Making Hay Monday – February 3rd, 2025

Making Hay Monday
Looking south, twice


It could be argued that former president Joe Biden rode the tariff coat tails of Donald Trump. Trump 2.0 could, of course, be a much different story as our current POTUS is threatening friends and foes alike with punitive tariffs. Should a 1930s-type trade war unfold, with all of its economically devastating consequences, it’s unlikely President Trump will continue to push through his draconian levies. In the past, he has shown the willingness to perform policy pirouettes worthy of a professional ballet dancer.

Rosenberg, BWD
Unsurprisingly, the U.S. trades at the highest Cyclically Adjusted P/E ratios among major (and some not-so-major) stock markets. This metric calculates an inflation-adjusted and smoothed earnings history over a trailing ten-year period. It is widely followed because it corrects for unusually high or low profits which can be distorted by booms and busts. While not shown, Brazilian stocks trade at a CAPE below eight, among the world’s cheapest. Anything around 10 on this basis is considered deeply undervalued.
“It’s super-easy to dollarise Argentina. This would end the fraud of the peso, which is melting like ice cubes in the Sahara.” -Javier Milei
“Mickey Mouse is the aspiration of every Argentine politician because he is a disgusting rodent whom everybody loves.” -Javier Milei
“Brazil has rediscovered itself, and this rediscovery is being expressed in its people’s enthusiasm and their desire to mobilize to face the huge problems that lie ahead of us.” -Luiz Inácio Lula da Silva
Stocks, Bonds & Brazil… & Argentina

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Power-Punchers
Let me be the first to admit we failed to capitalize on Argentina’s breathtaking turnaround. Even though Team Haymaker is a fan of the reforms Javier Milei shoved through last year in that long-beleaguered country, we expected the economic pain to last much longer than it has.
The reality is that most of his new policies were not even enacted until last July. Yet more remarkable is his party’s lack of a majority in Argentina’s Congress. In fact, it holds a mere 38 out of 257 seats in its equivalent of the House of Representatives and just 7 out of 72 Senate positions.
For sure, Argentina has endured a wicked recession. Yet Milei’s popularity has soared in recent months primarily because hyperinflation has been vanquished. Granted, inflation is still running at a toasty 3% per month, about 40% per year. But that’s down from over 200% in 2023. It is also clearly heading lower and we won’t be surprised if it’s in the teens before long…
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