ELEIÇÃO, JUROS E FISCAL: O QUE ESPERAR DO BRASIL EM 2026? | Second Level #30

Episode Overview

• Understanding Brazil's "Schizophrenic" Economy: Explores the conflict between aggressive fiscal spending (government) and tight monetary policy (Central Bank), creating a "toll" that stifles long-term investment.
• The Global Macro Landscape & Investment Strategy: Analyzes why US debt is safer than Brazil's due to its "asset" growth, and why the traditional 60/40 portfolio is failing in a geopolitically unstable world.
• Political Forecasting & Election Dynamics: Introduces the "Referendum on the Incumbent" model to predict election outcomes based on rejection rates rather than approval ratings.
• The Shift to Real Assets: Arguments for why gold has become a critical portfolio hedge following the 2022 freezing of Russian reserves, decoupling it from traditional interest rate correlations.
• Modernizing Asset Management: Discusses the widening technological gap between global "Champions League" funds using AI/Python and local Brazilian funds relying on intuition.

Key Concepts

The "Schizophrenic" Economic Policy Brazil's economy is described as an airplane where one turbine (government spending) accelerates while the other (interest rates) brakes hard. This contradiction forces the Central Bank to keep rates high to combat the inflation caused by fiscal expansion. This dynamic acts as a "toll" on the economy, where the cost of money remains artificially high, discouraging productive entrepreneurship in favor of rent-seeking (investing in safe government bonds).

Extractive vs. Inclusive Institutions Drawing from Why Nations Fail, the episode frames Brazil’s struggles as a result of "extractive institutions." Organized minority groups (across executive, legislative, and judicial branches) capture state resources and legal frameworks for their own benefit at the expense of the disorganized majority. This institutional degradation poses a greater long-term threat to legal security and growth than simple economic metrics.

Stock vs. Asset Growth (US vs. Brazil) A crucial framework for analyzing debt solvency. Debt is a "stock" (liability) that must be compared to the economy's "asset" (capacity for growth and innovation). The US debt situation is unique because its asset base grows at an extraordinary rate due to innovation and a pro-business environment. In contrast, countries like Brazil have high tax burdens or extractive institutions that stifle asset growth, making debt accumulation far more dangerous.

The "Referendum on the Incumbent" Model Elections involving a sitting president are fundamentally referendums on their performance, not choices between two fresh options. Success depends heavily on rejection rates. When a leader's "Bad/Terrible" rating rises while their "Great/Good" rating remains static, their path to victory narrows drastically, regardless of who the opposition is. This explains why high "undecided" voters in polls often represent anti-incumbent sentiment waiting for a name to rally around.

Geopolitics and the "Zero-Coupon" Gold Shift The traditional inverse relationship between gold prices and real interest rates broke in 2022. When Western nations froze Russian reserves, it signaled that US Treasuries are not "risk-free" for geopolitically misaligned nations. This structural shift has turned gold into a necessary "neutral reserve asset" and a hedge against the weaponization of the fiat financial system, rather than just an inflation hedge.

Technological Asymmetry in Investing There is a massive gap opening between global and local asset managers. Top-tier global funds rely heavily on Python, data science, and AI to process information systematically ("Champions League"), while many local funds still rely on intuition ("minor leagues"). The modern investor's edge lies in the ability to code and manage databases, not just analyze macro trends.

Quotes

• At 0:07:42 - "We unfortunately have this fate of not being able to advance on themes, particularly fiscal... public spending in Brazil grows recurrently at a frightening speed." - Explaining the root cause of Brazil's macroeconomic instability.
• At 0:12:12 - "It is an economic policy that I call schizophrenic. It's an airplane where the left turbine accelerates and the right brakes... It creates a huge toll on long-term capital allocations." - A vivid metaphor for the conflict between fiscal expansion and monetary tightening.
• At 0:14:35 - "Unfortunately, Brazil is perhaps also a very rare example in the world today of the result of extractive institutions... where interest groups take for themselves benefits that belong to society." - Connecting Brazil's economic malaise to deeper institutional failures.
• At 0:17:22 - "It is always the story of organized minorities managing to impose their extraction on disorganized majorities." - A concise summary of the political economy problem in Brazil.
• At 0:22:20 - "In 2014... you had a leverage of the private sector that was very large... Today the parallel is the companies are not as leveraged as back then... served as a lesson." - Distinguishing current risks from the 2015 crisis; the private sector is healthy, but the public sector is failing.
• At 0:28:38 - "The debt is a stock that you have to view in relation to another stock, which is the asset of the economy... the growth of the asset of American society is extraordinary." - Explaining why the speaker is less worried about US solvency compared to Brazil's.
• At 0:31:50 - "What I do is look if all [the models] are saying the same thing, I have high conviction... If they are divided... I lower my conviction." - Describing a robust analytical process for forecasting by triangulating multiple data models.
• At 0:42:07 - "Since it is impossible for a voter to make a careful evaluation of all candidates... you solve this problem by changing the dimensionality... to a single dimension." - Explaining how voters simplify complex elections into one question: "Who solves the biggest problem?"
• At 0:48:52 - "More than half of the S&P correction episodes had as a 'trigger' an increase in American interest rates... specifically long-term rates." - Identifying the primary historical catalyst for stock market corrections.
• At 0:56:56 - "The risk of assuming an excessively conservative portfolio... is missing an opportunity happening because of a world scenario that is still quite favorable." - Warning against premature defensive positioning despite global risks.
• At 0:57:24 - "It creates a temerity not to have gold [in your portfolio] today... it protects your equity, it protects your allocation... against the fiduciary world." - Explaining why gold is now a necessary insurance policy against the banking system.
• At 0:58:43 - "If you look at a 5-year real interest rate at 8%, it is something absurdly high... A nominal 10-year rate at almost 14% is extraordinary." - Highlighting the massive opportunity cost in Brazil; "risk-free" rates are too high to ignore.
• At 1:02:37 - "The relationship of gold with interest rates... the correlation between the two became zero. All models broke." - Describing the structural break in financial models caused by the weaponization of the financial system against Russia.
• At 1:16:41 - "In the US, we are in the Champions League, and here [in Brazil] we are in the Paulistão [local state championship]." - Illustrating the stark difference in technological sophistication between global and local fund managers.
• At 1:22:15 - "In the last 20 years, the S&P [hedged in Reais] gave you 20% a year in Reais... the CDI was closer to 10%." - Providing empirical evidence that a diversified global portfolio outperforms local instruments.

Takeaways

• Overcome Home Bias: Brazilian investors keep ~99% of wealth locally despite Brazil representing only ~1% of global GDP. Aim for a 50/50 split between local and offshore assets to reduce country-specific risk.
• Hedge Global Equity: Invest in global markets (like the S&P 500) but hedge the currency back to your local currency (Real). This captures global growth plus the high local interest rate differential.
• Buy Gold for Geopolitics, Not Just Inflation: Add gold to your portfolio specifically as a hedge against geopolitical "freezing" of assets and the instability of the fiat system, as correlations with interest rates have broken.
• Prioritize Government Bonds over Private Credit: In high-rate environments like Brazil (6-8% real yield), the risk/reward of private credit is poor. Stick to liquid, high-yield government bonds (NTN-Bs).
• Monitor the "Asset," Not Just the Debt: When evaluating country risk, do not look at debt-to-GDP in isolation. Assess the dynamism and growth rate of the private sector ("the asset") to determine if the debt is sustainable.
• Watch Rejection Rates for Election Predictions: In incumbent elections, focus on the "Bad/Terrible" ratings. If these are rising, the incumbent is likely to lose, even if the opposition is currently undefined or polling lower.
• Adopt a "Global House" Perspective: Recognize that 90% of local market moves are driven by global macro trends (US rates, liquidity). Do not get distracted by local political noise that only accounts for 10% of volatility.
• Modernize Your Toolkit: For aspiring investors or fund managers, learning Python and data science is no longer optional. The ability to process data systematically is the new competitive advantage over intuition.
• Prepare for Inevitable Fiscal Adjustment: Recognize that Brazil's current fiscal path is mathematically impossible to sustain beyond 2027. Structure portfolios anticipating either a forced reform or a crisis-driven adjustment.