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NTN-B Principal T-bonds

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  • #158079

    815
    Member

    NTN-B Pricipal are the Brazilian T-bonds linked to inflation. They give you a fixed rate of about 6% + the inflation index (IPCA).
    Is anybody else in on these? The income tax is the basic one for all renda fixa…the sliding scale that starts off at 23% mais ou menos for 30 day and goes down to 15% after two years. As residents we have full rights to buy these.
    I bought some already. With Mirelles out and Tombini in, looks like we are in for some inflation.
    Would anybody care to opine?

  • #158084

    micko
    Member

    Can you buy these at your bank and hold them as part of your account?

  • #158090

    815
    Member

    Yes, almost all banks are authorized to sell (and hold) your paper but be aware, most banks charge “custodia”, a fee to hold your paper and most of the big banks charge a lot, negating your gains!!!
    I buy them through my “corretora” Spinelli (https://www.investbolsa.com.br/) because they do not charge a cent to hold the paper. There are at least five other institutions that do NOT charge as well (if I remember correctly Banifvest(www.banifinvest.com.br) doesn’t and I have students who use them as their broker and are quite satisfied with them).I don’t want anybody to think I am a shill for any one company!
    You can check out more info about at http://www.tesouro.fazenda.gov.br/tesouro_direto/ It’s the Tesouro Direto site.

  • #158093

    GGTrek
    Participant

    Buying long dated inflation linked bonds makes a lot of sense at the moment with Dilma ready to start a boom and bust cycle.
    My only issue with NTN-Bs is that they follow IPCA, which is an inflation index maintained by a Government agency (IBGE). This index was, let’s say, highly “flexible” to political will in the 90s when there was hyperinflation. During that period very few investors wanted to purchase anything so “flexible”. The government was forced to issue inflation linked bonds that were using IGP-M as the indexer (different measure of inflation, but more reliable since it is maintained by a private “no profit” organization like FGV). These bonds are called NTN-C and have expiries until 2031 but they are very illiquid nowadays (i.e. who owns them does not sell them), so very hard to purchase.
    The problem with long dated issuances in Brazil is that Govies are the only market for long term debt. Up to 6-7yrs debt you can find some private issuers with much better rates and tax efficiency that Govies (i.e. no tax at all), but if you want 10 to 30 yrs, you can only go to the Tesouro Direito
    http://www.tesouro.fazenda.gov.br/tesouro_direto/conheca.asp
    I suggest you to avoid purchasing these bonds through a major high street bank or they will kill any performance with their absurd custody fees. In the past I have used an online broker that covers no custody fee: http://www.banifinvest.com.br/novosite/index.jsp
    The company that is doing the custody for “Tesouro Direito” is CBLC (Bovespa Clearing House) that will charge you a hefty 0,4% over the market value of the bonds. This further reduces performance, but at least you are not paying the absurd 2% custody fees of the major banks + the 0.4% fees of CBLC.
    Regarding tax, this is a more precise description of what you are going to pay depending on tenor of the investment:
    “Os impostos cobrados sobre as opera√ß√µes realizadas no Tesouro Direto são os mesmos que incidem sobre as opera√ß√µes de renda fixa, ou seja, Imposto de Renda – pessoa física sobre os rendimentos dos títulos e nos investimentos de prazo inferior a 30 dias IOF.

    A Lei n¬∫ 11.033, de 21 de dezembro de 2004, alterou a tributa√ßão incidente sobre as opera√ß√µes do mercado financeiro e de capitais, incluindo as alíquotas de Imposto de Renda na fonte incidentes sobre os rendimentos do Tesouro Direto. De acordo com a reda√ßão legal, as alíquotas válidas a partir de 1¬∫ de janeiro de 2005 são as seguintes:

    I Р22,5% (vinte e dois inteiros e cinco décimos por cento), em aplicações com prazo de até 180 (cento e oitenta) dias;
    II Р20% (vinte por cento), em aplicações com prazo de 181 (cento e oitenta e um) dias até 360 (trezentos e sessenta) dias;
    III Р17,5% (dezessete inteiros e cinco décimos por cento), em aplicações com prazo de 361 (trezentos e sessenta e um) dias até 720 (setecentos e vinte) dias;
    IV – 15% (quinze por cento), em aplica√ß√µes com prazo acima de 720 (setecentos e vinte) dias.”

    Considering current nominal long term gross yields 12% and for a 20 years investment, you pay the 15% tax on interest and the 0,4% yearly custody fee on capital, you are effetively giving away approx. 18.5% of your performance and so your net nominal yield will only be approx. 9.8%. Which is not bad, but with tax efficient private instrument I am getting the whole gross yield (albeit for a shorter period).

  • #158094

    815
    Member

    Thanks for your excellent post GGTrek!
    I agree about the IPCA being flexible. There were months in 2010 where it posted 0 and close to 0.
    Do you mind talking about your instruments. I am quite new to investing and all about learning!

  • #158133

    GGTrek
    Participant

    There are a few investments that are excluded from withholding tax in Brazil(IR = imposto de renda), I have invested in LCI and LCA, I am putting some links (in Portuguese) here to explain what they are (I do not have the time now to give a full explanation in English):
    http://queroficarrico.com/blog/2010/05/26/lci-letras-de-credito-imobiliario/
    http://www.agroanalysis.com.br/index.php?area=conteudo&esp_id=4&from=especial&epc_id=20
    http://www.cosif.com.br/mostra.asp?arquivo=mtvm_agronegocio
    Basically they are securitized instruments where you are running credit risk if, at the same time, the debtors and the financial institution that securitized the debt default at the same time (this is a possibility in case of a systemic crisis like in the US 2008, since credit risk correlation goes to 1 in such cases).
    These are the Brazilian Financial Institutions from which I bought these instruments:
    http://www.ourinvest.com.br/m3.asp?cod_pagina=938
    http://www.bfre.com.br/brazilianmortgages/m3.asp?cod_pagina=960&cod_pai=0
    http://www.bancojbs.com.br/lca.html
    Again avoid big Brazilian financial institutions or they will screw your performance. Ouroinvest is the umbrella group of Brazilian Mortgages (i.e. they provide financing to them), JBS is the bank of the biggest meat processing company in the world. The minimum investment with Ouroinvest LCI is R$ 30k, the minimum investment with JBS LCA is R$ 100k. Negotiate the rates, the longer the term and the more the money you invest, the higher the rate. JBS will give you better rates, as you can see they have the IGP-M linked instruments, I believe the maximum term is 3 to 5 yrs (as I said in my previous post the only way to invest into the long side of the curve in Brazil is Gov Bonds). There another couple of good financial institution that give good rates up to R$ 1M invested, above that your horizon expands a lot and you have a lot of choice.
    If you want an official full explanation of the tax rules for financial instruments in Brazil, this is the link:
    http://www.receita.fazenda.gov.br/pessoafisica/irpf/2010/perguntas/aplicfinanrenfixarenvariavel.htm
    Another investment that is long term (almost perpetual) and can be linked to IGP-M is the FIDC (but here you pay the 15% withholding tax):
    http://www.webfinder.com.br/disclosure/HTM/D124-art1.htm
    In this case you are running a credit risk if more than X% of the debtors default (you have to analyze very carefully the statute of the fund).
    Petra correttora used to have a good choice of FIDCs in the past, you will have to investigate if you want one linked to IGP-M:
    http://www.petracorretora.com.br/fundos.htm
    GGTrek2010-11-28 15:58:19

  • #158308

    815
    Member

    GGTrek-
    Thanks a lot for the above information! Of all you have mentioned, I have only heard of letras de credito imobilario.
    I will surely take a look.
    Cheers!

  • #250667

    miguel
    Participant
    Reviving a thread that, in hindsight, 2.5 years later, seems very prescient!

    Thanks to Paulistano USA. With some real value-added contributions from GGTrek.

    From the peanut gallery: it would appear that anyone who invested in such inflation-linked notes, at any maturity, from the time of the initial post, given where yields are today (although their recent hefty increase is hereby acknowledged!) would have realized a hefty capital gain had they sold up until now, on top of the accumulated built-in inflation protection and fixed-rate payout. And well exceeding, by comparison, the floating rate notes indexed to SELIC.
    It would also appear that anyone still invested in such notes, on a mark-to-market basis, would still be sitting on some nice gains despite recent monthly market losses. (Again, assuming the investment was made at the time this thread was created.) Those accumulated gains were sustained in the face of the Dilma economy of the past few years – rising inflation and lower interest rates!!
    So, a fixed 6% payout (if the note was principal-linked then payout at maturity of course) adjusted by the eventual hefty accumulated inflation payouts. With no risk to principal if held to maturity. Certainly much better than the NEGATIVE real interest rates sustained in recent years by Selic- or CDI-linked investments like DI Funds, floating rate CDBs, floating rate notes (LFTs), or the “lowly” poupan√ßa (old or new) for that matter.
    Wondering if those who already shared their experiences on this thread, or any others here, would be interested in sharing their present perspectives – whether the investment met their initital expectations, whether they have maintained the investment, whether they have added to the investment, whether they would now consider such an investment, etc.?
    Or alternative investments folks here have made during this period or are now considering?
    With the view of initiating a discussion here on financial investments.
    OK personally speaking. I have not yet invested in Tesouro Direto but would seriously consider an investment in the NTN-B in one of the shorter maturities if the fixed rate component exceeded 5%. Combined with the inflation protection, that, in my view, would certainly represent a decent real return here.
    In the past have ridden out the interest rate curve with floating rate instruments (like CDBs or DI funds), but the VERY real risk of NEGATIVE real interest rates (nominal rates less than inflation)- as evidenced in the recent past – can certainly grate…. I’m sure there are other resident investors here that have not been particularly pleased with that performance?!

    miguel2013-06-04 23:15:34

  • #250687

    [QUOTE=miguel]Wondering if those who already shared their experiences on this thread, or any others here, would be interested in sharing their present perspectives – whether the investment met their initital expectations, whether they have maintained the investment, whether they have added to the investment, whether they would now consider such an investment, etc.?[/QUOTE]
    Paulistano and I had some bate-papo in the Exchange Rate 2013 thread a few months ago about LCIs. I had a CDB maturing, and my account manager encouraged me to put the funds in an LCI. Pays slightly higher than a CDB, but the real bonus is that there is no tax to pay when the term concludes (min of 100k/1yr@HSBC).
    As GGTrek mentioned, the LCI is a mortgage backed security. But since there’s no sub-prime shenanigans occurring in Brasil (yet), I’m not concerned about massive defaults (yet). I believe I’m earning around 8%. Granted, that’s essentially 50% less than what rates were when I arrived in Brasil, nonetheless it’s eight times more than what one would earn in the US for a similar conservative investment.
    I can’t state just yet that my expectations were met, but I think they will be as far as taxes go. As for inflation‚Ķ I prefer not to think about that!
    Gringo.Floripa2013-06-07 20:04:11

  • #250693

    815
    Member

    I really wish I had bought more back then!
    I am very leery of any Brazilian Treasuries at the moment. Why you ask? Because Globo is (not even Globo news but the regular channel + Globo news) is hawking them!!! They are pumping them up as a great investment; the best thing going.
    You know the old adage, once the press is buzzing, the party is already over but when Globo starts buzzing I feel the consequences are probably much worse!

  • #250732

    miguel
    Participant

    [QUOTE=Paulistano USA]I really wish I had bought more back then!
    [/QUOTE]

    That’s hardly surprising! Once again, congratulations on a great market call and terrific investment.
    To get a rough idea of the profitability of these treasury instruments I just checked the Brazil Capital Markets Assocation website (Anbima) and during the period of Sept 2011 through early May 2013 (yes, I recognize that I am excluding a full year of market returns since your initial investment but wanted some quick & dirty numbers), the IMA-B 5+ index (representing inflation-linked securities with maturities over 5 years) returned a cumulative 40%. Not too shabby for the last 1.5 years.
    So, greater than 2% per month (before tax) during this period. This compares with a mere 15% cumulative pre-tax return in the IMA-S index (representing SELIC or floating instruments). So during this period you earned more than 2.5 x your standard bank CDB(and that assumes close to 100% of CDI), or a DI fundwith a taxa de administraçao of less the 0.5%, which is difficult for most retail investors to achieve in the first place.
    Does that sound about right for the last 1.5 years of your investment?

    miguel2013-06-05 14:47:04

  • #250740

    miguel
    Participant

    [QUOTE=Paulistano USA]

    I am very leery of any Brazilian Treasuries at the moment. Why you ask? Because Globo is (not even Globo news but the regular channel + Globo news) is hawking them!!! They are pumping them up as a great investment; the best thing going.
    You know the old adage, once the press is buzzing, the party is already over but when Globo starts buzzing I feel the consequences are probably much worse!
    [/QUOTE]

    I hear you Paulistano. I saw those hyped reports, and in their print edition too, a couple of months ago.
    And sure enough, your old adage proved correct, coinciding roughly with the market carnage in fixed income, where retail investors, late to the party to begin with, made for the early exits. That occurred both in investment funds and in individual securities, and resulted in locking in those short-term market losses. I doubt those investors will return anytime soon.
    Since then, at least in print, Globo has reported extensively on those market losses in fixed income and inflation-linked securities, and even providing examples of their loyal readership that duly lost their shirts. That’s quite a service, even by Globo standards.
    So, who knows, the old adage may be indicating that it’s time to consider buying – or at least to hold on to one’s existing holdings.

    miguel2013-06-05 15:29:40

  • #250751

    miguel
    Participant

    [QUOTE=Gringo.Floripa]
    Paulistano and I had some bate-papo in the Exchange Rate 2013 thread a few months ago about LCIs. I had a CDB maturing, and my account manager encouraged me to put the funds in an LCI. Pays slightly higher than a CDB, but the real bonus is that there is no tax to pay when the term concludes….
    I believe I’m earning around 8%.
    [/QUOTE]

    That’s a very interesting after-tax (in this case, tax-free) annual return, GF, especially for an investment made a few months before the recent rate hike cycle! 8% being roughly equivalent to a pre-tax 9.5% with 15% withholding tax (and closer to 10% with a higher assumed WHT).
    I need to read up on the differences between LCI vs. LCA vs. LF. For example, some of these investments, as you state for LCI, are tax-free and others are not. Also, some of these investments are covered by FGC insurance (roughly equivalent to FDIC), and recently increased, while others are not. Do you happen to be familiar with those nuances?
  • #250762

    miguel
    Participant

    [QUOTE=Gringo.Floripa]
    As GGTrek mentioned, the LCI is a mortgage backed security. But since there’s no sub-prime shenanigans occurring in Brasil (yet), I’m not concerned about massive defaults (yet). I believe I’m earning around 8%. Granted, that’s essentially 50% less than what rates were when I arrived in Brasil, nonetheless it’s eight times more than what one would earn in the US for a similar conservative investment.
    [/QUOTE]

    Good point about potential sub-prime risk! For that reason I would never invest in CRI’s, a related securitized vehicle but with no recourse to the issuer, unlike LCI’s, as GGTrek also pointed out, where your potential credit exposure is much higher.
    There is apparently a new investment flavor being promoted by brokerages, since their retail equities business is not going anywhere – except down the tubes. They’re called Fundos Imobiliarios (FII is their acronym) and they are Exchange Trade Funds (ETFs) traded on the local stock exchange. I would not touch those either. Just look at the recent share performance and that of their underlying investments.
    Also a very valid point to compare returns here with returns one would have received stateside, especially as a resident investor – or retiree – here. For someone living at least partially off of one’s investment income here, which is better: to be earning 8% on a deposit account here vs. 1% stateside; and 10% on a 10-year fixed rate bond here vs. just over 2% stateside?!
    Speaking of which, the local 10-year T bond, NTN-F (not inflation-linked) may be tempting. It presently yields around 10.2%, down from 10.5% yesterday right before the removal of the IOF tax on foreign fixed income investments here. (All long bonds here had major declines in yields today.) Given that US 10-year treasuries yield just short of 2% (and rising), that is still a very compelling yield spread for a resident investor/retiree here – that could make or break achieving one’s budget.

    miguel2013-06-05 16:24:56

  • #250775

    [QUOTE=miguel]I need to read up on the differences between LCI vs. LCA vs. LF. For example, some of these investments, as you state for LCI, are tax-free and others are not. Also, some of these investments are covered by FGC insurance (roughly equivalent to FDIC), and recently increased, while others are not. Do you happen to be familiar with those nuances? [/QUOTE]
    Miguel, the hype of “FDIC insured” is fine if one SmallTown Bank USA goes under here and there, but should there be a multitude simultaneously fold, or several big boys collapse together, there’s not enough reserves to cover everyone’s account balances. I’ve never looked into the aspects of FGC here in Brasil, but I’m sure it’s the same thing.
    When my acct. mgr was giving me the pitch for the LCIs, I did inquire about ‘risk’, and she assured me the bank (HSBC) would ‘protect’ me. I just smiled and did an invisible eye-roll. While HSBC indeed has it’s shortcomings, the fact they are one of the largest financial entities on the planet gives me some assurance. Should they go under, we’ll all probably be scrounging for grubs and roots anyway, so it won’t really matter.
    All sarcasm aside, have you ever considered Miguel becoming a financial advisor, with a niche focus on expats? If you haven’t contemplated this, you should.

  • #250783

    doctorlili
    Member

    Is HSBC really that big? Their US presence at least is skimpy at best. They do a lot of airport advertising (with really stupid slogans BTW), I am kind-a happy that they gave me such a hard time to open an account here in the US, because I am hearing limited customer satisfaction and high fee rip-off levels.
    I am happy to have my BdB account. I pay no fees and have no minimum balance requirement. Branches every couple of kilometers it seems. And my checking account is automatically backed by an investment fonds, DI something or other. I think they are around 5-6% return right now. May be not the top of the top, but super convenient. When I transfer a chunk into my checking account, they sweep it to this fond automatically, leaving a very small balance on the checking only (meaning less than R$1000). At any time when I issue a debit to the checking, it just gets automatically taken from that fonds.Squiddie2013-06-05 18:41:15

  • #250789

    [QUOTE=Squiddie]Is HSBC really that big? Their US presence at least is skimpy at best.[/QUOTE]
    From Wikipedia: As of 31 December 2012 it had total assets of $2.693 trillion, of which roughly half were in Europe, the Middle East and Africa, and a quarter each in Asia-Pacific and the Americas.
    As of 2012, it was the world’s largest bank in terms of assets and sixth-largest public company, according to a composite measure by Forbesmagazine.

    It was explained to me the US presence was initially the result of Asian immigrants, mainly Chinese, and actual branches in the US are mostly limited to NYC, major west coast cities, and Miami (a South American specific branch is there).

  • #250797

    Anonymous

    [QUOTE=Gringo.Floripa]have you ever considered Miguel becoming a financial advisor, with a niche focus on expats? If you haven’t contemplated this, you should.[/QUOTE]
    May I just add my vote to this suggestion. Along with the request that, for starters, availability be announced here.
    As iron sharpens iron, so one person sharpens another.

  • #250837

    815
    Member

    [QUOTE=picolino][QUOTE=Gringo.Floripa]have you ever considered Miguel becoming a financial advisor, with a niche focus on expats? If you haven’t contemplated this, you should.[/QUOTE]
    May I just add my vote to this suggestion. Along with the request that, for starters, availability be announced here.
    As iron sharpens iron, so one person sharpens another.
    [/QUOTE]
    I just hope Miguel sticks around and continues to post here. An intelligent poster adding truly beneficial information to gringoes.com gets my Thumbs%20Up

  • #250845

    graham
    Participant

    thank you for posting this information!

  • #250928

    miguel
    Participant

    Good to see that my posts updating Paulistano’s thread generated interest and were of use to the forum community.

    You know, I stumbled upon Paulistano’s thread in the first place as I was about to invest in Tesouro Direto securities and wanted to see what in the way of information had already been posted on this site; and also conducted a search under Investments to see what else in the way of financial investments in general had been posted.
    I was amazed to see how little in the way of Financial Investments and Personal Finance has been posted and had to go back 2 1/2 years to find this thread.
    As I know there are a number of us resident investors and/or retirees on this forum, I would think that more posts regarding our individual experiences with Financial Investments, Personal Finance, Retirement, market intelligence, and sharing of financial success (and otherwise) stories would be of general interest and would encourage more of that. Do you agree.
    And with all due respect to the newbies (as we all were once), help the forum go beyond the incessant “how to open a bank account?” and “transferring monies for a real estate purchase?” that are constantly recycled here and thus help retain overall forum member interest.
    And that could well re-engage folks like GGTrek, among others, in this area and just round out the forum in these areas. There is certainly not much in the way of quality internet space for financial investments and retirement issues for expats resident in Brazil. Anyway, just a thought, cheers.

    miguel2013-06-06 22:02:27

  • #250947

    [QUOTE=miguel]
    As I know there are a number of us resident investors and/or retirees on this forum, I would think that more posts regarding our individual experiences with Financial Investments, Personal Finance, Retirement, market intelligence, and sharing of financial success (and otherwise) stories would be of general interest and would encourage more of that.   Do you agree.
    [/QUOTE]
    I most certainly agree Miguel! Paulistano was just saying the same thing to me. Lead on….
    Several of us also agree that you should begin your own consulting firm, outsideof this forum.

  • #250950

    graham
    Participant

    [QUOTE=Gringo.Floripa] [QUOTE=miguel]
    As I know there are a number of us resident investors and/or retirees on this forum, I would think that more posts regarding our individual experiences with Financial Investments, Personal Finance, Retirement, market intelligence, and sharing of financial success (and otherwise) stories would be of general interest and would encourage more of that.   Do you agree.
    [/QUOTE]
    I most certainly agree Miguel! Paulistano was just saying the same thing to me. Lead on….
    Several of us also agree that you should begin your own consulting firm, outsideof this forum.
    [/QUOTE]
    I agree that stories of experience and general interest such as outlined by Miguel would be encouraging and useful addition to forum discussions. There are certainly a base of people here who have interest, and there is too little dicussion of such considerations.
    On the other hand, I have always been very reticent to discuss much of my personal finances with anyone except those who need to know. I am also guilty of sucking up information like a sponge while doing little to return the favors in this regard. Perhaps too, I am fearful of boasting and also of having less useful knowledge to share than I care to admit…though I have a lot of experience, I am no mogul.
    Still, I hope that dialogs in the above vein will grow. I will try to contribute something, whenever it might seem useful.
    good luck
    edit:typo
    Grads2013-06-07 07:54:47

  • #250955

    [QUOTE=Grads]
    On the other hand, I have always been very reticent to discuss much of my personal finances with anyone except those who need to know. I am also guilty of sucking up information like a sponge while doing little to return the favors in this regard. Perhaps too, I am fearful of boasting and also of having less useful knowledge to share than I care to admit…though I have a lot of experience, I am no mogul. [/QUOTE]
    I understand your renitence Grads. Aside from needing to be discreet with such an exploitable discussion of highly personal information, there is indeed a certain fringe element here who loves nothing more than to interrupt a thread with their criticisms and ridicule. Several of those pesky ticks were recently picked off and squashed, although a few still remain. I say we ignore them, and carry on the discussion(s), at least initially, in generic terms. As Picolino stated, “Iron sharpens iron”, and I have no doubt some valuable information could be shared amongst us.
    Now where, oh where, did I leave those tweezers??? Evil%20Smile

  • #250957

    Deleted User
    Moderator

    [QUOTE=Gringo.Floripa][QUOTE=Grads]
    On the other hand, I have always been very reticent to discuss much of my personal finances with anyone except those who need to know. I am also guilty of sucking up information like a sponge while doing little to return the favors in this regard. Perhaps too, I am fearful of boasting and also of having less useful knowledge to share than I care to admit…though I have a lot of experience, I am no mogul. [/QUOTE]
    I understand your renitence Grads. Aside from needing to be discreet with such an exploitable discussion of highly personal information, there is indeed a certain fringe element here who loves nothing more than to interrupt a thread with their criticisms and ridicule. Several of those pesky ticks were recently picked off and squashed, although a few still remain. I say we ignore them, and carry on the discussion(s), at least initially, in generic terms. As Picolino stated, “Iron sharpens iron”, and I have no doubt some valuable information could be shared amongst us.
    Now where, oh where, did I leave those tweezers??? Evil%20Smile
    [/QUOTE]

    MISSION (almost) ACCOMPLISHED! LOL

    Echoesof George Bush? A little brush of foreplay does not an orgasm make.

  • #250958

    [QUOTE=Esprit]A little brush of foreplay does not an orgasm make.

    [/QUOTE]
    You might want to pass on that valuable tip to your new friend. Wink

  • #250959

    Deleted User
    Moderator

    [QUOTE=Gringo.Floripa][QUOTE=Esprit]A little brush of foreplay does not an orgasm make.

    [/QUOTE]
    You might want to pass on that valuable tip to your new friend. Wink
    [/QUOTE]

    I have a new friend?! Shocked
  • #250960

    ClaudePeebles
    Participant

    [QUOTE=Grads]On the other hand, I have always been very reticent to discuss much of my personal finances with anyone except those who need to know.[/QUOTE]
    Not only understand but fully agree with your reluctance. Some people seem to find it necessary to brag about how much they have, even if subtle hints like having great deposits and investing in funds with a minimum of R$XX etc etc.
    One can only assume this is as a result of insecurity, particularity when they have more than one account on the forum.
    Fortunately, this forum now has the potential to be a pleasant place given the administrator has unreservedly informed those less than nice members who were bullying others, particularly newcomers, that any future occurrences will result in their instant removal, a fantastic step forward.

  • #250961

    [QUOTE=Esprit]

    I have a new friend?! Shocked

    [/QUOTE]
    Perhaps comrade-in-arms then? I don’t know the extent of your relationship. He’s definitely your sidekick (see, he’s already jumped into the convo).
    You might also share yourfinancial savvy Esprit, which I have no doubt you possess. He could use all the help he can get. Wink
    See what I mean Grads….

  • #250972

    Deleted User
    Moderator

    [QUOTE=Gringo.Floripa][QUOTE=Esprit]

    I have a new friend?! Shocked

    [/QUOTE]
    Perhaps comrade-in-arms then? I don’t know the extent of your relationship. He’s definitely your sidekick (see, he’s already jumped into the convo).
    You might also share yourfinancial savvy Esprit, which I have no doubt you possess. He could use all the help he can get. Wink
    See what I mean Grads….
    [/QUOTE]

    Forbetter or for worse, I don’t have particular ‘relationships’ on this forum,faggoty or otherwise.

    Whatlittle investment expertise that I have often times keeps me awake in terror.In contrast to the temptation to gloat about success, I can provide succour tothose perverse among us who take comfort in the misfortune of others; schadenfreude, as only theGermans would have it, I can admit that the Brazilian sovereign debt that I’mholding is haemorrhaging a lot of ill-gotten gains since I bought it as cheapjunk cheap many years ago. In any event such investment continues to pump out thesame amount of crisply minted cash in an uninterrupted steady stream; myundiminished thanks goes to the taxpayers.

    Theprospects of the global downturn together with frivolous government spending byinept politicians, exampled by social programmes and wage interference, theWorld Cup and Olympics, is scaring off Brazilian debt investors. My stuff isstill in the black and I’m holding for the off-chance that the stampeding herdsof lemmings can be turned by the negative returns on offer elsewhere. Unfortunately,if I tell you my other secrets, I’m afraid I’d have to kill you. Tongue

    Esprit2013-06-07 11:04:58

  • #250995

    [QUOTE=Terry_2]
    Some people seem to find it necessary to brag about how much they have, even if subtle hints like having great deposits and investing in funds with a minimum of R$XX etc etc.[/QUOTE]
    There was no ‘subtle hint’ about anything. I was simply stating what the minimums are with my bank, just as GGTrek stated, “The minimum investment with Ouroinvest LCI is R$ 30k, the minimum investment with JBS LCA is R$ 100k”.
    But you didn’t read back that far, did you T_2? Just saw my post and jumped on my back with your criticism, per usual. Anyway, for whoever is interested, the minimum investment amount and term (for an LCI, what was being discussed), should be found on the website at whatever financial institution offers them.
    Like Grads, I’m no mogul, but I’m definitely ‘in the game’, and always looking to improve my skills. Miguel, Grads, Paulistano, Esprit even, anyone with genuine financial savvy, I’m all ears for what you might have to say.
    Yet it is indeed tacky to talk specific dollar amounts/reais amounts in one’s investment portfolio. It’s more polite to speak in terms of percentages. Everyone at the poker table can bluff all they want, but there comes a moment when you have to lay your cards down, and find out who was bluffing, and who wasn’t.
    For those in the peanut gallery, cala sua boca (favor).
    Or in plain english, “Put a ‘sock’ in it” LOL
    Yet as far as bragging goes amigo, do you mean like this? Confused
    [QUOTE=Terry_2]I’m just now on my way out of Brazil for a better life after enjoying a very comfortable lifestyle here for over 10 years, however I was on a full expat contract with everything paid including rent, utilities, car, gas etc, plus we’re tax free apart from a nominal equalization payment, literally all I need to pay for is food on the days we don’t have company meals. We have a large house in a safe area with two staff….[/QUOTE]
    Gringo.Floripa2013-06-08 09:38:15

  • #251001

    ClaudePeebles
    Participant

    [QUOTE=Gringo.Floripa]For those in the peanut gallery, cala sua boca (favor)[/QUOTE]
    Now that’s not a very nice thing to say on a public forum, some have tender ears.
    No problem, I’ll give you my sophisticated and noteworthy take on world financial matters and investments later, just a little busy with other stuff at the moment.
    But before I do that, would you clear up a small mystery, what does bluffing at a poker game have to do with this subject?, we’re all anonymous on here where you NEVER lay your cards down, except perhaps those of course who may wish to brag and show off.
    Also, I’m at a bit of a loss in terms your cartoon, would you do us all a favor and explain, is it perchance the percent risk of rain vs sunshine for next week?

  • #251012

    GGTrek
    Participant

    Hoping for a stop to the bickering above I shall try to put some input. NTN-B very long dated (2035 and 2045) was definitely a good investment I made at the time and that I closed in February this year, shame I did not have more money, but big house purchase in São Paulo in early 2011 and big builders fees along the earlier part of that year really killed my investments Cry
    I really like to look at this graph from the year 2000 (before then it is just a laugh and it shows that the country was in real deep issues) before making a fixed income investment:
    http://www.tradingeconomics.com/brazil/interest-rate
    In my humble opinion rates have still got some way to go (up clearly) before they reverse to long term trend line (in all models of interest rates dynamics, mean reversion is incorporated). I would not start to invest in Brazil long term fixed income instruments until the Selic has gone above 10% (i.e. above the trend) at such point your potential risk of further rates increases is greatly diminished.
    Another important point, if interest rates go up the Real vs foreign currencies that do not increase their interest rate will have a good chance of becoming stronger. I.e. the Real will be purchased more because of the higher yields offered and there will be pressure for the exchange rate to go down which means stronger real, this could be obviously compensated by a strong trade deficit in Brazil, but financial flows are nowadays faster and bigger than trade flows.
    About FGC, as recently as May 2013, their rules changed for the better (for the investors), more instruments are now covered (including LCIs and LCAs):
    http://www.fgc.org.br/?conteudo=1&ci_menu=19
    and the basic guarantee was extended to R$ 250000 (there are many other types of guarantees):
    http://www.fgc.org.br/?conteudo=1&ci_menu=20
    which covers principal + interest
    I would also suggest to look at how “quickly” they pay in case of bank insolvency:
    http://www.fgc.org.br/?conteudo=1&ci_menu=1327
    BVA for example was a bank that became insolvent in October last year and in early March you could already get your money back (up to the secured limit) with FGC so approximately 5 months waiting time (not bad for a country that takes decades for a serious court claim!)
    I have many more opinions and ideas on assets inside and outside Brazil and even about my Brazilian naturalization application I presented in May this year, but my time lately has been very limited, so I shall stop here for the time being.
    GGTrek2013-06-07 18:57:21

  • #251013

    [QUOTE=GGTrek]
    I have many more opinions and ideas on assets inside and outside Brazil and even about my Brazilian naturalization application I presented in May this year, but my time lately has been very limited, so I shall stop here for the time being.[/QUOTE]
    Great to see you post again on this GGTrek! Given your limited time, I know everyone genuinely interested in this thread is appreciative. When you have the opportunity, please share those other opinions and ideas of yours.
    Parabenson your application to become naturalized! Expect at least a year, but depending on your location, might be a bit sooner, or quite awhile later. The key is to get the PF to do their home visit, so your file can be sent off to Brasilia. Once it arrives there, the process goes fairly swift (for Brasil).
    Gringo.Floripa2013-06-07 19:19:29

  • #251017

    Deleted User
    Moderator

    [QUOTE=Gringo.Floripa]
    MAINTAINING A BULLY FREE FORUM!SilverSurfer/suspended… Verdadeiro/suspended… Gringo.Europia/suspended… LouLipsh**z/suspended… Uncle Fred/suspended…
    [/QUOTE]

    Allthose notches on your gun handle – wanna change your name to Clint.Floripa?Thank ye kindly sheriff. LOL

  • #251019

    ClaudePeebles
    Participant

    [QUOTE=Esprit]
    [QUOTE=Gringo.Floripa]
    MAINTAINING A BULLY FREE FORUM!SilverSurfer/suspended… Verdadeiro/suspended… Gringo.Europia/suspended… LouLipsh**z/suspended… Uncle Fred/suspended…
    [/QUOTE]
    All those notches on your gun handle – wanna change your name to Clint.Floripa? Thank ye kindly sheriff.
    [/QUOTE]
    Hysterical…

  • #251021

    [QUOTE=Esprit]

    Allthose notches on your gun handle – wanna change your name to Clint.Floripa?Thank ye kindly sheriff. [/QUOTE]
    I told your sidekick Esprit, that if he would lead, I would follow. Credit for the tagline goes to him. I merely provided an update to the ‘maintenance’.
    [QUOTE=Terry_2]Maintaining a bully free forum[/QUOTE]
    Besides, I don’t have the ability to suspend anyone. Wish I did! Perhaps you and Mini-Me should take that complaint up with SR. Oh look!!! There’s your sidekick now, on your heels, posting immediately after you.
    Please do take him under your wings and give him some much needed investment advice. Speaking of, in spite of death threats (jokingly said bu you, of course), anything else useful and constructive to contribute to this thread?
    Gringo.Floripa2013-06-08 09:16:27

  • #251022

    ClaudePeebles
    Participant

    I’m just so happy to be here….Terry_22013-06-07 22:14:54

  • #251023

    [QUOTE=Terry_2]So sad…[/QUOTE]
    What, your balance sheet? Get with Esprit, he’ll help you.

  • #251024

    ClaudePeebles
    Participant

    [QUOTE=Gringo.Floripa]
    [QUOTE=Terry_2]So sad…[/QUOTE]What, your balance sheet?¬† Get with Esprit, he’ll help you.[/QUOTE]
    My balance sheet is in superb condition, in fact it couldn’t be better, no need for help from anybody, but thanks for suggesting.
    You didn’t answer my questions from earlier today, about your cartoon etc. And why are you copying my signature?, not very nice old chap.
    Have a great evening.
    Terry_22013-06-07 22:23:02

  • #251030

    [QUOTE=Terry_2]
    My balance sheet is in superb condition, in fact it couldn’t be better, no need for help from anybody, but thanks for suggesting.[/QUOTE]
    That’s really great to hear. Therefore, you must have lots of tips and advice for this thread. You mentioned earlier today you didn’t have time to share any, but it appears you have plenty of time now. Hit us with your Top 5!

  • #251034

    ClaudePeebles
    Participant

    When you answer my questions I’ll let you in on the secrets to my success…you’ll be amazed I’m sure.
    Mmm moving goalposts.
    Terry_22013-06-08 09:13:17

  • #251037

    Deleted User
    Moderator

    Iwould offer Micawber‚Äôs financial advice: “Annual income twenty pounds, annualexpenditure nineteen shillings and six, result happiness. Annual income twentypounds, annual expenditure twenty pounds ought and six, result misery.”

  • #251039

    ClaudePeebles
    Participant

    Ah, how refreshing, Micawber..such a fine upstanding fellow.

  • #251134

    miguel
    Participant

    [QUOTE=Gringo.Floripa][QUOTE=GGTrek]
    I have many more opinions and ideas on assets inside and outside Brazil and even about my Brazilian naturalization application I presented in May this year, but my time lately has been very limited, so I shall stop here for the time being.[/QUOTE]
    Great to see you post again on this GGTrek! Given your limited time, I know everyone genuinely interested in this thread is appreciative. When you have the opportunity, please share those other opinions and ideas of yours.
    [/QUOTE]

    Could not agree more. If updating Paulistano’s thread has contributed to GGTrek’s re-posting here on financial investment issues, then it was well worth it!

    miguel2013-06-08 18:31:34

  • #251137

    miguel
    Participant

    [QUOTE=GGTrek]
    I really like to look at this graph from the year 2000 (before then it is just a laugh and it shows that the country was in real deep issues) before making a fixed income investment:
    http://www.tradingeconomics.com/brazil/interest-rate
    In my humble opinion rates have still got some way to go (up clearly) before they reverse to long term trend line (in all models of interest rates dynamics, mean reversion is incorporated).
    [/QUOTE]

    Agreed, and I think you’ll find the following post from yesterday’s ValorInvesteblog on topic and of interest:

    miguel2013-06-08 18:29:22

  • #251143

    miguel
    Participant

    Referring to the interest rate risk that GGTrek alludes to, in today’s environment I would suggest that anyone investing in inflation-indexed securities invest in a maturity that corresponds to the approximate time he or she intends to actually hold the investment, and then hold to that maturity. (This would of course represent funds you do not anticipate drawing down on during that time.) Doing so eliminates the possiblity of capital losses, while ensuring full inflation protection and the prefixed interest rate. Then ignore all the mark-to-market noise of the daily fluctuations in net asset values, collect your coupon payments every six months (if you selected that option), and eventually receive your principal. If your securities start trading at a premium in the secondary market, then you can choose then to excerise your redemption option and recognize your gain, but you should regard this as a medium-term investment and not a short-term trade.

    The same holding philosophy would also hold true for NTN-F’s and LTN’s (i.e. fixed-income securities).

    If you select a broker with little or zero custody charges, as GGTrek explains early on in this thread, then you can save big time on the admin expenses that your typical fixed income or inflation-linked mutual fund would charge.
    Also, no fixed income or inflation-indexed mutual fund – or fancy hedge fund for that matter – can guarantee no market losses, as they have no fixed maturity, unlike the holding of individual securities to maturity (unless they actively utilize derivatives which are expensive and the cost of which, along with their management fees, would be passed on to you).

    miguel2013-06-08 19:14:39

  • #251145

    [QUOTE=miguel]If you select a broker with little or zero custody charges, as GGTrek explains early on in this thread, then you can save big time on the admin expenses that your typical fixed income or inflation-linked mutual fund would charge. [/QUOTE]
    Isn’t that the truth! This is why I still keep a significant percent of investments in the US, because I’ve found the majority of the admin expenses in Brasil to be absurd!
    Yet I’m looking to move these assets OUT of the US, and soon.
    Again, Miguel… financial consulting… expats… think about it!
    Gringo.Floripa2013-06-08 19:12:01

  • #251326

    815
    Member

    [QUOTE=miguel]
    Referring to the interest rate risk that GGTrek alludes to, in today’s environment I would suggest that anyone investing in¬†inflation-indexed securities¬†invest in a¬†maturity that corresponds to the approximate time he or she intends to actually hold the investment, and then hold to that maturity.¬† (This would of course represent funds you do not anticipate drawing down on during that time.) Doing so eliminates the possiblity of capital losses, while ensuring full inflation protection and the prefixed interest rate.¬†¬† Then ignore all the mark-to-market noise of the daily fluctuations in net asset values, collect your coupon payments every six months (if you selected that option), and eventually receive your principal.¬† If your securities start trading at a premium in the secondary market, then you can choose then to excerise your redemption option and recognize your gain, but you should regard this as a medium-term¬†investment and not a short-term trade.¬†¬†

    The same holding philosophy would also hold true for NTN-F’s and LTN’s (i.e. fixed-income securities).¬†

     
    If you select a broker with little or zero custody charges, as GGTrek explains early on in this thread, then you can save big time on the admin expenses that your typical fixed income or inflation-linked mutual fund would charge. 
     
    Also, no fixed income or inflation-indexed mutual fund Рor fancy hedge fund for that matter Рcan guarantee no market losses, as they have no fixed maturity,  unlike the holding of individual securities to maturity (unless they actively utilize derivatives which are expensive and the cost of which, along with their management fees, would be passed on to you).  

    [/QUOTE]
    In your humble opinion, how out of control do you see inflation getting. Brazil has a pretty bad precedent.
    I am kind of a doom and gloom guy when it comes to Brazilian economics and her history does not shine any light on this outlook.
    Also, do you have any fears of going really long on a Brazilian currency based investment considering in the past they changed currencies more than some people change cars in a lifetime? I have this fear that the government would default on this debt or something similar.

  • #251340

    miguel
    Participant

    In a nutshell I sure wouldn’t place all my eggs in this one basket. I would though consider allocating a portion of resources in an overall well-diversified portfolio (Overseas Investments vs Brazil Investments; fixed vs floating vs. inflation for the Fixed Income portion; and Equities/Alternative Investments/etc.). But over to you first, if you don’t mind, the OP!

    2 1/2 years ago you took the calculated risk of investing in these very securities. That was based on your view then that inflation was ready to rear again its ugly head with Tombini & Mantega in place. Later in the thread you mentioned that you wish you had purchased more back then. Perhaps that is because that very inflation, greater than the market had projected, and in line with your own projections, resulted in very significant investment gains. First, do you see a greater overall risk, and inflation risk, today than when you originally invested. And second, if you don’t mind sharing, what was the original term of those securities, and did you actually redeem any or all of them. miguel2013-06-10 18:23:41

  • #251372

    @Paulistano: You might find this article to be of interest… Fall from grace
    @miguel: I think you’ll get a good laugh from the last paragraph of that article!
    Actual link
    http://www.economist.com/news/leaders/21579007-how-squander-inheritanceand-how-easily-it-could-be-restored-fall-grace
    EDIT: Two other articles perhaps to be of interest
    http://www.economist.com/blogs/americasview/2013/06/brazils-public-finances
    http://www.economist.com/news/americas/21579048-feeble-growth-has-forced-change-course-governments-room-manoeuvre-more
    Gringo.Floripa2013-06-11 07:26:18

  • #251383

    815
    Member

    [QUOTE=miguel]
    2 1/2 years ago you took the calculated risk of investing in these very securities.¬† That was based on your view then that inflation was ready to rear again its ugly head with Tombini & Mantega in place.¬† Later in the thread you mentioned that you wish you had purchased more back then.¬†¬† Perhaps that is because that very inflation, greater than the market had projected, and in line with your own projections, resulted in very significant investment gains.¬† First, do you see a greater overall risk,¬†and inflation risk, today than when you originally invested.¬† And second, if you don’t mind sharing, what was the original term of those securities, and did you actually redeem any or all of them.¬†¬†
    [/QUOTE]
    You are giving me way too much credit! You make my decision sound much more “scientific” than it was. I saw a good base interest rate and as I mentioned I am a “doom and gloom” Brazilian investor so I just thought it was a given that inflation would rear its ugly head (of course nudged by the facts that you stated). Call it a hunch, a “feeling”.
    I continue to feel very bearish on Brazil as a whole. In 5 years of living here having contact with literally all the classes (favela to Class A!!!), I don’t see Brazil ready to “step up” any time soon. It is not a serious country and unless it is conquered by one it never will be.
    I only bought bonds with maturity in 2015. Why? Like I said, Brazil makes me nervous and I felt this date is between the cup and the Olympics and Brazil wouldn’t break before this. Furthermore, I was living in SP and not liking it AT ALL so my future in Brazil was a lot more shaky at the time with many dreams of returning to the US. I did not want to go too long term because I imagined, if I were in the US and the exchange rate was something crazy 3:1 or even 2.50:1 I would get royally screwed and lose all gains in the exchange rate. I have not yet cashed out because I don’t need these funds and they are growing for me.
    edit: One more thing that scares me about Brazil (investing wise) is its propensity to change rules or make them up on a whim! Poupan√ßas have disappeared in the past…and one of the key culprits is senator today! Paulistano USA2013-06-11 08:49:34

  • #251385

    815
    Member

    GF- thanks for the link! Nice read. Not shining any light on my dark outlook for Brazil!
    edit: by the way, it is so amusing reading the comments on these articles. Brazilians are like Christians in the dogmatic zeal in what they “believe” despite any facts or evidence. Paulistano USA2013-06-11 08:45:29

  • #251400

    miguel
    Participant

    [QUOTE=Gringo.Floripa]
    @miguel: I think you’ll get a good laugh from the last paragraph of that article!
    Actual link
    http://www.economist.com/news/leaders/21579007-how-squander-inheritanceand-how-easily-it-could-be-restored-fall-grace
    [/QUOTE]

    Thanks GF actually I got several good laughs out of that one! The local press had quoted it, but of course, badly, and reading the original in context made my day.
    I read all of the links you provided, they were all good – if somewhat more sobering – reads.

    miguel2013-06-11 16:05:43

  • #251401

    celso
    Member

    [QUOTE=GGTrek]
    Another important point, if interest rates go up the Real vs foreign currencies that do not increase their interest rate will have a good chance of  becoming stronger. I.e. the Real will be purchased more because of the higher yields offered.
    [/QUOTE]
    Wrong! Infation in Brazil from Backdoor BNDES financing and gov spending will continue to drive the real lower, much lower.
    S&P negative watch says much. Nobody wants to be long the real.
    Look at Petrobras and Vale in a state of collapse.
    You trust Guido Mantega andTombini? GreatBallsoFire2013-06-11 16:30:20

  • #251403

    miguel
    Participant

    [QUOTE=Paulistano USA] [QUOTE=miguel]
    2 1/2 years ago you took the calculated risk of investing in these very securities. That was based on your view then that inflation was ready to rear again its ugly head with Tombini & Mantega in place. Later in the thread you mentioned that you wish you had purchased more back then. Perhaps that is because that very inflation, greater than the market had projected, and in line with your own projections, resulted in very significant investment gains. First, do you see a greater overall risk, and inflation risk, today than when you originally invested. And second, if you don’t mind sharing, what was the original term of those securities, and did you actually redeem any or all of them.
    [/QUOTE]
    You are giving me way too much credit! You make my decision sound much more “scientific” than it was. I saw a good base interest rate and as I mentioned I am a “doom and gloom” Brazilian investor so I just thought it was a given that inflation would rear its ugly head (of course nudged by the facts that you stated). Call it a hunch, a “feeling”.
    I continue to feel very bearish on Brazil as a whole. In 5 years of living here having contact with literally all the classes (favela to Class A!!!), I don’t see Brazil ready to “step up” any time soon. It is not a serious country and unless it is conquered by one it never will be.
    I only bought bonds with maturity in 2015. Why? Like I said, Brazil makes me nervous and I felt this date is between the cup and the Olympics and Brazil wouldn’t break before this. Furthermore, I was living in SP and not liking it AT ALL so my future in Brazil was a lot more shaky at the time with many dreams of returning to the US. I did not want to go too long term because I imagined, if I were in the US and the exchange rate was something crazy 3:1 or even 2.50:1 I would get royally screwed and lose all gains in the exchange rate. I have not yet cashed out because I don’t need these funds and they are growing for me.
    edit: One more thing that scares me about Brazil (investing wise) is its propensity to change rules or make them up on a whim! Poupan√ßas have disappeared in the past…and one of the key culprits is senator today! [/QUOTE]

    Thanks Paulistano for providing the context in which you made your investment decision. Don’t sell yourself short; given your self-awareness of your risk tolerance at the time, and your ability to also articulate those risks, IMHO you could not have invested better, independent of the result:
    You invested in a maturity (approx 5 years) that was suitable for you, for the reasons you share; you invested in the type of security (NTN-B) that hedged against the risk you were most worried about (inflation); you invested in the principal only (no coupon) variation as you did not need the investment income in the interim – hence saving considerably on local withholding taxes; and with the ability to hold until maturity you assured yourself a result no worse than the 6% per annum real coupon corrected by whatever accumulated inflation would be; and you gave thought as to how much in the way of local currency instruments you felt comfortable with, in terms of your overall portfolio.
    As it happened, that risk (inflation) did rear its head, in a very ugly way indeed, and you will have ended up earning that return of 6% p.a. over and above the annual inflation rate for each year of your investment. FWIW probably the best investment you could have made in any vehicle or fund at the time.
    So, what about now? The fixed, real rates of every maturity are not the 6% they were when you invested but they are edging up fast, for each maturity they are now above 5%. No need to rush now. What about maturity: you can choose among 6, 7, 11, 22, and 37 (!!) years. Those last three maturities are an eternity here of course!! And the risk premiums for extending out there for those are inadequate IMO.
    The devaluation risk is always there, but if you are a resident and now intent on staying longer now than when you did originally, that is a mitigant and it won’t matter quite as much, particularly if you won’t be using those funds for travel. As for default risk, you have to look at the potential slate of presidential candidates over that period and look at that potential policy option which seems a bit remote at the moment, especially among the shorter two maturities.
    As for the risk of Tesouro Direto versus other instruments, 5-10 years ago I would have hesitated, since the folks then investing in the stuff were the larger investors. Each year since the minimum investment size has decreased (I think it is now close to 75 reais), the investor base extends to all social classes (except probably E), as the governo has successfully positioned it as alternative to expensive bank funds and low paying CDBs. So the government’s base including lower income groups would suffer mightily from a default. And there is no such thing as selective default, in that dire scenario happens, then the entire country and its banking system collapses. In my view, at least for the two and arguably three lower maturities, the country’s structural fundamentals practically rule that out and the country has enough to lose that no presidential candidate would even consider opting for it. As you point out though, a certain current senator confiscated (or at least froze) folks’ assets under his plano close to two decades ago. So as I say, even as a resident, diversify your investments and certainly don’t allocate them all to this particular country. But the risk-reward ratio for a certain slice you feel comfortable with, as you have already demonstrated to us, could be well worth the effort.

    miguel2013-06-11 17:48:57

  • #251404

    [QUOTE=miguel] I read all of the links you provided, they were all good – if somewhat more sobering – reads.[/QUOTE]
    And given the state of affairs of most of the world’s major economies, not just Brasil’s, it only makes me NOT want to stay sober! LOL
    I would be hesitant to make any ‘long term’ investments right now, whatever the country/currency, except perhaps in some under-priced RE ‘deal’, which occasionally comes along. The LCI I recently placed some funds in is for a one year term. That’s as far as my binoculars see right now….

  • #251405

    miguel
    Participant

    [QUOTE=Gringo.Floripa][QUOTE=miguel] I read all of the links you provided, they were all good – if somewhat more sobering – reads.[/QUOTE]
    And given the state of affairs of most of the world’s major economies, not just Brasil’s, it only makes me NOT want to stay sober! LOL
    I would be hesitant to make any ‘long term’ investments right now, whatever the country/currency, except perhaps in some under-priced RE ‘deal’, which occasionally comes along. The LCI I recently placed some funds in is for a one year term. That’s as far as my binoculars see right now….
    [/QUOTE]

    I hear you, now where is that caipirissima?!
    I agree: for now, keep it short-term, and keep it floating. Local financial assets here are getting less expensive – and will continue to get less expensive – so pounce only when you feel you are going to get real value. But definitely an interesting environment for the very patient value investor.
  • #251451

    815
    Member

    miguel,
    I’ve been paying off a considerably large personal debt (interest free ) , so I don’t have the “extra cash” for investing as I was two years ago. The few spare shekels go into poupan√ßa. I like to keep R$ X,XX in poupan√ßa at all times and this was depleted due to a down payment on said personal debt.
    With that said, this debt will be paid in full in August and my poupança will be at the level that I like and I will have the extra shekels to invest again. My situation in Brazil is much more comfortable than before and as interest rates are creeping up again, I probably will go back to buying some more treasuries.
    I have my eye on some cheap stocks as well. I keep hearing that the stock market could keep rising medium term due to many factors such as, even with poor performances of companies, there are not many good options for the big money.
    I must be honest, the stock market for is not only investing for me, but fun. I get a thrill when I see the stocks I picked go up. I allocate very few funds due to the risk.

  • #251456

    Deleted User
    Moderator

    Paulistano –

    Treasuriescontinue to fall like a rock and so yields are on the increase. Come August youmay again to able to get 10/12%. That’s pretty good despite high inflation. Thestock market, on the other hand, can be a mugs game when the focus isexclusively gain rather than dividend income.

  • #251464

    [QUOTE=Paulistano USA]I have my eye on some cheap stocks as well. I keep hearing that the stock market could keep rising medium term due to many factors such as, even with poor performances of companies, there are not many good options for the big money.
    I must be honest, the stock market for is not only investing for me, but fun. I get a thrill when I see the stocks I picked go up. I allocate very few funds due to the risk. [/QUOTE]
    Paulistano, our strategies might be quite different. Having won big at the Wall Street Casino prior to 2008, my focus now is more to preserve my capital, thus my choices very conservative. I fear that if I jump back into the market like before, ‘Lady Luck’ will seek her revenge. LOL
    Nonetheless, seeing that a trade is merely a log-in and a few clicks away, I too enjoy the fun of the game every now and then, and allocate nothing more than I’m willing to lose. I saw your post about PBR, and while double the present share price of PBR, you might take a look at ABV. It’s presently trading near it’s 52 week low, and it pays a consistent dividend. Unlike commodities, such as petroleum, beverages, the soft and adult versions, will always be in demand. Wink
    Gringo.Floripa2013-06-12 11:46:03

  • #251475

    815
    Member

    [QUOTE=Gringo.Floripa]you might take a look at ABV. It’s presently trading near it’s 52 week low, and it pays a consistent dividend. Unlike commodities, such as petroleum, beverages, the soft and adult versions, will always be in demand. Wink
    [/QUOTE]
    The problem with Ambev for me is that a lot (100 shares) is too rich for my blood at the moment, for my stock allocation. It’s trading around R$78. I remember though, when it was trading around $50 and I could (read SHOULD) have gotten in!Cry

  • #251484

    815
    Member

    Timely article Article about NTN-B Principal bonds
    *edit:
    One more!
    These came in my e-mail todayPaulistano USA2013-06-12 15:42:09

  • #251521

    miguel
    Participant

    [QUOTE=Gringo.Floripa][QUOTE=Paulistano USA]I have my eye on some cheap stocks as well. I keep hearing that the stock market could keep rising medium term due to many factors such as, even with poor performances of companies, there are not many good options for the big money.
    I must be honest, the stock market for is not only investing for me, but fun. I get a thrill when I see the stocks I picked go up. I allocate very few funds due to the risk. [/QUOTE]
    Nonetheless, seeing that a trade is merely a log-in and a few clicks away, I too enjoy the fun of the game every now and then, and allocate nothing more than I’m willing to lose. I saw your post about PBR, and while double the present share price of PBR, you might take a look at ABV. It’s presently trading near it’s 52 week low, and it pays a consistent dividend. Unlike commodities, such as petroleum, beverages, the soft and adult versions, will always be in demand. Wink
    [/QUOTE]

    I’ll also plead guilty to getting an occasional rise out of playing the Bovespa casino, with a sliver of funds that I could do without. AMBV4 no doubt has been one of the better long-term picks, and the dividend yield has been nothing to complain about. Although their proposal to unify all share classes is uncharacteristically not the most shareholder friendly, it is not a deal breaker for purchasing additional shares if they continue to trade lower.
    AMIL3 was great while it lasted; bought when they went public and sold when they went private. Objective was to hedge against premium increases in health care plan with potential gains in the stock, and it actually panned out. Most often these things do not. As an ON in the Mercado Novo, minority shareholders were guaranteed Tag Along rights in the case of a takeover of 80% of the premium offered to the controlling shareholders, but they actually granted 100%. That goodwill prompted me to hold on to the health plan – until United Health Care does something really stupid to screw it up.

    miguel2013-06-13 04:29:01

  • #251522

    miguel
    Participant

    [QUOTE=Paulistano USA]
    The problem with Ambev for me is that a lot (100 shares) is too rich for my blood at the moment, for my stock allocation.
    [/QUOTE]

    You could eventually purchase in the Mercado Fracionario, as I have done from time to time, if the stock is liquid, as AMBV generally is; just check out the bid-ask spreads on your homebroker first.
  • #251523

    miguel
    Participant

    [QUOTE=Paulistano USA]
    With that said, this debt will be paid in full in August and my poupança will be at the level that I like and I will have the extra shekels to invest again. My situation in Brazil is much more comfortable than before and as interest rates are creeping up again, I probably will go back to buying some more treasuries.
    [/QUOTE]

    By August the real yield for NTN-Bs could exceed 6% which would be interesting(as you already know from your last purchase!). I also agree with Esprit that if nominal rates are around 12% for a non-inflation-linked instrument, that could be an interesting entry point there as well. Two months from now seems like a reasonable period of time to take stock before doing anything.
  • #251593

    [QUOTE=Paulistano USA]These came in my e-mail today[/QUOTE]
    Found this in my email tonight….


    So regardless of what rates do in Brasil, never forget, the grass isbrowneron the other side of the fence! Wink
    (This post is in no way a solicitation or advertisement for the company above)
    Gringo.Floripa2013-06-13 21:42:55

  • #251616

    815
    Member

    That surely doesn’t even come close to inflation right? And from what I understand, inflation could be a huge problem in the US in the near future.

  • #251687

    miguel
    Participant

    Not even close. And that’s exactly why TIPS sported NEGATIVE real yields as recently as a couple of weeks ago.

    Yes, US investors eagerly signed up to guarantee their eventual real losses. Approx minus 1%. On those US inflation-indexed bonds. They figured they would be no worse off than signing up for the advert that GF received – in fact far better off if future inflation took off. But a real loss all the same.

    Compare that to the Brazil equivalent, NTN-F’s (the coupon-paying variety), the subject of this thread where, holding to maturity, one is currently guaranteed at least a positive 5% real yield.
    Of course, there are certain reasons for that differential (note: TIPS yields also increased to positive territory last week) as reflected in the risk factors for investors to weigh, as previously described in this thread, in determining whether that differential is sufficient to justify such an investment.

    miguel2013-06-15 09:12:16

  • #255400

    GGTrek
    Participant

    Following up on this thread I have started to purchase again long dated (5+ years) Brazilian treasuries. At the moment mostly fixed rate LTN and NTN-F, I am doing small purchases approximately every 15 days (or whenever the long dated rates spike a bit) and will continue to do so for the next 7 to 8 months in order to get an average on this time span (extremely difficult to buy at the bottom, important is to buy close to the bottom). At the moment 5-10 years rates vary between 11.5 and 12% which is not bad historically, but I can see that the rates can go further up (between 13-14% which would be ideal for my purchase plan). At the moment there is a very strong positive correlation between the BRL exchange rate and the long term rates (which unlike the SELIC rate are not so easy to control by the BC) so the higher the USD/foreign currencies go the higher the long term rates will go.
    Lots of volatility in the rates market as well:
    http://surgiu.com.br/noticia/105740/tesouro-vende-papeis-de-longo-prazo-a-taxas-excessivas-para-confirmar-demanda.html
    http://surgiu.com.br/noticia/103010/tesouro-direto-patina-mas-e-a-aplicacao-mais-segura-conheca-os-papeis.html
    But I agree with the articles, a cautious purchase program at these rates could perform very well in the medium term. I also had a look at Bovespa.
    http://www.bmfbovespa.com.br/indices/EvolucaoMensal.aspx?Indice=IBOVESPA&idioma=pt-br
    There is a lot more risk in Bovespa than in the rates market in my opinion, so it is not great value yet. If it reaches 43-45k then I shall start to investigate (the 2008 bottom was a real solid bottom for almost all the markets worldwide)

  • #255406

    miguel
    Participant

    That’s an interesting investment plan, GGTrek. Premiums of long-dated fixed-rate paper have certainly surged recently, and with good reason, as per the Exchange Rate Forecast thread. As you mention, those premiums may well continue to rise so purchases are really only for folks with your profile who don’t have plans to touch those securities anytime soon. Otherwise, they will lose their shirts. But I can see where dollar-cost-averaging (or real-cost-averaging here!) would certainly make sense with the deliberate purchases as you are making over a reasonable time period to try and maximize yield. Personally, I will wait it out a bit more, with an eye to potential increases in US Treasury yields with not all tapering priced in; and a potentially higher trading range of the real.
    I note that you don’t mention inflation-linked securities, i.e. NTN-Bs, in your investment plan. Is that because you do not consider those real yields to be interesting (range of 5.4% – 5.7%) yet and consider the non-inflation linked nominal yields now (11.5% – 12.5% as you mention) sufficient cushion for future inflation?
    miguel2013-08-26 18:30:35

  • #255462

    GGTrek
    Participant

    Hi Miguel,
    spread of NTN-Bs over inflation (i.e. fixed yield over IPCA inflation) is still a bit lower that I would like it (at the moment 5.2 to 5.7 range but the higher spreads are only available on very long dated NTN-Bs which have a bigger duration/risk than a 10 year NTN-F). I put some very small money in the shortest NTN-Bs maturity so far, but I am waiting for an extra 50bips increase in the spread before starting to invest more money in NTN-Bs. I am also waiting for 10 yrs nominal yields to go solidly above 12% to invest more in the fixed rate instruments. So far only 5% of my liquid Brazil net worth is invested in Brazil treasuries, so it is not like I am taking a big risk.

  • #255465

    GGTrek
    Participant

    Another good graph to look at (especially from 2006) about 10yrs yields in Brazil. As I said you have to go back a long time to find rates above the range 13-14% (except the great spike of the 2008 crisis which only lasted for very few months):
    http://www.tradingeconomics.com/brazil/government-bond-yield
    The central bank is very politically averse at increasing rates. Recently I read an article in Valor Economico where it was clearly stated that to “defend” the currency they prefer to squander their USD reserves rather than increasing rates and affecting the bank loans to local companies and individuals. I cannot find it anymore, but I found a good article that convinced me 15 days ago to go back to the Brazil treasury market:
    http://www.valor.com.br/valor-investe/o-consultor-financeiro/3236600/o-melhor-momento-para-alongar-aplicacoes
    The main point is the following one with the risk in red:
    “Para tentar minimizar o risco de preju√ɬ≠zos com as oscila√ɬß√ɬµes dos t√ɬ≠tulos prefixados, uma alternativa √ɬ© escolher o momento certo para alongar as aplica√ɬß√ɬµes. Geralmente, a ocasião √ɬ© quando os juros de curto prazo estão subindo, como agora.

    Apesar de parecer contradit√ɬ≥rio, comprar pap√ɬ©is de longo prazo quando o BC decide elevar a taxa Selic para combater a infla√ɬßão pode garantir aplica√ɬß√ɬµes no pico das taxas. Desde que a pol√ɬ≠tica econ√É’mica tenha credibilidade e haja apoio dos demais √ɬ≥rgãos governamentais atuando com o objetivo de controlar os gastos p√ɬ∫blicos.”

    Brazil has presidential election in just a bit more than one year time, high inflation never sold well to the electorate. Of course purchasing at this time is risky, but I always made my best trades at the riskiest times (I remember late 2008, early 2009 was a wonderful risky time to purchase bonds or to change USD to BRL. Afterward I only wished I had done more, but my fear/risk aversion stopped me)

  • #255519

    miguel
    Participant

    Thanks GGTrek for your responses, and let me just say it’s great to see you posting again and sharing your knowledge on this forum.
    I could not agree more with you that the real yields of NTN-B’s are not appealing right now. Even at the longest maturities those yields are below 6%, and the difference in those real yields between longer and longest maturities is way too small as you state to justify the enormous interest rate risk (duration) with those longest maturities. Like yourself I would demand a minimum 6% real yield for shorter dated NTN-Bs before investing.
    As for NTN-F’s, we also share a common minimum nominal yield requirement of a yield well above 12%. That’s the threshold I am looking for, in as you state, a relatively small portion of the overall local portfolio. I have typically invested in floating-rate instruments, given the market interest rate risks, but am looking into diversifying into fixed-rate securities at the appropriate risk premium as a “put” option for eventual benchmark interest rate decreases. Hence my interest in reviving Paulistano’s thread a little while back.
    You quoted one of my favorite local personal investment columnists, Marcelo d’Agosto, writing for Valor (too bad his free-access blog has been discontinued but he continues to write as a columnist) and I agree with him that to capture the peak market premium you do have to actually invest when the central bank benchmark rate is increasing, subject to the important caveat you have highlighted in red, because as soon as they stop the hiking then the yield curve at the longer ends can fall precipitously, and voila, you missed your chance. Depending on your view of the SELIC trajectory, that could mean investing within the next couple of COPOM meetings. But then we face that important pre-condition that you have highlighted.
    miguel2013-08-29 01:44:28

  • #255697

    miguel
    Participant

    Another strike against investing in inflation-linked bonds (NTN-Bs) – versus the nominal variety (NTN-Fs).
    This would be of interest to those looking to receive income, in the form of semi-annual interest payments during the life of the NTN-B, i.e. prior to maturity.
    If you need this income, say because you are retired, to support your daily expenses, prior to maturity, then this is NOT the investment for you.
    The reason (and this may surprise you): the annual coupon interest payments will be eaten up by currrent inflation and regardless of maturity these annual yields pay out less than the “new” poupan√ɬßa pays out now! (without the need to tie up your money for several years; and also also unlike the coupons from these bonds the poupan√ɬßa is tax-exempt)
    How is this possible, since this is, after all, an inflation-linked bond? Let me qualify that this holds only until the actual maturity of the bond, which is when the inflation adjustment to principal actually kicks in.
    Too many first-time local Treasury investors overestimate income from coupon-paying NTN-Bs, as the published payout formula they receive from their friendly bank brokerage firm and their clueless bank gerente is indicated to be: the fixed coupon PLUS the floating inflation rate. Thus these folks believe that they will actually receive the sum of the annual coupon rate + the annual inflation rate each year. Wrong!
    NTN-Bs are the local equivalent of US TIPS securities. You receive the fixed income coupon each year. And the inflation adjustment only at maturity, in the form of the adjustment to principal. Yes, you do receive current interest on the adjusted principal over the life of the bond. But if you run the simulations you’ll find that it does not make much of a difference in semi-annual income, until very well into the life of the bond.
    As a current live example: the 10-year coupon-paying NTN-B offers a real yield right now of 5.67%. That is what you’ll receive every year until maturity (along with the current interest on adjusted principal above), which is less than poupan√ɬßa right now and most fixed income funds and fully taxable. It is also less than current inflation. You’ll have to wait until 2024 to receive all the accumulated inflation protection you signed up for.
    By contrast the 10-year NTN-F offers a nominal yield right now of 12.08%. You’ll receive that yield, after taxes, starting from your first coupon. That is considerably higher than the poupan√ɬßa right now, as well as most DI and Renda Fixa funds right now. But you of course need to compare that to the benchmarke SELIC right now (9%) and where you expect it to go over the next 10 years.
    You also need to compare it to the NTN-B; the so-called breakeven rate is approximately 6.4%. If you expect inflation to be less than that over the next 10 years, then this is a better buy under current market conditions than the NTN-B. However, if you expect runaway inflation, and you don’t need the current income, then you should consider a Zero-Coupon NTN-B.
    Note: the OP invested in inflation-linked bonds, but these were Zero Coupon Bonds, with interest payments only upon maturity. So none of this discussion pertains to him. This is obviously because he was not depending on these bonds for income and this is extremely tax-efficient. And the OP also did not have the reinvestment risk of the income stream.

  • #255700

    Awesome post Miguel! I’ve printed it, so I can digest it further. Keep it up! You are a valuable asset to this forum!!!
    Clap

  • #255763

    The only downside is the REAL. Is it worth it to make 10% real after-tax return in Brazil when the currency loses 15-20% against the dollar or Euro. No.

  • #255776

    miguel
    Participant

    No, indeed. Most of the offshore, speculative Carry Traders have lost their collective shirts here over the years. Serious miscalculations of real risk and potential returns.
    The focus in this revived thread, as previously stated, has been on the resident, long-term investor here, perhaps a retiree, looking to hedgetheir local currency liabilities/expenses with local currency assets/income (and hence minimizeor eliminateforeign exchange risk), for thatportion of an otherwise properly diversified international portfolio.
    miguel2013-09-04 02:02:27

  • #259852

    miguel
    Participant

    Update to this thread (see caveatsin previous posts in this thread above):
    I have not touched the inflation-linked NTN-B bond, zero coupon or otherwise, for the reasons stated in the last few posts above.
    I have not bitten the nominal 10-year NTN-F bond either, but have been nibblingwhenever the nominal rate has exceeded 13% (like today). Right now it is trading at 13.20% and I find that attractive given the last central bank communique (which seems to hint at one or two further increases at most in SELIC during the coming election year) and the break-even rate (6.60% over the inflation-linked bond of similar maturity) which is also above the upper threshold of the inflation band.
    No question about it, those rates reflect the inherent market risks, which as far as I am concerned have always been there lurking in the Dilma administration but just seriously underpriced in the markets and now investors are finally getting a decent premium.
    At 13.20%, it would take 5.45 years for the investment to double in value (rule of 72). Looked at in another more cynical way: it the government defaulted just over halfway into the investment, all principal would have been recovered. If that event does not occur then, or at maturity, the investment would have nearly doubled again in value at maturity. Again, we are talking in nominal terms; in a previous post I mentioned why I don’t especially like coupon-paying inflation bonds.
    As previously stated, this fixed-rate portion should be part of an internationally diversified portfolio, both here and abroad, for the local resident investor, perhaps a retiree, with the local portfolio predominantly floating-rate and liquid to eliminate interest rate risk. The fixed rate portion of Treasury securities should be held to maturity and thus match the liabilities of the local investor. By doing so as per last post, the currency risk inherent in bringing in external funds to meet those liabilities should also be mitigated, as well as the potential repeat of Dilma’s irresponsibly reducing the SELIC rate. A number of us got burned when Dilma last did that, and this is a limited put option or floor at 13.20%.
    miguel2013-12-02 15:55:53

  • #267525

    815
    Member

    IT seems as though 2014 has been good to those who are holding this paper:

  • #267545

    GGTrek
    Participant

    I started my tesouro direito purchasing program a little bit too early last year and I ended it in early March this year (I mixed equally inflation linked with fixed rate, I avoided LFT since it is much cheaper to buy a good CDB if you want exposure to variable and I have more than enough exposure to variable rates). I cannot complain about the results so far, but they have not been as good as my 2011 program (much longer durations at the time). Again I am worried about the election this october, it is a big bet on Dilma getting out of the way and getting a more serious executive worried about inflation. It is still a risky bet in my opinion because of the election.

  • #267555

    815
    Member

    I thought about some short term LFT because it would make sense as inflation rises, the interest rates should follow to curb it….right?

    I have never bought CDBs. You buy them at your bank right? What are the terms (how many years) and what are the fees involved, besides IR of course. Thanks!
  • #267556

    GGTrek
    Participant

    In theory you would be right, interest rates should follow inflation if the central bank is independent and with a clear aim of fighting inflation. But do you believe these two statements w.r.t. the Central bank in Brazil? Regarding variable rate: CDBs I buy them from small banks in small quantities (well below the FGC limit) providing at least 100% of CDI and with daily liquidity, which means you can redeem them any day with no penalties (only issue if the bank go bust FGC will only repay your capital + interest at term that can be as long as 3 years down the line). My CDBs are a kind of savings account liquidity cushion, when I need liquidity for my family expenses I just redeem. I then buy a mixture of tax free LCIs and LCAs with 6 months term (at the moment some solid ones from Ourinvest giving approx 94.5% of CDI and some less solid ones from Banco Maxima at 102% of CDI). However if you have a view on rates (inflation or the curve) nothing beats Tesouro Direito in the mid-term (above 24 months investment span). Some infrastructure debentures might be much better in terms of rates and being tax free, but their liquidity is pretty bad (try to sell them back in small quantities). GGTrek2014-06-11 08:54:20

  • #267558

    815
    Member

    Thank you so much for your comments. This is valuable information.

    I happen to have some TD about to mature and I want to roll it over into something that won’t tie it up for more than two years. It’s not a huge sum so this sounds good.
    Thanks again
  • #267562

    miguel
    Participant

    Interesting discussion. Tesouro Direto has certainly undergone somewhat of a rally (some would say “correction” but I can’t use this term in good conscience with respect to a positive trajectory in Brazil without reforms) this year.
    Those folks who bought fixed-rate or inflation-linked securities during the Fed “taper tantrum” or at other stress points last year are sitting on some nice price appreciation on top of what, in retrospect, were some pretty juicy spreads for their purchase. It turns out, at least for now, that purchasing NTN-Fs last year at nominal rates exceeding 13% or NTN-Bs with real rates approaching 7% was a solid investment. I stress the “at least for now” part. Short-term traders if they haven’t already will recognize their capital gains and sell back to the BC, preferibly before interest rate expections unexpectedly rise and their gains turns into losses. Longer-term investors will hold onto those securities, perhaps until maturity, certainly not indifferent to their securities’ price appreciation, but valuing more that the coupon exceeds not only current SELIC but also present interest rate expectations as reflected on the local yield curve, and well as above current inflation. Again, at least for now.
    Others who bought such securities over the past couple of years with nominal rates at around 9% or real rates around 4% are not as pleased. Those who have not already sold those securities at a loss are sitting on mark-to-market losses, which of course are just paper losses if held to maturity. Investors in NTN-Fs would just be pissed that they are now receiving fixed rates not only below SELIC but also below current interest rate futures. Of course if rates unexpectedly fall they will be nicely hedged and could eke out a short-term or even long-term capital gain when those holding onto floating rate securities like LFTs will see their income levels plummet to a level potentially below inflation. I hasten to add that this is not the most likely scenario.
    Personally I will wait for another “stress” event before effecting additional purchases of fixed-rate or inflation-linked securities. I don’t think there is enough of a risk premium reflected in rates right now and the Fed steroid effect on rates still looms large. The markets are heavily discounting more of Dilma as well as inflation over the next four years which could see a correction in itself. And the colossal economic mess she is now creating for electoral purposes could set back the economy regardless of victor. In such a scenario I would agree that right now investing in floating makes the most sense.
    I like TD as a tool for managing interest rate risk inside a diversified portfolio. Most of my local portfolio, like GGTrek’s, is floating and invested in alternatives to LFTs for return as well as liquidity reasons.
    miguel2014-06-11 11:21:03

  • #269632

    ffm
    Member

    TD (Tesouro Direto) has been getting pumped up in the media in the past year. I have seen clips on the news about investing in TD and popular investing sites such as InfoMoney have been pumping it up a lot in recent months.

    Reminds me of the US in 2006-2008 when there were a lot of news pieces about “how to make your fortune in real estate”……moments before the crash! There is the old adage that if the press it’s talking about it, the party is over.
    Just an observation.
  • #269638

    Serrano
    Participant

    I’ve been quite happy with LCIs, since there’s no tax to pay on the earnings.√Ǭ† With a CDB, one has to hold it at least 720 days, in order to get hit with the lowest tax rate of 15%.
    Just be sure to select the LCI com liquidez.  The additional earnings on the other is minimal, and your deposit is frozen, for at least a year.  The downside of the LCI for some investors is that the minimum can be rather high.
    Gringo.Serrano2014-10-16 17:13:25

  • #270982

    ffm
    Member

    http://www.infomoney.com.br/onde-investir/renda-fixa/noticia/3589480/curva-juros-indica-que-hora-exata-comprar-titulos-tesouro-direto?utm_source=newsletter&utm_medium=email&utm_campaign=nlmercados

    According to this article, we are at the EXACT moment to buy bonds. I don’t buy do to my mistrust of this banana republic government. Would anyone like to opine?
  • #270984

    jeb2886
    Member

    Don’t try and time the bottom, buy when it’s recovering. Considering their premise is that the market wants a new government, if that new government doesn’t come into power, then what?

    Wait until after the government is settled and then do something. You miss out on the massive returns, but prevent massive losses on what amounts to a gamble if it goes wrong.
  • #270990

    ffm
    Member

    Like the saying about “catching a falling knife”?

  • #271008

    ffm
    Member

    A reader brought up his fear that Tesouro Direto poderia dar calote (not pay).

    The “expert” pretty much brushes it off. What do you think?
  • #271011

    Brazil can pull an Argentina anytime they want to.
    I hope you’re not taking a hardER currency like USD, Euro, Sterling to buy brazilian junk…

  • #271028

    Luca
    Member

    A Brazilian federal debt default, of any kind or proportion, would represent a huge setback for the country. I’d have to believe that they would go at any length – FMI, China, Mark Zuckerberg.. – to avoid it. At present time there is not the slightest hint that it could occur. In the long term – a couple of decades – it is likely to occur if they don’t reform their generous pension system; or they will have to choose between defaulting on their debt or not paying out pensions. The previd√ɬ™ncia deficit is by far the biggest long-term structural problem in Brazil, and yet it is hardly ever mentioned anywhere in the Brazilian media (The Economist brings a reminder every so often). Long-term thinking isnt exactly a strong suit of the Brazilian psyche, especially when you are talking about something that could or could not happen 20 or 30 years from now. But then again, other countries are dealing with the same type of problems. I just have a feeling that Brazil will see this one right to the edge of the abyss.. and then fall in the abyss. tbird2014-10-18 11:13:09

  • #271031

    jeb2886
    Member

    I’m not sure about default on the currency, I think that is a ways off. But at 12%-20% interest rates, debt doubles every 3-4 years, which means 100% in 3 years, 400% in 6 years, 1600% in 9 years. Even with limited debt, 1600% in less than 10 years isn’t sustainable.

    The biggest issue facing the currency and country is the fact that they won’t have any GDP increase from now on. Housing has got to be coming to some kind of bust, there are simply too many units sitting unsold. Once housing stops, construction stops and then unemployment sets in. Those workers aren’t easily transferred to other projects, unless the government steps in and starts doing a lot of infrastructure work (decent chance there). But GDP still won’t grow, unless they start really pulling back on everything that holds brazilians back from being more productive, but what holds them back are rules designed to protect people, to protect businesses and to protect the way of life here. Who wants to race to the bottom and see if 16 hour work days at R300/month is the way to go. No one wants to compete with China or other asian countries on the bottom line of consumer grade goods and consumables. So if they don’t erase all of those laws and regulations, then we won’t see growth, but if they do we’ll see massive unemployment as people are laid off from those government jobs! and we’ll see masses of manufacturing going under as the can’t compete, and eventually a whole new set of winners in this country with the poor being far worse off.
  • #271046

    biziness
    Member

    Brazil currently holds a nice international stash of around US$350-400mi, so even if Dilma wins and follows the same economic policy/strategy it would still take some time for the country to default. It just does not make sense. Also the country could get some help from IMF prior to going bankruptcy.

  • #271051

    [QUOTE=jkennedy]I’m not sure about default on the currency, I think that is a ways off. But at 12%-20% interest rates, debt doubles every 3-4 years, which means 100% in 3 years, 400% in 6 years, 1600% in 9 years. Even with limited debt, 1600% in less than 10 years isn’t sustainable.

    The biggest issue facing the currency and country is the fact that they won’t have any GDP increase from now on. Housing has got to be coming to some kind of bust, there are simply too many units sitting unsold. Once housing stops, construction stops and then unemployment sets in. Those workers aren’t easily transferred to other projects, unless the government steps in and starts doing a lot of infrastructure work (decent chance there). But GDP still won’t grow, unless they start really pulling back on everything that holds brazilians back from being more productive, but what holds them back are rules designed to protect people, to protect businesses and to protect the way of life here. Who wants to race to the bottom and see if 16 hour work days at R300/month is the way to go. No one wants to compete with China or other asian countries on the bottom line of consumer grade goods and consumables. So if they don’t erase all of those laws and regulations, then we won’t see growth, but if they do we’ll see massive unemployment as people are laid off from those government jobs! and we’ll see masses of manufacturing going under as the can’t compete, and eventually a whole new set of winners in this country with the poor being far worse off.

    [/QUOTE]
    this will be interesting to see, considering that Brazilians like to hold onto things even if they are negativeor losing money.
    The other day, I was watching a few students go into an English course. I was curious so I started making a very detailed list of expenses. All the small stuff adds up. They are definitely negative, or payingto teach very basic English to students. My Brazilian wife said that they probably think it’s just temporary.
    I would venture to say that there are loads of businesses in this situation now.
    Work for free! Not me! I would rather sit around and do nothing.

  • #271063

    ffm
    Member

    [QUOTE=andrew_nofro][QUOTE=jkennedy]I’m not sure about default on the currency, I think that is a ways off. But at 12%-20% interest rates, debt doubles every 3-4 years, which means 100% in 3 years, 400% in 6 years, 1600% in 9 years. Even with limited debt, 1600% in less than 10 years isn’t sustainable.

    The biggest issue facing the currency and country is the fact that they won’t have any GDP increase from now on. Housing has got to be coming to some kind of bust, there are simply too many units sitting unsold. Once housing stops, construction stops and then unemployment sets in. Those workers aren’t easily transferred to other projects, unless the government steps in and starts doing a lot of infrastructure work (decent chance there). But GDP still won’t grow, unless they start really pulling back on everything that holds brazilians back from being more productive, but what holds them back are rules designed to protect people, to protect businesses and to protect the way of life here. Who wants to race to the bottom and see if 16 hour work days at R300/month is the way to go. No one wants to compete with China or other asian countries on the bottom line of consumer grade goods and consumables. So if they don’t erase all of those laws and regulations, then we won’t see growth, but if they do we’ll see massive unemployment as people are laid off from those government jobs! and we’ll see masses of manufacturing going under as the can’t compete, and eventually a whole new set of winners in this country with the poor being far worse off.

    [/QUOTE]
    this will be interesting to see, considering that Brazilians like to hold onto things even if they are negativeor losing money.
    The other day, I was watching a few students go into an English course. I was curious so I started making a very detailed list of expenses. All the small stuff adds up. They are definitely negative, or payingto teach very basic English to students. My Brazilian wife said that they probably think it’s just temporary.
    I would venture to say that there are loads of businesses in this situation now.
    Work for free! Not me! I would rather sit around and do nothing.
    [/QUOTE]

    Yeah, we had this discussion before. People (myself included) going into a car/moto dealership and seeing a three year old car/moto, 0km, and only 2-3k discount. Ridiculous!
  • #271090

    miguel
    Participant

    [QUOTE=The Abbot]http://www.infomoney.com.br/onde-investir/renda-fixa/noticia/3589480/curva-juros-indica-que-hora-exata-comprar-titulos-tesouro-direto?utm_source=newsletter&utm_medium=email&utm_campaign=nlmercados

    According to this article, we are at the EXACT moment to buy bonds. I don’t buy do to my mistrust of this banana republic government. Would anyone like to opine?

    [/QUOTE]
    Catching up here after a well-deserved break. Hopefully no one but the author (not you Pauli but the Infomoney writer) followed this advice! Just where does Infomoney find these “specialists”? Superficial analysis, technical errors, electoral-based.
    Repressed inflation risks, huge duration (interest rate risk) for longer maturities, risk downgrade possibilities, did they ever heard of the Fed? Sometimes these are risks worth taking in fixed-rate and inflation-linked securities here (see my previous posts on this very thread), but there has got to be a decent premium involved.
    miguel2014-10-20 22:49:24

  • #271091

    miguel
    Participant

    [QUOTE=jkennedy]Don’t try and time the bottom, buy when it’s recovering. [/QUOTE]
    And I thought you considered yourself a value investor??
    Sorry, could not resist that! WinkWe’ve had this discussion before, and like yourself, in equities, I can often behave more like a momentum investor, to avoid catching that falling utensil that Pauli refers to above.
    However, in fixed income here, I pounce when the yields, or especially their spreads over US Treasuries, spike well above my target and do not wait around for a recovery to take hold, by that time, fast and furious, given durations and volatility of the securities that I look at, the buying opportunity has probably passed.
    miguel2014-10-20 22:48:27

  • #271092

    miguel
    Participant

    [QUOTE=The Abbot]A reader brought up his fear that Tesouro Direto poderia dar calote (not pay).

    The “expert” pretty much brushes it off. What do you think?

    [/QUOTE]
    Most probable risk is loss of Investment Grade rating.
    Particularly by S&P who have left no room for maneuver (as they have already downgraded the country to BBB-). Ironically, it was S&P who were the first to (prematurely) upgrade the country to Investment Grade.
    An outright default is unlikely, for many of the reasons stated above, and the government, at least as represented by the present two candidates would not opt by choice for a “strategic” default. For one, it would result in the absolute collapse of the banking system, given the (required) prominence of government securities in their reserves.
    It would also result in the loss of the private pensions of a good part of the population, given that here in Brazil, previdencia complementar is not “blindado” or bulletproof from the health of the financial institution holding the assets, different from a true custodial relationship. Not to mention corporate and government retirement funds in the underlying government securities.
    And given the significant numbers of small-fry individual investors in Tesouro Direto, the government could not just claim that it would be large institutional hedge funds that would be adversely affected. Just as importantly, around 70% of the Tesouro debt is held by residents – not foreign creditors.
    miguel2014-10-20 23:18:11

  • #271271

    biziness
    Member

    My apologies: I meant “Brazil currently holds a nice international stash of around US$350-400BI”, intead of “US$350-400mi”.

  • #17933

    815
    Member
  • #276627

    ffm
    Member

    http://www.infomoney.com.br/onde-investir/renda-fixa/noticia/4201643/tesouro-direto-volta-operar-apos-suspensao?utm_source=newsletter&utm_medium=email&utm_campaign=nlmercados
    Here’s a link with a table of current bond interest rates. (Scroll to the bottom)
    Do you think it is safe? Do you think Brazil will make good on her short term debt? I am only looking at buying 5 years or less. I haven’t made a bond purchase here for 4 years and the namesake of this thread matured this June.

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