In Search of Happiness

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In Pursuit of Happiness

By Paola Pecora

Buenos Aires, Argentina

April 4, 2008

*** In the United States have almost given homes who could not afford them. That is happiness for many people but ... individual good leads always to the common good?

*** The Argentina is growing at an 8% average ... remain the same expectations of growth after the recent events that almost starve the population?

The Markets:

While Latin America yesterday.

Brazil Bovespa 64,175 + 1.3% points.

The rise caused by speculation yesterday as expected 'investment grade' for Brazil, which in turn obtained Peru yesterday. As if there was an effect for this "contagion". The infections are for when there are bad, not good. Anyway.

There is very good news for Brazil in the beginning of the year: there was flight of funds in January to U.S. $ 2,670 million, and in March for U.S. $ 1,000 million. The index fell 4.6% in the first quarter, the worst since 2005. He lost 4% in March. Since the fourth quarter of 2007 is abutting BVSP in the area of ​​65000-66500 points. We'll see if this new bullish momentum that brings from the March 20 pierce that ceiling does history. Caution: when to cover liabilities for losses in northern markets, the emerging 'emerging' as the chief of which come off. However, some are now emerging with strengthened macroeconomic accounts and have more support. Even when settlements are massive ... massive.

Mexico's IPC +0.7% 31,689 points.

The mostly Mexican peso value against the dollar two years. Investors are pulling to purchase Mexican debt against the decline in T-bonds. The rate spread between bonds is 525 bps, the highest since 2005.

Argentina Merval 2152 +0.77% points.

Seventh bull wheel for the index, with 7% upward accumulated. Increased volume for Tenaris, the world's largest manufacturer of seamless steel tubes, up 2.2% rise in the oil. Unemployment rose to 21 days of the field, but this does not seem to influence the outcome of the index, since during the bosses lockout was coming up the index without being distracted.

Lima BVL +1.54% 17,886 points.

2% annual rise in 2008. Banks rose on the improvement of Peru's debt rating to 'investment grade' by Fitch Ratings. The sun rose 1.1% against the dollar, the highest value in the decade.

Caracas IBC 38,564 +4.7% points.

The state CANTV (+19.6%) and EDC (+14%) today announced dividends, plus the purchase of a package of ADS by CANTV, now in the hands of a U.S. hedge fund.

DJIA +0.16 12 616 points

Jobless claims rose to 38,000 last week, highest level since 2005.

March ISM 49.3 49.6 hardly changed, but always below 50, indicating contraction in the economy. BSC is still above the offer price of U.S. $ 10 JPM-Fed combined experiment. WMT rising to higher levels of 4 years, driven by recession in the U.S.: the reading is that you will benefit because their prices competitive with other retailers.

June gold +1.05% U.S. $ 909.60 / Spot U.S. $ 902.90 -0.04%

Platinum +2% for new issues of power outages in South Africa.

Index USDOL 72.24 +0.02%

Oil U.S. $ 103.83 -0.95%

*** "Thanks to this U.S. $ 500 that we were missing, we could buy a house. Thank you very much.?

Chris Gardner told a couple who had been hired as an extra for the movie "The Pursuit of Happyness? ("The Pursuit of Happiness', inspired by the life of Gardner, who lived in homes for homeless people). This couple had to represent herself homeless people waiting for their turn to enter the Glide Memorial, a home in San Francisco, USA, in 2006 during the filming of the movie.

That seems to have set a ceiling. Yes, the same year that the housing market had a record high and from which he never ceased to fall. A homeless couple who had been 6 months living on the streets, and thanks to $ 500 could get it. I wonder if the fortune of yesterday became today unfortunately, for them. With jobs so insecure they can not afford to raise U.S. $ 500, that poor people or is in debt or has had to leave their homes because they can not cope with their mortgage, most likely. Because stories like that of Chris Gardner, is given once every million.

But stories like that of the U.S. $ 30,000 billion the Fed used to fund less liquid assets of Bear Stearns (BSC: NYSE), providing loans to investment banks, is itself quite new.

"The Bear Stearns receptionists look at themselves, astonished. One is nervously pulls hair while the other speaks excitedly over the phone. Do not know what to do. About 100 homeowners have just entered the elegant lobby of the investment bank in New York. Wednesday afternoon. Traders in costumes, going to buy a quick sandwich or for business lunches, gather behind the security desk at the entrance of the bank.

"Suddenly they come face to face with a group of ordinary Americans, whites, blacks, latinos, blue collar workers, retirees and women with children. Protestors carry shirts with the logo 'Sharks beware!'. They carry banners: 'Support Main Street - Not Wall Street.', 'Chase, what happened to my house?' 'Where is our savior package?' And while the bankers out to lunch, they throw in their epithets thick expensive.

On one side are the owners who can barely pay their mortgages or no, and have actually received very little government assistance. On the other traders at Bear Stearns?, Reports Spiegel International.

However, many investors are considering that it's time to re-enter the mortgage market, is the case with Larry Fink, CEO of Blackrock, a New York firm of 823 billion euros in asset portfolio. Fink saw the subprime debacle came and remained more or less removed. But now feels it was time to invest again. "I'm telling my international clients for long term investment, credit markets have great value.?

The flames were extinguished yet, there are banks that are accruing losses and others who are setting up special units to return to bet on the same instruments. Buy without pay, to operate with air.

Probably wind up like Ron Beller, co-founder of Peloton Hedge Fund (one of its funds already collapsed in February, already discussed in previous articles). Beller was gathering capital and took off in January to buy mortgage-backed assets at discount prices.

But he was wrong. And mistakes today cost too expensive. Peloton, heavily indebted to banks, was forced to sell for U.S. $ 2000 million at discount prices as well, when the market fell again in February.

*** Growing pessimism about the future of Argentina ... for many, it was not necessary to have to go to such extremes with the main economic fuel to realize that the tail wind, when blowing hard blows at high speed, but when an engine plant ... we can crash, which does not occur when the skill of the pilot is enough ...

"A survey conducted by the firm OPSM reveals that 45% of the respondents consider that the current situation in Argentina is regular, while 25.5% considered that the outlook is negative. Only 29.5% gave a positive opinion. The survey, which was conducted on a sample of 1,100 cases across the country between March 31 and April 1, reveals that in just four months, positive trials went ahead 51.5% to 37% and negative expectations rose from 10.4% to 22.2%.

'It created a crisis of expectations. Positive diagnoses declined, increased negative judgments and consolidates a large majority of expectant attending developments?, Explains Enrique Zuleta Puceiro, director of consulting 'the Chronicler Commercial. "With the bombardment of information, people support the Government in regard to taxation but now wonder where the money goes to the withholding. The government could enter an area of ​​political risk if the polarization is still committed to plebiscite?.

For its part, the bank JPMorgan (JPM: NYSE) recommends selling debt in Argentina and Turkey, and buy Peruvian. According to Reuters, "JP Morgan adjusted its portfolio by selling 3 million Bonar bonds maturing in 2011 to $ 91.50. The bank said that 'the President of Argentina, Cristina Fernandez de Kirchner, has failed to take advantage of the post-election scenario for key changes such as altering the measurement of inflation, excessive dependence on raw material prices and the shortage of energy '. According to JP Morgan, these problems' in the long run undermine the prospects for growth and exacerbate the current problems of inflation. Given the limited market access to the government, the economy's capacity to absorb a potential adjustment in domestic demand seems fairly limited. " The bank said it would add 2 million Peruvians global bond due in 2025 to its investment model, at a price of $ 113.75.? Yesterday was an investement grade Peru.

The level of economic activity contracted for Argentina circumstantial fact: unemployment in the field for over 20 days deprived of food to the supermarket shelves and government revenues. Its main source revenue collection.

This effect, to continue the benevolent external circumstances, would be brief. But the big concern is not whether the ruralistas return to the field, but if international commodity prices fall too much.

Had to fall into a pattern of paralysis of the main export activity center to see what it was. The course considers the embargoes imposed, in addition to being scheduled deployment in the Constitution, (must be debated and enacted in the National Congress) are confiscatory. And the ordinary people on the street yielded pots voluntarily, as in the crisis of 2001 to protest a government they do not trust, nor in economic measurements performed.

But it is an excellent opportunity for honest government and reflect prices in real statistics. You now have an excellent excuse.

See you next Friday

Paola Pecora

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Editor's Note: China, slowly positions itself more strongly in other markets, anticipating in advance the decline in activity in the U.S.. A very good initiative in China, but can doubly hurt Latin American economies. I can send your comments to: paola@moneyweekes.com

China: Opportunity or Threat for Latin America?

By Horacio Pozzo

With all this in unemployment in the Argentine countryside and shortages on the shelves of supermarkets, yesterday I went round to visit my friend Cheng to see how it had affected this conflict has not yet completed.

The supermarket in my Chinese friend was well stocked out by the way, but not a face of concern found in Cheng. This caused me some concern so I decided to ask why it was that he was not concerned if their trade is almost no dairy or meat to sell ... But he said that despite the problems he was facing here in Argentina, their families in China have good news. Is that they have a textile factory and problems in the U.S. they had complicated exports to that country. But fortunately for them, had access to other markets to sell their production. And it seems that what has happened to the Cheng family, also is happening to other families in China.

So, China and other East Asian economies are facing greater difficulties to export to the U.S. by the economic problems through the northern economy. Bernanke already said the word that no one wanted to hear: "Recession?. It is true, said they were already in recession, but at least he spoke of his ability and that's a bad sign because it indicates that the situation has worsened.

And as the U.S. market is more limited for Asian exports, is that these eastern countries, with China leading the way, decided to go in search of new markets and with good results, even faster than expected. According to the World Bank, the annual export growth of emerging nations of East Asia declined from 22% in January 2007 to 15-16% in the third quarter, before recovering to reach a growth of 18-19% . And this rapid recovery is due to the immediate rehabilitation of Asian products in these new markets.

Latin American countries have seen remarkable growth in Asian countries an opportunity to grow and so we are moving very rapidly in trade agreements. Peru, for example, is negotiating an FTA with China, while Chile aims to deepen the agreement already signed. Even in Argentina, multiply the organization of trade missions to Asian countries.

This great interest in increasing the commercial link that led to exchanges between China and the countries of the region reached a record U.S. $ 102,611 million in 2007 (an increase of 46.6% over 2006), with Brazil and Colombia as the most increased their trade with the Asian country.

I know several young entrepreneurs who have managed to export products to Asian countries. You have to see how happy they are because they see there a great opportunity to grow ... But the sharp increase in trade, although it may be seen as good news, you can reach in the future become a concern if the Exports from China to the region grew disproportionately more than they do exports to that country. Latin American governments must pay close attention to the development of commercial accounts with these countries.

Keep in mind that the American economic downturn forces China and other Asian countries to other markets offset lower demand for their products to not feel the impact and that the trade agreements with Asian countries, can open the doors for a massive influx of them. In Argentina, it is already suffering with the sharp increase in imports of footwear and textiles.

An additional fact to consider is that both the euro and the currencies in Latin America (except Argentina, Venezuela and Mexico), have been appreciating against the dollar to a greater extent than it has been China's currency and the other main Southeast Asian currencies (ie, excluding the Japanese yen). In fact, since early 2007, the yuan has appreciated 10.2% against the dollar, the euro as it did in 18.4%, the Colombian peso by 18.3%, the Chilean peso by 18 %, to give some examples. Thus, the nominal exchange rate between China and these economies has evolved in favor of the Asian economy.

The threat posed by these Asian countries in the region adds to the already problematic are facing many Latin American countries whose currencies lose competitiveness against the major currencies (dollar, euro and yen).

That is why I understand how worried they are the producers of Latin American countries also face a higher rate of inflation, loss of competitiveness and weakening of the host economies of their products ... How did the Latin American governments to address the threat posed these economies? Are they taking advantage of the opportunities they represent?

We will meet again next Monday,

Horacio Pozzo