UMA AULA SOBRE ECONOMIA E INVESTIMENTOS COM DUAS LENDAS DO MERCADO | Market Makers #318

Episode Overview

• This episode features financial experts Alfredo Menezes and Sérgio Machado analyzing how global shifts—specifically the "Trump Effect" and US Dollar weaponization—are reshaping investment strategies in emerging markets like Brazil.
• The discussion deep dives into Brazil's structural challenges, highlighting how the "digital deficit" (streaming services, online betting) and political polarization are complicating the nation's fiscal health and currency stability.
• A significant portion focuses on the "Credit Crisis," warning investors about dangerous distortions in risk-return profiles, the fragility of high-yield private credit (analyzing the Banco Master case), and the paralysis of institutional investors.
• The conversation concludes with a contrarian "Lack of Paper" thesis, arguing that a scarcity of shares due to buybacks and delistings could trigger a sharp market upside if capital flows eventually return.

Key Concepts

• The "Trump Effect" and Global Reallocation The potential for a Trump presidency implies a policy preference for a weaker dollar to boost US exports. This, combined with the geopolitical weaponization of US reserves (sanctions), is forcing global investors to diversify away from US Treasuries. This capital is flowing into real assets (Gold, Silver) and Emerging Markets, benefitting Brazil not due to local merit, but due to global portfolio rebalancing.

• The "Cost of Carry" Trap For Brazilian investors, holding foreign currency (Dollars) comes with a high opportunity cost because of Brazil's high local interest rates (CDI). Even if the Dollar appreciates, if it does not rise more than the local interest rate (e.g., 10%), the investor loses purchasing power in real terms. This "carry cost" makes long-term passive dollar holding inefficient without buying productive assets.

• The Modern "Service Deficit" Brazil's Balance of Payments has a new structural leak: digital services. Capital leaves the country through streaming (Netflix/Spotify), cloud computing costs for AI, and online sports betting ("Bets"). These are invisible drains on foreign reserves that didn't exist two decades ago, meaning commodity exports must work harder just to maintain currency stability.

• The High Real Interest Rate "Curse" When risk-free government bonds offer real returns of 6-7% or more, it creates a "ceiling" for the stock market. Institutional investors (pension funds) can meet their actuarial targets safely via government bonds (NTN-Bs), removing their incentive to take risks in equities. This causes a liquidity drought in the stock market.

• Credit Market Distortion and Risk Assessment The speakers identify a dangerous compression in credit spreads, where high-quality (AAA) and low-quality issuers pay similar rates. This distorts the risk-reward ratio. Furthermore, the "Exempt" asset class (tax-free LCI/LCA) attracts retail investors, crowding out institutional players and forcing companies to issue debt rather than equity, further warping market signals.

• The "Lack of Paper" Thesis Despite the gloom, a bullish case exists based on supply constraints. Companies are aggressively buying back their own undervalued shares, delisting, or going private. This reduces the total stock of available shares ("paper"). If market sentiment shifts and demand returns, this scarcity of supply could lead to an explosive rise in asset prices.

Quotes

• At 0:08:12 - "Emerging countries should say a 'Lord's Prayer' for Trump every day... he provoked an aversion to the American economy, to Treasuries... The world needed to reallocate resources." - Discussing how US policy accidentally benefits Brazil.
• At 0:10:35 - "Trump... he is extremely objective. He wanted to devalue the dollar. The devaluation of the dollar brings greater competitiveness to the American economy." - Explaining currency volatility as a deliberate industrial tool.
• At 0:14:27 - "To say the stock market was positive for the year, I would like to see how much it was positive above the risk-free capital [CDI]. I think that drops significantly." - Emphasizing the importance of measuring returns against opportunity cost.
• At 0:17:35 - "You bought the dollar at 7 [in the past], you paid 6.20, and you carried it costing 10... opportunity cost-wise, you are losing." - Illustrating the math behind the "carry trade" trap.
• At 0:18:18 - "We have some structural changes in our external accounts... Streaming... Artificial Intelligence... Betting... we have 1.7 billion monthly." - Highlighting the new digital drain on Brazil's economy.
• At 0:26:52 - "People are losing the capacity to dialogue... This side doesn't listen to the other... This only allows absurdities to be justified." - On how political polarization blinds economic rationality.
• At 0:28:53 - "When I see a debt at 7.5%, 7.70% real interest running, the country is not solvent in the long term." - Identifying the tipping point for Brazil's fiscal solvency.
• At 0:35:36 - "It's no use comparing multiples from 20 years ago... The potential of the stock market is kind of limited. Because our real interest rate is very high." - debunking historical valuation comparisons.
• At 0:38:59 - "Whoever doesn't have gold and silver in their portfolio, hasn't understood what is happening in the world." - On the geopolitical shift away from fiat currencies.
• At 0:41:50 - "You start to have a subversion of the risk-return binomial... The difference between an S1 and an S3 is 5% of the CDI, it makes no sense." - Critiquing the broken credit market pricing.
• At 0:42:24 - "It's the third curse: it's 10% real interest rate. Why am I going to take risks?" - Summarizing the primary obstacle to equity investment.
• At 1:00:50 - "They summarized it as the thesis of 'paper will be missing'... Many share buybacks, many delistings, companies that left the stock exchange." - Explaining the supply-side constraint that could trigger a bull market.
• At 1:03:48 - "We see IPOs in Brazil, 80% is because [the owner] thinks the price is much higher than what it's worth." - A warning about the misalignment of incentives in new public offerings.
• At 1:09:47 - "If the model is defrauded so easily, we have a big error. And you can have a problem of loss of credibility in the financial system." - Discussing systemic fragility and regulatory gaps.
• At 1:13:39 - "There are two ways to learn: listening to the more experienced, or through pain. The Brazilian investor only learns through pain." - On why investors fall for high-yield scams.
• At 1:15:37 - "I haven't met any [successful bankers] who ostentated even half, or a quarter, or 10% of what [failed bank owners] ostentated." - Using behavioral red flags as a due diligence method.

Takeaways

• Benchmark Against Risk-Free Rates: Stop celebrating nominal gains. If your portfolio isn't beating the CDI (or local risk-free rate), you are losing value in real terms.
• Diversify into Strategic Commodities: Treat Gold and Silver not just as jewelry or inflation hedges, but as geopolitical insurance against the weaponization of the US Dollar.
• Beware the "High Yield" Trap: Be extremely skeptical of credit products offering returns significantly above the benchmark (e.g., 120-150% of CDI). Excessive yield almost always indicates distress or potential fraud.
• Monitor the "Service Deficit": Pay attention to the outflow of capital via digital services (bets, streaming). These are structural pressures on the currency that traditional trade balances don't capture.
• Don't "Buy and Hold" Cash Dollars: Avoid holding physical dollars or non-interest-bearing accounts in high-interest environments. Invest in dollar-denominated assets (stocks/treasuries) to offset the cost of carry.
• Use "Ostentation" as Due Diligence: When evaluating smaller banks or funds, look at the behavior of the owners. Excessive flashing of wealth is often a red flag for poor management or fraud.
• Don't Trust Regulation Alone: Do not rely solely on the FGC (guarantee fund) or CVM stamps of approval. The regulatory framework is lagging behind modern fintech complexity; perform your own checks on management.
• Adopt a Barbell Strategy: In a "binary" economic environment, avoid middle-of-the-road bets. Hold defensive assets (Gold/Hard Currency) on one side and high-upside liquid assets on the other.
• Watch the Supply Crunch: Keep an eye on share buybacks and delistings. This "lack of paper" is a coiled spring that could lead to rapid price appreciation if liquidity returns to the market.
• Question Tax-Exempt Incentives: Understand that the popularity of tax-exempt bonds (LCI/LCA) is often driven by tax policy, not credit quality. Don't assume these are "safe" just because they are popular with retail investors.