could change your future - 7th Nov 19
Is There a Stock Market Breakout Ahead? - 6th Nov 19
These Indicators Aren’t Putting to an Economic Resurgence - 6th Nov 19
Understanding the Different Types of Travel Insurance - 6th Nov 19
The Biggest Gold Story Of 2020 - 6th Nov 19
Best Money Saving FREE Bonfire Night Fire Works Show Sheffield 2019 - 5th Nov 19
Is the Run on the US Dollar Due to Panic or Greed? - 5th Nov 19
Reasons Why Madrid Attracts Young Professionals - 5th Nov 19
Larger Bullish Move in USD/JPY May Just Be Getting Started - 5th Nov 19
Constructive Action in Gold & Silver Stocks - 5th Nov 19
The Boring Industry That Hands +500% Gains - 5th Nov 19
Stock Market Chartology vs Fundamentals - 4th Nov 19
The Fed’s Policy Is Like Swatting Flies with Nuclear Weapons - 4th Nov 19
Stock Market Warning: US Credit Delinquencies To Skyrocket In Q4 - 4th Nov 19
Stock Market Intermediate Topping Process Continues - 4th Nov 19
Stock Market $SPY Expanded Flat, Déjà Vu All Over Again - 4th Nov 19
How To Buy Gold For $3 An Ounce - 4th Nov 19

Market Oracle FREE Newsletter

How To Buy Gold For $3 An Ounce

Goldman Sachs, Hazardous to Underweight Brazil, But Hold the Big Mac

Stock-Markets / Brazil Oct 27, 2009 - 06:12 PM GMT

By: Trader_Mark

Stock-Markets

Best Financial Markets Analysis ArticleDespite a 73% increase in the Bovespa this year and the country raising taxes to try to keep out an avalanche of Western central bank liquidity [Oct 20, 2009: Ben Bernanke's Money Printing Parade Forces Brazil to Slap a Tax on Outside Investors], Goldman Sachs still says the shares are cheap.  Certainly if EPS can grow 40%+ next year they might have a point, and who can argue against the fact this is one of the most attractive markets in the world.


Via Bloomberg
  • Brazilian stocks are inexpensive even after a 73 percent rally for the Bovespa index this year and cutting allocations may be “hazardous” for investors, Goldman Sachs Group Inc. said. “Forward valuations suggest it is hazardous to be underweight Brazil,” Stephen Graham, a Sao Paulo-based analyst wrote in a note to clients. “Brazilian sovereign risk and interest rates are at or near record lows, while prospects for sustainable economic growth are possibly better than at any period in the last few decades.” 
  • The Bovespa may top 85,000 by the middle of next year, he wrote. That represents a 31 percent gain from the close on Oct. 23. The index trades at 16.5 times estimated earnings, compared with 17.16 times for the MSCI Latin America Index, according to Bloomberg data. 
  • Earnings per share will likely grow 46 percent next year and 23 percent in 2011, meaning that forward valuations will remain steady even as the index climbs to 85,000, Graham wrote. 

We often cite the credit expansion in both Asia and South America, but the analyst makes an interesting demographic point as well.  As he has we mentioned the potential infrastructure upgrades coming from both the 2014 World Cup, and 2016 Olympics - although those are obvious quite long term benefits, not necessarily short term stimuli.  [Oct 2, 2009: Brazil Rallies Upon Winning 2016 Olympics]

  • A “baby boom” in the 1980s means consumers in their 20s are now entering the market with “credit volumes never before available,” driving up demand in Brazil’s domestic market, he wrote. 
  • The growth of the population may lift Brazil to the world’s third-biggest market for computers and telephones next year, Graham wrote. the country’s “financial stability” has led to 77 percent growth in bank accounts over seven years and 18 percent growth in the number of credit cards since 2001, the strategist wrote. 
  • Preparations for the 2014 World Cup and 2016 Olympic Games will likely speed up financing for needed infrastructure projects, Graham wrote. Brazil is seeing “some of the largest build-outs in the world underway in power transmission, pipelines, hydropower, and telecom,” as global attention from the sporting events puts pressure on the government to accelerate the pace of construction, he wrote. 
  • Latin America’s biggest economy is also at an advantage to other commodity-producing nations because it sells to “fast- growing” China instead of relying on sales to slower-growing markets in the U.S. and Europe, Graham wrote.  


However, in unfortunate news (at least for American visitors to Brazil) the real's appreciation (see Ben Bernanke's campaign above) has made a Big Mac an expensive proposition
  • The Brazilian real’s 34 percent, world-beating rally this year pushed up the price of a Big Mac in Sao Paulo above that in New York and London, a measure that would indicate the currency is overvalued. 
  • Buying McDonald’s Corp.’s flagship hamburger costs 8 reais in Sao Paulo, or $4.62, compared with $3.99 in New York and 2.29 pounds in the U.K. capital, or $3.74.  
  • While President Luiz Inacio Lula da Silva and Finance Minister Guido Mantega say the currency’s strength threatens exports and jobs and imposed a tax last week to curb the gains, analysts such as Goldman Sachs Group Inc.’s Paulo Leme says the real will continue to appreciate.

By Trader Mark

http://www.fundmymutualfund.com

Mark is a self taught private investor who operates the website Fund My Mutual Fund (http://www.fundmymutualfund.com); a daily mix of market, economic, and stock specific commentary.

See our story as told in Barron's Magazine [A New Kind of Fund Manager] (July 28, 2008)

© 2009 Copyright Fund My Mutual Fund - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules