Seeking Alpha
What is your profession? ×
Growth, value, special situations, portfolio strategy
Profile| Send Message|
( followers)

I started trimming my Banco Bradesco (NYSE:BBD) position today. This is a strategic decision; I have decided to sell this position. Of course, I'm doing it in stages.

This was an attempt to make money on one of BRICs.

The main reason I'm selling this position is because of the political situation in Brazil. Much bad (for business) news is coming from there. The government interferes more and more with business decisions.The latest news is that the government is trying to increase the share of state banks in the financial sector. Other news includes government plans to direct banks to increase lending. The Brazilian government more often finds itself in agreement with government of Venezuela, which is even more worrisome. I don't know if Lula wants to be Chavez, but I can't completely ignore such possibility.

Another reason: Brazil's economy is experiencing an investment bubble. The real (local currency) appreciated a lot since beginning of year. The government even tries to slow down foreign investments: Brazil nuts? The country’s new capital control.

Third reason: Brazil's economy mostly depends on the export of raw materials and food. So far, commodity prices are growing this year. But I have my doubts, especially because one of main export materials, iron ore, is in a bubble itself. So much of a bubble, that China, the main importer, uses less ore than it imports, stockpiling a lot of ore in ports (look here).

These factors make Brazil stocks way too risky for my taste. I will continue cutting down this position.

Full disclosure: at the time of publication author had a long position in BBD. Positions can change any time.