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.  ...

It wasn't surprising that Brazil slashed interest rates for the 5th time tonight, but it was a little surprising to see a 75 basis point cut. One needs to understand though that Brazil still maintains one of the highest interest rates in the world after this cut to 9.75%. This even after 275 basis points of rate cuts in the last 6 to 7 months. After a 2.7% GDP print for 2011, its just natural that the interest rate would drop from such lofty levels. What is ironic is that the original surprise cut back in August last year was so criticized. Just imagine now if the central bank hadn't started so soon. This economy might be headed to a recession if not for the fast action. One also needs to understand that interest rate cuts take up to 9-12 months to have an impact on the economy to a great extent. The original cut was only some 7 months ago. Though this does further highlight the typical problem with rate cuts. The Brazilian central bank has already made 5 rate cuts before t...

This is the 2nd article in a series focusing on whether now is the time to invest in emerging markets. The first article which focused on India concluded that while some appealing stocks were at very discounted levels, investors need to wade into the stocks carefully, in order to not catch the proverbial falling knife. This article focuses on the largest Latin America economy, Brazil. It faces similar problems, where high inflation led to numerous interest rate increases by the central bank, leading to a slowing down of the economy. The major difference, though, is that Brazil has already been aggressive-- with three rate cuts of 50 basis points each-- while India is still pondering whether to cut rates. The country also has two potential catalysts, with the World Cup arriving in 2014 and the Summer Olympics in 2016. Both events will require large infrastructure spending that should benefit not only the economy, but a lot of the stocks traded in the U.S. Read the full article at...