Tuesday, February 26, 2013

Another few more charts on Brazil [Credit]

These charts go to illustrate the gigantic mess that the brazilian government has put the country in.

They're basically outstanding loans, deflated by the IPCA (consumer price inflation).

They show that a/ credit has been slowing, and slowing, and slowing, despite 500bp in rate cuts since the end of October 2011.
And to show how bad the local government has handled the situation, by making quasi-public banks (Banco do Brasil, BBAS on Bovespa) and public (Caixa Econômica Federal, CEF, not listed) flood the market with cheaper credit, despite, perhaps, lower credit quality of borrowers, squeeze private banks out of the market, in order to decrease credit spreads, then banks' profitability, but at a cost of risking a surge in bad loans, which has already showed up... and kept up despite the 500bp in cuts.

Here are the charts, self-explanatory.

 As expected by the horrible CAGED #s (Formal Job Creation) from last week...

And now the credit charts....

 And the private banks in lending...

 And the Personal Default rate that doesn't give in much despite so much time passed since it peaked and the 500bp in rate cuts...

*Disclaimer: charts and data are presented as I receive/see them. Sources are usually not checked for validation and my own calculations are of 'back of the envelope'-type. I am aware that some math that I do myself might be wrong and/or misleading to some extent. In financial markets the rate of change of economic data is often more important than the actual level and the perception of 'what is priced in' is more important than 'what is actually going to happen'. This is actually the way people pick entry and exit points. So... yes, sometimes you might say 'This guy is an idiot, this is way wrong!' with a high conviction, being right. Not to worry. Markets are made of expectations and the clash of conviction between its participants. Portfolio managers know that being an idiot is sometimes profitable and being smart is often a bad choice. It is all reality, sometimes good, sometimes bad. By the way: corrections to my analysis and intelligent debate is welcome. theintriguedtrader AT gmail do com

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