Out Fox The $treet

After eight rate cuts totaling 450 basis points to a record low 8%, the Brazilian economy and stock market are still struggling to regain the growth of the last decade. Read this CNBC report for more details on the economy and interest rate cuts. Surely, now has to be the time to invest in this country. The Bovespa (BVSP) now trades close to 3 year lows, only trading slightly lower in the August to October 2011 time frame last year. So why aren't the rate cuts propping up the stock market? For one, the market doesn't appear as forward-looking anymore. The original rate cut didn't happen until August 2011, meaning that it is just now impacting the economy. Unfortunately, it hasn't prevented the forecast for the economy from dropping to 2.5% now. Until this trajectory returns to increased growth, stocks probably won't move up much. Read the full article at Seeking Alpha. Disclosure: Long NIHD. Please review the disclaimer page for more details.  ...

According to this Bloomberg report , Brazil expects to continue cutting the interest rate by 50 basis point intervals for the time being. The Selic rate is already at a historical low of 8.5% after five rate cuts. Yes, you read that correctly. From the chart below, the interest rate has averaged 16% since 1999. An incredibly high level when you consider the rates in the US or Germany. Heck, the 10 yr Treasury in Italy and Spain doesn't even match 8.5%. The amazing part is that the Bovespa trades closer to 3 year lows than highs. Shouldn't the significantly lower rates spur growth and investment demand? Well that use to be the theory but investors appear less forward looking than in the past. Just as the higher rates in 2011 hurt growth these rates should fuel growth. Unfortunately any gains are likely to lead to a spike in the markets followed by sharply higher interest rates. The drastic cuts by the government are going to lead to volatile times. The nex...

How many rate cuts is it going to take to kick start growth in Brazil? The 50 basis point cut is the 7th cut in a row and marks a drop in rates to record lows of 8.5%. While many apparently doubt whether growth will be kick started, this unprecedented move will undoubtedly usher in huge growth as 2012 ends. Combined with the country getting ready for the World Cup in 2014 and the Olympics in 2016, these rate cuts will put growth into sizzling status for 2013. The amazing part is that interest rates have now dropped below the 8.75% reached during the financial crisis in 2009. What happened next was boom times for the stock market as 2009 ended and 2010 started. Unfortunately that's when the Bovespa peaked in this cycle. Back then, inflation kicked up big time as commodity prices plunged in 2008 and then rebounded sharply by 2010. The year over year change over amplified some of the inflation fears back then. The two amazingly pieces to this story is that first interest rates...