In the last 12 months the dollar was not the best investmentthe fixed term calesita was the star, the dollar wholesaler still late, the Sovereign bonds a good investment alternative.
Inflation for the month of November would be at 6.0% per month, this would imply a inflation rate in the last 12 months of 94.4%.
In the month of November, the wholesale dollar rose 6.6%, and in the last 12 months it increased 65.7%.
So far we have inflation in dollars of 28.7% per year, this exchange rate delay at some point this government or the next one will have to adjust it.
On the interest rate side, the 30-day fixed term gives you a rate of 6.25%, and if you add the accumulated returns of the last 12 months you obtained a rate of 72.4% per year (we calculated a fixed term to 30 days taking the rates offered in the last 12 months)
The MEP dollar in the last 12 months rose 54.8%.
Inflation for the month of November would be 6.0% per month, which would imply an annual inflation rate of 94.4%
The ranking of investments: where was the dollar
The ranking would be first inflation or financial instruments tied to the evolution of inflation with a rise of 94.4%. In second place, the traditional fixed term with a rise of 72.4%. Third, the wholesale dollar or the instruments that adjust per linked dollar which rose 65.7%, In fourth place, the MEP dollar which rose 54.8%.
In recent days we have seen an improvement in sovereign bond prices in dollarsFor example, the AE38 bond was worth US$33.50 a year ago, and today it is worth US$30.20, however, he has paid rents worth US$2 during that period, with which the person who bought this bond lost 3.8%.
For the next 3 years, this bond pays rent in the months of January and July, in the year 2023 it pays US$1.9375 each month, in the year 2024 in each payment US$2,125 and in the year 2025 pays US$2.50 each month.
This implies that if you buy this bond today for US$30.20, in the next 3 years you will take US$13,125 in income, which implies that you will recover 43.5% of the money invested.
There are certain possibilities that this bond can be honored by Argentinabut if we were making a mistake and Argentina rescheduled the debt in the second half of 2024, we would invest US$30.20 and recover US$8,125, so this bond would cost us US$22,075, which is a very low value and easy to recover even though we have a debt restructuring ahead of us.
If the next government restructures the debt, offers a 20% capital reduction and leaves the income coupons unchanged, this bond would remain at parity of 27.6% and therefore would quickly recover to parity levels of 40.0 % that would leave us with a significant profit, since it left us at a cost of US$22,075, and if it later earns a parity of 40% on a face value of US$80 (by removing 20%), in terms reais would be worth US$32.00, which would leave me a profit of 45.0% in just over two years.
There are investments that paid off such as the calesita fixed term, you have to wait for the dollar
What should invest in
Argentine sovereign bonds in their different variants are an excellent purchase opportunity, they are at very low prices, and they would support up to a debt restructuring with a 20% capital removal, if in 2023 a government wins that imposes more economic rationalityinvestments in energy and mining mature, we have two years without drought and good harvests.
In the last 12 months, inflation-adjusted peso bonds and inflation-adjusted fixed terms were the big financial winners. The remembered fixed term calesita (whose author writes this note) is giving big differences. We remind you that the calesita fixed term was to make a fixed term adjusted for inflation at 90 days, 120 days and 150 days, to then renew it in all cases to 90 days, constituting a monthly flow of fixed terms adjusted for inflation with a premium of 3 months of accrued inflation.
Example: I have $300,000 and I make 3 fixed terms adjusted for inflation (UVA), $100,000 at 90 days, $100,000 at 120 days and $100,000 at 150 days, once they expire I renew them at 90 days, the first one is due at 180 days, the second at 210 days and the third at 240 days, and so I renew them successively, putting together a perfect monthly flow of quarterly returns that will give me inflation for 3 consecutive months as income.
The traditional fixed term, in the last 12 months might not beat inflation, but it made a difference to the wholesale dollars and bills, since in the last 12 months the fixed term yielded 72.4%, while the wholesale dollar 65.7% and the MEP dollar 54.8%.
The Government, until September, deliberately delayed the wholesale exchange rate, but from October onwards it began to index the economy, since the exchange rate, inflation and the interest rate grow at the same rate (between 6 .25% and 6.6% every month). This is very dangerous, since at some point these variables might spiral upwards, either due to prices that increase for seasonal reasons (for example meat) or a rise in imported products (given import restrictions). This would affect economic expectations, and this would be reflected in a widening of the gap, which would push the MEP dollar higher.
The crazy mania of issuing that this government has, issuing to finance the Treasury, to pay interest on the Central Bank’s debt or to buy bonds in pesos makes the danger of higher inflation or an increase in the gap latent. To this we add the dangerous move of implementing special dollars such as the soybean dollar, for which the Central Bank pays $230, and then uses them to deliver importers at $170, clearly a loss that is difficult to recover.
The traditional fixed term, in the last 12 months might not beat inflation, but it made a difference to dollars
What’s going to happen with the dollar
So far the dollar looks like the big loser, but relevant events such as the issuance, the lack of interest from the private sector in the treasury tenders and the failures of the special dollars, might revive the exchange rate from the ashes. Keep an eye on sovereign bondsbecause they pay rent in dollars bills, and their price is very low.
As for stocks, watch out for bank stocks, which rise little because banks are stuffed with treasury debt. I love YPF’s action, but if they are prohibited from increasing fuel by more than 4.0% per month, when they devalue at a rate of 6.6% per month, it does not seem appropriate to put money in a company with said equation, we will have to look with more attention to exporting companies linked to raw materials, with less state intervention in their businesses, difficult but not impossible.
There are investments that have paid off, such as the merry-go-round, you have to wait for the dollar, whoever waits often despairs, but everything will have its reward, and it will come very soon.
