The buy-to-open put/call ratio volume on major exchange-traded funds (ETFs) indicates that Hedge Fun...
Argentina: Don’t Cry for Me
03/31/2016 10:00 am EST
Until just a few months ago, Argentina was pure poison for investors. But everything has changed structurally and politically, and this country's economy is about to go on a bull run for the history books, asserts Peter Krauth in Money Morning.
A hundred years ago, Argentina was, per capita, the fourth-wealthiest nation on earth. Following the Great Depression, Argentina's politics were swept up by the rise of fascism. It was all downhill from there.
And the return to democracy in the 1980s didn't go much better, as the country was ruled largely by a succession of democratically elected, populist kleptocrats whose policies wrecked the economy.
By the 2000s, the Argentine peso had collapsed and the country saw soaring inflation and mass capital flight.
Finally, Argentinians have voted for a sea change in their most recent national elections. Last November, they elected a conservative businessman, and former Buenos Aires mayor, Mauricio Macri as president.
One of Macri's first actions was to devalue the peso to bring it in line with "actual" rather than "official" exchange rates.
While initially detrimental to locals, in the longer term it will attract foreign capital and boost exports as well as the wider economy.
Macri also promised to initiate large scale free-market changes. He eliminated farming quotas, rolled back a majority of agricultural export taxes, and cut personal income taxes.
Further, he liberalized energy prices, raised interest rates, and axed thousands of public sector workers.
It's a totally fresh approach for the country, with some stiff challenges… but huge opportunities for investors.
Macri's drastic improvements to Argentina's legal and economic landscapes mean it should thrive going forward, making it the most attractive market in Latin America.
And the best way to play this trend is through the Global X MSCI Argentina Fund (ARGT).
The fund holds a number of the largest Argentine public companies across a variety of sectors, including basic materials, consumer cyclical, financial services, real estate, utilities, communications, and energy.
It appears that ARGT has put in a double bottom, first in late September and again in late January. I suggest you watch for a breakout above $20, which is just 3.75% from current levels.
If ARGT can sustain a close above $20 and gains momentum to move higher, that will be your cue to add Argentina to your portfolio.
By Peter Krauth in Money Morning.
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