Amlove's Downfall
2,202 views11/27/2018
Checking in with a veteran EM investor and the Mexican assets of his portfolio.
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| 00:00 - 00:03 | Our allocation is now fully overweight Mexican assets. |
| 00:04 - 00:05 | Sound fundamentals coupled with a low EM beta, |
| 00:05 - 00:07 | Mexico should provide our portfolio with a layer of alpha. |
| 00:08 - 00:12 | Inflation is slowly converging at its long term dynamics and Banxico's target. |
| 00:12 - 00:15 | And further moderation in non-core inflation should enhance the attractiveness of carry. |
| 00:17 - 00:19 | Brilliant. Im confident we'll endure this brutal EM environment. |
| 00:19 - 00:21 | The incoming president won't do anything stupid. |
| 00:24 - 00:26 | Mr. Morski |
| 00:27 - 00:28 | AMLO |
| 00:31 - 00:33 | AMLO has announced the cancellation of construction of Mexico's $13 billion airport. |
| 00:34 - 00:36 | Mexico's largest infrastructure project in over a decade. |
| 00:53 - 00:58 | They stole a march on us. This is grotesque policy direction. Stay... if you want a big fucking ride. |
| 01:13 - 01:15 | Don't they understand the vicious loop of high political risk and market volatility? |
| 01:15 - 01:17 | $6 billion of quasi-sovereign bonds now price a non-trivial possibility of default. |
| 01:18 - 01:23 | Mexcat bonds trading at roughly 75 cents on the dollar, not accounting for currency depreciation. |
| 01:25 - 01:28 | Mexbol is down 20% YTD, at 39,427, its Mexbols lowest level since March 2014. |
| 01:29 - 01:31 | Not even Trump's election shocked Mexican assets prices like this. |
| 01:31 - 01:34 | Prices keep falling like knifes and we keep losing our fingers trying to seize the opportunity. |
| 01:34 - 01:37 | The 10 yr yield has increased above 9% and 5yr CDS stand above 150. |
| 01:37 - 01:40 | And MXN is swiftly losing ground to USD, at 20.60 and higher. |
| 01:40 - 01:42 | Mr. Morski, it's only $6 billion... surely, the market is overshooting. |
| 01:42 - 01:46 | Do you have the slightest idea of investing in EM? The signal sent by this cancellation could not have been worse. |
| 01:46 - 01:48 | Mr. Morski, it could be worse... it could be sovereign debt at risk of default. |
| 01:48 - 01:52 | Paul Hastings believes this development gives bond holders the right to accelerate the bonds. |
| 01:53 - 01:54 | By acting collectively, they can commence foreclosure on the collateral. |
| 01:56 - 01:57 | Mexcat bonds' collateral is the right to collect passengers' charges. |
| 01:57 - 02:00 | When bond holders accelerate, it'll compromise the operation and maintenance of Mexico City's current airport. |
| 02:00 - 02:03 | The conflict can emerge as new credit saga that will put investors in a collision course with the government. |
| 02:04 - 02:08 | Didnt Mexicans learn anything from Argentinas pari passu saga? |
| 02:08 - 02:13 | Fitch already revised their Mexico outlook to negative and spreads continue to widen. |
| 02:14 - 02:16 | FOR FUCKS SAKE, THEY DON'T HAVE LIONEL MESSI TO MAKE UP FOR A CREDIT DOWNGRADE. |
| 02:17 - 02:21 | A higher country risk premium is already forcing Banxico to hike further to salvage what is left of financial stability. |
| 02:27 - 02:29 | I was proven right about Turkey earlier this year. |
| 02:30 - 02:34 | Why didn't I see this coming? |
| 02:34 - 02:36 | Even Erdogan might eventually get his shit together. |
| 02:41 - 02:42 | This shitshow under a strong DXY environment... |
| 02:43 - 02:47 | any person with two fucking neurons would have advised against it. |
| 02:48 - 02:53 | For months, uncertainty surrounding NAFTA was a headwind for our portfolio. |
| 02:54 - 02:56 | We're only days away from the signing of the coveted USMCA. |
| 02:56 - 02:59 | There's so much defensive positioning can do |
| 03:00 - 03:02 | ...amid the swings in EM sentiment and Fed fund rate's expectations. |
| 03:04 - 03:07 | It's okay, we're overweight Brazil too. |
| 03:14 - 03:16 | Wigglesworth may be interested in writing a new LatAm credit series. |
| 03:19 - 03:23 | Get me Paul Singer, perhaps we can get a piece of these Mexcat bonds. |
| 03:25 - 03:26 | At a current duration of 12.35... |
| 03:31 - 03:33 | ...itll be a long and hard fight but it may pay handsomely. |
| 03:40 - 03:46 | I expect MXN short-term vol to be higher than long-term vol. |
| 03:46 - 03:49 | Maybe Manu Canas can come up with some trading ideas. |
| 03:53 - 03:56 | Horacio is only kidding. |