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"Junked" Brazil Is Falling Apart At The Seams; Cancels Bond Auction

Tyler Durden's picture




 

Exactly one month ago, in the aftermath of the Chinese devaluation announcement, we made a simple prediction.

Today, following the overdue, long anticipated, and yet "shocking" downgrade of Brazil by the S&P to junk, this prediction is coming true.

First, here is the currency, which is plunging to a fresh YTD low of just below 3.91, and which has a long way to go at least according to SocGen which now sees the USDBRL rising to 4.4 over the next 8 weeks: a whopping 15% devaluation over the next 2 months!

In other words, it could get worse fast, and as Bloomberg notes the next step could be a circuit breaker: "Continued selloff in DIs would risk triggering circuit break, which kicks in when rates rise/fall 80bps vs prior day’s official BM&F fixing intraday. Trading of BM&F’s USD/BRL 1st future will be halted if price hits 4060.33, equivalent to a 6% move vs yday’s official closing at 3830.57; while spot BRL would continue to trade, liquidity likely to be very poor given dominant role of futures trading."

* * *

Next, the Braziling ETF, the EWZ, is already pricing said devaluation in and was about 5% down as of this moment.

 

The Bovespa futures are looking very ungreen this morning.

But the biggest risk event for Brazil and its soaring double deficits, is that suddenly the entire nation which for years was so dependent on Chinese growth and is now giving it all back in spades, is that it is about to be locked out of the markets. Here's why:

  • BRAZIL TREASURY CANCELS LTN BOND AUCTION TODAY

This is the second LTN bond auction canceled in 1 week, and will lead many to ask: just how will Brazil - with its foundering economy (which we warned first about back in late 2014), and suddenly suddenly locked out capital markets, fund itself?

 

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Thu, 09/10/2015 - 09:40 | 6530791 XAU XAG
XAU XAG's picture

The WHOLE world is falling apart

 

 

Thu, 09/10/2015 - 09:49 | 6530827 Dr. Engali
Dr. Engali's picture

"The WHOLE world is falling apart"

 

Yeah, and we know where that leads.

Thu, 09/10/2015 - 09:57 | 6530850 VinceFostersGhost
VinceFostersGhost's picture

 

 

Cancels Bond Auction

 

Dammit.....and I was going to show up to.

 

I'm even wearing a tie.....I hardly ever wear a tie.

Thu, 09/10/2015 - 10:01 | 6530867 coinhead
coinhead's picture

South Americans have caught onto Bitcoin much faster than their none-too-bright neighbours in teh north.  Because there, currency crisises are the norm and have been for some time.  BTC showing some signs of life again teh past couple days.  Now will the pansies finally realize that what ever happens with XT, that it is not "TEH END", kindly remove themselves from teh scene so we can rally?  Thanks!

http://www.coindesk.com/

 

Thu, 09/10/2015 - 10:07 | 6530896 NoDebt
NoDebt's picture

Their bonds just got a Brazilian Wax.

Thu, 09/10/2015 - 10:54 | 6531086 Doña K
Doña K's picture

.GOV has created bitcoin and once it becomes very popular it will control you just the same as cashless society. True wealth preservation is only through physical possesion of silver and gold period. Not overseas, not in the bank, but in a place only you know. 

Thu, 09/10/2015 - 10:59 | 6531112 coinhead
coinhead's picture

Dona, that is teh most fucking retarded theory ever.  Bitcoin is government's worst nightmare... far harder to control than gold & silver.

Thu, 09/10/2015 - 12:18 | 6531532 wendigo
wendigo's picture

Anyone who says 'teh' is no friend of mine. 

Thu, 09/10/2015 - 13:38 | 6531875 Scooby Doo
Scooby Doo's picture

I'm usually not a grammar Nazi. But it is very difficult to take you seriously when you consistently misspell the word, "the". So before you go insulting people's intelligence, perhaps you might proofread and run a spell checker.

Thu, 09/10/2015 - 14:26 | 6532116 Oxbo Rene
Oxbo Rene's picture

"TEH" is indeed substituet for "THE" but , been around quite awhile now = some kind of cool mispelling for the YUPIE crowd...

Thu, 09/10/2015 - 17:09 | 6533064 Rodent Free Corps
Rodent Free Corps's picture

It is making fun of how people get so outrageously outraged that they screw up spelling. Also see 111!!11!eleventy1!11!

 

Thu, 09/10/2015 - 10:10 | 6530906 XAU XAG
XAU XAG's picture

I'm even wearing a tie.....I hardly ever wear a tie.

 

Bow Tie?

Thu, 09/10/2015 - 10:36 | 6531000 silverer
silverer's picture

My brother said long ago "Never trust a cocksucker with a bow tie".

Thu, 09/10/2015 - 13:05 | 6531735 coinhead
coinhead's picture

Does your brother watch a lot of Vin Diesel movies?

Thu, 09/10/2015 - 10:54 | 6531085 SmedleyButlersGhost
SmedleyButlersGhost's picture

Oddly enough - I once saw a Thai with a Brazilian

Thu, 09/10/2015 - 10:10 | 6530872 XAU XAG
XAU XAG's picture

@Dr

 

"Yeah, and we know where that leads."

 

soup!

Just soup

Long soup and broth

Thu, 09/10/2015 - 10:07 | 6530893 Secret Treaties
Secret Treaties's picture

Yep - more central bank intervention.  Amazing what you can do with unlimited deep pockets.

Thu, 09/10/2015 - 11:05 | 6531148 KnuckleDragger-X
KnuckleDragger-X's picture

It's becoming a thundering herd and South America is going full Venezuela......

Thu, 09/10/2015 - 09:41 | 6530795 pods
pods's picture

They should be in great shape by the time the Olympics rolls through.

/s

pods

Thu, 09/10/2015 - 09:45 | 6530808 insanelysane
insanelysane's picture

And people think Boston is crazy for passing on a chance to host the Olympics.  Brazil just had the World Cup and the Olympics is on the way.  Maybe they aren't the money makers they are marketed as?

Thu, 09/10/2015 - 21:35 | 6534071 Bazza McKenzie
Bazza McKenzie's picture

They're definitely money makers for someone.

Thu, 09/10/2015 - 10:04 | 6530874 MalteseFalcon
MalteseFalcon's picture

What do the 1916 Berlin Olympics, the 1940 Tokyo Olympics and the 1944 London Olympics all have in common?

They were cancelled.

Thu, 09/10/2015 - 10:33 | 6530992 silverer
silverer's picture

I know why!  They substituted the standard circus for another form of entertainment!

Thu, 09/10/2015 - 10:58 | 6531110 Doña K
Doña K's picture

Greece should refuse to provide the Olympic flame and sue for the name, as the games have become corrupt and big business. The Ancient Greek gods are taking out on Greece

Thu, 09/10/2015 - 10:52 | 6531079 lakecity55
lakecity55's picture

"Irate Brazilians today attacked the Olympic Village, made out of shipping containers. The athletes made a sprint for the airport. Several records were broken."

Thu, 09/10/2015 - 09:41 | 6530796 outlaw.guru
outlaw.guru's picture

Don't worry. Janet will save Brazil in a few days.

Thu, 09/10/2015 - 09:47 | 6530816 ZH Snob
ZH Snob's picture

you might be on to something there.  forget about a rate hike.  the fed must soon resume its overt QE (overt v hidden, which never stopped).

Thu, 09/10/2015 - 09:58 | 6530854 Carpenter1
Carpenter1's picture

"The FED must..."

 

You simply do not understand the FED.

 

The FED should've saved Lehman, but it did not. Why" BEcause they didn't see it coming?

 

LOLOLOLOLOLOLOLOL!!

 

When it's time for a crash, the FED suddenly becomes "incompetent," "ignorant" etc, etc

 

When will the sheep finally figure this out?

Thu, 09/10/2015 - 10:01 | 6530870 VinceFostersGhost
VinceFostersGhost's picture

 

 

The FED should've saved Lehman

 

Weren't the FED's shareholders Lehman's competition?

 

Not that I'm looking to create waves here.

 

 

Thu, 09/10/2015 - 11:17 | 6531049 ThroxxOfVron
ThroxxOfVron's picture

What exactly do peopple mean 'saved' or 'didn't save' or 'should have saved'?

Dick Fuld isn't flipping burgers, and he never saw the inside of a jail cell.

 

Of course the dominant narrative is that what was done had to be done.

That 'institutions and people had to be saved'.  

-Saved from themselves at the expense of institutions and people who did not have to be saved from themselves...

-That there was no choice but to impoverish a generation or two of Americans to preserve the accrued fortunes of the likes of Blankfein and Cassano are Mozillo, et. al..

It was bail out the .01% Fraudsters or 'Tanks in the streets'...

 

Oh, so You were told it was all to rescue your Gramma's pension?

Well fuck me!   Excuse my ignorance.  

-Who knew that your Gramma is Abby Joesef Cohen??!

Thu, 09/10/2015 - 09:59 | 6530860 ZippyDooDah
ZippyDooDah's picture

China should save Brazil, cause they're the BRICs.  This was gonna

be the combo that was going to lead the world.  China can't save shit, today.

Not itself, not Brazil.  Some great, new world-leading alliance.  LOL.

Thu, 09/10/2015 - 10:32 | 6530985 silverer
silverer's picture

This is when all the world competitors turn off their brains and roll out the tanks.  Was nice knowing you all.

Thu, 09/10/2015 - 09:44 | 6530801 LawsofPhysics
LawsofPhysics's picture

Well, cheaper reseources from Brazil for me, but damnit because I still ahve a bunch of Real in my pocket...

Thu, 09/10/2015 - 10:41 | 6531027 MSimon
MSimon's picture

Real? Not very.

Thu, 09/10/2015 - 09:44 | 6530802 youngman
youngman's picture

So far here in Colombia we are surviving...our peso is down 50%...but no effects yet..just my dog food going up  in price...imported...but beer is the same price....

Thu, 09/10/2015 - 10:12 | 6530911 greatbeard
greatbeard's picture

>> just my dog food going up  in price..

Just your dog food? WTF?  Nothing more important than the dog's food. One reason I stay fully stocked.

Thu, 09/10/2015 - 10:22 | 6530948 taketheredpill
taketheredpill's picture

He doesn't have a dog...

Thu, 09/10/2015 - 10:29 | 6530975 Yancey Ward
Yancey Ward's picture

Well, it did taste better than the dog food.

Thu, 09/10/2015 - 10:49 | 6531069 youngman
youngman's picture

I have 4 big dogs..so it is a big expense for me....but meat and chicken have not gone up....pork the same price as ever....even though Colombia supposidly imports a lot of feed for animals....rum is the same price as always...car sales are slowing down...still selling way to many as the roads here cannot handle what they have now....but everyone wants a car.....they first own a moto..a small motorcycle..then they move up to a starter car...middle class is booming here..or so they think.....I think we are 2 years behind Brazil until the effects start to hit...

Thu, 09/10/2015 - 12:32 | 6531598 Jethro
Jethro's picture

Keep the dogs, hopefully they have a good protective instinct. If they don't, you might want to trade them in.

My girlfriend's hair dresser is on welfare, and she raises Great Danes. She uses her food stamps to buy steaks for her Great Danes. These dogs don't eat dog food, just beef. I haven't bought a steak in years, and I've never been on welfare. If things ever become lawless around here, I'm going to eat those dogs. :^)

Thu, 09/10/2015 - 09:45 | 6530804 Dead Canary
Dead Canary's picture

Quick. Show a Brazil football flag girl!

Thu, 09/10/2015 - 09:46 | 6530809 smacker
smacker's picture

Meanwhile, Brazukas have got over "Babilonia" and are now getting into "A Regra das Jogas".

This is all that matters.

(These being the nightly prime time novellas on TV Globo.)

Thu, 09/10/2015 - 10:15 | 6530921 The Count
The Count's picture

I have been to Brazil 3 times over the last 30 years. Last time 2 years ago after a long break. And guess what? I hardly noticed any difference. Yes, as soon as you leave a city, a couple roads had been paved, but most are still dirt. People still live in shacks. Corruption is rampant as always. Yet all Brazilians keep claiming, mantra like, that it's the country of the future. Remember Brazil, ano dos mil?

Thu, 09/10/2015 - 10:41 | 6531019 smacker
smacker's picture

Quite so. I've been to Brazil about 25 times in 25 years. I'm here now.

The major changes in this time are the intro of cellphones and higher prices for everything. Consumer choice is limited due to highly complex import taxes which takes a brain the size of a planet to understand. They're really intended to protect domestic industry from outside competition, which means domestic R&D investment is low and productivity is low.
It's a truly corporatist economy, controlled by the bankers and big-money-industries, with the likes of Rousseff having her hands in their pockets for mutual benefits.

When Brazilians say Brazil is the country of the future, they omit the last part of that phrase: "and always will be". Or as they say here: "O Brasil, o país do futuro e sempre será".

Thu, 09/10/2015 - 11:29 | 6531311 mc225
mc225's picture

--"and always will be"--

 

lol

Thu, 09/10/2015 - 09:47 | 6530820 Tsar Pointless
Tsar Pointless's picture

Brazil. Who cares? US equities are green.

All that matters at this point.

Thu, 09/10/2015 - 09:47 | 6530821 Dr. Engali
Dr. Engali's picture

Time for the state to start selling some shit. The oligarchs will own it all before this is over.

Thu, 09/10/2015 - 12:26 | 6531572 Jethro
Jethro's picture

That big Jesus statue would look pretty groovy in my front yard.

Thu, 09/10/2015 - 09:57 | 6530852 q99x2
q99x2's picture

I'll buy a mummified cannibal head for my son egor's birthday and spend a weekend with an amazonian if that will help.

Thu, 09/10/2015 - 09:59 | 6530861 wolframm
wolframm's picture

No state funding is a good thing. They might actually have to lay off some bureaucrats or reduce welfare-destroying "welfare benefits". Brazilians can consider themselves lucky that their govt has no EU/ECB "helping" them. At least it is up to them: Marx or Mises. Let's hope they make the right choice.

Thu, 09/10/2015 - 10:02 | 6530871 JustObserving
JustObserving's picture

Is it too late to move the Olympics back to London?  Brazil cannot afford them now.

The corrupt city of London can always steal billions as needed.

London: A giant washing machine for the filthy cash of a corrupt elite

http://www.ibtimes.co.uk/london-giant-washing-machine-filthy-cash-corrup...

Thu, 09/10/2015 - 10:14 | 6530920 RockySpears
RockySpears's picture

London no longer has the stadiums.  They have been sold off and converted to immigrant housing.

Thu, 09/10/2015 - 10:24 | 6530959 Savyindallas
Savyindallas's picture

I think we should have an immigrant Olympics. I think the USA would win. We don't just have Mexicans  -we've been bringing them in from all over the world - and they eat good here too -we put them to work. They all have jobs. There's a couple right outside my window at my neighbor's house mowing the lawn. Used to be white kids doing such work for summer jobs. Now our kids get to hang around the house playing video games.

Thu, 09/10/2015 - 11:55 | 6531440 Vendetta
Vendetta's picture

"Used to be white kids doing such work for summer jobs"  I used to do landscaping and maintenance of 6 to 8 rental properties for years in high school and in college... best job I had prior to graduating

Thu, 09/10/2015 - 12:49 | 6531662 Wahooo
Wahooo's picture

You blaming our potato-chip kids on the Mexicans?

Thu, 09/10/2015 - 10:03 | 6530876 Vinividivinci
Vinividivinci's picture

Je suis Brazil.

Thu, 09/10/2015 - 10:39 | 6531016 PrimalScream
PrimalScream's picture

Hahahahahahahaha!!  Brilliant!

Thu, 09/10/2015 - 10:04 | 6530878 gwar5
gwar5's picture

The Olympics will also be downgraded.

Thu, 09/10/2015 - 10:44 | 6531043 lakecity55
lakecity55's picture

Two guys in a rowboat.

Thu, 09/10/2015 - 10:57 | 6531095 youngman
youngman's picture

Thiss depression that Brazil is going thru..you can bet they are not going to clean up the bay where all the water sports are supposed to be had.....that money will all be stolen to protect the powers that be in charge of the cleanup....corruption at its finest in Brazil....10 million to clean up the water...means to them..9 million for me and my friends and 1 million to hide the trash in the water....and not doing anything like they were supposed to....

Thu, 09/10/2015 - 12:48 | 6531658 Wahooo
Wahooo's picture

I can't wait for one of the swimmers to bump into a human body, or maybe a cow carcass. You know it's going to happen.

Thu, 09/10/2015 - 10:10 | 6530907 Deadratsplat
Deadratsplat's picture

Ties will make excellent washable toilet paper in the new normal!

Thu, 09/10/2015 - 10:21 | 6530945 silverer
silverer's picture

Wow, do you put them back on after you use them until you get home to wash them, or do you just roll them up and put them in your pocket?

Thu, 09/10/2015 - 10:25 | 6530962 Spungo
Spungo's picture

The budget will balance itself if more socialism is applied.

Thu, 09/10/2015 - 10:44 | 6530983 PrimalScream
PrimalScream's picture

BRAZIL's economy is showing what the WORLD really looks like.

Everything in the USA, Europe and Japan is an elaborate smoke screen. Those economies are not any better, if the true state of the banking system is unleashed.

The advice from that top-level advisor in Britain ... the advice posted on ZeroHedge recently ... it's looking pretty good today. Get some food into your pantry, some spare water and gasoline, and some emergency cash in a safe place.

Thu, 09/10/2015 - 10:55 | 6531094 surf0766
surf0766's picture

Send all of the progressives to live in their UTOPIA

Thu, 09/10/2015 - 11:00 | 6531123 Nana
Nana's picture

Where is Ronald Biggs!!!!

Thu, 09/10/2015 - 11:13 | 6531217 hairball48
hairball48's picture

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” – Ludwig von Mises

I just can't wait :)

hairball

Thu, 09/10/2015 - 11:20 | 6531263 Chuck Knoblauch
Chuck Knoblauch's picture

Brazil doesn't want US investors.

Thu, 09/10/2015 - 12:46 | 6531651 falconflight
falconflight's picture

BRICS is a fine idea in theory, but in practice it is likely stillborn.

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