Doug Casey on Crisis Investing in Brazil
Doug Casey on Crisis Investing in Brazil by Justin Spittler – Casey Research
Justin’s note: Brazil is in crisis once again.
This time, Brazil’s president, Michel Temer, has been accused of corruption, bribery, and obstruction of justice.
When news of this scandal broke, it triggered a huge selloff in Brazilian stocks. The iShares MSCI Brazil Capped ETF (EWZ), which tracks Brazil’s stock market, plummeted 18% in one day. It was the fund’s worst day since the 2008 financial crisis.
Most investors now want nothing to do with Brazilian stocks. But we’re not like most investors. We understand crises can actually lead to huge moneymaking opportunities.
Casey Research founder Doug Casey has made millions investing in crisis-stricken markets like Brazil. So I immediately called up Doug after I read this story. Below is a transcript of our conversation…
Justin Spittler: Doug, what do you make of Brazil’s latest crisis? Do you see a crisis investing opportunity shaping up there?
Doug Casey: I’m not sure I’m interested in putting money there right now. But I am interested in Brazil.
As a matter of fact, as I speak to you right now, I’m out in the countryside of Uruguay, next door to Brazil. All these Latin American countries, quite frankly, are very problematical. They’re all very state-oriented. All of them have extremely high levels of taxes and regulations. I’m just surprised that Latin America has done as well as it has, quite frankly. But it could have done much, much better.
Looking at Brazil in particular, I wrote a long article on Brazil in The Casey Report in January of 2013, when three books had come out saying that Brazil finally turned the corner. That it’s going to realize its potential. Everybody was ultra-optimistic, and the stock market was bubbly. A spate of books or magazine covers—bullish or bearish—are always a tipoff.
There’s this old saying: “Brazil is the country of the future. And always will be.” It’s worse than Argentina in terms of taxes and regulations and corruption. Frankly, I don’t know how anyone can do a legitimate business there. In terms of inflation, Brazil is even worse than Argentina. As late as the 1920’s, however, they both had currencies redeemable in gold coins. Since then they’ve both replaced their currencies several times, with compounded inflation numbers in the many trillions.
Justin: So I take it you’re not buying Brazil on the dips?