When I sold Commonwealth Bank of Australia (CMWAY) a few moments ago I wrote “I’ve only got a small bit of exposure to the global banking system and, frankly, I think it’s past time to get rid of even that exposure. We’re in one of those banking sector moments where we know that banks are loaded up with assets that can’t be priced (in the case of some illiquid securities), or can’t be sold (as in the case of leveraged buyout obligations (LBO), or that are going bad at an unpredictable rate (mortgage loans.)”
To which I’d add in the case of Itau Unibanco (ITUB) that I’d like to reduce my exposure to Brazil’s economy. The next stage in the coronavirus pandemic is a devastating out break in the developing world where the virus will rip through the favelas of Brazil, the slums of Nigeria, and the vast pockets of poverty in India in a disaster that I find hard to imagine. Think of New York with higher poverty levels and less healthcare available to the poorest. (The death rate in New York City from the coronavirus maps closely to poverty levels in the city.)
I’d like to think I’m wrong about this global picture.
But Brazil represents a special case of potential horror because the country’s president Jair Bolsonaro is one of the few global leaders still dismissing the danger of the coronavirus. Besides calling the virus “a flu” Bolsonaro has fought any effort to impose social distancing a way to control the spread of the virus. Yesterday he criticized the governor of Rio de Janeiro, Wilson Witzel, for his “dictatorial” decision to order the state’s 17 million citizens to stay at home–and off the state’s beaches. “Ban people from going to the beach? My God!” said Bolsonaro. “Beaches are outdoors. There’s no problem going there at all,” he added, contradicting guidelines from his own health ministry for avoiding crowds.
I have a 68.52% loss on the ADRs of Its Unibanco since I added it to my Jubak Picks Portfolio on October 31, 2014. The stock pays its dividend monthly so you’re not giving up a significant dividend payment by selling now.
