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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: Wyätt Gwyön who wrote (81218)	7/10/2008 6:37:34 AM
From: THE ANT	Read Replies (4) of 116555

If one looks at the dollar vs real at 1:1.6 and take into account Brazilian and US inflation over the last 15 years (greater in Brasil as there was at least one year of double digit inflation in Brazil after real introduction, and greater inflation in Brazil every year on annual basis since then)You get a real exchange rate of about 1:1 which is where it was when Brazil ran massive trade deficits.Even Morgan Stanley is predicting trade deficits in Brazil within the next 12 months.When the Real was 1:1 to the Dollar there were more Brazilians going to Disney world than any other nationality in the world.Brazil is held up by the commodity boom but is headed towards a trade deficit even before the world slow down which is in process. I have a mind for numbers and relative values and have gone to Brazil 1-3X a year since 1981.This is the 3rd time I have seen similar overvaluation:1986 Plano Sarney, 1994 Plano Real and now Plano Greenspan is a Dumbass.Ocean front property in fair locations is 20% less than Us property on the ocean.Brazil has come too far too fast.Other than control inflation (it is a big big deal) and moderatly change the pension system they have not made many hard changes.I tell my friends, with zero transport costs I can not fathom anything I could produce or outsource to Brazil that would be competitive with what we have here(thanks to China).I pay 1/5 of my after tax salary as a physician to maintain a 23 year old nephew of my wife with no college education at my beach house in Brazil to supervise construction there.On a purchasing power basis minimum wage workers in Brazil make 50% of workers in the US.This is great for them as prior to the plano Real it was about $30 a month if you took inflation into account.I just say given multiple structural issuses in Brazil a minimum wage worker there is not competitive with the rest of te world.Their wages will not fall and that is not needed.For the Third time since 1981 I tell Brazilians their currency is a fantasy (although this is the closest it has been to real).Each time I am told that I just can not accept the new order of things and it is envy.I have been right the last two times,if I am wrong I am richer than I think

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