Ray Hendon

Brazilian Real: Update to the Downside

With respect to the prospects for EWZ I would encourage you to split your views into the short run and the long run. If your horizon is short, say, a year or less, then EWZ is not a strong prospect for gain. A 10% gain for Brazil is not out of the question; their recent gains have far exceeded that amount. But you do need to extend your horizon some to be more certain of coming out ahead.

Equity markets are in a transition stage, especially in the developing world, where there have been huge gains over the last few years. They will pay back some of their gains as the effects of world inflation and slowing Europe and America take their toll. But Brazil is in such a good position to profit from the commodities boom, that they must eventually prosper more than most others. They have so far to go, and for the first time in their history, they have the infrastructure in place to make something out of it.

But they are strictly a longer term play.
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Brazilian Real: Update to the Downside

I still like their equity ETF (EWZ). There is often a disconnect between a currency and equities, and I feel much stronger about the economy of Brazil than I do their currency, at least over the next months. The currency was simply oversubscribed by the carry trade hot money. EWZ has taken its hits lately, as all emerging markets have, but I think this will pass once commodity prices stabilize and they do some test drilling in their new oil fields off shore. But, it's still risky for either investment.