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An Un"real" Move: Brazil Currency In Freefall After Record Low Consumer Confidence
On Wednesday, we got what might fairly be characterized as the first sign that Brazil has reached the point of no return.
The country’s recent woes are no secret and the S&P downgrade served notice to the entire world that that at least some very “serious” people believe that the negative feedback loop between the country’s economic and political crises may soon serve to tip one of the world’s most important emerging economies into chaos.
But what happened on Wednesday marked a new low. By almost all accounts, the move by Brazilian lawmakers to uphold 26 of President Dilma Rousseff’s 32 expenditure vetoes should have given the plunging real some respite. Only it didn’t. The BRL’s harrowing slide continued unabated, forcing the central bank to intervene with swaps and an FX credit line in what Rabobank's Christian Lawrence says is a pretty clear sign of "panic".
The fact that the currency did not stabilize after Rousseff’s vetoes were upheld seems to indicate that, at least in the near-term, nothing can stop the BRL from falling further and indeed that assessment is consistent with the idea that a prolonged period of currency weakness is necessary if Brazil is to mark a proper “adjustment.”
On the heels of Wednesday’s carnage it wasn’t hard to predict what would happen on Thursday and sure enough, the BRL is plunging anew after consumer confidence for September came in at the lowest level on record.
The headline print was 76.3, but as you can see from the following look at the subcomponents, there's a marked disconnect between reality and "hope":


Here’s Reuters:
Brazilian consumer confidence fell to an all-time low for a third straight month in September as a deepening political crisis stoked pessimism among families already struggling with inflation and unemployment, a private survey showed on Thursday.
The Getulio Vargas Foundation (FGV) said its confidence index fell to 76.3 in September, the lowest since the data series began in 2005, from 80.6 in August.
"It will take a sequence of good economic news and the political tensions to ease in order to change this scenario," FGV economist Viviane Seda Bittencourt said in the data release posted on FGV's website.
Yes, a “sequence of good economic news and the easing of political tensions” is necessary, and because neither of those things has any chance of actually happening, don’t expect Brazilians' outlook to brighten any time soon.
We also got a look at unemployment for August and the picture wasn't pretty there either, as the 7.6% print represents a remarkable increase from a year ago, when unemployment stood at just 5%. "We expect the labor market to deteriorate further. Policy tightening, depressed consumer and business confidence, and tighter financial conditions are expected to lead to deep recession in 2015-16, visibly higher unemployment rates in 2015 and 2016, and declining real wage growth," Goldman laments.
Meanwhile, the central bank is out with its latest quarterly inflation report which unsurprisingly suggests that pass-through from the BRL debacle will weigh heavily going forward. Here are the bullets:
- BRAZIL'S 2016 CPI AT 5.3% IN REFERENCE OUTLOOK; WAS 4.8%
- BRAZIL'S 2015 CPI AT 9.5% IN REFERENCE OUTLOOK; WAS 9%
- BRAZIL'S 2016 CPI AT 5.4% IN MKT OUTLOOK; WAS 5.1%
- BRAZIL'S 2015 CPI AT 9.5% IN MKT OUTLOOK; WAS 9.1%
Here's Goldman on why, despite the outlook for inflation, a Selic hike isn't likely:
In all, notwithstanding the deep economic recession and depressed consumer and business sentiment, the current balance of risks for short-term inflation is not favorable and demands that at the least monetary policy remains vigilant. And one could argue that given the drifting currency, deterioration of inflation expectations and expected weaker contribution of fiscal policy to disinflate the economy, the balance of risk for inflation would demand additional near-term rate hikes in order to really force inflation down to the target by end-2016. However, given the rapidly deteriorating real activity picture and heightened political/institutional noise and uncertainty, near-term rate hikes are unlikely (unless the authorities fail to stabilize the currency). After all, the Copom has been reiterating that “the remaining risks for the secure convergence of projected inflation to the target in 2016 are consistent with the lagged and cumulative impact of the monetary policy actions, but demand that monetary policy remains vigilant in case of significant deviations of projected inflation from the target.”
Notwithstanding the fact that projected inflation for year-end 2016 has deviated further from the 4.50% target we are of the view that rather than additional Selic rate hikes the Copom will instead opt to keep the policy rate at the current 14.25% restrictive level for a longer period of time in order to continue to disinflate the economy and assure convergence of inflation to the target by some time in 2H2017. After all, according to our proprietary Real Financial Conditions Index (FCI), overall financial conditions have tightened very significantly in recent weeks (driven by the steepening of the yield curve and higher CDS spreads), and will likely turn even more restrictive/contractionary by 1Q2016 when, due to high base effect, headline inflation is projected to moderate to below 8% from a projected 9.5% in 2015. Furthermore, the current level of macroeconomic and political uncertainty is so high that more negative and disruptive tail-event economic scenarios cannot be altogether ruled out.
The takeaway there is that the gap between Copom's target and reality is widening.
And then there was this:
- BRAZIL CENTRAL BANK SEES 2015 GDP -2.7%,; PRIOR -1.1%
So in other words, the inflation-growth outcome (i.e. stagflation) is set to get materially worse after hitting a decade low in Q2, which of course means consumer confidence will continue to make new lows and that, in turn, portends further trouble in the most important indicator of all for Brazil, shown in the following chart:
* * *
Bonus chart (CDS still blowing out to post-Lehman wides):


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This keeps up, 2016 Olympics should be epic...and for all the wrong reasons!
The 100 meter swiming through shit butterfly.
The poor Brazilians live and die by their stupid national football team which is not very good anymore. They were vaprized by the Germans at 2014 World Cup. The Argentinians stayed close in the final against the Germans.
This is also an attack on the BRICs by the NWO/dollar gang.
Caralho!
I know some of you still won't believe me, but:
BZQ
Check out the six month gold chart in Real. Up 30% vs USD in gold since July.
http://www.kitco.com/gold_currency/index.html?currency=brl&timePeriod=6m...
Football is a cruel mistress.
Germany got their shit together back around 2000, in preparation for them hosting the 2006 World Cup. They started from the ground up (investing in development), and it has certainly paid off in spades, now.
Brazil suffered due to the pressure, yes, but also the loss of their talismans (Neymar in attack, and Thiago Silva in defence) and a terribly naive coach. Once your are down 2, you still have to go for the win, but unfortunately for Brazil, from 2-0 down, they were very quickly 4-0 down! And they became understandably despondent. The score is by no means indicative of the gap between the footballing nations, IMO.
Don't cry for me, Argenti.... wait, wait. No. Wrong country. Sorry. Carry on.
I thought your first sentence was funny because it's accurate, the Rodrigo de Freitas Lake and Copacabana Beach are full of poo, bacteria and viruses. Yes it's well documented and easily found in searches. These are of course the outdoor venues for events like triathalon swimming, boating etc. and it doesn't appear to be getting any better.
That Dilma is sooooooooo smart. Paying off the Olympics AHEAD of time by devaluing the currency.
/sarc off
I only clicked to see pics of the Brazilian Women's Volleyball Team. I am sorely disappointed. Tyler, you can do better...
there are a million other, readily available websites that can help you with that, uh, "problem". just don't do it at work or where the wife might walk in.
I had to completely give up porn, cause I got caught/chewed out so many times ..................
Speaking of porn:
Jenna Jameson has become the latest contestant to be evicted from Celebrity Big Brother.
http://www.dailymail.co.uk/tvshowbiz/article-3245256/I-win-Porn-star-Jen...
Jameson was a real trail blazer in her business, and God knows, I love tail blazers.
Yes, those who purchased a store of value in gold are sitting pretty down there in Brazil.
I have to agree with others on this site who say the Chinese should buy gold if they believe their currency the RMB will fall more [which i think it will] as we proceed deeper into currency wars.
He lived during a VERY interesting time in history.
Faith in government is looking pretty shaky and they need to do the hard things that nobody wants to do. This is coming to the entire world...soon......
From now on my friend its not about investing, its about survival.
Surival requires investment, but of a different kind and your health can't be priced in dollars......
They should have used Bitcoin. $232.78
She's sad because she didn't buy gold or silver.
The lesson here, of course, is that if you are a financier country, you'll do well.
Where as, if you are an actual producer of something, the financier will rape your currency.
Australia? Not so good with those metals.
China? Not so good with that lead paint toy stuff.
Brazil, Russia, Mid-east? How's that oil price treating you?
Since the non-financing countries are 90% of the global population or more, gosh I wonder what would happen if they collectively got pissed off at us?
I remember looking at Petrobras as a potential investment some 5 years ago or so.
Upon close inspection, I saw that it was no ordinary corporation and the government held a large stake! Immediately I thought "Now would they ever do anything that would be good for them, and bad for shareholders? Like take bribes, or award contracts in return for kickbacks?"
Unfortunately I answered "Naah", and as a result I am the largest single shareholder of Petrobras as of today (OK, I am kidding, of course I didn't touch the stock)
Someone bought 15,000 January 2016, 80-strike puts on the HYG high yield bond ETF. That’s a $1.6 million cash bet on an event
http://investmentresearchdynamics.com/wp-content/uploads/2015/09/Untitle...
I sharted Brazil.
Who the hell cries over sports anyway?
Grow up Brazil, welcome to the global economy.
Just means the Politicians and police will have to steal more to keep up thtyles....corruption rules can change...to make more money.....they all have houses in Florida to keep up
What fuck do you want from a country led by a Marxist bitch? Suffering, misery, and poverty are only things this rotten and utterly corrupt system can offer.
We have gone one step further in Britain, Corbyn is a communist
I have lost count to the quote we all have been using for the past 6 years: "Is this it?"
Now, it may seem the mother of all Ponzis is unravelling. So, once again; Is this IT? Markets haven't had peace since the oil price started tumbling last year, and the frequency of bad news in the markets is now happening daily, not weekly or monthly. How long till the whole thing just implodes?!
I keep asking the same thing: "Is this it?"
IMO, the reason why this global house of cards hasn't collapsed, is because so many individuals are interdependent on the system's survival. There is a collective psychosis that borders on a religious belief that the system cannot collapse. It's as if those in power are suffering from delusions and denial that "everything's going to be o.k, BTFD, and infinite growth on a planet with finite resources will get back on track".
From what I've seen around me and heard anecdotally, the end is nigh…but it's been "nigh" for an awful long time.
Caution: This is a process, not an event.
True...Instead of abrupt implosions, this one may just be a slow excruciating process to the bottom, and may very well last for a few years. Or, will the markets collapse in a sudden short order. I guess we will see!
It's HAPPENING, we're in it. Because it will most likely be an unwind as opposed to an outright total crash, we will only be able to 'see' what is happening at the moment.
We'll see it clearly in the rear-view mirror.
That's what you get for dressing up in national colors and visiting the currency exchanges.
Betsy Ross .... embroidered 13 stars in a circle .... 360°/13 = 27.69° apart ?
http://people.bath.ac.uk/masgcs/Article24.pdf
The Thirteen Point Circle
Or, in Islamic/Arabic pattern geometry:
The triskaidecagon, or tridecagon, is a difficult shape to deal with when attempting to construct patterns. This is due to the awkward junctions formed with any other regular geometry. Occasionally seen both in nature and in constructed works, they appear to have come about accidentally rather than as the result of a rational process. There is no way to set out a thirteen point pattern in the manner in which most of the other geometries are demonstrated.
http://catnaps.org/islamic/geometry2.html
Cancel the Olympics?
Hey, Latina Lover .... what's the USSA angle ?
Dilma Roussef is a member of which tribe, again? Is she Amish like so many other politicians and central bank members?
Brazil, the new Greece. (only bigger)
Beautiful, now Brasil can really start to dump their US junk off their balance sheet, just like China and Russia are doing.
WHAT YOU ARE SEEING is a rapid exodus of foreign funds from Brazil. Short-term money is afraid that the Brazilians will take some sort of desperate measure, and put restrctions on trades or the stock market (to prevent a total collapse). Long-term money from retirement funds cannot stay in Brazil ... because of the plunge in the credit rating. Basically, BRAZIL is the epicenter of a global disaster zone for the emerging markets.
Brazil is AT RISK of a collapse in boh their stock market and their real estate values. Quite a lot of speculative money has flowed into S. America (incl. Brazil) in the last few years ... going into real estate. Those investors will be panicking now, with the real possibility of a long-term downturn in the Brazilian ecoomy.
I cannot imagine what is going to happen to tourists who hit Rio next year (Olympics). I know ordinary Brazilians who will NOT go to Rio or Sao Paulo now .... because of the crime situation there. Next year, tourists need to be bulletproof, or experts at the 100-meter dash. Brazil will need to flood Rio with police, for this event to work out positively.
"Brazil will need to flood Rio with police, for this event to work out positively."
No worries by next year "police state" may be the new normal everywhere. Just don't lose your papers.
BUT BUT BUT THE BRICS BANK IS GONNA DESTROY THE ANGLO-AMERICAN WORLD POWER AND PUTIN IS GONNA RIDE IN ON HIS WHITE BEAR AND . . . .
AND NOw IT ALL LIES IN TATTERS.
Wow, Dollar, Inc really are the smartest guys in the room. But the dollar will collapse . . . as soon as we run out of zeros.
President Dilma Rousseff is German Jew. She has no Brazillian blood whatsoever...Even Wiki mentions her German roots. The entire South America is ruled by the NaziGermans.
90% of all billionares and millionares in South America are either Germans or Europeans. Google it
The Natives of Brazil has nothing to do with currency or stock markets.