You Can Run But You Can't Hide

When I was making my decision to move to Brazil, one of the things that I looked forward to most was just taking some time off from following the markets. I had spent so much time over the past eight years in finance that I was intrigued by the idea of having a break from it all. I would say that in the first few months here I enjoyed that luxury. Unfortunately, that is no longer the case as the destruction that is occurring in the U.S. has finally made its way south. The Bovespa (Brazilian stock market) is down 20% in just October alone and off around 35% in the past 30 days as investors are starting to worry that the developing countries are going to slip into a recession. Commodities, which are Brazil's bread and butter, are getting hammered left and right. However, the most relevant data to us foreigners is that the Brazilian Real (Brazil's currency) is off 60% against the dollar since the low, which was reached only in August. It's been incredible to watch and none of us can believe it, and this very rapid and wild swing in the exchange rate has forced all of us gringos to address the issue head-on. It can be looked on in both good and bad light. Certainly going forward, a better exchange rate like we have now is great for any future dollars that are exchanged into reais. However, if you had exchanged some money into reais in the past, you might be feeling some serious pain right now. For instance, I had to wire a big chunk of change back in August (very near a six year low) to apply for my visa and although I keep telling myself that there isn't a whole lot I could have done about it, it's enormously painful. At this point, I have two choices. I could say WTF and keep trying to tell myself that it will all work out in the end, or I could slip back into the old mode, start tracking the markets, and figure out a way to take advantage of the current environment. For better and for worse, I have chosen the latter. You can run but you definitely can't hide so why the hell not?

The interesting thing about all of this is that it seems that it's all anyone can talk about. You can't escape it. Most of my conversations now start with a quote from today's exchange rate. "Hey Chris. Just checked - 2.45. How are you man?" This has greatly confused my quest to find something to do on the business side. As of a month ago, it was a great idea to be making reais with the thought of there being an eventual return to the U.S. to spend those reais. Now, it makes much more sense to be making dollars and spending them here. Of course, with how quickly this has changed in one direction, it certainly has the potention to reverse itself again. But if I knew the answer to how that would work out, I wouldn't have to be searching for a business in the first place. ;) BTW, the great news is that for those of you coming down to visit, you just got 60% richer!

As I mentioned above, the Brazilian economy is finally starting to feel the effects of the global slowdown. The correlation certainly makes sense. Although many people thought Brazil was immune to this (including the current president who cracks me up with his arrogance), this was inevitable. The emerging market countries like Brazil, India, and China really so heavily on the big economic powers that when those countries are hurting that pain will most certainly trickle down in a big way. I have a friend who is a stock broker here, and he invited me to his office last week. It's a really interesting setup. There is one big office for the brokers and an outside room with computers and TV's where clients came come during the day to monitor the markets and trade stocks. The only thing that separates them is a big piece of glass, but most of the brokers are out there mingling with the clients anyway talking about trades, etc. I really couldn't imagine having clients in the office but we're in Brazil so I just went with out. The kicker was that there were people literally crying....literally. That's how much money is being lost. Many people rode the wave up and had a hell of a time, now it's time to take a seat and face the music. Let's just hope that a return to "normalcy" happens sooner rather than later.

BTW, I heard a great quote from the Senate committee hearing on Lehman Brothers. The quote was, "We can't keep privatizing gains and socializing losses." Talk about summarizing everything in a nutshell.

Ok, sorry for the drag blog post. I'll get back to writing about surfing, nightlife, and Brazilian chicks ASAP!!!!