 Brazil is about to join China and India in fighting inflation.
On March 17 the Brazilian central bank, Banco Central do Brazil, surprised pretty much every economist in the country by holding its benchmark interest rate steady.
 But that’s just raised their conviction that the bank will raise interest rates in April. On top of interest rate increases in India and higher reserve requirements in China, the move would make Brazil the third developing world powerhouse to start to slow its economy to fight inflation. (See my post https://jubakpicks.com/2010/03/19/inflation-is-about-to-break-loose-in-china-and-india/ )
 Economists predict that rising inflation will force the bank to act—and the longer it delays the higher the inflation rate is likely to get.
Analysts project inflation of 5.1% in 2010 and after the central bank failed to act raised their forecast for 2011 to 4.7%. That’s up from a consensus projection of 4.6% a week earlier in the central bank’s weekly survey.
 The forecast right now is for the benchmark interest rate to climb to 9.25% in April. That would be the first rate increase since September 2008. The benchmark rate is currently a record low 8.75%.
 For why the inflation fight in India, China, and Brazil is likely to make the U.S. stock market the best performer in the world over the next three months or so see my post https://jubakpicks.com/2010/03/19/how-long-can-this-last-the-u-s-stock-market-is-out-performing-the-world/ )
speelty,
I pulled up AGNC’s description, and that was all I needed to read:
“American Capital Agency Corp. (AGNC) is a real estate investment trust (REIT). AGNC earns income primarily from investing in residential mortgage pass-through securities and collateralized mortgage obligations. These investments consist of securities, for which the principal and interest payments are guaranteed by United States Government-sponsored entities, such as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) or by a United States Government agency, such as the Government National Mortgage Association (Ginnie Mae).”
The risk there is more than obvious. Having said that, a VERY small position in AGNC doesn’t sound too bad. A position about the size you’d take to a blackjack table in Vegas…
Why Brazil? how about protect yourself with high divident paying stock….19% and P/E under 5… such as AGNC
Lessons to be understood and learned. The longer you wait (to fight inflation) the harder it gets. We’re currently having inflation in the US. The President is relying on high inflation to pay off government deficits in the future. Will the Fed raise interest rates? Not soon
GreatDoctor,
You would get 9% of the Real and have to pay currency conversion fees.
Is there much risk in the Brazilian currency? Why can’t I just put my money in a Brazilian bank and earn 9% interest?
tom,
That’s a fancy term for stock markets.
Let me ask an admittedly uninformed question: When people refer to “equity markets,” what exactly are they referring to? I hear this phrase all the time and used in different contexts.
One thing to keep in mind is that Brazil’s central bank has one of the highest rates in the world. An increase of 0.5% is almost irrelevant there. An increase of 0.5% in the U.S. would probably send investors screaming from the equity markets.