The Brazilian stock market index (IBovespa) reached its peak 13.5 years ago, in May 2008, at 72,767 points. Adjusted to inflation (IPCA), this peak level would be equivalent today to 155,000 points.
The IBovespa has been lately in the vicinity of 105,000 points, which is 32% below the 2008 peak, a never-ending bear (even though it is a non-native species).
Someone that would have bought dollars in May 2008 and left them under the mattress would have outperformed the Ibovespa by 2.3x. And gold, the “barbaric relic”, outperformed the Ibovespa by 4.8x.
Anyone can make money in any market on Earth by speculating. Usually speculation takes advantages of government-caused distortions in the markets – for instance, some traders are making money right now in the Argentinean stock market. Investing is a completely different ball game; it is the process of allocating capital to a productive business in the anticipation of creating more wealth. In a nutshell, speculation is for the short-term and investment for the long-term.
Markets usually follow emotional cycles depicted in the figure above. They move from euphoria to despair. Because of this, there is some art in investing, smart investors “buy when blood is running in the streets”; they buy during the despair phase.
The Brazilian stock market experienced a recent thrill by reaching 130,000 points in the beginning of the year. However, it is not adequate to place Ibovespa’s ups & downs under the emotional market cycle framework. Why? Because Bovespa is speculation and not investment. First, by its historical disastrous performance against all possible benchmarks. Second, by the own definition of investment which embeds the creation and not the destruction of wealth. In the end, Bovespa is just a back-seat passenger of a hijacked train (by the state apparatus) called Brazil – there is simply no capital markets vaccine against two-digits price inflation, Kafkian bureaucracy, gargantuan taxation, and all types of interferences against the free markets.
Brazilian savers are back again into governments bonds, feeding the Leviathan, who will eventually digest them.
Brazilian investors are investing in tech-B2B late-stage VC in the US alongside Fabrica Ventures.