The news that Chanos is closing his Brazil shorts (or some of them) highlights for me why I like Emerging Market (EEM, quote) investing as markets can over react and overshoot creating great buying opportunities for those will to take measured risk.
See the article from Reuters that just hit the tape and this is something we will address tonight on Fast Money. Reuter's Article
Jim Chanos is closing Brazil shorts. If anything Chanos is saying what I said on Friday afternoon in a “Street Fight” with Brian Kelley. My man “BK” took the view that commodities remain Brazil’s Achilles heel and will continue to weight down the economy, and I said yeah I get that but I think the market (and especially the currency) have priced this in. See video by clicking on line below.
No one is speculating saying that Brazil (EWZ, quote) is a fantastic investment environment (and BK knows his EM btw). Rather the market got overly negative and on the potential and actual election outcome. In fact if you walked in Monday Brazil was down almost 10% and this might just have been the capitulation moment I was describing.
What Brazil offers as a case study is exactly the kind of set up Emerging Markets equities often give. And these set ups are not without their risk but the cross over players in Emerging Markets and marginal last Dollar is usually the blood in the streets that I like to buy on days like yesterday after markets have made their statement in the days(months) leading up to the event.
Meanwhile Jim Chanos is an accomplished short seller and does his homework and has made some great calls but I doubt Chanos got short PBR on Sept 5th and rode is 25% lower into elections. If he did – congrats because Brazil was certainly overbought into the summer on election expectations that we too thoughts were not reflecting reality.