For a couple of weeks now I’ve been looking at the merits of either buying the Chile ETF (ticker: ECH), shorting the Mexico ETF (ticker: EWW) or both. And by the way things have been looking recently, not only do my instincts look about right, but I may have even missed the boat. For those who have been watching the elections in Italy, the fallout for the euro has been pretty hard, on the order of 300 bps in Monday alone. So what does this have to do with Latin America? Well, a lot, actually. I initially wrote about this back in June last year for Seeking Alpha here, and apparently my thesis still holds.
The storyline as I see it is pretty simple.
Basically, at a meta level, world markets still generally move according to one question: do we like dollars or not? And if it’s time to not like dollars, which it has been for the past couple years, then everything else benefits: euro, mexican peso, brazil, oil, gold, etc. If it’s time to like dollars, then all those other things get sold off, the main exception being the Japanese yen, but that’s an entirely separate conversation. And by “dollars”, all we’re talking about is the actual currency, plus US treasuries. US stocks qualify as “not dollars”. There are minor subplots that people can be distracted by in smalller fits and starts, but that’s the basic meta narrative.
I don’t know if I’d go so far as to say the dollar is starting its capital C Comeback, but the extent to which this Berlusconi thing is scaring the hell out of people tells me that nobody really bought the euro-optimist rhetoric over the past couple years. They were just willing to take it as long as Bernanke and company were setting interest rates at zero. But now even zero interest US rates are apparently more appealing than a hung parliament in Italy.
The tallest midget strikes again!
But I digress. Anyway, the point is that for those of you who want to geek out on macroeconomic indicators of Mexico versus Chile, the latest Seeking Alpha article is for you.
For those of you who don’t, I’m going to try a different format and since this is my first try at this, I’d love to hear any feedback on the effectiveness of this. I’ve made a prezi file entitled, “Is Mexico’s Economy All It’s Cracked Up To Be?”, which takes the essential points of the Seeking Alpha article, but focuses a bit less on the Chile end of it and aims more at all this ridiculous gushing over Mexico. From an operational standpoint, I like it better than powerpoint, but none of this matters if it isn’t received as being more readable than powerpoint. Check it out and let me know what you think. If you want something emailable or twitterable, this is the link.