Plato's Bunker

I read this news (link below) yesterday that indicates that BRL might be very expensive according to three models from Deutsche Bank. Though I don't have access to those models metrics, it got my attention because that information doesn't really fit very well with some simple models I run. I know there are lots of ways to model FX and as everyone might know its not a very easy market to figure out, specially for EM, where lots of feedback loops between country risk and FX rate happens and you can have long and short term models. Another point, specially for the PPP metric is the timeframe chosed. Anyway, just decided to post my findings here because they contrast with the DB picture. They might be right but here is my view: Business Insider (Australia) link for the news:  https://www.businessinsider.com.au/currency-valuations-september-deutsche-bank-2017-10 That's DB chart... My Behavioral model based on Commodities and CDS (YoY %) PPP metrics based on C

After a stellar performance in the last one year and a half or so some might be asking if IBOV is running ahead of itself, specially if we take into account all the political turmoil in the recent past and the uncertainties about the next year election. But though recently Ibov reached the historical highs in BRL terms it's still way below in USD terms and relative to other EM markets. The only certainty is that no one knows for sure what is going to happen, so my intention here is just to put the actual levels on a more historical perspective to clarify a bit where we are at this point. And in my humble opinion Ibov still have room to go in the next 2 to 5 years. (if we don't follow a venezuela path of course, but think that risk is low). Ibov in USD log terms since 1968 removing it from the trend... 5 years annual compound return... 10 years annual compound return... relative value of the EWZ ETF against EEM...

Quick post here. I have been following a bunch of indexes and proxies of global trade volume for a while. I think its very important not just because we can have a picture of global growth, specially for emerging markets, but also because as commodities has in general become more traded by large numbers and types of players, including financial institutions, they have become more prone to herding behavior in the short time and sometimes losing its status as a proxy of global trade. Well, what most of them have been showing recently is that so far global trade measured in volume keep improving. Below some charts of those indexes: CPB global trade volume and prices RWI Container Throughput Index   next, Cass Freight Index and Intermodal Traffic Index. Both are more related to US trade but also corroborating with the idea of a more healthy global trade   I don't like much the Baltic dry index because it also h

Commodity prices in general have been soaring for almost one year and based on year over year returns are now at levels only seen a few times. Though very often prices, specially for assets wide traded, usually front run the real economy, with some time in our favor it is possible to at least question those price actions. Possibly could be too early to question that but its getting intriguing in my humble opinion. Some charts and thoughts below: Commodities (equal weighted index) YoY + 2 standard deviation. In the meantime global trade volume (CPB data) have improved somewhat but hardly to the same extend as commodity prices. Last time we have seem those price levels trade volume were running at 5 to 10% against 3% now on YoY. (trade volume LHS)   using the two Y axes: by the way, its also interesting how trade volume is weak and lagging behind some other economic measures that it used to have some correlation like the US ISM PMI.