O QUE NÃO ESTÃO TE CONTANDO SOBRE A ALTA HISTÓRICA DA BOLSA BRASILEIRA | Risco Brasil #24

Episode Overview

• This episode features market experts Christian Keleti and Alfredo Menezes analyzing the current "perfect storm" of capital flows into Brazil, driven by global geopolitics rather than domestic fundamentals.
• The central discussion revolves around the structural scarcity of investable assets in the Brazilian stock market ("The Lack of Paper Thesis") caused by aggressive corporate buybacks and de-listings.
• The conversation explores why foreign investors ("gringos") are aggressively buying Brazilian assets despite local pessimism, and how high real interest rates act as a massive "gravity well" competing against the stock market.
• A significant portion of the dialogue focuses on global macro trends, specifically the weakening US Dollar, the shift toward "real assets" like gold and silver, and the risks associated with US fiscal dominance and upcoming elections.
• The experts debate the "Reflation Trade" and how persistent inflation, combined with fiscal insolvency risks, creates a complex environment where short-term momentum (flow) battles long-term economic reality (fundamentals).

Key Concepts

• Macro Overriding Micro: Broader macroeconomic forces like global interest rates and currency fluctuations are currently driving asset prices far more than individual company performance. Even strong companies can stagnate if the macro environment is unfavorable, while entire sectors rise due to capital flows regardless of specific fundamentals.
• The "Lack of Paper" Thesis: A structural scarcity of investable assets is emerging in Brazil due to three factors: aggressive corporate share buybacks, M&A consolidation reducing the number of listed entities, and low liquidity in remaining stocks. This creates a supply squeeze where foreign capital chases a shrinking pool of high-quality assets.
• The "Lazy Gringo" Flow: Foreign capital often enters via passive vehicles (ETFs like EWZ), flowing indiscriminately into the heaviest-weighted stocks (Blue Chips like Vale and Petrobras) rather than through careful stock selection. This causes large caps to rally first and hardest, disconnecting their prices from smaller companies.
• The US Dollar Divergence: Historically, crises triggered a "flight to quality" into the US Dollar. Now, due to US fiscal concerns and political uncertainty ("Trump risk"), capital is flowing into "real assets" (commodities, gold, emerging markets) instead of US Treasuries, benefiting resource-rich nations like Brazil.
• The Fiscal Trap & Real Rates: Brazil's high real interest rates (around 10%) act as a ceiling for stock valuations. For the stock market to truly re-rate, these risk-free rates must fall. However, market pricing suggests current debt levels make the country potentially insolvent at these rates without unrealistic economic growth, keeping the risk premium high.
• Mechanical ETF Creation: When large allocators decide to enter a market, the process is mechanical. ETF issuers must buy the underlying basket of stocks to create new shares, creating price-insensitive buying pressure that can distort valuations beyond historical norms.
• Gold vs. Silver Dynamics: While gold acts as a sovereign reserve asset protecting against geopolitical risk (sanctions/US debt), silver has a dual nature. It serves as a monetary metal but also has critical industrial demand (solar, AI hardware), potentially allowing it to outperform gold as industrial needs grow.
• The Liquidity Dam: A massive discrepancy exists between the M4 money supply (cash in circulation) and stock valuations. Most liquidity is trapped in fixed income due to high rates. If rates fall even slightly, a small reallocation of this capital into the "shrunken" stock market could trigger a disproportionately large rally.

Quotes

• At 0:02:35 - "He warned that the stock market would dry up and prices would explode due to a lack of sellers or low supply of papers." - Highlighting the core thesis that supply constraints, not just demand, will drive prices up.
• At 0:06:33 - "The insecurity of financial agents with Trump's posture... agents are looking to reallocate, exit the American economy." - Explaining the geopolitical shift where capital is fleeing US political uncertainty for emerging markets.
• At 0:11:36 - "The number of companies repurchasing shares was around 50... we reached 2024/25 with more than 100 companies with open repurchase programs... giving us a signal: 'If you don't want to buy, I will.'" - illustrating how companies are removing their own supply from the market because they believe they are undervalued.
• At 0:13:58 - "The foreigners... netted R$ 25 billion into Brazil... exactly the same number the foreigner bought the entire last year." - Emphasizing the extreme velocity of recent foreign capital inflows compared to historical norms.
• At 0:14:36 - "So you subtract these [uninvestable] stocks... 200 stocks remain, of which 45% were not worth more than R$ 2 billion in market cap... Brazil became an egg." - Using a metaphor to describe how small and fragile the Brazilian market has become for large institutional money.
• At 0:26:13 - "The index turned into a terrible hedge recently... buying the Brazilian index means 12% Vale, 12% Petrobras, and 30% banks." - Explaining that the Brazilian index behaves more like a commodities/financials ETF than a true economic reflection.
• At 0:31:12 - "With 10% real rates, activity didn't decelerate. It was supposed to go into a huge recession... This limits the upside potential for stocks." - Pointing out the economic resilience anomaly which paradoxically prevents the central bank from cutting rates aggressively.
• At 0:37:38 - "Don't fight against the flow... If Itau goes to 12x earnings, like Chilean banks trading at 15x, I won't stand in front of the gringo saying 'It's impossible'." - Arguing that historical valuation ceilings become irrelevant in the face of massive global liquidity flows.
• At 0:41:25 - "The creation of EWZ shares is at a historic high... BlackRock goes there and buys all the papers that make up the basket... It's mechanical." - Detailing the plumbing of the market to show that rallies are often driven by structural ETF mechanics, not discretionary choices.
• At 0:52:45 - "Whoever has military sovereignty has the store of value. It is very difficult to reallocate to another currency with the geopolitical risk you have in the world." - Defining the modern macro thesis for gold as a hedge against the lack of US neutrality.
• At 0:58:22 - "The correlation between silver and gold will decrease... because today new demand is emerging for silver, whether for data centers, for photovoltaic panels, and supply is limited." - Explaining why silver might decouple from gold due to industrial scarcity.
• At 1:00:50 - "People started melting silver candlesticks at home... and then they saw there were lots of silver candlesticks... and delivered it physically." - Using the Hunt Brothers' failure to teach a lesson on how high prices can unlock hidden secondary supply.
• At 1:08:25 - "Our NTN-B, which is real interest rates, has much more correlation with the Treasury, which are nominal rates, than with TIPS, which are real rates." - Highlighting that US inflation expectations directly impact Brazil's financing costs more than US real growth.
• At 1:09:20 - "7.5% real interest rates for 10 years, 15 years, Brazil goes bust. Brazil is not solvent... to stabilize the debt, I would have to grow 3% every year and have a primary surplus of 2.5%." - Providing the mathematical reality check on Brazil's fiscal solvency that keeps long-term rates high.
• At 1:13:09 - "Against flow, flow is sovereign in the short term. But who defines the long term is the fundamental." - Summarizing the core tension between momentum trading and value investing.

Takeaways

• Monitor the "Shrinking" Market: Recognize that stock buybacks and de-listings are creating scarcity. When supply shrinks and demand stays constant, prices must rise. Look for companies aggressively buying back their own shares.
• Don't Fight the Flow: When foreign capital enters via ETFs, it buys indiscriminately. Avoid shorting large-cap "Blue Chips" (like Vale or Petrobras) solely based on valuation metrics during high-flow periods, as mechanical buying ignores price.
• Watch Real Rates as the Trigger: The primary catalyst for a broad market rally (beyond Blue Chips) is a drop in real interest rates. Until risk-free rates fall significantly below 6-7%, local institutional money will likely stay in fixed income.
• Diversify into "Real Assets": Consider allocating to commodities and physical assets (gold, silver) rather than just financial paper. The global trend is moving away from US Treasuries toward tangible assets that don't carry counterparty risk.
• Distinguish Silver from Gold: Treat silver not just as a precious metal but as an industrial play on the energy transition (solar) and tech (AI hardware). It may have a higher floor than gold due to this industrial consumption.
• Ignore Local Pessimism: Be aware of the disconnect between local sentiment (negative due to politics/fiscal) and foreign sentiment (positive due to cheap valuations/commodities). Foreigners often buy the bottom while locals sell out of fear.
• Understand the ETF Mechanic: Realize that when the "gringo" buys Brazil, they are often buying the index (EWZ). This means the rally will be concentrated in the top liquid names first. Small caps will lag until local investors rotate capital.
• Check the Fiscal Math: Keep a realistic view of Brazil's solvency. Long-term positions should be hedged against the risk that the government cannot maintain a primary surplus required to sustain high real interest rates.
• Respect the "Reflation" Risk: Be cautious of signs that inflation is re-accelerating (rising input costs like copper/silver). If inflation returns, central banks may pause rate cuts, which would be a headwind for equity markets expecting easy money.