The macro bubble burst | The exchange ran …

In the stock Exchange from Buenos Aires 97 large local businesses are listed. The price of the shares for the price of each of them delivers as a result the market value of companies. In January 2018, the total is equivalent to 116 billion dollars. This is when the MerVal main stock index reached the record of 1800 points measured in dollars. The day after the elections, STEP discovered the impressive speculative bubble macrofueled by the issuance of uncontrolled debt and the highest real interest rate in the world, a bicycle fueled by money laundering and the reclbadification of the border to emergence. The yellow balloon was punctured and the price collapsed. Stock market capital has declined from the above-mentioned maximum of $ 116 billion to approximately $ 24 billion.

One of the measures of the economic catastrophe of this political cycle is that local and foreign investors have registered capital destruction of 92 billion dollars. The distribution is shocking: from January 2018 to the end of August 2019, The loss of value of listed local companies is 80%.

The rebounding prices of the last days do not alter the damage caused to the market or the rejection that the big investors have at the moment towards the Argentine place. The race against Argentine badets is still alive.

The macro-economy has left no space to destroy. It has also done with the market value of large local companies, such as banks Galicia, BBVA, Macro and Supervielle, the energy companies Pampa, Edenor and Central Puerto, the oil company YPF, Telecom, Aluar, Cresud, Cablevisión, among others.

The main Argentine companies are at a good price on the market to tempt big companies and foreign investors. We must see if another landing of these capitals takes place, as was the case in the 90s, after hyperinflation and at the beginning of the new century, after the corralito, the megadevaluación and the defect. The sales or transfer of the control package were made with the value of the companies devalued.

55/55

he Argentine Institute of Capital Markets prepare a daily report of market capitalization expressed in pesos. When calculating these data with the exchange rate at the end of each day, the dollar value of domestic firms is reached. The sequence of the evaporation of the stock market wealth is shocking:

* In January 2018, he added 116 billion dollars.

* August 9, the Friday before the STEP election, was $ 52,522 million.

* On the 12th of August, the Monday following the elections, he went down to 35 412 million dollars.

* The last day of last month had fallen to $ 23.675 million, a 55% drop since Friday, August 9th.

These figures are very telling to dismantle another strategy of confusion of the official discourse that not They triggered turbulence in the financial and stock markets. As can be seen, from the peak of the course until the eve of the primary elections, the market capitalization had also fallen. 55 percent. This is the period during which the macroeconomy lacked voluntary external financing, which resulted in a strong exchange rate and in relation to Argentine badets. The government was able to prolong the agony with the huge loan provided by the International Monetary Fund.

The capital flight It was already launched and the IMF dollars were used so that the move to the October elections this year is not traumatic. Almost exhausted these resources and with the emergence of a PASO politico-electoral scenario modifying the large investment funds, even more after being deceived by official polls, the leak has accelerated.

One factor not mentioned is that the fall was more violent because, in the months preceding the WWTP, the central bank stepped the exchange rate and raised the interest rate, encouraging carry trade. At the same time, the vice of the plant, Gustavo Cañonero (formerly Deutsche Bank and former Templeton Funds' Argentine partner) and the Finance Secretary, Santiago Bausili (formerly Deutsche Bank and JP Morgan), encouraged Wall Street hedge funds to ride on this bike, guaranteeing them the exit door with future dollar (The BCRA had accumulated the amount of these contracts). This mission was completed at the end of June with the Minister of Finance at the time, Nicolás Dujovne. In this way, they fed in dollars the engine of the intensive treatment of macro economyagain inflating the speculative bubble which, when it burst, was even more furious.

The second step of skid stock It started when the Macri government lost to the elections because of blows and, with a sleeping president and a denier of what had happened to him, he decided not to intervene in the market, leaving the currency exchange rate uncontrollable . Which also collapsed as a result and was immediately stock quotes and public securities.

With another round of the mega macro devaluation he was naked that he financial evaluation model Opened in December 2015 was full. And the race that began at the end of the first quarter of last year, when Wall Street opened the tap of dollars to the Argentine economy, rushed at full speed. The balance was that in less than a month, dollar market capitalization saved too 55 percent.

The difference between the two periods of flight from the stock markets was speed; The balance is the same: at each step, the market value of the companies decreased on average by 55% in dollars compared to the base amount (January 2018 and August 9, 2019, respectively). In all, the stock market crash in 20 months of crisis is 80%.

Record

The financial news agency Bloomberg has published a ranking of the world's most violent daily stock market collisions. The record is 94 since 1950. In the top five places, the Argentine market occupies two. The most impressive collapse was that of Sri Lanka., in 1989, when a civil war broke out in this Asian country: down 61.7 percent.

In two places, landslides of the MerVal, the main stock index. Last August 12th was the second worst ranking in this ranking, with a fall of 48.0%, followed by the 2002 crash of 45.2%. In fourth place, the bag of Kazakhstan which also accounted in 2002 for a daily loss of 38.6%, to close the list the Mongolian market, which in 2004 dropped 35.4% in one day.

Being part of this ranking does not leave well the local market protagonists or the regulators who allowed and facilitated the construction of a phenomenal speculative bubble. The flow burst, with the initial euphoriathe latest panic and the crack, has the same characteristics as what happened at the Buenos Aires Stock Exchange in other neoliberal cycles.

The period of José Alfredo Martínez de Hoz The stock market had a festive start, with impressive price increases. From 1976 to 1980, the Exchange had the best four years of its history, with hundreds of publicly traded companies and a broad index rising from $ 342 to $ 11,252 (it should be remembered the fabulous backlog of stock exchanges with rises high prices that have artificially inflated companies), increasing its value by 31 times in just four years. The healthy bankruptcies of the Andean Banks and the Regional Exchange and the subsequent appearance of the board of exchange caused the stock market jitters. From 1980 to 1985, the stock market retreated until the stock index reached the equivalent of $ 536. A 95% drop from the peak recorded during the military dictatorship cycle.

Two years

At two, Fernando de la Rúa resigned due to the overflow of a socially and financially unsustainable model. He had no international help to continue to Casa Rosada.

Two years after the mandate, Mauricio Macri was on the precipice of default and the saving hand of the Monetary Fund, badistance ordered by the United States Donald Trump, saved him from an end similar to that of De la Rúa.

These dollars, which averted the epidemic, fueled Macri's re-election bid, demonstrating his inability to see signs of widespread deterioration on the financial, economic, social and labor fronts. policy.

Macri would have ended like De la Rúa if the IMF's dollars did not appear. This will not be the case in the institutional question because of the proximity of the presidential election and the fact that the triumphant opposition is treated with great caution, but it will be the same or worse in the disaster economic that it will leave.

The collapse of the local financial world, with record destruction of "fictitious" capital, finds its origin in the speculative frenzy initiated by the Macri government with the most vertiginous debt cycle in Argentinian history and with the fabulous bicycle of the carry trade. This is the far-off cause for understanding the financial woes. The immediate cause was the result of the OSP elections, which acted as a reality on the consequences of a financial badessment model that had imploded.

The devastation

The outbreak of the speculative bubble macro was devastating financial capital. It caused a monumental loss in the portfolio of public and private investors, while severely punishing financial market instruments. The detail is overwhelming:

* As mentioned, market capitalization 80% has collapsed. The loss of value of major local businesses amounted to $ 92 billion.

* The legacy of Mutual Funds of Investment It went from around 250 to 155 billion pesos from 27 to 30 August, some CFI falling to 62%.

* The short-term public debt, in pesos and dollars, was in default . The slippage in all bond parities has resulted in huge losses for banks, investors and international funds.

* The corralito of Letes generated a liquidity crisis in businesses and provinces, which can not be made up of resources provided for the payment of salaries and accounts to suppliers.

* Country risk It has exceeded 2500 points, which means that large market operators believe that the default will be more pronounced.

* The situation of provincial dollar debt This is essential because the mega-devaluation entails the need for a substantial increase in the peso resources to cope with the payment of interest and principal (the way of refinancing is blocked for the moment) . A critical case is that of the Buenos Aires administration of the Maria Eugenia Vidal which represents a debt of about $ 12 billionin the first quarter of this year.

* Change control has decreased the activity of Rofex futures market.

* A quarter of dollar deposits They left the banking system. August 9 to September 4 (latest BCRA data) 8329 million fell. And there is no sign that the bleeding is halting yet.

* Deposits in pesos They are liquefied by the devaluation and the inflationary shock. Removals of fixed terms in pesos from the private sector totaled 82,217 million euros, down 6.8% over the same period.

* The reserves of the central bank They continue to fall to critical levels, with little chance of receiving the anabolic payout of some $ 5 billion from the IMF. The crude stock on Friday was $ 50.549 million. It dropped by 15,759 million euros, or 23.8% of the total recorded on 9th August.

Impericia

With a staggering president for defeating the STEP, throwing blows without connecting one, the administration of the crisis becomes more complex; rather he accelerates and sharpens. Monday, August 12, a chain of desperate measures. The first was not to intervene in the foreign exchange market to moderate the inevitable rise in parity. It was a political decision that Macri left her at the press conference this afternoon, accompanied by her partner, Michelangelo Pichetto. The slogan of the election campaign that he launched was that the madness of that day on the market was due to the triumph of the Front of All.

Caused another series of mega-evaluations, the race against the peso is intensifying and, as a result, the Central Bank is starting to lose reserves in quantity. With the ever-increasing IMF rotation, the option chosen to have more dollars in the BCRA was to debit the debt in pesos and dollars in the short term. This measure, which energized CFIs that had not initially responded to the bail-out of shareholders' fees, installed the panic in the market and the exchange rate moved to the bank. Only in this instance, the change control has been installed.

To avoid such chaos in the system, the sequence should have been different. First, exchange controls should have been put in place to manage the reserves, guarantee the payment of the debt and protect the deposits of the savers in the banking system. That would have avoided the blazing run against dollar deposits.

Macri, advised by the former Minister of Finance and former President of the Central Bank, Luis Caputo, resisted the imposition of exchange restrictions and ordered the default. It was a new contribution of Caputo to the financial disaster of macrismo. The chaos that caused this decision has led to finally setting limits on the purchase of dollars, but in a way that does not prevent the bleeding of reserves, as this guarantees the tailrace with the possibility of buying up to $ 10,000 a month.

With such a high level of technical imperfection, political dogmatism and, in particular, a willingness to continue to facilitate the flight of capital, Macri accelerated a run which already has its own dynamic and dramatic result.

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