The crazy Argentine government is at it again, as we all probably know by now. How such a wealthy country can end up so perpetually mismanaged is beyond me. Yet the lesson is, when your money eventually becomes trapped, 'the market' becomes a store of value.
If you find yourself driving through the suddenly packed condo canyons of Miami—lamenting not having bought during the property crash—shake a fist or two at the Argentines. So many of them ponied up 80 percent cash down payments on units (mortgage market be damned) that South Florida’s condo depression rather abruptly turned into another boom. Their thinking was defensive: Swap iffy pesos for dollars and store that value in U.S. property, out of the prying hands of the government back home.
Now, with Buenos Aires finding some rather innovative ways to crack down on the flight to dollars, that spirit of capital preservation has morphed into a panic in Argentina to get out of the peso, the world’s worst-performing currency. In the black market for dollar-denominated bonds, Argentines are spending dearly to circumvent President Cristina Fernández de Kirchner’s expanded limits on foreign exchange, and inflation that’s privately estimated at 25 percent. According to data compiled by Bloomberg, the black market exchange rate is at 8.98 pesos per dollar, after touching a record 9.14 pesos last week. Compare that with the government’s official exchange rate of 5.17 pesos per dollar, and it’s easy to see why Argentines are so desperate to get out of the local currency in South America’s second-biggest economy.
The anything-but-cash mood is also helping the store-of-value appeal of Argentina’s equities, where the benchmark Merval stock index is up 23 percent this year.
Copyright iTulip, Inc. 1998 - 2016 - All Rights Reserved
Opinions expressed herein are those of the posters, not those of iTulip, Inc., its owners, or management. All material posted on this board becomes the intellectual property of the poster and iTulip, Inc., and may not be reposted in full on another website without the express written permission of iTulip, Inc. By exception, the original registered iTulip member who authored a post may repost his or her own material on other sites. Permission is hereby granted to repost brief excerpts of material from this forum on other websites provided that attribution and a link to the source is included with the reposted material.
Nothing on this website is intended or should be construed as investment advice. It is intended to be used for informational and entertainment purposes only. We reserve the right to make changes, including change in price, content, description, terms, etc. at any time without notice. By using this board you agree that you understand the risks of trading, and are solely responsible for your own investment and trading decisions. Read full legal disclaimer.
Journalists are not permitted to contact iTulip members through this forum's email and personal messaging services without written permission from iTulip, Inc. Requests for permission may be made via Contact Us.
Objectionable posts may be reported to the board administrators via Contact Us.