Brazil – The Ministry Of Stupidity Speaks

BRIC Leaders.  Lula Da Silva is on the left

BRIC Leaders. Lula Da Silva is on the left

Orginal Image

The Ministry Of Stupidity Speaks – Brazil down 4%

Every so often some ministry or another does some bone headed thing and tanks their markets. In the case of Brazil, it was the President.

What did he do? By executive order, he imposed a 2% tax on foreign trades in stocks and bonds. Basically a "Tobin Tax" on foreigners. So today, the EWZ Brazil ETF was down about 4% (a bit more mid day) and I have sold ALL Brazilian positions. BAK, PBR, CZZ, EWZ whatever. I was “money good” in them by a lot (100% gain in some of them) so it’s time to “cut and run for the border”.

When The Ministry of Stupidity Speaks, grab your money and run. Period.

I’ll come back when the dust has settled and the rules are clear.

FWIW, The Ministry of Stupidity proposed some similar restriction on foreign investors in India about a year ago. In their case it was some financial minister. Market tanked for a week or so and then they reversed their decision…

You don’t need to be in the middle of that kind of game with that kind of risk.

So BAIL OUT first. Then decide at your leisure if you want to return.

Heck, next thing you know they might start buying out the banks, setting pay scales, and nationalizing car companies…


Several markets were looking ‘Toppy’ so I sold a fair number of positions today. I’ll update the list under the weekly posting later. The trades settle in 3 market days, so Friday. I’ll mostly just sit in cash through Friday unless some really great idea demands to be addressed.

Yes, when something like Brazil spooks markets, it can roll over into other markets too.

FWIW, when I’m ready to go “back in” it will likely be into India, unless the Brazilian President of Stupidity reverses his executive order in a hurry.

About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
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2 Responses to Brazil – The Ministry Of Stupidity Speaks

  1. Tony Hansen says:

    Is this just another version of killing the goose that lays the golden eggs?
    EM, what happened in the Indian market when they did this? I missed it.

  2. E.M.Smith says:

    The Indian market wobbled for a day or two, then dropped for about 2 weeks, then the decision was reversed and it started to go up again. IIRC it was at the start of 2008, so a visit to BigCharts and plotting EWZ and EWO vs IIF for 2005-now would show it as a drop in early 2008 when the others keep rising.

    You could also just hit the “races” tab up top, scroll down a couple of pages to the “international markets” race and hit the 10 year chart. A bit more cluttered, but its still visible.

    And yes, every so often some politician decides to screw the “rich capitalists” and this kind of thing pops up. FWIW, the Democrats have been just itching for a Tobin Tax in the USA as well. It’s not just a 3rd Word issue…

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