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Posted by BradyNet ( Friday, October 3, '03 )

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GLOBAL MARKET HIGHLIGHTS

How to Hamstring a Hyperpower 10-03-03 (Yahoo) THE AMERICAN ECONOMY seems bedeviled by twin towers. The terrorist destruction of the World Trade Center has left a residue of homeland security costs that will be a drag on the economy for years to come.

The painful reality the IMF ignores 10-03-03 (Yahoo) The fund has again failed in its most urgent task - to reform itself

Household incomes and 2004 10-03-03 (Yahoo) The Census Bureau reported on Friday that the inflation-adjusted median household income declined for the third consecutive year, while the nation's poverty rate increased for the second year in a row.

Jobless, Factory Data Show Wobbly Economy 10-03-03 (Yahoo) WASHINGTON (Reuters) - The number of Americans lining up to claim jobless benefits rose in the latest week, while manufacturers' new orders fell sharply in August, the government said on Thursday in reports showing a wobbly economic recovery.

Global Economy: Europe, Japan Lift Hopes 10-02-03 (Yahoo) LONDON (Reuters) - Manufacturers in Europe and Japan won more orders and made more goods in September, according to surveys on Wednesday, going some way to offset doubts about the strength of a U.S.-led economic recovery.

Students Get Early Start On Postgrad Job Search 10-02-03 (Washington Post) Paolo del Mundo said he had tuned out the noise and the competition as he stood in line at a recent University of Maryland job fair in College Park, hoping to catch the eye of the recruiter from a technology firm.

Jobless Claims Are Highest in 2 Weeks 10-02-03 (Yahoo) WASHINGTON - New claims for unemployment insurance moved higher last week as laid-off workers who had been prevented from filing because of Hurricane Isabel finally made it into state offices to apply for benefits.

LATIN AMERICA

Brazil Economy Sees Worst Years Since 98 10-02-03 (Yahoo) SAO PAULO, Brazil - Brazil's economy will probably grow less than 1 percent this year, representing the worst performance for South America's largest country in five years, the central bank said Tuesday.

ASIA

Chinese Girls Toil Brings Pain, Not Riches 10-02-03 (NY Times) NSHAN, China — Each eyelash was assembled from 464 inch-long strands of human hair, delicately placed in a crisscross pattern on a thin strip of transparent glue. Completing a pair often took an hour. Even with 14-hour shifts most girls could not produce enough for a modest bonus.

OIL PRICES

The curse of an oil economy 10-02-03 (Yahoo) WASHINGTON - America is jeopardizing the long-term health and stability of Iraq and, what's worse, it doesn't even know it.

Iraq oil work to cost extra $1bn 10-02-03 (BBC) An extra $1bn (Ł603m) will be needed if Iraq's oil output is to be restored to pre-war levels by the end of next year, a senior Coalition Provisional Authority official has been reported as saying.

Newest messages appear on top.

10-03-03 leo: Unemployment at 6.1 better than forecasted......dollar and stocks bouncing big!!

10-03-03 Glutt: opti, bullish on UST? explain why please.

10-03-03 Glutt: Fox <This is the conundrum <over time> in Russia's case this time expand was very short 3 to 4 years (correct me if Im wrong Glutt).> right, this began since 1999. Of course Russia pays this debt with oil dollars but one has not to forget that besides cash there should exist commitment. Russian commitment came at a time of default and economic humiliation … however what was interesting to see was government underfinancing expenditure each time revenue was falling short… they began doing this when oil bill was thin and they continue today even when dollar bill is fat. Explain me please what makes Russian government committed to such austerity when I would say it even hurts investment spending which could be otherwise made with oil dollars? For the record, Russia grows around 5% for the last 3 years now … I excluded post crisis growth spike.

Amateur <The problem is a domestic debt-baloon problem.> thanks for informing me about my own argument I was repeating here since now two years…on the rest I have no disagreement with Gaucho as regards high interest rates contributing to domestic debt pile. I also NEVER said Brazil has or had to default on external debt, scroll to my postings of year ago to see my argument was always about domestic debt. however as history shows upheaval on domestic markets can heavily impact prices of Globals… ask wally about prices of RusFed that time…

10-03-03 optimist: Buying opportunity in UST.. 5 yr paper nearly at par.

10-03-03 Amateur: Glutt, as Gaucho explained, Braz debt is growing because of a sub-par year growth, and, even more determinant, because of a too high domestic real interest rate on the public debt.

Foreign debt is not growing much, or at all. The problem is a domestic debt-baloon problem. Read the Delfim comment posted by Fox. There is room for a LARGE reduction in the domestic real public debt-cost, and the trend is already working in that direction. The only limitation is the speed of the process cannot be accelerated more -Delfim says-, because of capital flows and inflation concerns (and Gaucho agrees). I humbly believe a higher speed would be better, but the general direction is the right one, and the people in charge are not so dumb...

10-03-03 Fox: <Amateur> Very Good Posting!!! ;-)

10-03-03 Fox: <.... he would love to see Brazil running overall balanced budget so means paying with own means (not borrowing) and being net payer of debt which should yield net debt reduction in nominal terms...> This is the conundrum <over time> in Russia's case this time expand was very short 3 to 4 years (correct me if Im wrong Glutt).

<The 4.25% primary surplus is the amount required to reduce debt/GDP, over time, provided certain hypotheses, the two major ones being real interest rates of 10% and GDP growth of 3%.> If the hypothesis includes a time expand of 10 to 15 years you are exposed to people listening to you in a Global Bull Markets & dumping you in a liquidity crunch, as <Goldjfan> probably knows by now.

If everything goes well <Savo's> desire will start to show when? Is the markets' timing the same as the one included in the hypothesis?

How many Market participants have any idea of the complexities involved in Brazil's debt dynamics & its outcomes?

Last but not least Im not a Brazil pessimist as I think the country has achieved a political maturity & consciousness that will help her meet her destiny. But those that carry Brazilian Assets must understand the volatility they will be expoded to.

I have sold all my Brazilian Bonds & invested 25% of proceeds in <Private Equity> as I value Barbell strategies at the moment.

PS: Brazil produces 90% of the Oil it consumes. The big discussion today in the Energy issue is how to use the Gas that will require big investments in infrastructure but addtionally will free Oil, Gasoline & Diesel for export.

10-03-03 nautilus: <driving his car with hydrogen instead of gasolin> give me a hint, c-banker, which will be chemical source of "H+" you want to be produced in relevant amounts?

10-03-03 spurs: I think one idea which may help to clarify whether Brazil is a good risk or not is where we are on the global liquidity cycle. Right now, thanks to the Japs and the Yanks, there is copious global liquidity. Every time the Japanese do unsterilized intervention yet more liquidity is injected into the global banking system. I cant help but think this is why US equities are rallying. But this is also the big negative. Monetary conditions will not get any easier than this. They will eventually get tighter again. Either because inflation will fall, (and nominal rates cant be cut again) or because inflation rises and rates are hiked. The other negatives that could make you nervous are the rise of protectionism in the US, and the costs of the War on Logic (sorry terror).

The big plus for global markets is that there is plenty of oil out there, and eventually oil prices will fall.

My problem is that I cant see how the world will get better for net dis-savers. I can only see it getting worse. Am I wrong in thinking the first rate hike in the US will knock C-bonds down? Or that any further evidence of deflation will eventually lead to protectionism in the US and by extention the Eurozone?

Its a poor argument, cos I dont really understand Brazil that well, but I cant see any way out. Its just not a great time to be relying on external capital flows (even if the external flows are really just recycled Brazilian money).

10-03-03 wally: <Vaaallly, i don't think an 11% YTM is a good risk/reward for Brazil, if this 11% YTM was at 60/par> i think you are focussing too much on "below par as much as possible" <philly> for the simple reason that in the back of your head a red neon sign "recovery value" is continously flashing. i look around and compare alternatives but can't find any which fit into my highyield/cash strategy which i am following since several months. i <schleep> without any problems as in all my positions (Samba, Pinky, Uru, Guano) i am sitting on fat profits and will not hesitate to sell in case there is a sudden drop and then do the UNTHINKABLE by sitting on 85% cash for an extended period of time. life is difficult. but not as difficult as i thought a year ago.

10-03-03 Amateur: Savo, I also like your angle: <All I try to do is to find bonds whose price reflect an almost certain default, that I don not believe are going to default.>. Brasil certainly does not fit this pattern, because current prices do not reflect a high default chance.

But there are so few bonds that fit this pattern today, that we are forced to concentrate in Ecu and few Ecu-alikes, or else stay liquid at ridiculous low rates.

Thats why Brasil becomes interesting even at 10%. You dont have a lot of default protection, but the profits in a non default situation are big. Braz Cs at par would still yield 2% more than same duration Mex or Rus, and in the meantime, a 10% current yield gives a nice cushion as compared to 1% mm rates. Carry doesnt hurt.

If one would become really optimistic that the virtuous cycle is coming, the longer bonds would give a higher principal appreciation. But Cs and other short bonds can be profitable even in an average, <no default, no boom> period, which is IMHO the most likely scenario in the coming times.

10-03-03 savonarola: gaucho..Glutt has answered.

10-03-03 Glutt: Gaucho, IMHO savo probably means he would love to see Brazil running overall balanced budget so means paying with own means (not borrowing) and being net payer of debt which should yield net debt reduction in nominal terms. This is the case of Russia in fact, might be the case of Ecuador but is not the case of Brazil. Under assumption of heavy debt load such measures are in fact a good remedy but we also know many countries having deficits, quite some debt & still alive. So why? Here comes second component which is payment profile which shows Brazil has unsustainably high obligations to pay within fiscal year. Such thing is manifested by service ratios to budget and export revenues which in case of Brazil run high… next sustainability ration such as debt to exports in Brazil case is at odds with debt to GDP ratio. While debt to GDP does not look suicidal (look at so called new convergence piles of sh—t) but debt to exports drifts across 300% which is way high. I am not arguing Brazil has to fall, no, particularly because political element is important to assessing this and I find Lula doing much better than so called reformers until recent. As regards risk premiums, depends, overall EM is expensive not only Brazil, still if value Brazil vs Turkey it is damn cheap. Again IMHO

10-03-03 Fox: UOL-News
<Veja outros trechos da entrevista de Lula e os respectivos comentários de Delfim:

JUROS

Lula: "Estamos trabalhando para que os juros continuem caindo, e caindo de forma muito madura, de forma muito consistente, porque năo adianta nada vender mais uma ilusăo ao povo brasileiro, aqueles rompantes que determinados governos tęm, que anunciam coisas mirabolantes e um męs depois a vaca foi para o brejo. Prefiro dar passos devagar, com consistęncia para que a gente năo tenha que voltar atrás em nenhuma tomada de posiçăo que nós tivemos."

Delfim: "Acho que vai haver agora uma queda monotônica da taxa de juros. Ainda há espaço para alguma ousadia. O Brasil é um país que vai ter que conviver com taxa de juros real de 6%. Isso, na ponta, no tomador de empréstimos mesmo, năo com o governo federal. Se verificarmos que a inflaçăo para os próximos 12 meses está rodando em 5,5%, 6%, para ter essa taxa de juros teria que ter uma taxa Selic de 14%, 13%. Mas isso depende muito da situaçăo externa. Tem que ser compatível com o equilíbrio externo. Há uma relativa expectativa de estabilidade no câmbio, a taxa de juros nos Estados Unidos está baixíssima, 4%. Isso mostra que, se vocę tiver alguma expectativa de desvalorizaçăo de câmbio, tem que haver uma reduçăo muito substancial do spread. E, para obter reduçăo muito substancial de spread, voltamos ŕ mesma história de sempre. Precisa reduzir a relaçăo dívida externa/exportaçăo, reduzir a percentagem de exportaçăo que gasta para pagar amortizaçőes mais juros, reduzir o nível da dívida líquida. Acho que está tudo na direçăo correta. Se tentar fazer as coisas antes da hora, simplesmente vai quebrar."

CRESCIMENTO ECONÔMICO

Lula: "A retomada do crescimento da economia é nosso desejo, nossa obsessăo, é nosso sonho. Tudo isso está dentro da certeza de que acabou o tempo das vacas magras, o sacrifício que tinha que ser fito já foi feito."

Delfim: "Eu acho que năo é preciso mais sacrificar produto nem emprego para a estabilidade. Daqui para a frente, existem condiçőes para se voltar a crescer. Acredito que exsitem condiçőes de terminarmos 2004 rodando com crescimento em 3%, 3,5%. Esse ano vai ser uma tragédia. Vai ter uma queda de 0,6% do PIB per capita. A situaçăo é muito difícil. O Brasil exportou tudo o que podia. O Brasil está com endividamento interno fantástico, uma dívida externa muito grande, com a maior carga tributária do mundo, para um país com o nível de renda como o nosso. O Brasil năo tem espaço para se mexer. Acho que o presidente agiu corretamente neste primeiro semestre, sacrificando realmente um pedaço do produto, mas pelo menos deu para preservar o que tínhamos obtido pela estabilidade monetária, que estava perdida na transferęncia do governo."

REFORMA TRIBUTÁRIA

Lula: "A reforma tributária vai ser votada, tal como precisa ser votada. Eu năo tenho nenhuma preocupaçăo com o Senado ou com a Câmara. Ŕs vezes as pessoas tęm que fazer um discurso pelo partido, ou um discurso para o eleitor, mas se vocę năo entende isso năo entende nada, é melhor năo fazer política. Fazer política achando que todo mundo tem que dizer amém ao presidente năo é possível."

Delfim: "Seria um grande passo votar o projeto original, mas aí eu năo posso concordar. O projeto de reforma foi inexperiente, uma aventura. Houve aquela ousadia de colocar em rediscussăo o Fundo de Participaçăo dos Municípios. Animou-se 5.500 tigres para assaltar o país. É um escândalo. O presidente está dizendo uma coisa absolutamente correta, que vamos voltar para o original. O original tinha cinco coisas excelentes, mas a idéia do ICMS é uma coisa péssima. Um péssima proposta. Temos que ter coragem de deixar para depois. O ICMS é incompatível com o sistema federativo. Năo podemos mais nos dar ao luxo de cometer erros novamente. Espero que sobreviva a volta para o projeto original e joguem para depois o ICMS, até eles aprenderem o que é isso.">

10-03-03 Gaucho1: <. I just think that current returns are worth the risk that Brazil fails ones again as it has done cyclically every two or three years over the last 15.>

Savo: I would never quarrel with anyone over their risk preferences, utility functions, valuations or fancies. Those are subjective and only of secondary interest (by the same principle, I refrain from dispensing unsolicited <advice>)

The interesting debate, for me, is what are the assumptions you are using to form your judgement.

Your claim that Brazil is expensive is indisputable-- because its your money and <expensiveness> is for you to know (by the way, I don't find that claim unreasonbable at all).

But when you manifest scepticsm over Brazil's fiscal policy, I am interested in knowing why, in the belief that there is some objective content in that assertion which I might use to form my own judgement.

10-03-03 panasonic: Bonjour friends, anyone has recent info or good source on Russian Corps?

10-03-03 leo: I agree for speculative positions they are usefull.....but not to hedge.

10-03-03 C-Banker: < Advice55: Brazil will be autosuficient in oil very soon...> In a hundred years or so, when everybody will be driving his car with hydrogen instead of gasolin ??? :-)) Nevertheless: If it's true, helps us clippers :-))

10-03-03 atb: Leo--I disagree with your general view, though I agree that in general you're probably better off going long the risk in the cash market, except at certain times...on the other hand they are pretty useful to go short the risk without worrying about repo risk, or specialness, something which if you may remember killed more than one soul at the time of Argie...

10-03-03 leo: DFS are useless in my view....if you take a risk just take it if you don't want the risk anymore sell it.Don't hedge the risk simply remain on the sidelines.As simple as that....

10-03-03 atb: PILLZ-Did you get your info on the DFS contracts? I can probably be of some help.

10-03-03 ArielB: test

10-03-03 danni: cirun:help with timing since he is MASTER in finding vodoo stock! .... CIRUN there is alvel that you mast be rady for to swime with the shark & thay can b...

10-03-03 cirun: <danni><....CIRUN in my case i bot AAWH as A Respcet to DR SPAL ! >

right, am waiting for it too as A Respcet to DR SPAL ! but I feel we should try to help with timing since he is MASTER in finding vodoo stock!

10-03-03 danni: WALLY we f*#*T up big time in trland i sold 1.15m of tr10/12/30 @ 92to102.85 but i bot pinki18 @ 82 & pinki27 @ 64 at the same day as i dont belive in CASH

10-03-03 danni: ADVICE im with you that same of this forum membr are going to mise the 2nd rally in LULAbondland

10-03-03 danni: cirun: May I ask again since I feel ignored? ....CIRUN in my case i bot AAWH as A Respcet to DR SPAL !

10-03-03 cirun: May I ask again since I feel ignored? <schpal><<<or others>>> could you plaease eksplain <a signal that a <refi> is in the wings> dont understand <refi>, that means refinanciation? or revaluation? Thanks, Am not an nativ english. Excuse me for boring presence am still invested in <SBAC>. Thanks velly matsch!!! on AAWH i would wait quite a bit till it goes down to 0,11 - 0,2. Consider there are bad news coming when they announce filing CH11. I think after that´s gone you can buy cheap. At todays prices I would sell and keep money in pocket for buying back later for less. May be one risks to pay more but I think the risk for price going down is higher. Posted.

10-03-03 PILLZ: <i think for most of the colores (including me) it is not the question presently whether Brazil will "make it" but worth an investment based on weighing risk/reward ratio which under prevailing circumstances is very interesting. >

Vaaallly, i don't think an 11% YTM is a good risk/reward for Brazil, if this 11% YTM was at 60/par maby I would think about it but at 80 to 110 to par, it is not for my good sleep..with Guano 30 at 63 and 15% YTM , I schleep better, I will only go back to Brazil 24, ven it is below 70.. good night... see you in late afternoooon..

10-03-03 danni: GARIB of to the office befor i get the trafik

10-03-03 danni: CARIB you got me there, but ADVICE & I still say LULA can do it what is 3 days for MASTER LULA .

10-03-03 carib: ...still. I wonder if making february three days longer will mean march will be three days shorter...I suspect it's just a plot to prolong Carnaval...

10-03-03 carib: Danni: Certainly if Lula can change the calendar (worldwide) he can also balance the budget. Prosit!

10-03-03 danni: carib: Danni: if february will have 31 days .....CARIB advice & i think that lula can innovat the date from 30/2 to 31/2 posttt

10-02-03 danni: SPAL is there any vlu in WCOEQ shctock???

10-02-03 carib: Danni: if february will have 31 days next year, that innovation will be more important than Br 09 reaching 129! ;-))

10-02-03 danni: my target price for LULA up to 31/2/04 .bra09@129.bra20/126.bra24/92.bra27/99.bra30/122.bra40/106.posttt.

10-02-03 danni: SPAL: <10-02-03 danni: > ? are you saying you bought at 0.55 or want to buy at that level? Or is it 0.30? .....SPAL i bot shatock of AAWH @ o.55c . & i have offer to buy @ o.30c to the 31/10/03.

10-02-03 Advice55: And Foxito, it seems that now it is true! Strong good news? Probably yes and not priced in....

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