BRAZIL: Brazil for President!
Beauty, Chaos And Surrender
Executive Summary
How truly alive can we be?
Complimentary gifts from South America don’t seem impossible.
Spinoza and Hegel could have appreciated Política Brasileira’s script.
Will the election result matter? We don’t think so.
Brazil’s First Lady will help us dance through the trade. Hallelujah.
1. Why Do I Care Right Now?
There should always be time to care for Brazil, always. You either love it, or you worship it. I was extremely excited to see it flashing on my screens. I had to drop everything instantly and went right into the heart of Brazil’s market and its historical price behavior through EWZ, its juicy ETF reflecting most of the Brazilian equity market. How beautifully it echoes the overall body of the nation: its passions, its emotions, its dancing, and its fights. The ups and downs you will experience when you have the privilege to be close to that holy land will shake you to the ground and make you realize how alive you truly are.
We want to feel alive and participate in what is happening right now. Be aware, though. Beauty, chaos, surrender. All that extravaganza comes at a cost. No complimentary gifts. Not from South America. To interact with divinity, you must be switched on, emotionally stable, and ready to run. Escape is not a given.
We don’t dislike the idea of casually kicking the ball in the streets of Sao Paulo, Rio, or Salvador. The chart shows us random and volatile patterns for nearly two years, but we also see a slight increase in reason, narrowing the funnel into election month. It could be the quiet before the storm. Below the surface, implied volatility is building up.
To be honest, we are torn. But then, do we really want to give Brazil a pass? It’ll be only for a few weeks. That’s what she promised.
It’s a yes from me.
2. Useful Background Information
Let’s address the elephant. Política Brasileira. Let me try and break down that act with its overblown production, mediocre script, and helpless actors.
Rant Around The Political Spectrum
It is never easy to see the complete picture with only one teary left eye or tackle tomorrow’s problems with just one rigid right hand. My father always said free your second hand, so you can function better, or open both your eyes so you can see more clearly. Valuable advice. And not straightforward when you are a prisoner of an immature worldview and carry the weight of complicated value structures.
It took me a fair bit to internalize advice like that and realize the advantages of using the frontal yet central lobe in concert with the left AND the right hemisphere. It took me even longer to understand, that healthy dialogue and something voodoo, like love, can play vital roles in getting the good rationales out of your egocentrism. With that in mind, you might enrich the lives around you and ultimately enhance your own.
I am sure Hegel and Spinoza did some work on that. It is more relevant than ever in the age of political and social radicalism.
I stop here.
Parts of the Política Brasileira script seem published. The excerpt below must have been written after Independence Day, Rio de Janeiro. It mirrors current affairs surprisingly well.
Mediocre script. Yet, the moment of excess drama could be reason enough to consider selling volatility and betting on a contained and peaceful election process with volatility contracting. We feel the democratic institutions will hold firm and hope that not too many people will get hurt.
From an economic or investment perspective, the result of the election will not matter in our view, at least not in the mid-term. With either outcome, certainty will calm down affairs. Although the overall picture looks balanced, there is a good case for more upside from here post-election with uncertainty out of the way. Especially with commodity prices that have run far ahead of equities. The Brazilian stock market is typically correlated to global commodity prices.
A solid case for a prolonged sideways move would be a global recession with affairs in China and Europe getting wilder than they already are.
2.1 Development of the Brazilian Equity Market
2.2 Development of the Global Commodity Market
2.3 Brazil Exports 2020
2.4 Brazil Dance 2021
The First Lady in ecstasy counts as useful background information. We welcome modern Brazilian dance and the Evangelist movement. It will certainly help with an application to the Bolsonaro administration, alongside military credentials.
Now we know why John Locke came around with that dull separate-church-from-state idea. Hallelujah.
3. Trade Execution
We are selling a slightly bullish risk-defined straddle at 32, with wings at 24 and 40, maturity Nov 18, 2022.
Break-evens are at 27 and 37.
Implied volatility is high enough. And we have chosen November as the expiration month to give us enough time considering all the election noise.
The Fibonacci extension and retracement align well with our break-evens.
3.1 Trade Entry - Sep 13, 2022
Total: 4.50 Credit.
4. Final Comments
Expect updates on BrainDoζers within 4-6 weeks. We use the exact heading, ending with (+/- xy%), and label the cover cartoon with a red Doζed stamp. That way, the performance will be easy to follow.
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