Tag Archives: brazilian
Brazil’s Unrest: Should Investors Worry?
http://blogs.ft.com/beyond-brics/2013/06/19/brazils-unrest-should-investors-worry/#ixzz2WqmHIlTT Jun 19, 2013 4:11pm by Jonathan Wheatley The scenes have been extraordinary. Not only the size of public demonstrations in Brazil’s major cities over the past week but also the violence with which they were met by supposedly elite police units have made for surprising and shocking viewing. Are investors worried? And should they be? The short answer to the first question is, apparently, No. To be sure, Brazilian stocks have had a rough ride lately but equity investors are far more worried about the US Federal Reserve than they are about protesters, and the Bovespa index has been heading south since long before they took to the streets. The same is true of the currency and other assets. Beyondbrics has not seen a single analyst make any connection between the demonstrations and asset prices (we would be more than interested to be advised otherwise). To the second question, though, the answer must surely be, Yes. “What is going on is the result of slow growth and that is unlikely to go away,” says Alfredo Behrens, a professor of management at FIA, a business school in São Paulo. Which about sums it up. As one articulate young video blogger puts it, this month’s protests are about more than the 20 centavo increase in bus and metro fares that initially sparked them: “If everything was working, health, education, public transport itself,” she says, “nobody would be on the streets demonstrating.” Parallels have been drawn with the recent protests in Turkey (indeed, protesters in São Paulo and Istanbul saluted each other). Other parallels could be drawn with recent demonstrations in Chile, and even with the upper middle class protesters of Moscow and Chinese micro-bloggers. In all cases, newly economically-enfranchised people, the much-cited new middle classes, are looking about and finding themselves dissatisfied, often because their taxes are not being properly spent. They may feel their freedoms are being curtailed in other ways, too, but common among them is a sense of getting the bad side of a bargain with the state. Many have been quick to point out that Brazil’s protesters may be more privileged than the newly-enfranchised “classe C”. As newspaper Folha de S.Paulo noted on Wednesday, three quarters of the demonstrators have university degrees and more than half are aged under 25. But to dismiss them as a bunch of upper crust urbanites with nothing better to do would be a serious mistake. The educated young have led big revolutions in Brazil in the past (and around the world). And the first thing on the shopping lists of many joining the classe C has been a university eduction for their children. Why should investors worry? One threat to their interests is that the government may react in an overly placatory manner. Reversing the increase in transport fares would be fiscally irresponsible. (Doing what some protesters demand and making public transport free would be fiscal suicide.) The government may be doubly tempted to damp down the protests with floods of cash by the fact that next year is election year – and voter support for President Dilma Rousseff, until recently seen as a shoo-in for re-election, has slipped severely in recent weeks. Another threat is that the government may simply ignore the protests, assuming they calm down over time. That would leave Brazil stuck in its low-growth rut. This may no longer be as appealing to policy-makers as it once was. Slow growth of around 2.5 per cent is probably enough to keep unemployment at a level acceptable for voters. But voters are getting upset all the same. Ideally, of course, the government will listen to the voices from the streets and take energetic action to fight corruption and inefficiency in the public service. On the evidence of recent performance, the chances of that are slim. Even the leading Brazilian politicians who were convicted last year for corruption in a landmark case have yet to actually do any time. Continue reading
Column: Housing Rebound Boosts Timber Stocks
By John Wasik CHICAGO | Mon Jun 3, 2013 4:42pm EDT (Reuters) – If a tree falls in the forest, can you make a little money? As the U.S. housing rebound continues, you can watch the value of your real estate rise. In addition you can reap gains from resource companies that own and process timber. Since most U.S. homes are still framed with wood, timber becomes a more valuable commodity as new construction booms. Home prices gained the most in seven years in March, according to a recent S&P Case-Shiller housing index report. Housing starts in April rose 16 percent over the previous month with new building permits up 14 percent, according to the U.S. Census Bureau. North American sawmills are running at the fastest pace in six years, up nearly 7 percent over last year, according to CIBC World Markets , a Canada-based investment bank. Growth in China is also contributing to the rebound. More than 60 percent of log exports from the Pacific Northwest head to the People’s Republic. Timber is also becoming more scarce as forests shrink. As a commodity, it provides an inflation hedge, too; the S&P Global Timber & Forestry index has produced an annualized return of nearly 7 percent over the past three years through April 30. The current Consumer Price Index is running at an average 1 percent. Why invest in timber and related resource companies instead of the obvious play in homebuilder stocks ? Those companies have been rallying for more than a year and are pricey. The SPDR S&P Homebuilders ETF, for example, a fund that holds most of the major home-construction companies, is up more than 50 percent over the past year through Friday, almost double the price of a consumer cyclical index. That portfolio’s price- earnings ratio – what investors are willing to pay for a dollar of expected earnings – is 20, compared to 14.4, for the SP 500. The underlying S&P index for the timber sector has climbed more than 31 percent over the past year through May 31 compared to a nearly 50-percent gain for the S&P Homebuilders Index. The iShares Global Timber and Forestry Index ETF (WOOD), has p/e of 18; that’s not a bargain price either, but timber stocks are a better value now relative to homebuilding stocks and may have more upside. REGIONAL VIEW Most timber companies specialize in specific regions where they own or lease properties. But to obtain global diversification, it’s best to consider one of two exchange-traded funds on the market that hold timber, packaging and real estate investment trusts (REITs) that own lumber resources. The Guggenheim Timber ETF, holds major producers like Weyerhaeuser Co and International Paper Co. It tracks the Beacon Global Timber Index, which holds companies that own or lease forested land or produce wood-based products. More than 40 percent of the companies are based in greater Europe or Asia. It’s up 8 percent year to date through May 31 and gained 25 percent last year. As an alternative, the iShares timber ETF mentioned above has more than 60 percent of its holdings in the Americas, including Plum Creek Timber Company Inc and Potlatch Corp . The iShares fund is a better deal on expenses than the Guggenheim product, charging 0.48 percent annually for management, compared to 0.70 percent for the Guggenheim fund. It’s gained 4 percent year to date and 23 percent last year. Of the two ETFs, the iShares fund offers more total international exposure, including 13 percent stakes in Brazilian companies and 11 percent in Japan , says Eric Dutram, ETF analyst at Zacks Investment Research in Chicago. Either way, the two funds are reasonably priced, he said. Many timber companies give you a bonus if they’re vertically integrated. They could mean they are producing value-added products like rayon, packaging or paper, which also would benefit from a broad economic recovery. These companies may also own or lease land that may result in other mineral plays such as petroleum or natural gas . Keep in mind that timber trends can cut the other way. As funds specializing in a handful of commodities that rise and fall directly with economic demand, these ETFs are not for nervous investors. Guggenenheim Timber lost nearly half its value in 2008 and has a 32-percent five-year standard deviation, a volatility gauge. That compares to 20 percent for a world natural resources stock index. If the housing market goes south again, then these ETFs will suffer. Consider them only as small parts of a larger portfolio and not large holdings. (The author is a Reuters columnist and the opinions expressed are his own. For more from John Wasik see link.reuters.com/syk97s ) (Follow us @ReutersMoney or here Editing by Linda Stern and Andrew Hay) Continue reading
Farm Bill Gets House Hearing After Senate Panel Approval
By Alan Bjerga – May 15, 2013 The U.S. House Agriculture Committee debated legislation today to reauthorize farm programs, a day after the Senate panel approved a version that will cost $955 billion over 10 years. The House measure, which proposes spending an estimated $940 billion, would cut $40 billion over the next decade by eliminating $20.5 billion from nutrition programs including food stamps , the biggest USDA program, $18.6 billion in farm subsidies and 4.8 billion in environmental programs, the Congressional Budget Office reported. Crop insurance, which is making record payouts after last year’s drought, would rise by $8.9 billion under the House measure. Enlarge image Senate and House committee leaders have said they’ll end a program that pays growers of corn, rice and other major crops regardless of market prices, and use some of the savings to insure revenues in less-profitable years. Photographer: Daniel Acker/Bloomberg “Farmers, ranchers and American taxpayers are counting on us to pass a farm bill,” said House Agriculture Committee Chairman Frank Lucas , an Oklahoma Republican. “This committee will mark up a reform-minded bill that was developed with true bipartisanship.” The House version, like the Senate’s, includes $6.4 billion in mandatory budget cuts known as sequestration that took effect March 1. Crop subsidies benefiting buyers such as Archer-Daniels-Midland Co. (ADM) and food stamps subsidizing purchases at Supervalu Inc. (SVU) are targets for lawmakers seeking to trim the deficit. Senate Action The full Senate will take up its version of the bill next week, said Senator Debbie Stabenow , the Michigan Democrat who heads that chamber’s committee. Lawmakers are seeking to pass a bill after failing to renew farm policy last year. The Senate passed legislation last year by a vote of 64-35 that included the first major reductions in farm aid since 1996. The measure died in the House, where Republican leaders wanted deeper cuts to food stamps. The current law, passed in 2008, was extended until Sept. 30. House Majority Leader Eric Cantor , Virginia Republican, said he plans floor action by August, giving both parties time to negotiate a final package before current law expires. The House committee today rejected an attempt to limit a revamp of dairy policies that would re-introduce supply management into the boom-and-bust milk market. Dairy Plan The Dairy Security Act, part of the committee’s draft, would subsidize insurance policies for producers to ease tight profit margins created by low milk prices and high feed costs. In return, farmers would agree to cut milk production once prices fall below a set limit. A producer in the program who ignored the agreement would receive less in government payments. Money saved would then be used to buy dairy products for distribution to the poor — another way to lower inventories. Small dairy producers say subsidies are needed to stabilize their boom-and-bust business. Groups representing companies including Dean Foods Co. (DF) say the market distortions would harm trade and consumers. Representative Robert Goodlatte, a Virginia Republican and former chairman of the committee, offered an amendment stripping the supply-management provisions from the bill. The proposed dairy language would “penalize both consumers and dairy producers who want to expand their operations,” Goodlatte said. Representative Collin Peterson of Minnesota, the committee’s top Democrat who crafted the program, said his proposal was a realistic way to deal with price swings. ‘Worst Interest’ “We’ve got to understand that we have to deal with milk, and if we have an oversupply, what do we do?” he asked. “Volatility is in the worst interest of the dairy producer.” The amendment failed 20-26. Both Senate and House committees plan to end a program that pays growers of corn, rice and other major crops regardless of market prices, and use some of the savings to insure revenues in less-profitable years. The House and Senate proposals would each also expand crop insurance and introduce some form of “shallow loss” protection for farmers with revenue reductions not covered by indemnities. Government-subsidized crop insurance sold by Wells Fargo & Co ., Ace Ltd. (ACE) and others have soared to records, galvanizing groups fighting for less farm aid. Indemnities for last year’s Corn Belt drought, the worst since the 1930s, are at $17.1 billion so far, according to the government. Distribution Disagreement In Senate committee debate yesterday, committee members differed on how payments should be distributed. Senator Pat Roberts of Kansas, the top Republican on the committee last year, disagreed with successor Thad Cochran of Mississippi over provisions setting floor prices for commodities, which were added this year to satisfy lawmakers from the South. It’s “beyond frustrating” the Senate last year passed a bill without target prices and is now approving “a rear-view bill” that continues obsolete policies and may bring challenges before the World Trade Organization , Roberts said. Under a recent trade case, the U.S. is paying $147 million a year to Brazilian cotton farmers in a temporary settlement of a case over U.S. policies that support the fiber. “The WTO stove is hot,” said Roberts, who voted against the bill. “We should not reach out to touch it again.” Republicans unsuccessfully sought larger cuts to food stamp funding. “The Americans who rely on” the aid “are not nameless, faceless people looking for a handout,” said Senator Kirsten Gillibrand of New York , the lone Democrat to oppose the bill. “They are children, hard-working adults, struggling seniors, veterans, active duty troops and the families that stand by them. That’s who suffers in this callous political fight.” To contact the reporters on this story: Alan Bjerga in Washington at abjerga@bloomberg.net Derek Wallbank in Washington at dwallbank@bloomberg.net To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net Continue reading
