Yesterday, we were surprised—though perhaps not entirely—by the details of the conversations between Justice Alexandre de Moraes and Daniel Vorcaro, the owner of Banco Master. You don’t need to be a legal expert to see the high level of familiarity between the two; that alone raises serious questions about what actually transpired between them—the revealed closeness itself is proof enough.

Most astonishing was the reaction of Prosecutor General Paulo Gonet, who rushed to declare the material illegal and argued it should be dismissed. The timing couldn’t have been worse: even if he is technically correct, the optics work against him, and in the current climate, no one cared a whit about the legal argument. Furthermore, based solely on what has already been revealed, everyone involved should, at the very least, offer their resignation. But in Brazil, true justice doesn’t always prevail. Let’s see how this case plays out.

I’ve always been intrigued by the fact that “Brazil” is spelled with a “z” in English. For those living here, however, the explanation becomes obvious. It’s hard for outsiders to grasp everything we go through—from recurring scandals to institutions that always seem a step behind what has already become public knowledge; it really had to be spelled with a “z.”

As I mentioned previously, I’m preparing for an exhibition at FEA-USP, and I can tell you that the content requires daily updates—data is changing exponentially, and what was true two weeks ago no longer holds water. Without Claude’s help, staying up to date would be practically impossible. While the focus there is financial, today I want to concentrate on how companies are using artificial intelligence, and especially its impact on employment. I’ve received a lot of material on this subject over the last few days.

Contrary to initial projections—which predicted mass layoffs—the data so far does not point in that direction. There are isolated cases, of course, but the main conclusion is that there has been a slowdown in hiring rather than a wave of layoffs—an impact in itself, certainly, but one that is unfolding much more slowly and less dramatically than the doomsday rhetoric suggested.

“Exhibit 8: 22.4% of Firms Are Using Artificial Intelligence in Their Regular Business Functions” — GS.pdf article, Goldman Sachs, AI Adoption Tracker, September 1, 2026

Goldman Sachs’s figures confirm this assessment. AI adoption among U.S. companies reached 22.4% in August—a 0.9 percentage-point increase from July—with expectations to hit 25.9% over the next six months. It is consistent growth, yet at a manageable pace—nothing like the vertical curve many had predicted.

“Exhibit 9: Adoption Is Approaching 50% in the Information Sector” — GS.pdf article, Goldman Sachs, AI Adoption Tracker, September 1, 2026

However, adoption varies significantly across sectors. The information sector leads, with nearly 50% of companies already using AI, closely followed by professional services and the financial sector. At the other end of the spectrum, construction and transportation remain below the 20% mark. Large companies—those with more than 250 employees—are also ahead of the curve: 40% of them already use AI regularly, compared to a much slower adoption rate among smaller firms.

The impact on employment remains visible but concentrated. Sectors such as marketing, graphic design, and customer service show a slowdown in job creation—partially offset by a construction boom linked to data centers, which has added approximately 209,000 jobs since 2022. Layoffs directly attributed to artificial intelligence totaled 11,000 in June, bringing the year-to-date total in the United States to 113,000—a significant figure for those affected, yet small relative to the overall size of the U.S. labor market.

Exhibit 23: “AI Was Cited in Layoff Announcements Affecting 11k Employees in July” — GS article.pdf, Goldman Sachs, AI Adoption Tracker, September 1, 2026

A regional survey by the Federal Reserve Bank of New York, covering service and manufacturing firms in the area, points in the same direction. AI adoption among service firms jumped to 61% this year, up from 40% last year and just 25% in 2024; among manufacturers, usage rose from 16% to 51% over the same period. Despite this progress, staff reductions remain rare: only 4% of service firms reported AI-related layoffs in the last six months, and no manufacturers reported any.

Federal Reserve Bank of New York, Liberty Street Economics, September 1, 2026

The preferred path is something else: retraining. More than a third of service firms and about a fifth of industrial companies stated they are training their employees to work with the new tools rather than simply replacing them. Productivity gains help explain this choice: academic studies point to an average increase of 23% where AI has already been implemented, and companies themselves report even higher gains, around 32%.

It is this disconnect—between the fear of mass unemployment and the reality of a market changing more slowly and unevenly than predicted—that confirms my assessment from months ago: artificial intelligence is not wiping out jobs overnight; it is reshaping roles, redistributing tasks, and demanding a new type of skillset.

I find myself thinking about this as I finish organizing materials for FEA. If an academic event requires daily updates just to stay current, I can only imagine the challenge this poses for companies, governments, and workers trying to adjust in real-time to a technology that is altering the very pace of the economy. Caught between politics mired in old scandals and technology advancing in a matter of weeks, Brazil continues, as always, trying to decide how fast it wants to run—and, in fact, it remains a country that spells its name with a “Z.”

Technical Analysis

In the post “o-mercado-respira” [the market is breathing], I made the following comments regarding the Ibovespa:

“Let’s wait a few more days to see if the Ibovespa surpasses the 178,000 mark and, more importantly, the 180,400 mark. If that happens, I will update my wave count. But don’t even think about popping the champagne: even if the market climbs to somewhere around 186,000 or 192,000, a decline is likely to follow.”

The stock market has staged a robust rally in recent weeks and surpassed the levels suggested above, prompting me to adjust the positioning of the orange “Wave A” in particular. Note also that, according to this criterion, the orange wave B is currently underway—and, as you likely know, it is treacherous. Why does it behave this way? It is a combination of forces: on one hand, it aligns with the longer-term trend—in this case, upward—while a counter-force acts in the moment—in this case, downward. Its intensity depends on the volume on each side.

However, there is another possibility: that the correction has ended. In that scenario, the orange wave B should conclude between the 186,000 and 192,000 levels. If it moves above that range, this alternative scenario gains more weight.

If the working hypothesis I’m using is correct, I must emphasize: be careful with this wave B; it is treacherous and can suddenly change direction.

A reader and friend sent me a video explaining what supposedly happened in the stock market. According to him, a massive volume of buy orders was executed for EWZ contracts—traded in the US—as well as for index futures, both expiring in December of this year. The video suggested that “someone” possessed insider information, highlighting that both contracts expire after the elections. My friend asked for my take on it. My first thought was that this “someone” had held a short position and decided to close it out—triggering others to follow suit as the market rose—or was simply placing a market bet for some reason.

If it is the former, I would emphasize that at some point they might sell rather than buy; perhaps this hypothesis aligns with the wave B idea. But what information could they possibly have about the elections, as the video suggests? None! If that was the reason, they would be speculating that the market is bound to rise regardless of who wins—perhaps because it is undervalued?

Conclusion: don’t waste your time trying to figure out who bought or why—what matters is the chart; it’s all in the prices!

The S&P 500 closed at 7,666, up 0.46%; USDBRL at R$ 5.1059, down 0.96%; EURUSD at € 1.1589, unchanged; and gold at US$ 4,389, up 1.40%.

Stay tuned!

Original Post: Click Here

This is not an investment recommendation.

About the Author of this Post: David Gotlib has 45 years of experience in investment management. An engineer from Polytechnic School of the University of São Paulo, he was one of the founders of the first Brazilian hedge fund in 1993 (AUM US$ 1 billion). Later, he was Managing Director of Deutsche Bank Asset Management (AUM R$ 2.2 billion) until the company was sold to Bradesco. He is currently the manager of his own investment portfolio and the author of the blog Acertar na Mosca, where, since 2011, he has shared his thoughts on the global economy and the financial market on a daily basis.

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Chapter 3

Mungerisms: Charlie Unscripted Highlights from Recent Berkshire Hathaway and Wesco Financial Annual Meetings By Whitney Tilson

Chapter 3 of Poor Charlie’s Almanack is one of the most important sections of the entire book for anyone interested in investing. Charlie Munger turns his attention from financial analysis to something even more fundamental: the psychology that drives human decisions. His central argument is that investors are not purely rational decision-makers. We are influenced by predictable psychological tendencies that can distort our judgment, create blind spots, and lead us to make decisions that work against our own interests.

Munger’s great insight is that understanding these tendencies is not merely an academic exercise. They directly influence financial markets. Investors buy stocks because others are buying them, hold losing positions because they cannot accept a mistake, become excessively confident after a period of success, or make decisions based on fear during a market crash. If an investor wants to make better decisions, understanding human psychology is therefore just as important as understanding accounting, economics, or valuation.

Munger presents a long list of psychological tendencies that can systematically influence human behavior. Individually, many of them seem obvious. The real danger comes from the fact that they frequently operate without our awareness—and sometimes several biases reinforce one another simultaneously.

One of the most powerful is reward and punishment tendency. Human beings naturally move toward actions that offer rewards and away from those that create pain. This sounds simple, but its consequences are enormous. In business, people respond to compensation structures, bonuses, promotions, status, and other incentives. If an organization rewards the wrong behavior, employees may rationally pursue actions that are harmful to the company.

For investors, this means that analyzing incentives should be a central part of evaluating a business. How are executives compensated? Do managers own significant amounts of stock? Are they rewarded for short-term earnings or long-term value creation? Understanding these incentives can reveal why management behaves the way it does.

Munger also emphasizes liking and loving tendency. People naturally develop positive feelings toward individuals, companies, products, and ideas that they find attractive. Once an investor becomes emotionally attached to a company, objectivity becomes difficult. A great brand, charismatic CEO, or exciting product can cause investors to overlook weaknesses in the underlying economics of the business.

The opposite tendency is disliking and hating tendency. Investors can reject an opportunity simply because they dislike the industry, management team, country, or business model. This can be just as damaging as excessive enthusiasm. A rational investor should evaluate an investment according to its economics rather than personal preferences.

Another important bias is inconsistency-avoidance tendency. Once people form an opinion, they naturally resist information that challenges it. This creates one of the greatest dangers in investing: confirmation bias. An investor who believes a stock is undervalued will tend to search for information supporting that conclusion while dismissing negative evidence.

Munger’s solution is intellectual discipline. Investors should deliberately search for reasons why they might be wrong. Instead of asking only, “Why should I buy this stock?”, they should also ask, “What would prove my thesis wrong?” This habit can prevent investors from becoming prisoners of their own opinions.

Closely related is commitment and consistency tendency. Once people publicly commit themselves to an idea, they feel psychological pressure to remain consistent with it. This can make it extremely difficult to sell a stock when the original investment thesis has failed. Investors often tell themselves that the company will recover because admitting the mistake would mean admitting that they were wrong.

Munger’s philosophy is very different. Being wrong is not the greatest problem. Refusing to recognize that you are wrong is. A rational investor should be willing to change his mind whenever new evidence contradicts the original thesis. Capital should be allocated according to future prospects, not according to the emotional desire to justify past decisions.

Another major psychological force is social-proof tendency. Humans tend to assume that if many other people believe or do something, it must be correct. Financial markets are particularly vulnerable to this tendency. Bull markets encourage investors to believe that rising prices validate their decisions, while bear markets create the impression that selling is the only rational response.

Munger repeatedly warns against following the crowd. When everyone agrees that an asset is a wonderful investment, the price may already reflect that optimism. Conversely, periods of extreme pessimism can create opportunities precisely because investors have become excessively negative.

Envy and jealousy are also dangerous forces. Investors constantly compare their results with those of others. Someone who earns 10% may feel unsuccessful after hearing that a friend earned 30%. This can encourage unnecessary risk-taking. The desire to outperform others can become more powerful than the desire to preserve capital.

For long-term investors, this is an important lesson. Your investment process should be based on your own objectives, risk tolerance, and understanding of value—not on whether someone else made more money last year.

Munger also discusses loss-aversion tendency, the tendency to experience the pain of losses more intensely than the pleasure of equivalent gains. This helps explain why investors frequently hold losing stocks for too long and sell winning stocks too quickly. They want to avoid realizing a loss while eagerly locking in gains.

This psychological asymmetry can produce terrible investment behavior. A disciplined investor must evaluate each position based on its future expected return and risk, not on whether the position is currently showing a profit or loss.

Another powerful tendency is overconfidence. Successful investors can become especially vulnerable to it. After making several correct decisions, they may begin to believe their skill is greater than it really is. They may increase leverage, concentrate their portfolio excessively, or assume they can predict market developments.

Munger believes humility is essential because luck plays a much larger role in life and investing than people generally recognize. A good outcome does not necessarily prove that a decision was good. Sometimes a poor decision produces a profitable result simply because circumstances happened to move in the investor’s favor.

Munger also emphasizes availability-misweighing tendency. People tend to give excessive importance to information that is vivid, recent, emotionally powerful, or easily remembered. In investing, a dramatic news story can influence decisions far more than a decade of fundamental evidence. A recent market crash can make investors believe another collapse is inevitable, while a spectacular rally can make permanent prosperity seem obvious.

Rational investors must therefore distinguish between what is memorable and what is actually important.

One of the chapter’s most valuable lessons is that psychological biases rarely operate independently. Several tendencies can combine and produce what Munger calls a kind of psychological “lollapalooza” effect—a situation in which multiple biases reinforce one another and push people toward extreme behavior.

This helps explain financial bubbles and crashes. During a speculative boom, social proof, overconfidence, reward seeking, envy, commitment, and optimism can all operate simultaneously. People become increasingly convinced that prices will continue rising because everyone around them is making money. Eventually, rational analysis is overwhelmed by psychological forces.

The same process can operate in reverse during market panics. Fear, loss aversion, social proof, and recency bias combine to create extraordinary pessimism. Investors sell because everyone else is selling, even when the underlying value of the businesses they own has not changed nearly as much as their stock prices.

For investors, the practical message is profound: the greatest threat to rational decision-making may not be the market itself, but the investor’s own mind.

Munger’s answer is not to eliminate human psychology—something he recognizes as impossible—but to understand it well enough to defend against it. Investors should create rules and habits that protect them from their predictable weaknesses. They should think independently, examine incentives, seek disconfirming evidence, recognize uncertainty, avoid excessive leverage, and maintain a willingness to change their minds.

The chapter ultimately reinforces one of Munger’s deepest principles: good investing is less about being brilliant than about avoiding predictable mistakes. An investor who understands human misjudgment can recognize when emotions are influencing the market and, equally importantly, when those same emotions are influencing his own decisions.

For stock investors, Chapter 3 is therefore much more than a catalog of psychological biases. It is a warning about the limitations of human judgment and a practical guide to becoming more rational. The market constantly presents opportunities to act emotionally, follow the crowd, defend previous decisions, chase recent winners, and fear temporary losses. The investor who can recognize these impulses—and resist them—possesses a significant advantage.

Munger’s message is ultimately simple: better investing begins with better thinking. Understanding companies and valuations is essential, but understanding yourself may be even more important. The investor who learns to recognize the psychological forces influencing his decisions becomes better equipped to remain rational when others are losing their discipline.

In the long run, that ability can be worth far more than any single stock tip. As Munger’s philosophy demonstrates, investment success is not simply a contest of intelligence. It is a contest of judgment, temperament, discipline, and the ability to avoid being misled by one’s own mind.

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Last week, few topics dominated market news quite like the US Treasury’s activity in the bond market. I had already taken a stance against the “debasement” narratives and the doomsday talk circulating at the time; a few days later, I see banks and research firms belatedly reaching similar conclusions.

However, the more I read the reports I received, the more convinced I became that the real reason behind the drop in long-term yields wasn’t exactly that. The market was “all in” against yields—heavily betting on the short side of long-term bonds. Before seeing the actual figures, I preferred not to risk making that claim, so as not to give readers a misleading impression. But the data accompanying the reports leave no doubt.

In the nearly fifty years I’ve spent in this market, I’ve learned that it’s easy to figure out an investor’s position: just say something that contradicts their thesis, and they’ll go straight for your jugular in defense. That nervous reaction is the clearest evidence that they are heavily positioned and don’t want anyone spoiling the party.

A chart from Citadel Securities illustrates this perfectly. A simulation of systematic strategies (CTAs) regarding the long end of the US yield curve hit -2.28 standard deviations at the end of August—the most stretched level in the series since 2024. In other words, the short positioning on long-term bonds was so compressed that any news—no matter how minor—had the potential to trigger a rush to close out positions.

“Our CTA Simulation Implies Long End Positioning is Stretched” — source: citadel.pdf / Bloomberg, Citadel Securities

That is exactly what happened. Vishal Khanduja, of Morgan Stanley Investment Management, scaled back his “curve steepener” bets against US long-term bonds, stating publicly that Treasury Secretary Scott Bessent is willing to do “whatever it takes” to keep yields in check. He called the Treasury a “non-economic” buyer at the long end of the curve—the kind of phrase written only when the hand holding a bet is being forced to let go.

It is striking that the same firm now betting on a reversal in long-term rates was arguing the opposite just a few weeks ago. In July, Citadel warned that the market was underestimating the determination of the new Federal Reserve chairman, Kevin Warsh, to curb inflation; it even bet on a rate hike at the July 29 meeting—a view contrary to the consensus, which expected the Fed to stand pat. The Fed kept rates unchanged, but Warsh’s comments during the press conference raised doubts about his anti-inflationary commitment, fueling a sell-off in longer-term bonds. Now the assessment has changed: weaker recent employment and inflation data have seemingly “justified” the Fed’s softer stance, helping to explain why the contrarian bet lost steam.

I do not favor government interventions in markets. They distort prices, and the distortions worsen with greater volume and frequency. The reason is simple: if the market is wrong, sooner or later it will be left holding the bag—paying the price for its error. But this time, the Treasury decided to act. And note this: so far, it hasn’t repurchased a single dollar’s ​​worth of bonds. It was merely the announcement. Sometimes, that alone is enough to make the market a bit more rational.

Market figures themselves confirm the effect. Since Bessent’s announcement, Treasury bonds have begun to outperform swaps of equivalent maturity, and the spread on the 30-year bond has narrowed to its lowest level since February.

[“Gap Between Swap Rate and Treasury Yield Narrows” — source: bessent.pdf / Bloomberg]

I also received a table that helps explain why interest rates eased. It illustrates just how asymmetric the outcome of a given interest rate fluctuation—whether up or down—is for these short positions: to make money, the bond price must keep falling—meaning interest rates must keep rising. If the trend reverses, the loss far outweighs the potential gain that was at stake. It is precisely this type of asymmetric trap that turns a minor trigger into a mass unwinding of positions.

“Estimated 12-month total return for Benchmark U.S. Treasury Notes and Bonds” — source: retornos.jpg]

I do not buy into the alarmist narratives currently circulating about the demise of the dollar or a collapse of U.S. debt. And I respectfully disagree with Robin Brooks, who has a habit of doubling down when the market moves against his bets—seeing a “debacle” even in minor fluctuations. That is the behavior of a trader, not an analyst.

Yardeni Research follows a similar path, but with less drama. They argue that the 10-year yield—currently near 4.6%—remains within the “normal” 4% to 5% range that prevailed during most years of a healthy economy. Furthermore, the model they use to track “bond vigilantes” shows that long-term rates remain below nominal GDP growth—a sign that the recent rise reflects economic strength rather than a revolt against debt.

I prefer this dispassionate view to the “end-of-the-world” rhetoric. The bond vigilantes haven’t saddled up their horses yet—to use market parlance—and it is important to clarify that the recent rise in rates has more to do with a strong economy than with a lack of confidence in the Treasury’s ability to pay.

I don’t think there is much room for rates to drop further for the time being. Nor do I believe the recent movement was abrupt—there are too many uncertainties in the air for that. However, I do believe the Treasury’s actions ultimately have a simpler goal than it seems: to calm nerves. It is a message that can be summarized in a few words: let’s take it easy; the United States isn’t coming to an end.

Someone told Trump that bond vigilantes are spoiling the party and pushing for higher rates. Look at what he proposed. Hahaha.

Technical Analysis

In the post “Do you get it right by luck or skill?”, I made the following comments regarding the Ibovespa:

“The stock market might still see a slight drop from current levels. Although it didn’t reach the initial 160,000 mark, the correction may have ended (...) If we are in an upward trend, two things need to happen: surpassing the 174,000 and 178,000 levels, and showing five waves within a shorter timeframe. On the other hand, if a decline is underway, the index should fall again without surpassing the aforementioned levels.”

I’m making a correction to the text of the post above:

a technical detail — to eliminate the chance of further declines, the 180.6k level must not be surpassed. I had left out the word “not”; without it, the sentence made no sense.

I didn’t mention in today’s post that the market’s reaction to the Treasury’s move sparked a frenzy of excitement around risk assets—the dollar, gold, bitcoin, and others. From a technical standpoint, everything is proceeding as expected based on my previous posts, including the Brazilian stock market, which is currently at the 174k level. Looking at the movement over a two-hour window (attached here), one can observe a rather jagged ascent; if one is generous with the interpretation, it is possible to count five waves.

Let’s wait a few more days to see if the Ibovespa breaks past the 178k mark and, more importantly, the 180.4k mark. If that happens, I will update my wave count. But don’t even think about popping the champagne just yet: even if the market climbs to somewhere around 186k ​​or 192k, a decline is likely to follow. The completion of the “green wave 4” will still take some time.

The S&P 500 closed at 7,675 (unchanged); the USDBRL at R$ 5.1516 (unchanged); the EURUSD at € 1.1652 (down 0.19%); and gold at US$ 4,594 (down 1.39%).

Stay tuned!

Original Post: Click Here

This is not an investment recommendation.

About the Author of this Post: David Gotlib has 45 years of experience in investment management. An engineer from Polytechnic School of the University of São Paulo, he was one of the founders of the first Brazilian hedge fund in 1993 (AUM US$ 1 billion). Later, he was Managing Director of Deutsche Bank Asset Management (AUM R$ 2.2 billion) until the company was sold to Bradesco. He is currently the manager of his own investment portfolio and the author of the blog Acertar na Mosca, where, since 2011, he has shared his thoughts on the global economy and the financial market on a daily basis.

There is a lot of noise in the market and very little timeless wisdom.

That’s why I decided to create a new section at Brazil Stocks: a curated collection of the best interviews ever given.

Over the years, I’ve learned more by reading and rereading interviews like these than from many classic investment books. Quite often, it’s in a simple answer, almost hidden in the middle of a conversation, that the most valuable insights emerge.

The idea is not to focus on short-term predictions, but on mindset, methodology, and principles that continue to work over time.

Today’s interview is with Gabriel Negraes.

Throughout the conversation, Gabriel outlines an investment philosophy that is essentially speculative and event-driven: he seeks to identify triggers capable of generating buying pressure and repricing assets—particularly in situations involving judicial reorganization, turnarounds, asset sales, court rulings, stock splits, tender offers, and legislative changes. His approach begins by identifying significant discrepancies between the current price and an anticipated event, looking for high-upside asymmetries even in companies with poor fundamentals or those nearing bankruptcy. He closely monitors legal and administrative proceedings, CVM (Brazilian SEC) filings, investor relations communications, social media, legislation, and a broad network of investors to uncover opportunities before they become widely known. He also makes it clear that he avoids emotional decision-making, following third-party recommendations, day trading, or trading instruments he does not fully understand; instead, he prefers to focus on one investment case at a time—often involving low-quality assets, penny stocks, and companies undergoing restructuring. His positions typically last from one week to three months, following the “buy the rumor, sell the news” logic, with positions closed once the market has fully priced in the expected event.

Enjoy.

From January 2020 to March 2024, his historic performance will be the envy of anyone.

His portfolio returned 1558.58% in the period, versus 8.04% for Ibovespa.

This guy knows how to generate real value.

Shall we meet him?

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BZ: Gabriel, could you tell us a little about yourself?

GN: I come from a family in Goiás that was extremely conservative and traditional regarding investments.

Anything other than land, cattle, and crops was viewed with skepticism.

Despite that unpromising background, I experienced a major shift in perspective toward the financial markets.

Soon after starting law school, I began to engage with corporate law.

At the time, I was following the fallout from major cases such as the Parmalat bankruptcy proceedings in Brazil, the reactivation of the Telebrás system, the Eike Batista and “X-companies” saga, the Gradiente vs. Apple dispute over the iPhone trademark, and the Varig bankruptcy estate, among dozens of others.

The extreme volatility in the share prices of these assets always caught my attention.

I kept trying to understand why that happened.

Once I actually became a lawyer, I began to grasp the underlying rationale better.

The dynamics of these types of investment theses became much more tangible to me.

That was the moment I started to gain confidence and build purchasing power.

I kept pedaling—falling, getting back up...

Refining my modus operandi over time.

BZ: What is your strategy for making money on the stock market?

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After so many years in the finance industry—a field I would characterize as speculative—whenever I reflect on my major successes, I classify them this way: luck played a bigger role than competence. Not that competence isn’t important, but without luck, my results might have been different. The major turning point in my career came when I started using technical analysis; it helped me primarily with the discipline of entering new trades and with risk management.

I would be unfair to the academic approach if I didn’t acknowledge the importance of fundamentals. They are always present, but it has been a long time since they were my primary focus. Let me give a practical example: looking at Brazil’s fiscal situation, I would say that betting against the real would be the most attractive option in terms of pricing. Readers know I have been looking for an entry point using technical analysis, but one hasn’t appeared yet. This is a classic case where fundamentals point one way but technicals haven’t confirmed it yet—and for me, the latter carries much more weight when it comes time to pull the trigger.

This tug-of-war between fundamentals and technicals has entered a new chapter with artificial intelligence, and Bloomberg recently offered an interesting look at this trend. The report highlights individual investors trying to replicate at home what funds like Millennium and Citadel achieve with armies of PhDs: one investor spent over a year programming an automated options system—without outperforming a simple index fund—until he rebuilt the model with more rigorous testing and loss limits; another connected an AI dashboard to his brokerage account and claims to have made more profit than he could on his own, without needing to monitor the market all day; a third outsourced decisions to an AI agent, arguing that the machine eliminates the bias and fear a human brings to every trade. I can’t say for sure if these home-grown models will actually succeed in the long run, but looking at what happened to the fund industry—including hedge funds—it doesn’t seem like a good idea to try to copy what they do. The report cites Millennium and Citadel specifically as benchmarks, but the author may not fully grasp what these funds actually do: they allocate capital among dozens of internal managers, employing a constant model of bringing in top performers and letting go of those who fail to deliver. It is a smart strategy because it captures the upside of each manager while discarding them as soon as results deteriorate—precisely what these amateur investors cannot manage on their own, lacking the infrastructure to quickly replace underperforming elements.

This trend of amateurs turning into home-grown “hedge funds” is not an isolated case. It fits into a broader pattern of capital migration I have been tracking: traditional funds are losing ground to ETFs. Over the last decade, $170 billion has flowed out of multi-strategy funds in North America, whereas ETFs have attracted over $7 trillion since 2016. The explanation is no mystery: index replication is cheap and, more often than not, delivers results that most active managers fail to achieve consistently. Those who get it right often do so only for a time; winning for a short period doesn’t justify management fees in the long run. It is no wonder ETFs are so successful in the US market.

Speaking of questionable management, Michael Saylor of MicroStrategy has finally taken a positive step. The company sold $333.7 million in common stock to repurchase preferred shares and bolster its cash position—not to buy more Bitcoin. There was no movement in its cryptocurrency holdings during the seven days ending August 16, and the company hasn’t bought Bitcoin since mid-June. It is only a modestly positive step, as the ideal move would have been to sell some Bitcoin to fund the repurchase. But perhaps Saylor is realizing—albeit belatedly—that the “infinite accumulation” model isn’t working the way it used to. If he stays on this path, shareholders will eventually realize that, ultimately, MicroStrategy looks increasingly like a Bitcoin ETF, only with much higher costs. I believe that all this effort to maintain the structure will ultimately be in vain.

So, I return to the question in the title. It is far more gratifying to attribute a successful trade to competence than to admit it was luck—because admitting luck can make it sound as though you simply flipped a coin and let chance decide for you. But I can assure you: if you aren’t honest with yourself in this assessment, your ego will cost you money. When closing a trade, take stock of the situation sincerely. Over time, I believe you will reach the same conclusion I did. It is the same reason why so many professional fund managers—despite having vast resources and PhDs at their disposal—fail to replicate their performance year after year. Getting it right once is luck disguised as talent; getting it right consistently is a different story. It requires a model, discipline, and, above all, risk management. There is no point in trying to recoup losses by increasing your bet size, nor in chasing that one “big score” to solve all your financial problems at once—when that actually works, it is a matter of sheer luck. That is where the difference lies between a trader and a survivor.

Technical Analysis

In the post “nvidia-garante-galera,” I made the following comments regarding the IBOVESPA:

“Under this new hypothesis, the orange ‘wave C’ could end at 160,000 (-4%) or around 150,000 (-6%); I used orange symbols to mark this. Crucially: if the market drops sharply and continues its downward trend, hitting 119,500, my scenario predicting a continued rise will be compromised, and I will have to revise my hypotheses.”

This morning, the US Treasury announced plans to repurchase long-term US bonds (maturities exceeding 10 years) and sell shorter-term bonds in their place. Markets will likely react positively: stock exchanges—including Brazil’s—will rise, while interest rates and the dollar will fall. Are the Americans trying to copy the Japanese? In a way, yes. I do not think it is a good idea; it might work in the short term, but the pressure for higher interest rates is a more widespread factor, as I discussed in yesterday’s post, “tudo-tem-dois-lados” (everything has two sides). As I mentioned above, in the scenario I am working with, the stock market would still see a slight decline from current levels. Although it did not reach the initial 160,000 mark, the correction might be over—I emphasized the word “might”: I am not implying that it has definitely ended.

How should one position oneself? For now, observe. If we are in an upward trend, two things must happen: the market must surpass the 174,000 and 178,000 levels and show a five-wave pattern on a shorter timeframe. On the other hand, if the decline is ongoing, the market should fall again without breaking through the aforementioned levels—a technical detail: to rule out the possibility of further drops, the 180,600 level must be surpassed.

At 4:30 PM, the S&P 500 stood at 7,719 (up 0.36%); the USDBRL exchange rate was R$ 5.1711 (down 0.91%); the EURUSD rate was € 1.1678 (up 0.89%); and gold was at US$ 4,508 (up 4.01%).

Stay tuned!

Original Post: Click Here

This is not an investment recommendation.

About the Author of this Post: David Gotlib has 45 years of experience in investment management. An engineer from Polytechnic School of the University of São Paulo, he was one of the founders of the first Brazilian hedge fund in 1993 (AUM US$ 1 billion). Later, he was Managing Director of Deutsche Bank Asset Management (AUM R$ 2.2 billion) until the company was sold to Bradesco. He is currently the manager of his own investment portfolio and the author of the blog Acertar na Mosca, where, since 2011, he has shared his thoughts on the global economy and the financial market on a daily basis.

Today I have the pleasure of interviewing Brazilian investor Nilson Sato.

From June 2019 to April 2024 his historic performance will be the envy of anyone.

His portfolio returned 493.00% in the period, versus 30.89% for Ibovespa.

This guy knows how to generate real value.

Shall we meet him?

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BZ: Sato, could you tell us a little about yourself?

NS: Well, my name is Nilson. I have a degree in Economics; I worked at a few private companies and later pursued civil service exams in my field. I worked at Caixa (CEF), but eventually settled into a role as an economist at the Federal Public Defender’s Office, managing assets. My interest in the stock market was sparked even before college, when I read *The Intelligent Investor*, the classic by Benjamin Graham.

At the time, I thought, “This is it!” That book was a real “aha!” moment for me—the equivalent of the “mind-blown” emoji, haha. However, I was a student back then and didn’t have any money. I remember the 2008 subprime crisis like it was yesterday: stocks were dirt cheap, but I didn’t have the cash to invest.

Later, I focused more on my job and built up decent savings to invest in publicly traded companies. That’s when the capital multiplication process began. At first, I moved slowly with the help of an investment research firm, but eventually, I concentrated all my savings into two companies I believed were at the bottom of the Brazilian construction cycle: JHSF and Trisul. (The construction sector’s GDP had been falling for years, but a macroeconomic shift seemed to be underway in Brazil with the new government and economic agenda—specifically, falling interest rates and rising incomes on the horizon.) I didn’t hesitate. I wanted to multiply my capital quickly, and since I had the security of a public sector job, concentrating my investments made sense at the time. It worked out very well, but then the pandemic hit and changed a lot of things.

I studied and learned like never before during that period: I read dozens of books, took investment courses, and pored over countless corporate financial statements. I emerged in a better financial position, having made a lot of money with Taurus—a company that experienced an incredibly successful cycle; the stars really aligned for them. After multiplying my capital several times over, I planned a career transition; I obtained the CNPI fundamental analysis certification (which involved further study) in late 2023, and today I work independently—helping other investors as a consultant and independent analyst (and am open to partnerships)—applying a more balanced perspective based on what I have learned.

BZ: What is your strategy for making money on the stock market?

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Jensen Huang is such a skilled strategist that I don’t need to waste space explaining the obvious. Ten years ago, he was running a manufacturer of gaming graphics cards. Today, he leads the most valuable company on the planet, having surpassed giants that once seemed untouchable—such as Microsoft, Apple, and others. Those who follow *Mosca* know this isn’t just a trend; it’s about execution.

The major battleground right now is no longer just technological; it is financial. Whoever secures the funds to build data centers wins the race, and the cost of capital is rising even for the hyperscalers—Google, Microsoft, Amazon, and Meta. If it’s getting pricier for them, imagine the situation for smaller companies that also require computing power but lack the same cash reserves.

Nvidia doesn’t want to rely solely on major clients. Google has been manufacturing its own AI chips—TPUs—for years and is expanding that effort, a clear signal that other hyperscalers might follow suit and reduce their dependence on Nvidia. Whether they can truly compete with Huang in the medium term is another story. For now, Nvidia remains the one calling the shots.

So, what was Huang’s move to avoid losing smaller clients who lack the deep pockets to buy chips upfront? He decided to get ahead of the problem and organize the financing himself. The *Wall Street Journal* detailed the mechanism: a $500 billion plan, structured with banks and asset managers, to standardize chip financing and create capital pools backed by these assets. In practice, special-purpose vehicles (SPVs) purchase the equipment using funds raised from investors, lease it to the end customer, and pass the payments on to the investors. Nvidia acts as a sort of partial guarantor—Huang calls this a “residual-value support mechanism.” If the value of the chip backing the loan falls below a certain floor, Nvidia covers part of the difference, potentially footing up to 25% of the project cost. In short—without naming names—Nvidia is backing its customers so they can keep buying its chips, and doing so without offering discounts.

The scale of this move is impressive. According to Bank of America, the issuance of AI-linked bonds has already hit a record this year—far surpassing the total raised in 2025—and the market expects this pace to remain strong through December. However, not everyone raises capital at the same cost: smaller companies, lacking the robust balance sheets of hyperscalers, are already paying significantly higher interest rates to secure the same financing. This reflects the market pricing in the higher risk associated with this type of transaction.

It is worth noting the criticism from Michael Burry—the investor who gained fame by betting against mortgage-backed securities in 2008 and is now shorting Nvidia and other AI stocks. He pointed out that while structuring credit is standard practice, the problem arises when credit is artificially structured to prolong late-stage bull market momentum—that is where the risk lies. It is worth keeping this warning in mind as the financial engineering surrounding Nvidia becomes increasingly sophisticated.

I would also like to address another topic that has been generating buzz: the exceptional second-quarter earnings reported by S&P 500 companies, a trend explained by data from Yardeni Research. So far, 90% of the index’s companies have released their results, beating analyst projections for both earnings and margins. However, a significant portion of this outperformance did not stem from core operations: mark-to-market accounting gains on equity stakes held by Alphabet and Amazon, combined with a tax reversal at Meta, added $14 to the index’s earnings per share for the quarter. Consequently, the S&P 500’s EPS rose 46.7% year-over-year; excluding this accounting effect, the growth rate was 25.7%.

CHART: “S&P 500 Operating Earnings Per Share — 2026 Quarterly Analysts’ Consensus Forecasts (y/y% growth rate)” — source: Yardeni QuickTakes, “Raising Our S&P 500 Earnings & Price Targets Outlook Due To FEMO (Fabulous Earnings Momentum)”, August 11, 2026

If you look at the chart without this context, the slope of the curve might be startling. But don’t be alarmed: the effect stems from a legitimate, recognized accounting practice—mark-to-market valuation of equity holdings—rather than any sort of window dressing, and it is unlikely to recur with such intensity every quarter. Even so, setting aside this one-off effect, a 25.7% annual earnings growth rate is—let’s face it—extraordinary in the best possible way.

Yardeni Research used these results as an opportunity to raise the bar on its own projections. The S&P 500 earnings-per-share estimate was revised from $330 to $375 for 2026, and from $375 to $415 for 2027. The firm also raised its year-end 2026 target for the index from 8,250 to 8,400 points, while maintaining its 10,000-point target for the end of 2029—and making it clear that this could rise further if the “Roaring 2020s” scenario continues to play out. This is no mere figure of speech: the team raised the subjective probability of this positive cycle continuing from 60% to 80%, while keeping the chance of a market-crushing recession at 20%. It is open optimism, yet with the risk acknowledged in the figures themselves—which speaks volumes about the current moment. CHART: “S&P 500 Index & YRI Forecast Range” — index trajectory and Yardeni Research’s new price targets through 2030 — source: Yardeni QuickTakes, “Raising Our S&P 500 Earnings & Price Targets Outlook Due To FEMO (Fabulous Earnings Momentum),” August 11, 2026

CHART: “S&P 500 Index & YRI Forecast Range” — index trajectory and Yardeni Research’s new price targets through 2030 — source: Yardeni QuickTakes, “Raising Our S&P 500 Earnings & Price Targets Outlook Due To FEMO (Fabulous Earnings Momentum),” August 11, 2026

I’ll wrap up with the data that dominated screens this morning: the July CPI came in as expected, with the headline index holding steady at 2.7% year-over-year and core inflation at 3.1%—up from the previous reading. Nothing that changes the script on its own, but enough for the market to spend the day deciding whether to feel relieved that there were no disappointments or to conclude that everything was already priced in before the opening bell.

Technical Analysis

In the “yen-bad-boy” post, I made the following comments regarding the Ibovespa:

“The triangle pattern eventually broke, but without any real strength—moving with the same lethargy the market has shown since June; the difference is clearly visible in the slope of the green line. While international markets continue the rally that began this year, the Ibovespa has lost its luster. Have investors lost heart at the prospect of a ‘Lula 4’ term? A scenario that, were it to happen, would be too late anyway.”

I used to think my comments carried as much weight as those from a bank like JPMorgan—after all, it only took them announcing a downgrade of the Brazilian market from *overweight* to *neutral* for the index to drop 2.5% yesterday. If that’s the case, I’ll downgrade it to *underweight* and see what happens. Just teasing—you know me! Hahaha.

But rather than focusing on recommendations—which might well be right—being downgraded *after* the drops have already occurred, it’s better to pay attention to the chart, which, as I mentioned earlier, wasn’t showing positive signals. Although the low of 167.9 hasn’t been breached—that level is still holding—all signs point to further declines ahead. Therefore, I will assume that the orange wave B ended prematurely at 180.6k.

You may recall that I ventured a buy recommendation, albeit with considerable caution. I emphasize that B waves are treacherous: never trust them blindly; always remain wary.

Under this new hypothesis, the orange wave C could end at 160k (-4%) or around 150k (-6%); I have used orange symbols to mark this. Crucially, if the stock market falls sharply and continues its downward trajectory, reaching 119.5k, my scenario of a potential rally would be compromised, and I would have to revise my hypotheses.

This entire sequence of events aligns with my view on the Brazilian stock market, which can be summarized as follows: it lacks a long-term directional trend; the movements observed are corrective in nature.

Just to speculate for a moment: if the market were to drop more abruptly and hit the 120k level, what would happen to the exchange rate?

The S&P 500 closed at 7,748, up 0.26%; the USDBRL stood at R$ 5.1916, up 0.29%; the EURUSD was at € 1.1523, down 0.17%; and gold was at US$ 4,413, up 1.03%.

Stay tuned!

Original Post: Click Here

This is not an investment recommendation.

About the Author of this Post: David Gotlib has 45 years of experience in investment management. An engineer from Polytechnic School of the University of São Paulo, he was one of the founders of the first Brazilian hedge fund in 1993 (AUM US$ 1 billion). Later, he was Managing Director of Deutsche Bank Asset Management (AUM R$ 2.2 billion) until the company was sold to Bradesco. He is currently the manager of his own investment portfolio and the author of the blog Acertar na Mosca, where, since 2011, he has shared his thoughts on the global economy and the financial market on a daily basis.

Today I have the pleasure of interviewing Brazilian investor Ivan Barboza, CFA.

From June 2013 to December 2023 his historic performance will be the envy of anyone.

His portfolio returned 1433.1% in the period, versus 181.8% for Ibovespa.

This guy knows how to generate real value.

Shall we meet him?

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BZ: Ivan, could you tell us a little about yourself?

IB: I started investing in the stock market in 2008, right in the middle of the subprime crisis. At the time, I was still in college and had very little money or knowledge. I lost part of my investment, but it turned out to be a lesson on why one shouldn’t invest recklessly. It was after that event that I began studying economics, finance, and investments in general more seriously.

I hold a degree in Engineering Physics, but I never worked in a technical role. I had a brief stint in strategic consulting right after graduating; I didn’t enjoy the field and quickly switched to investment banking. I worked in that sector for several years—mostly at Ártica, the firm I co-founded. Later, I left that line of work to dedicate myself entirely to investment management, which is what I intend to do for the rest of my life.

I manage the Ártica Long Term equity fund, which began in June 2013 as an investment club. We started very small, using only our own capital (mine and my partners’), and grew gradually using earnings from investment banking, the fund’s own returns, and investments from acquaintances who were interested due to the strong returns we had achieved over time. In 2019, we converted the club into the current equity fund.

BZ: How did your experience in Investment Banking/M&A help you with the investment and company valuation process? (Special question from Clara Sodré)

IB: Investment banking is a career that offers a privileged vantage point for learning about business. I worked on dozens of successful company acquisitions and sales; for every deal that closed, there were numerous alternatives explored beforehand. Each transaction provided the opportunity to closely follow a company’s development and get to know the key partners, executives, private equity investors, and lawyers from major firms—all top-tier professionals. Meeting hundreds of people of this caliber taught me invaluable lessons about business.

I also witnessed various companies fail completely or see their ambitious business plans thwarted. Understanding these failures is arguably even more important than understanding the successes. Grasping what leads intelligent, sophisticated people to make mistakes on major investment decisions is a vital part of becoming a skilled investor.

BZ: What is your process for finding a new buy opportunity? What filters do you use?

IB: It is a filtering process. We always start by looking for flaws in investment opportunities. The sooner we identify a problem that invalidates the thesis, the less time we spend on a poor opportunity. In this way, the approved theses are the ones that ultimately survive the analysis process.

There are two main questions we seek to answer. The first is whether the business we are evaluating is a good one—featuring high profitability and competitive advantages that appear sustainable enough to maintain that high profitability over several years. The second is whether its current share price is significantly below what we believe the business is worth.

What we are looking for is what every buyer wants: opportunities to buy something good at a low price.

BZ: What is the secret behind your portfolio’s explosive 30% annual return over the last 10 years?

IB: There is no secret—in the sense of a trick that boosts returns quickly and easily. As with almost any profession, investment success depends on time, hard work, and discipline. The rest of the team and I have dedicated our lives to becoming as skilled as possible at analyzing businesses and investment opportunities.

Our day-to-day work involves educating ourselves as thoroughly as possible on topics relevant to the investment theses we are analyzing, and then waiting patiently for good opportunities to arise. These usually appear during periods of market extremes. At such times, we remain rational and are comfortable trading against the majority of other investors for a few years.

Perhaps the greatest challenge for the individual investor is trading against the crowd. When every newspaper predicts a disastrous economic future, the confidence needed to disagree and buy stocks comes from a solid foundation of technical knowledge, rigorous analysis, and the experience of having seen such cycles play out before.

BZ: How do you value a share: DCF, Multiples, implied IRR, a mix of the previous ones, …?

IB: Valuation based on multiples is a rather simplistic technique. We use it only to gauge whether something appears expensive or cheap during the initial screening of stocks we select for analysis; multiples do not provide the level of reliability needed to make an investment decision.

We build DCF models for all investment theses. Both the fair value and the implied IRR are derived from this method. Once the model is built, we run a series of simulations—varying the assumptions that most significantly impact the valuation—to gain a better understanding of the range of possible future values ​​for the business. It is important to highlight this point: while valuation is often discussed as a fixed figure, this is done merely for the sake of convenience. In reality, the analysis does not conclude that a business is worth exactly 100; rather, it might indicate a 90% probability that its future value will fall between 80 and 120, for example. The width of this range varies from business to business. For some companies, the probable value might be between 90 and 110, while for others, the range might span from 50 to 150.

BZ: Some investors dislike investing in commodity companies, arguing that they require more complex analysis. Do you like investing in them? How do you typically conduct your valuation analysis?

IB: We face no restrictions on investing in any specific sector, yet we do not invest heavily in commodities due to the difficulty of forecasting future commodity prices over the long term. The way we address this unpredictability—which significantly impacts the valuation of companies in these sectors—is simply by demanding a much larger margin of safety in the purchase price; this practice makes it very difficult to meet our target entry price and almost always keeps us out of commodity stocks.

BZ: Do you believe that technical analysis, combined with fundamental analysis, can help determine buy and sell points for stocks?

IB: I don’t believe in technical analysis. Especially nowadays, given the level of technology used by quantitative funds—if there were money to be made by purely analyzing a stock’s historical price series, that opportunity would be snapped up by quant funds within minutes. An individual investor analyzing charts “by eye” wouldn’t stand a chance.

I believe the best approach is to assume that price movements are random in the short term but converge toward a business’s fair value in the long term. That is the traditional premise held by fundamental investors.

BZ: What are the main analytical errors you see when applying U.S. investment literature to stock investing in Brazil?

IB: Investment principles are the same regardless of geography. What I notice about American literature is that it doesn’t pay much attention to certain issues that are rare there but significant in the Brazilian context. Examples include legal uncertainty—particularly regarding tax laws—political instability, which makes government economic policy less predictable, and interest rate volatility, which is much higher here than in the United States.

Even so, I believe it is the best source for study. Unfortunately, Brazilian literature on investment and business still leaves much to be desired compared to the American material.

BZ: Do you believe the pattern of the Ibovespa cycle chart (in USD) will hold?

IB: Economic cycles will continue to occur, and therefore the IBOV will continue to show a chart of ups and downs; however, I do not think it is possible to predict the timing of how these cycles unfold based on chart analysis of past cycles. In other words, even with a reasonable idea of ​​which phase of the cycle we are currently in, the moment the current trend reverses will always be highly unpredictable.

BZ: What additional margin of safety is required to justify swapping a stock currently in the portfolio for another? In other words, how much greater must the potential return of a stock under analysis be to warrant selling a current position? (Musashi’s Special Question)

IB: We don’t have a hard-and-fast rule for this, but it is generally somewhere between 10% and 20%. One must take into account the imprecision inherent in valuation. If the difference in margins of safety is 5%, it falls within the margin of error. It is not attractive to incur transaction costs and the burden of switching to a less familiar investment thesis based on a very small price difference.

BZ: How do you rebalance the portfolio based on market volatility, and what is the best way to do this given liquidity constraints? How can you continue to significantly outperform the benchmark if the fund’s assets under management grow? (Special question from Pedro Perin)

IB: We consider three aspects when determining the weight of each stock in our portfolio: the risk-return profile of each asset, the degree of uncertainty surrounding each investment thesis, and the correlation of each business with the other companies already in our portfolio. However, there is no formula that dictates the ideal allocation for each thesis; it is a blend of quantitative analysis and subjective judgment.

Regarding performance as the fund grows, I do not believe it is possible to avoid a drop in returns once assets reach a certain level—provided we continue to operate solely in the local market. Investing exclusively in Brazil, it seems to me that we would begin to see diminishing returns once assets exceed R$ 1 billion (the fund currently holds R$ 230 million, so we have plenty of room). Our plan to address this issue is to look at other geographies as well. Brazil accounts for about 3% of the global stock market; expanding into new markets significantly increases the scale we can achieve while maintaining the same return targets.

BZ: Which incentive for the management of a publicly traded company is most aligned with the interests of shareholders? (Special question from João Marcos)

IB: Variable compensation paid through the granting of shares subject to vesting (a minimum period during which the executive must retain ownership of the shares). This structure ensures that executives become long-term shareholders of the very company they manage, sharing in the downside when the stock price falls and benefiting when it rises.

BZ: What is the cheapest company on the stock market today?

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I remember, from my days of being more active in the foreign exchange markets, riding a major yen rally. In June 2007, the Japanese currency stood at ¥124; by 2011, it had reached a low of ¥75—an appreciation of 40%. (It is worth noting for readers less familiar with currencies that this quote indicates how many yen are needed to buy one dollar; in other words, the lower the number, the stronger the yen.) I didn’t catch the entire move, but I did capture a significant portion of it. Back then, everyone wanted yen; it was considered the ultimate safe-haven asset.

Japan had been grappling with decades of deflation and responded with an extremely loose monetary policy—featuring zero percent interest rates and long-term bonds that offered savers meager returns. Weary of these paltry yields, the Japanese began seeking higher returns abroad, while global investors grew increasingly wary of the mountain of debt the country had accumulated. Since then, the yen has been on a downward trajectory, albeit with intermittent periods of stability.

This sustained currency depreciation, combined with the inflation emerging everywhere—including Japan, following the pandemic—has placed the Japanese government in an uncomfortable dilemma. It must either raise interest rates to correct the imbalance (and it is worth noting that analysts like Robin Brooks point out that such a hike would need to be substantial to be effective) or attempt to somehow halt the yen’s slide. The problem is that while a weak currency benefits exporters, it also fuels inflation, which in turn increases the pressure to raise interest rates. It is an uncomfortable cycle.

Evolution of the dollar/yen exchange rate since 2024, showing episodes of intervention. Source: article “What to Make of the Latest Yen Intervention”, Robin J. Brooks, Shadow Price Macro]

To prevent a disorderly depreciation, the Bank of Japan (BOJ) has engaged in recurring interventions, yet the practical effect has been increasingly short-lived; Robin Brooks emphasizes that the efficacy of these interventions is diminishing, with the exchange rate deteriorating more rapidly after each round. Faced with this, Tokyo sought assistance from the US Treasury. Secretary Scott Bessent bought yen and sold euros held in his portfolio—notably, he chose not to sell dollars, preferring instead to utilize his holdings of another currency. It was a decision lacking an obvious economic rationale—one for which Trump will almost certainly exact a price from the Japanese down the line.

According to Brooks, the intervention is short-lived because Japan fails to address the root of the problem: significantly raising interest rates or reducing its portfolio of foreign financial assets—which, it is worth noting, amounts to around 82% of its GDP. In the past, this very lack of structural action caused previous interventions to quickly lose momentum.

Bessent, for his part, signaled that further action might be taken, arguing that the yen’s weakness heightens the risk of broader depreciation across Asia—and that the United States would, in some way, derive “financial benefit” from the intervention. It is intriguing to see a former hedge fund manager—who once bet against the yen while working with Soros—now sitting on the other side of the table, championing the very currency he helped drive down.

As this tug-of-war between intervention and market forces plays out, the day-to-day reality of the Japanese economy clearly reflects this imbalance. Banks are profiting from a steeper yield curve, export-oriented industries are benefiting from the weak yen, and the technology sector is riding the wave of the artificial intelligence boom. On the other hand, the low-income consumer foots the bill—facing higher import costs and steeper energy prices, while suffering the effects of relentless inflation. A stronger yen would help redistribute some of these gains to consumers and to sectors that have lagged behind, such as energy and sanitation, healthcare, and basic consumer goods.

It is worth noting here that the market is divided on a crucial point: is the yen cheap or expensive? Gavekal, analyzing the currency through the four lenses it applies to any asset—fundamentals, positioning, momentum, and valuation—concludes that the yen is like a compressed spring: solid fundamentals (Japan boasts the largest current account surplus and the smallest fiscal deficit in the G7), still-light positioning, negative momentum since the April 2025 tariffs, and valuations stretched to the downside. Bessent appears to subscribe to this thesis.

Brooks strongly disagrees, and this disagreement is the most interesting point of the entire debate. In his view, the yen isn’t cheap; it’s expensive. The logic is as follows: the BOJ keeps long-term interest rates artificially suppressed by ceaselessly buying government bonds; consequently, the so-called “shadow yield”—where the 30-year rate would stand without BOJ interference—is at least 300 basis points above current levels. This suppression shifts fiscal stress from the bond market to the currency market. In other words, the yen isn’t cheap by accident; it is being prevented from pricing in Japanese fiscal risk, which is precisely why it remains weak.

The truth is that, in recent years, the yen has ceased to be the safe haven that once yielded me good returns and has instead become the “bad boy” of the currency market—no one wants to hold a long position in it, and each intervention seems to have a shorter-lived impact than the last.

Technical Analysis

In the post “The Eclipse of the Magnificent Seven,” I made the following comments regarding the Ibovespa:

“I am increasingly confident that a red ‘wave B’ is underway; in the short term, this suggests a triangle—highlighted by the red ellipse—where the final leg is currently forming. An upward move should follow soon, pushing prices toward the levels indicated by the orange rectangle.”

The triangle did eventually break, but without any real momentum—reflecting the same lethargic pace the stock market has shown since June; the difference is clearly visible in the slope of the green line. While international markets continue the rally that began earlier this year, the Ibovespa has lost its luster. Have investors become discouraged by the prospect of a “Lula 4” term? A scenario that, were it to happen, would be too late to matter. Acting Finance Minister Dario Durigan—whose tenure is uncertain—has been trying to convince the financial market (Faria Lima) that the government will make a fiscal effort to prevent an uncontrolled surge in public debt. However, he is viewed with deep skepticism; one need only look at the government’s track record.

It would also be wise for them to get on the same page, as Sérgio Gabrielli—the government’s campaign coordinator—expresses a different view regarding government spending and has even floated the idea of ​​capital flow controls. That is a topic akin to stirring up a hornet’s nest.

In case the reader doesn’t quite recall who Gabrielli is: he was the president of Petrobras during the *Lava Jato* (Car Wash) scandal—which makes it baffling that he can still hold a position of trust within the PT!

Well, ultimately, it comes down to the bottom line; and, as happens from time to time, the Brazilian stock market currently offers no appealing opportunities for investors.

The S&P 500 closed at 7,723, down 0.17%; the USD/BRL exchange rate stood at R$ 5.1431, unchanged; the EUR/USD rate was € 1.1552, up 0.17%; and gold traded at US$ 4,249, up 4.21%.

Stay tuned!

Original Post: Click Here

This is not an investment recommendation.

About the Author of this Post: David Gotlib has 45 years of experience in investment management. An engineer from Polytechnic School of the University of São Paulo, he was one of the founders of the first Brazilian hedge fund in 1993 (AUM US$ 1 billion). Later, he was Managing Director of Deutsche Bank Asset Management (AUM R$ 2.2 billion) until the company was sold to Bradesco. He is currently the manager of his own investment portfolio and the author of the blog Acertar na Mosca, where, since 2011, he has shared his thoughts on the global economy and the financial market on a daily basis.

Today I have the pleasure of interviewing Brazilian investor Jayme Simão.

From January 2024 to June 2026 his historic performance will be the envy of anyone.

His portfolio returned 54.32% in the period, versus 28.20% for Ibovespa.

This guy knows how to generate real value.

Shall we meet him?

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BZ: Jayme, could you tell us a little about yourself?

JS: I am a production engineer by training, with an MBA from Insper. I built a corporate career in operations at Ambev until I was thirty. That experience gave me a valuable perspective on how companies actually function—far removed from the “Faria Lima” valuation bubble.

After that, together with my partner Ricardo, I founded Hub do Investidor, which has now been operating for six years. Today, we are one of the country’s leading research firms, focused entirely on serving institutional clients: investment advisory firms, brokerages, banks, and asset managers.

BZ: What is your strategy for making money on the stock market?

JS: Our methodology revolves largely around the margin of safety. Whether in our reports or during committee discussions on allocating a stock to a portfolio, we prefer to stress-test the variables that drive the company’s revenue and cash generation. And when testing these variables, we tend to avoid optimism. In other words, we look for a scenario where things don’t go particularly well for the company, yet the stock remains cheap. That is the kind of situation we like.

We are not a firm that speculates on a company’s success; instead, we focus on finding a margin of safety in the price under adverse conditions.

BZ: What is your process for finding a new buy opportunity? What filters do you use?

JS: We do use some quantitative filters—mainly regarding liquidity, since we manage some large portfolios. We also look for companies with a track record of cash generation, though this isn’t a hard-and-fast rule, as a company might be going through a rough patch.

Beyond that, the process is largely qualitative. It’s about understanding whether the business is sound and capable of weathering various economic cycles. We also pay close attention to the people running the business—the family behind it. We aren’t big fans of widely held corporations; we prefer owner-led companies.

BZ: How do you value a share: DCF, Multiples, implied IRR, a mix of the previous ones, …?

JS: We use a bit of everything. The DCF ends up being the primary method for arriving at a valuation. We look at multiples occasionally—usually at the end of the fiscal year—to compare against peers. We also work backward to calculate the implied IRR to see if the price makes sense.

But, again, what matters most is how we handle the variables that make up the key components of the DCF: we stress-test those variables to understand the margin of safety.

BZ: How do you like to build your stock portfolio, considering the number of companies, sectors and concentration?

JS: We aren’t big fans of excessive diversification. That is precisely why we like using ETFs—including within our strategies—following a “core-satellite” approach: the ETF forms the portfolio’s indexed core, and we then seek to generate alpha by adding specific individual stocks.

In practice, we typically work with a single ETF making up the core, complemented by investment theses involving six to twelve individual names.

BZ: How often do you like to rebalance your portfolio?

JS: It really depends. If a stock’s price has dropped and we believe the investment thesis remains unchanged, we might rebalance as often as every month. But generally, our average rebalancing cycle is around every three months. Sometimes it’s more frequent; other times, we might go a bit longer than three months without making any changes.

BZ: How long on average do you hold a position in your portfolio?

JS: We don’t have a hard-and-fast rule. However, since we seek a significant margin of safety, when the investment thesis plays out successfully, that margin supports the position for a long time. So, we typically hold these investments for years. Among the names we hold today, well over half have been in the portfolio for at least two years.

BZ: Do you believe that graphical analysis, together with fundamental analysis, can help with the buying and selling points of stocks?

JS: Yes. Again, we don’t use technical analysis as the basis for our decision-making here, but we do view the chart as a comprehensive map of that asset’s history. When you zoom in, you can spot some interesting points. That’s what we use it for.

So, to sum up: the decision stems from both the macro and the micro, but the implementation certainly involves the chart.

BZ: What are your favorite sectors on the Stock Exchange? And the ones you avoid? Why?

JS: We don’t have any major sectoral reservations. Everything is fair game; there are good companies in every sector—that’s just the nature of the economy. However, we have been allocating heavily to utilities lately, seeking out strong cash generators that offer a margin of safety. This doesn’t happen all the time, but during periods of market stress, you often find companies offering returns of IPCA plus 12% or IPCA plus 15%.

Honestly, there isn’t a specific sector we avoid. In practice, though, the healthcare sector is quite complex and difficult to make money in, with rare exceptions.

BZ: Do you use stop loss? Where do you usually place it?

JS: We don’t use stop-losses in the classic sense of closing out a position at a specific price level. Instead, we have internal rules requiring a rigorous re-examination of the investment thesis if the stock drops more than 20% against our expectations—provided that decline isn’t linked to a macroeconomic move.

BZ: Do you use derivatives? What is your strategy?

JS: No, not given the mandates of the portfolios we manage. However, we consider it a very interesting tool for hedging and risk reduction. Overall, we focus on managing equities and other variable-income assets, and when we look to complement that diversification, we tend to use fixed-income ETFs.

BZ: What is the cheapest company on the stock market today?

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Mentions of the “Magnificent Seven” have all but vanished from the headlines—something that should surprise no one who has followed the market for any length of time. With every new technology, a group of companies emerges to dominate the spotlight for a while, until the trend runs its course and a new protagonist takes center stage. Most recently, it was the turn of chipmakers—companies “rediscovered” overnight when demand for data centers exploded far beyond anyone’s expectations. Profits soared, and the market—as it always does—rushed to project that growth indefinitely into the future.

But a familiar problem cropped up: where does the money come from to sustain investments of this magnitude? Initially, companies tapped into their cash reserves—and these were substantial war chests. It wasn’t enough. They then turned to borrowing, and that’s when the snowball effect began. Each company launched an investment program as ambitious as its rival’s—a “pedal-to-the-metal” approach that left Wall Street skeptical about whether all that capital would ever pay for itself. The specter of billions invested in processing capacity failing to yield a return on capital is already haunting investors; they have begun unwinding positions in tech giants and shifting toward more traditional companies—what I often call “mom-and-pop” stocks: banks, insurers, and pharmaceutical firms—businesses that don’t promise dizzying growth but deliver predictable income.

The results of this shift are already showing up in the numbers. The equal-weighted S&P 500—which assigns the same weight to each of the index’s five hundred companies—hit an all-time high and outperformed the Nasdaq 100, which is itself teetering on the edge of a 10% correction. The dispersion within the market itself is striking: the 25 best-performing stocks in the Russell 1000 during the first half of the year—most of them linked to semiconductors and AI infrastructure—have fallen by an average of more than 36% this month. Conversely, the 25 worst performers of the semester rose by 14%. The narrative is flipping right before our eyes, without any significant corporate news to justify such an abrupt turnaround.

As investor appetite for tech stocks cools, the cost of financing that same technology is rising. A $12.5 billion bond offering linked to a Meta data center project in Texas priced at an annual rate of 7.5%—nearly three percentage points above the 10-year Treasury yield—representing a higher premium than that paid on a similar deal the previous year. New bond issuance by companies linked to artificial intelligence has already reached $270 billion this year, nearly double the total issued throughout last year.

Faced with these rising debt costs, the “hyperscalers”—the nickname the market has given the giants underpinning AI infrastructure—have begun to favor raising capital through equity issuance. Historically, this has been cheaper for them than debt, given the generous multiples at which their shares trade.

The result is that 2026 could become the first year in decades to see net equity issuance in the United States rise again, reversing the trend of share buybacks that has supported the stock market for so long.

Increased supply of stock in the market tends to put downward pressure on prices—yet another ingredient in the mix that has caused investors to lose steam regarding the “Magnificent Seven” narrative.

All of this has unfolded rapidly and intensely, and it is natural for investors to feel wary; after all, a vast amount of money is riding on something that is still new. Adding to this skepticism is the ongoing price war among service providers—a topic I discussed in my post “token-liquidation.” I have no doubt that many companies will go bust during this process, just as happened with the dot-coms in the early 2000s. But there is a significant difference between that moment and the present: back then, the billions in revenue projected by the market were merely a hope—a distant promise. Today, it is a reality already reflected in financial statements.

I cannot say whether what we are experiencing now is merely a passing fear, or if, ten years from now, the use of artificial intelligence will be so widespread—and in such diverse ways—that even a low price point multiplied by billions of users will justify current investments. Another point worth considering is that the “Magnificent Seven” are solid companies with decades-long track records; dismissing their executives as reckless strikes me as questionable. I can assure you that they face just as many uncertainties as we do—albeit perhaps fewer—and they certainly didn’t reach the top by acting like reckless gamblers.

It is worth noting that the “Magnificent Seven” never formed a homogeneous block. Apple—often criticized for failing to gain a strong foothold in artificial intelligence—has nonetheless overtaken Nvidia again as the world’s most valuable company, reaching a market capitalization of $5 trillion this week. It serves as a reminder that, even within the same group, fortunes can diverge significantly.

History, however, works against them: market leaders rarely stay at the top for long. Bloomberg’s John Authers titled his latest piece “The Sunset of the Magnificent Seven.” For now, I prefer to call it an eclipse—a passing phenomenon that obscures without necessarily extinguishing.

Technical Analysis

In the post “the-retirement-stock,” I made the following comments regarding the Ibovespa:

“The red Wave A looks ‘neat’—’by the book,’ as market jargon goes. Consequently, a red Wave C is required—though not yet visible—which should reach levels lower than red Wave A, around the 160,000 mark (a figure subject to further calculation).”

The Brazilian stock market is moving without much conviction—rising one day and falling the next—which is typical of corrections. With each passing day, I grow more confident that a red Wave B is underway; the short-term outlook suggests a triangle pattern (highlighted by the red ellipse), where the final leg is currently forming. An upward move should follow soon, taking the index to the levels indicated by the orange rectangle—I will be able to provide a more precise forecast if the triangle scenario proves correct.

I ventured a buy recommendation a few days ago, but we were stopped out at breakeven. You may recall I mentioned that Wave Bs are very difficult to trade: they take two steps forward and one—or one and a half—steps back. Observe the movement since June of this year—where the orange “wave A” is located—and tell me if that isn’t how the stock market performed.

The S&P 500 closed at 7,316, down 1.52%; the USDBRL at R$ 5.1274, down 0.16%; the EURUSD at € 1.1449, up 0.55%; and gold at US$ 4,049, up 0.54%.

Stay tuned!

Original Post: Click Here

This is not an investment recommendation.

About the Author of this Post: David Gotlib has 45 years of experience in investment management. An engineer from Polytechnic School of the University of São Paulo, he was one of the founders of the first Brazilian hedge fund in 1993 (AUM US$ 1 billion). Later, he was Managing Director of Deutsche Bank Asset Management (AUM R$ 2.2 billion) until the company was sold to Bradesco. He is currently the manager of his own investment portfolio and the author of the blog Acertar na Mosca, where, since 2011, he has shared his thoughts on the global economy and the financial market on a daily basis.

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Chapter 2

The Munger Approach to Life, Learning, and Decision Making

Chapter 2 of Poor Charlie’s Almanack introduces what Charlie Munger considers the foundation of sound judgment: worldly wisdom. Rather than focusing on stock-picking techniques or financial formulas, Munger argues that successful investing begins with learning how to think correctly. He believes that most investment mistakes are not caused by a lack of intelligence, but by narrow thinking and poor decision-making. Investors who wish to outperform over the long term must build a broad understanding of how the world works instead of becoming experts in only one field. This chapter lays out the intellectual framework that guided Munger throughout his remarkable career alongside Warren Buffett.

Munger begins by criticizing the modern educational system, which often encourages excessive specialization. Universities produce highly skilled professionals within individual disciplines, but many graduates fail to understand how those disciplines connect. Economists often ignore psychology. Engineers overlook incentives. Lawyers may know the law but fail to appreciate basic economics. According to Munger, reality does not organize itself into academic departments, so our thinking should not either.

Instead, he proposes developing what he calls a latticework of mental models. A mental model is a fundamental concept that explains how part of the world operates. Every important discipline—economics, mathematics, psychology, biology, engineering, physics, history, statistics, and even evolution—contains a handful of core ideas that repeatedly explain human behavior and real-world outcomes. The objective is not to become an expert in every field, but to master the few truly important concepts from each one and integrate them into a coherent decision-making system.

For investors, this idea has profound implications. Financial statements alone rarely tell the complete story about a business. Understanding consumer psychology, competitive dynamics, incentives, technological change, network effects, organizational behavior, and human biases often provides a much greater advantage than simply memorizing accounting ratios. Munger argues that investors who rely on only one analytical framework resemble a carpenter whose only tool is a hammer. When every problem looks like a nail, mistakes become inevitable.

This observation leads to one of Munger’s most famous ideas: “To the man with only a hammer, every problem looks like a nail.” He warns that professionals naturally become prisoners of their own specialties. Accountants see accounting solutions. Lawyers see legal solutions. Economists see economic explanations. Investors fall into the same trap when they evaluate every company using only valuation multiples or discounted cash flow models. The world’s complexity requires multiple perspectives. The best investors constantly switch between different mental models depending on the situation.

Another major theme of the chapter is the importance of understanding human psychology. Munger believes that nearly every significant investment mistake ultimately traces back to predictable flaws in human behavior. People become overconfident, follow crowds, fear losses more than they value gains, seek confirmation for existing beliefs, and react emotionally during periods of uncertainty. Markets amplify these tendencies because investors constantly influence one another.

Rather than assuming people behave rationally, Munger urges investors to expect irrational behavior as the norm. Successful investing therefore requires recognizing psychological biases not only in other market participants but also in ourselves. The investor who understands human nature gains an enormous competitive advantage because markets frequently misprice assets when emotions dominate rational analysis.

Closely related is Munger’s emphasis on incentives, a subject he repeatedly describes as one of the most powerful forces governing human behavior. People generally respond to incentives exactly as incentive systems encourage them to behave, even when those behaviors produce undesirable outcomes. Executives, brokers, analysts, consultants, politicians, and corporate managers all make decisions within structures that reward certain actions.

For investors, understanding incentives often reveals more about a company’s future than reading its annual report. Executive compensation plans, ownership structures, customer relationships, regulatory environments, and industry economics all shape behavior. Whenever investors fail to examine incentives carefully, they risk misunderstanding why decisions are being made.

Munger also stresses the importance of probabilistic thinking. Investing rarely offers certainty. Instead of searching for perfect predictions, investors should estimate probabilities and make decisions when the expected outcomes are favorable. This approach requires accepting uncertainty while remaining rational. Good decisions can occasionally produce poor outcomes, just as bad decisions sometimes appear successful because of luck. Therefore, investors should judge their decisions by the quality of their reasoning rather than by short-term results.

This naturally connects with another key lesson: always focus on avoiding stupidity before pursuing brilliance. Munger frequently remarks that it is easier to become consistently successful by eliminating obvious mistakes than by trying to discover spectacular opportunities. Investors often spend enormous energy searching for the next multibagger while ignoring basic errors such as excessive leverage, overconfidence, inadequate diversification, emotional trading, or poor risk management.

One of Munger’s recurring principles is inversion—the habit of solving problems by considering the opposite perspective. Instead of asking, “How can I become wealthy?” he encourages investors to ask, “What behaviors almost guarantee financial failure?” The answers are usually straightforward: excessive debt, frequent speculation, emotional decision-making, ignoring incentives, failing to learn continuously, and refusing to admit mistakes. By systematically avoiding these behaviors, long-term success becomes much more likely.

The chapter also highlights the importance of continuous learning. Munger argues that knowledge compounds exactly like capital. Every new mental model increases the usefulness of all previous knowledge because ideas reinforce one another. Reading broadly across many disciplines therefore produces exponential returns over decades. History, biology, engineering, mathematics, philosophy, and psychology all contribute insights that improve investment decisions.

This lifelong learning mindset distinguishes exceptional investors from average ones. Markets evolve, industries change, technologies emerge, and competitive advantages disappear. Investors who stop learning gradually become less capable of interpreting new information. Munger himself devoted several hours every day to reading, believing that intellectual curiosity represented one of the greatest competitive advantages available.

Another central idea is the importance of independent thinking. Munger warns against following popular opinion simply because it is widely accepted. Financial markets constantly create social pressure to conform. During bubbles, optimism becomes contagious. During crashes, pessimism spreads just as rapidly. Investors who depend on consensus inevitably buy high and sell low.

Instead, Munger advocates building convictions based on facts, logic, and careful analysis. Independent thinking does not mean automatically disagreeing with everyone else. It means reaching conclusions through one’s own reasoning rather than borrowing the opinions of others. The ability to remain rational when the crowd becomes emotional represents one of the defining characteristics of outstanding investors.

Humility also occupies an important place within Munger’s framework. Despite his extraordinary success, he consistently reminds readers that reality is too complex for anyone to understand completely. Investors should therefore remain willing to change their minds whenever new evidence appears. Confidence should come from disciplined reasoning rather than from certainty. Recognizing the limits of one’s knowledge often prevents catastrophic mistakes.

Throughout the chapter, Munger repeatedly returns to the idea that successful investing is fundamentally a byproduct of good thinking. Superior returns do not primarily result from discovering secret information or predicting market movements. They emerge from consistently making slightly better decisions than others over very long periods. Better decisions arise from broader knowledge, stronger mental models, sound psychology, rational judgment, and relentless curiosity.

For stock investors, Chapter 2 may be the most important part of Poor Charlie’s Almanack. Rather than offering formulas for beating the market, Munger provides something much more valuable: a framework for improving the quality of one’s thinking. He argues that investment success begins long before analyzing companies or building portfolios. It begins by constructing a mind capable of understanding reality from multiple perspectives, recognizing psychological traps, evaluating incentives, embracing lifelong learning, and remaining intellectually humble.

Ultimately, Charlie Munger’s message is simple but profound. Wealth is not created by isolated moments of brilliance but by decades of rational decision-making. Investors who develop a multidisciplinary understanding of the world, continuously refine their judgment, and patiently apply timeless principles will enjoy an enduring advantage over those who rely only on technical knowledge or market forecasts. In Munger’s view, the greatest investment anyone can make is not in stocks, but in building a better mind.

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Did you fall for my trap? After all, Mosca has always said he doesn’t recommend individual stocks. It’s just a marketing hook—hahaha. I’m pretty sure we’d all love to pick the next Nvidia—that stock that multiplies exponentially and sets up early investors for life. Will it be SpaceX? Or, once they go public, OpenAI or Anthropic? Is there still time to buy Micron, even though it’s already surged? Don’t ever expect a tip like that from me; as you’ll see below, the market darling of the moment often disappoints over time.

In my view, the best approach is to buy SPY or competing funds that track the market-cap-weighted S&P 500. With this type of vehicle—as I’ve mentioned before—the most sought-after stocks gain weight, taking the place of those losing value. This adjustment happens automatically, without anyone needing to make a decision: when a company’s value rises, its market cap grows and its share of the index increases automatically, without a single real changing hands; when it loses value, the opposite happens, and if the drop is steep enough, the index’s methodology itself drops the company and replaces it with another.

The index lets winners run and gradually sheds losers without you having to hit a buy or sell button, and without the decision depending on your mood, your current conviction, or your ability to predict the market’s next favorite. It is essentially the psychological opposite of picking individual stocks—a situation where, every day, you’re tempted to second-guess yourself, buying more during the euphoria or selling in a panic. Over time, you end up with a portfolio that moves with the market flow—not trying to score a massive windfall, but maintaining a measured stake in the market’s favorites. Hendrik Bessembinder, a professor at Arizona State University’s W. P. Carey School of Business, published a study in July 2026 titled “Returns to ‘Do-Nothing’ Portfolios.” In it, he reconstructs 55 years of year-by-year returns based on the components of the S&P 500 itself, and he is categorical on this point: betting every year on the index’s largest stock was, historically, a poor strategy. Anyone who did so between 1971 and 2013 turned one dollar into just over four, whereas the full index turned that same dollar into nearly eighty.

International Business Machines was the index’s largest stock for most of the 1970s and 1980s, posting declines of up to thirty percent in some of those years. General Electric took over the top spot in the 1990s and the first half of the 2000s, followed by Exxon Mobil until the beginning of the last decade. The following chart, reconstructed from the study’s data, clearly illustrates the picture: the line representing the full index portfolio easily outperforms portfolios concentrated in the largest stocks throughout almost the entire period, while the line for the single largest stock spends most of its time at the bottom.

The advantage that the largest stock of the moment has shown over the last dozen years is atypical; much of its luster is owed to a single extraordinary success story—Apple. Buying the entire index, rather than the market darling of the moment, also has the advantage of shielding you from the predictions of fundamental analysts—who get things right and wrong in the same proportions as always—and aligns your decisions with behavioral finance, which is where, at this stage of my life, I prefer to place my bets.

Hedge funds are out of the question as an alternative to this disciplined approach. A survey by RIABiz using HFRI index data shows that, between 2010 and 2025, the average hedge fund outperformed the S&P 500 in only three years—2015, 2018, and 2022—and even then, only because they lost less than the index, which fell more sharply during those periods. In all the other thirteen years of the series, a simple index fund would have left the investor with more money in their pocket than the average hedge fund—despite the array of renowned managers, sophisticated strategies, and steep management fees.

The attached chart shows the full series: even the twenty largest funds by assets under management beat the index in only seven of the sixteen years analyzed—a slightly better track record, yet still inconsistent. The fundamental issue is that this asset class is supposed to provide diversification and reduce correlation with the stock market, yet the opposite is observed: hedge funds generally rise and fall in tandem with the stock market, albeit with less intensity—an undesirable correlation for those paying a premium for protection.

I’ve learned from life—and perhaps with age—that the simplest things are usually the best. If you need to become a finance expert just to understand an investment, I generally wouldn’t recommend it. And if I could offer one piece of advice to my readers: don’t go looking for that one “retirement stock,” and don’t try to get rich overnight. In the latter case, you’d be more honest with yourself just playing the lottery.

Technical Analysis

In the post “EM=ET,” I made the following comments regarding the Ibovespa:

“I initiated a long trade at the 174.2k level, as mentioned in the post above. I have to say, it takes a lot of courage to enter a trade during a correction—especially a ‘Wave B.’ As an old guru I used to follow used to say, ‘Wave Bs are profit killers.’”

We were stopped out of the trade last week. In the previous post, I described what bothered me about the operation—mainly the fact that it was a Wave B. What is the psychology behind these waves? Since they move in the direction of the original trend—in this case, an uptrend—they can be violent: buyers pile in, believing they’ve found a bargain, while short sellers get caught off guard and are forced out of their positions by stop-loss orders. However, sometimes that doesn’t happen, and the price action becomes erratic—two steps forward, followed by one to one-and-a-half steps back.

So, where do we stand now? I’m waiting for the rally to play out; if it reaches the levels marked in the orange rectangle, I’ll consider the possibility of a short trade.

— Wait a minute, David—say what? You’re going to suggest a short trade? I don’t recall you ever doing that before.

You’re right; it’s very rare. But in this instance, the red Wave A looks “pretty”—or “by the book,” as the market jargon goes. Therefore, a red “C” wave is required—not yet visible—which should reach levels below the red “A” wave, around the 160,000 mark (a figure subject to further calculation). Furthermore, while I am working with a medium-term bullish scenario, if the market drops below 151,000 and, crucially, breaches the 134,000 level, the situation changes entirely, and I will shift from a bullish to a bearish stance. In any case, based on current observations, this latter scenario does not appear likely. Would a solvency crisis be the trigger? That is not for me to predict.

The S&P 500 closed at 7,499, down 0.14%; the USDBRL stood at R$ 5.0662, down 0.41%; the EURUSD was at € 1.1411, up 0.12%; and gold traded at US$ 4,134, up 1.40%.

Stay tuned!

Original Post: Click Here

This is not an investment recommendation.

About the Author of this Post: David Gotlib has 45 years of experience in investment management. An engineer from Polytechnic School of the University of São Paulo, he was one of the founders of the first Brazilian hedge fund in 1993 (AUM US$ 1 billion). Later, he was Managing Director of Deutsche Bank Asset Management (AUM R$ 2.2 billion) until the company was sold to Bradesco. He is currently the manager of his own investment portfolio and the author of the blog Acertar na Mosca, where, since 2011, he has shared his thoughts on the global economy and the financial market on a daily basis.

Today I have the pleasure of interviewing Brazilian investor Filipe Ramos.

From March 2018 to November 2023 his historic performance will be the envy of anyone.

His portfolio returned 308.21% in the period, versus 48.07% for Ibovespa.

This guy knows how to generate real value.

Shall we meet him?

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BZ: Filipe, could you tell us a little about yourself?

FR: I am 46 years old, married, a father of two, and hold a degree in Business Administration from PUC/MG. I began my professional career as a trainee at ABN Amro (formerly Banco Real) and later worked as a Middle Market manager at Unibanco before leaving to become an entrepreneur. I launched several businesses across sectors ranging from fashion retail to civil construction; when they succeeded and reached their peak, I would sell them, and when they didn’t work out, I would close them down—selling off inventory, the leasehold, and so on. That was when I realized I was simply curious about business—I enjoyed the mathematical side of things but didn’t care for managing day-to-day operations. I saw that the financial market offered a way to focus on the best parts of the job while relying on the country’s top minds to handle the actual operations. Today, I make my living from the market, even though no one in my family has any connection to it—quite the opposite, in fact; they ask if I “gamble on the stock market”... haha.

BZ: What is your strategy for making money on the stock market?

FR: I initially started out with a “buy-and-hold” approach based on reading research reports, which proved to be a very shallow and naive strategy. It was only after encountering Howard Marks’s theory of market cycles and the field of behavioral finance that I realized the market held inefficiencies I could exploit to make money—specifically by trading in line with cycles and against the herd. Although it sounds simple, it required mental conditioning: building a foundation of “value” thinking alongside an understanding of herd psychology, as well as training my “gut” to handle the pressure—since being a contrarian means fighting against our own survival instincts. I highly recommend the following books: *The Most Important Thing* (Howard Marks), *Mastering the Market Cycle* (Howard Marks), *The Psychology of Money* (Morgan Housel), *Stocks for the Long Run* (Siegel), *The Little Book That Beats the Market* (Joel Greenblatt), *Beating the Street* (Peter Lynch), and *Manias, Panics, and Crashes* (Charles P. Kindleberger). I also really enjoy biographies, but regarding the topic at hand, those are the ones that made the biggest impression on me.

BZ: What is your process for finding a new buy opportunity? What filters do you use?

FR: First, I examine macroeconomic conditions to understand where we are in the cycle. Next, I identify the sectors that specifically benefit from that stage of the cycle—looking for clear catalysts—while never neglecting fundamentals, so as to avoid permanent capital loss. Within those sectors, I look for companies with high-quality management that are trading at low multiples—situations that often arise due to a fleeting event that unsettles the market and creates such opportunities. “Owner-operated” companies (where there is “skin in the game”) always have an edge; provided the owner isn’t unscrupulous, returns tend to be superior—a fact backed by research. Last but not least, interacting with close friends in the industry—low-profile figures like those interviewed for this profile—adds significant value to the search for off-the-radar opportunities. A special thanks here to Thiago Ribeiro, who was interviewed for this feature.

BZ: How do you value a share: DCF, Multiples, implied IRR, a mix of the previous ones, …?

FR: I prefer looking at multiples, but I like to run my own calculations to filter out information that might mislead me into seeing value where none exists. At this stage, it is crucial to visualize the business in operation—going beyond the raw numbers—to identify its strengths, weaknesses, opportunities, and threats; the goal is to buy the existing business at a discount while getting the optionality and value triggers as a bonus.

BZ: How do you like to build your stock portfolio, considering the number of companies, sectors and concentration?

FR: I apply a rule of a maximum 20% allocation per stock and 30% per sector, and I never deviate from this; I use leverage for short positions—up to 15% in BOVV11 and IVVB11 (I do not short specific individual tickers)—which is the Club’s limit. I allocate 75% of the portfolio to approximately 10–12 companies, while the remaining 25% consists of small positions—such as initial exploratory trades, arbitrage opportunities, or holdings I am gradually unwinding as they approach my target price.

BZ: How often do you like to rebalance your portfolio?

FR: I analyze it daily, but I adjust the portfolio depending on the market—for instance, if a position has grown too large, if other opportunities have emerged, if I’ve concluded I was mistaken about the management, or if there has been a structural change in the investment case. In other words, it’s like running a holding company, constantly monitoring the businesses and the pricing of their assets or cash flows.

BZ: How long on average do you hold a position in your portfolio?

FR: It largely depends on the balance between operational profitability and asset appreciation. There are stocks I’ve held for five years that consistently deliver operational surprises and create significant long-term value, while others haven’t stayed in the portfolio for even 30 days because a specific trigger caused the price to surge close to my target. It’s important to look at your portfolio value every day and ask yourself: “If I had that amount of cash in hand today, would I buy exactly these same assets in the same position sizes?” If the answer is no, it’s time to adjust the portfolio. This protects you from falling in love with a stock or succumbing to loss aversion (the “average price” trap).

BZ: What are your favorite sectors on the Stock Exchange? And the ones you avoid? Why?

FR: I like sectors with clear growth opportunities that expand regardless of GDP growth—where players hold a small market share but possess a significant “moat,” such as competitive advantages derived from geographic location.

I avoid the airline industry, where you have to make numerous long-term capital expenditure (Capex) decisions while grappling with high volatility in short-term operating expenses (Opex). Ultimately, one need only look at history to see that this sector has left many investors by the wayside.

Another sector I dislike is major appliance retail; its history is littered with corporate casualties (Mesbla, Mapin, Ricardo Eletro, etc.), even though there are success stories—like Lojas Cem—that have managed to navigate the landscape very well for a long time.

Businesses that have to struggle mightily to generate cash—relying on a host of factors to align just right to turn a profit—are businesses where the odds are stacked against you.

I prefer businesses that offer a margin of safety and generate cash. Keep it simple; there’s no need to reinvent the wheel!

BZ: What is the cheapest company on the stock market today?

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Yesterday was a “reversal day,” and the market celebrated as if it were a victory. The June CPI fell 0.4%—the largest monthly drop in six years—and annual inflation retreated to 3.5%.

However, this “good news” was aided by a player that deserves no credit whatsoever: oil. Hours earlier, Trump announced a 20% tariff on ships in the Strait of Hormuz and revoked the measure in less than 24 hours—the kind of chaotic move that drives down the price of a barrel for a day, only for it to vanish the next. Without that one-off energy hiccup, there would have been no reversal to celebrate. Kevin Warsh, in his first testimony as Fed Chair, had the good sense to avoid the trap and refused to declare the “mission accomplished” that Wall Street wanted to hear—yet the swaps market has already gone all-in: for the first time since the 2024 election, one-year breakeven inflation fell below the 2% target, with the market celebrating victory before the final whistle.

It is the same selective euphoria that allowed Wall Street to pocket the best trading quarter in history—JPMorgan and Goldman Sachs had never profited so much from volatility—on the very same trading day that IBM plummeted 25% (its worst daily drop ever) after failing to convince anyone of AI’s actual value to its balance sheet. AI anxiety pays bonuses on one side of the table while burning market value on the other—all in a single day.

And this tendency to see diversification where there is actually concentration has a direct parallel elsewhere in the market: international allocations.

For nearly two decades, holding stocks outside the United States has been an exercise in patience. At the start of 2025, the ETF tracking developed markets (excluding the U.S.) was trading at virtually the same price level as in June 2007. The emerging markets ETF showed a similar pattern. Over the same period, the S&P 500 nearly quadrupled.

Recently, that picture has changed. “Old economy” sectors—financials, energy, materials, and industrials—which have always carried more weight in non-U.S. indices, have regained momentum. This shift is driven by a new geopolitical focus on defense and industrial self-sufficiency, as well as artificial intelligence capital expenditure (capex) spilling over into energy, hardware, and materials—precisely the sectors where emerging market and “rest-of-world” indices are historically overweight. Fiscal activism is also playing a role: German stimulus is the most visible example among developed economies, but Mexico is also investing heavily in rail infrastructure, even while attempting to reduce its deficit. European banks, which had struggled for nearly fifteen years, have seen a repricing alongside improved profitability. Meanwhile, the dollar—which rose about 40% between 2010 and 2024, acting as a constant drag on returns for U.S. investors holding unhedged foreign assets—may be nearing a plateau; it fell more than 9% in 2025, its worst performance since 2017.

However, there is a catch to this narrative of “renewed diversification.” The three largest holdings in both the emerging markets index and the ex-U.S. index are currently TSMC, Samsung, and SK Hynix; these three names account for nearly 30% of the emerging markets index and about 10% of the ex-U.S. index. This concentration at the top is revealing: the ten largest names in the global ex-U.S. index make up just 16.8%—a moderate figure. In contrast, the top ten names in the emerging markets index account for 39.4%—a higher level of concentration than the S&P 500 itself, which stands at 36.7%.

In short: anyone buying an emerging markets ETF today to diversify their portfolio is, in practice, making a heavy bet on semiconductors and technology. Brazil, which emerged as a destination for foreign capital flows early in the year, has recently lost its appeal; interest has shifted to Asia—precisely where TSMC, Samsung, and SK Hynix are based. Hence the provocative title: “EM” isn’t an acronym for “emerging diversification.” It stands for *Emerging Technology*—an “ET” that, like any good alien, disguises itself as something familiar before revealing its true nature.

The common thread linking today’s two topics is simple: whether looking at yesterday’s inflation data or the actual composition of emerging market indices, appearances can be deceiving. A single month of favorable CPI data doesn’t erase a decade of higher expectations. An ETF labeled as a diversification tool might, under the hood, actually be another concentrated bet on the same old value chain. It is always worth asking what lies behind the acronym before putting your trust in it.

Technical Analysis

In the post “navigating-new-seas,” I made the following comments regarding the IBOVESPA:

“What I can say is that the market is undergoing a correction, contained within the red ellipse. In situations like this, I look for further clues by examining charts with shorter timeframes, as shown below. Here are the possibilities:

1) Red wave B is underway and could take the market to the 187.5k level (↑ 10%) or 192.9k (↑ 12%); or

2) Red wave A hasn’t finished yet, and further declines could occur below 168k... I consider option 1 more likely and will wait for a breakout above the level marked with the red symbol—at 174.2k.”

The breakout occurred on July 10th, triggering a long trade at 174.2k, just as I mentioned in the post above. I have to say, it takes a lot of courage to enter a correction—especially a wave B. As an old guru I used to follow used to say: wave Bs are profit killers.

Where should I place the stop-loss? Ideally, it would be at 172.6k, which could result in a loss of approximately 1%—nothing catastrophic—but I’m going to use the entry level of 174.2k since my confidence in this trade is low. The target is marked on the chart below, between 187.5k (+7%) and 192.9k (+10%).

Another factor bothering me is that the rally indicated by the orange symbol needs to reach 181.6k quickly.

“David, it looks like you’re treading very carefully here, but...”

Exactly. Anyone experienced with Elliott Wave knows that navigating a wave B is a heroic feat: this wave tends to move two steps forward and one to one-and-a-half steps back. Keep an eye out, as I might exit the trade at any moment. A brief comment on yesterday’s match between France and Spain, in which the French were considered the favorites. I am very fond of the French—after all, I made many friends during my time at BFB—but I detest Mbappé; he is an arrogant fellow and a massive jinx, given his track record of losses wherever he goes. The press tried to compare him to Messi, but he doesn’t even come close to the brilliant Argentine player.

The S&P 500 closed at 7,572, up 0.38%; the USDBRL at R$ 5.0925, unchanged; the euro at € 1.1469, up 0.38%; and gold at US$ 4,057, up 0.11%.

Stay tuned!

Original Post: Click Here

This is not an investment recommendation.

About the Author of this Post: David Gotlib has 45 years of experience in investment management. An engineer from Polytechnic School of the University of São Paulo, he was one of the founders of the first Brazilian hedge fund in 1993 (AUM US$ 1 billion). Later, he was Managing Director of Deutsche Bank Asset Management (AUM R$ 2.2 billion) until the company was sold to Bradesco. He is currently the manager of his own investment portfolio and the author of the blog Acertar na Mosca, where, since 2011, he has shared his thoughts on the global economy and the financial market on a daily basis.

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Chapter 1

And Bill Gates Has to Say

The final section of Chapter 1 of Poor Charlie’s Almanack gives readers a unique perspective on Charlie Munger through the eyes of Bill Gates. Unlike a conventional endorsement, Gates’ tribute is a thoughtful reflection on why Munger stands apart from almost every other successful businessman he has ever known. It is particularly significant because it comes from someone who has spent decades working with many of the world’s brightest entrepreneurs, scientists, executives, and investors. If Bill Gates considers Charlie Munger one of the most extraordinary thinkers he has ever encountered, investors should pay close attention to the reasons why.

Gates begins by borrowing an observation from Benjamin Franklin, who once wrote that the Infinite Father neither expects nor requires praise because He exists far above human admiration. Gates uses this idea to describe Charlie Munger’s personality. He suggests that no matter how many compliments or accolades people offer, Charlie himself remains his own toughest critic. External recognition simply does not matter very much to him. In fact, Gates jokes that Charlie probably appreciates his own jokes more than anyone else’s compliments. This opening immediately reveals one of Munger’s defining characteristics: genuine intellectual independence. He does not seek approval, popularity, or admiration. Instead, he evaluates himself using standards that come from within rather than from public opinion.

Bill Gates then recalls Warren Buffett’s introduction before they first met. Buffett described Charlie as the greatest business partner anyone could hope for. At the same time, Buffett humorously warned Gates not to expect much opportunity to speak during conversations with Charlie. According to Buffett, Charlie would sometimes hold up his hand during a cocktail party to prevent others from interrupting while he paused only long enough to take a drink before continuing his explanation. Buffett also shared a funny story illustrating Charlie’s occasional lack of attention to ordinary practical matters. Despite being an exceptionally rational thinker, Charlie once managed to sink a boat on a perfectly calm lake by putting the engine into full reverse at high speed. These stories remind readers that extraordinary intelligence does not necessarily translate into perfection in every aspect of daily life. Like many exceptional thinkers, Charlie’s mind was often so occupied with important ideas that routine details occasionally escaped his attention.

When Gates finally met Charlie, he discovered that Warren’s descriptions had actually understated the experience. Charlie exceeded every expectation. Gates describes him as the broadest thinker he has ever met. What impressed him most was not Charlie’s knowledge of investing alone, but the astonishing breadth of subjects he had mastered. Whether discussing business strategy, economics, architecture, university dormitory design, engineering, or even catamaran construction, Charlie displayed remarkable depth of understanding. Gates suggests that he had never encountered another individual capable of moving so comfortably across so many unrelated disciplines while consistently producing valuable insights. This multidisciplinary approach lies at the heart of Munger’s philosophy and helps explain much of his investing success. Rather than viewing companies through a purely financial lens, Charlie integrated ideas from psychology, biology, engineering, mathematics, history, law, and economics to build a far more complete understanding of reality.

Gates also highlights the unusual nature of his correspondence with Charlie. Their most memorable exchange involved stock options and the ways they can distort corporate financial results and management incentives. This reflects Charlie’s lifelong concern with incentives, one of the central ideas running throughout Poor Charlie’s Almanack. Munger believed that understanding incentives explains much of human behavior, both in business and in life. Poorly designed incentive systems often produce unintended consequences, while properly aligned incentives encourage rational decision-making and long-term value creation. Gates admired Charlie’s ability to cut through accounting complexity and identify the underlying economic reality behind business decisions.

Interestingly, Gates notes that their longest correspondence had nothing to do with investing. Instead, it focused on the mating habits of naked mole rats and what humans might learn from studying them. At first glance, this topic seems entirely unrelated to business. Yet it perfectly illustrates Charlie’s lifelong commitment to multidisciplinary learning. Munger believed that every field of knowledge contains ideas capable of improving decision-making in completely different areas. Nature, biology, evolution, engineering, psychology, and economics all provide mental models that can be applied to investing. Gates clearly appreciated that Charlie’s curiosity had no boundaries. He did not study subjects because they were immediately useful. He studied them because understanding the world from many perspectives ultimately leads to better judgment.

One quality Gates particularly admires is Charlie’s ability to compress complex ideas into unforgettable phrases. Throughout his career, Munger became famous for expressing sophisticated concepts in remarkably simple language. Gates offers several examples. When discussing why some children succeed more than others, Charlie often referred to the “genetic lottery,” reminding people that luck plays a significant role in life. When criticizing venture capitalists who defended excessive stock option compensation, Charlie compared them to “the piano player in a whorehouse,” suggesting they had become so immersed in their environment that they no longer recognized obvious ethical problems. Discussing cost-plus contracts, which reward suppliers for spending more money rather than less, Charlie liked to observe that “even the mule knew to slow down,” illustrating how incentives naturally shape behavior. These expressions demonstrate one of Charlie’s greatest communication skills: transforming abstract economic principles into vivid mental pictures that people remember for years.

For investors, Gates’ observations reveal why Munger’s wisdom extends far beyond stock selection. Charlie did not become extraordinary because he memorized financial ratios or predicted markets more accurately than others. He became extraordinary because he developed a better way of thinking. His greatest competitive advantage was not information but judgment. He consistently asked better questions, drew knowledge from more disciplines, understood incentives more deeply, and avoided simplistic explanations. Gates suggests that this intellectual framework made Charlie uniquely valuable not only as Buffett’s partner but also as an advisor, teacher, and friend to many of the world’s leading business figures.

Another important lesson emerging from Gates’ tribute is the value of intellectual humility. Despite Charlie’s immense knowledge, Gates never portrays him as someone seeking recognition. On the contrary, Charlie constantly questioned his own conclusions and remained his own harshest evaluator. This humility is one reason he continued learning throughout his life. Investors often become dangerous when early success convinces them they already know enough. Charlie avoided this trap by remaining permanently curious and continuously expanding his mental models. His confidence rested not on believing he was always right but on maintaining a process that constantly reduced the likelihood of being wrong.

The section also reinforces an important theme that appears repeatedly throughout Poor Charlie’s Almanack: true excellence comes from combining depth with breadth. Many professionals specialize narrowly within one field. Charlie mastered investing precisely because he refused to think only about investing. He believed reality does not organize itself according to academic departments, and therefore neither should our thinking. The best investment decisions emerge when economics, psychology, engineering, biology, mathematics, history, and human behavior are considered together. Gates’ admiration reflects his recognition that Charlie’s greatest achievement was building one of the most complete intellectual frameworks ever applied to business.

Bill Gates closes his tribute by observing that a book collecting Charlie Munger’s wisdom was long overdue. That conclusion feels entirely justified after reading his reflections. Gates does not praise Charlie because of his wealth or investment record, impressive as both may be. Instead, he celebrates the quality of Charlie’s mind—its curiosity, breadth, originality, clarity, and relentless pursuit of truth. For stock investors, this may be the most valuable lesson of all. Superior investment performance begins long before analyzing financial statements or valuing companies. It begins by building a disciplined way of thinking, remaining curious about the world, understanding how incentives shape behavior, communicating complex ideas simply, and never allowing success to end the learning process. Bill Gates’ tribute ultimately reminds readers that Charlie Munger’s greatest legacy is not merely the fortune he helped create at Berkshire Hathaway, but the timeless intellectual framework he leaves behind for anyone willing to study it.

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Today I have the pleasure of interviewing Brazilian investor Diego Lobato.

From November 2018 to November 2023 his historic performance will be the envy of anyone.

His portfolio returned 421.09% in the period, versus 40.78% for Ibovespa.

This guy knows how to generate real value.

Shall we meet him?

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BZ: Diego, could you tell us a little about yourself?

DL: I am 38 years old, and I spent 15 of those years working in the automotive retail sector. However, in 2018, I decided it was time to start planning my transition to managing my own assets in the stock market. My goal was to make this shift gradually, aiming to complete the transition by 2023. Yet, an unexpected opportunity arose, and I ended up starting the process earlier than planned.

Even without available capital to invest, I began studying the financial market in early 2018. It was in November of that same year that I took the first step on this new journey by making my initial investment. From 2021 onwards, I dedicated myself fully to this new endeavor.

Over time, I realized that the stock market offers a range of advantages and opportunities compared to the business sector where I had previously worked.

My introduction to the financial market happened when I was just 13 years old, when my father—an investor himself—introduced me to that world. Back then, I bought my first shares of Petrobras. However, I must admit that the following years were a frustrating experience, and I eventually closed my brokerage account.

BZ: What is your strategy for making money on the stock market?

DL: There are countless opportunities in the Brazilian market, which undergoes intense economic cycles. Therefore, understanding these cycles is crucial to avoid following the herd. Whether in a bull market or a bear market, the market can become completely irrational, yet there is always a turning point. This year, for instance, with favorable economic data, we have entered a cycle of interest rate cuts, even though the outlook remains fraught with uncertainty. Regardless of the political landscape, the asymmetry tends to be favorable, as we have observed. It is precisely at these times that great opportunities arise, and you usually need to take a position contrary to the herd; otherwise, you will miss out on major market moves.

I believe in buying companies at a significant discount and selling when they approach their fair value. If you make good selections, it is hard not to succeed in the long run.

At some point—after dedicating a great deal of effort to studying and analyzing companies—the level of knowledge among investors tends to converge, differing only in the specific nuances of each manager’s approach. That is when emotional maturity becomes the decisive factor, and that is an extremely challenging aspect. It is virtually impossible to significantly outperform the average (such as a benchmark index like the Ibovespa or the Small Cap index) without enduring substantial temporary losses.

BZ: What is your process for finding a new buy opportunity? What filters do you use?

DL: Initially, I prioritize analyzing sectors where I have expertise, looking for relevant opportunities.

I perform quick multiple-based calculations to assess whether a specific asset is worth investigating. If it looks promising, I analyze balance sheets and quarterly reports, participate in conference calls, speak with the company, and study historical data. I also build a detailed model to project future results and identify growth potential. Additionally, I like to stay in touch with the company on a quarterly basis to keep up to date on execution versus my projections.

I maintain frequent communication with friends who are fund managers and investors, seeking to leverage their knowledge and experience regarding specific cases and sectors. This helps me deepen my analysis more efficiently. Furthermore, they can alert me to opportunities I might not have considered, which is extremely valuable.

BZ: How do you value a share: DCF, Multiples, implied IRR, a mix of the previous ones, …?

DL: I generally use various multiples to determine an asset’s target price, taking into account earnings projections and indicators such as ROE, ROIC, PEG, and Capex, as well as the asset’s history and the sector in which it operates. Based on this data, I establish a fair multiple to set the asset’s target price.

BZ: How do you like to build your stock portfolio, considering the number of companies, sectors and concentration?

DL: It is rare for a company to reach 20% of the portfolio’s net asset value, given the specific risks involved. On the few occasions when this has happened, the company demonstrated growth potential far exceeding the average of the others. Currently, the top five companies in my portfolio account for approximately 70% of the net asset value. However, regarding sectors, I generally limit exposure to 50% of the net asset value, though it is uncommon to have such high exposure to a single sector.

At times, highly significant opportunities arise in specific sectors. Recently, for instance, there was a significant opportunity in the construction sector, where I established a substantial position. However, throughout the year, I made significant adjustments to the size of individual holdings—both increasing and decreasing positions—as some companies showed limited remaining upside potential while others still held great potential.

BZ: How often do you like to rebalance your portfolio?

DL: Almost daily, depending on asset price fluctuations.

I seek to capitalize on market volatility to generate alpha. A simple example involves two assets, each with 100% upside potential: one rises by 20% while the other remains stable. In this scenario, rebalancing would be appropriate—reducing the position in the asset where upside potential has decreased and increasing the position in the asset where it has remained intact. This way, I increase the portfolio’s upside potential and reduce risk, provided the price movement wasn’t driven by changes in the company’s fundamentals.

BZ: How long on average do you hold a position in your portfolio?

DL: There is no specific timeframe, but most of the companies I invest in have been in my portfolio for several years. My standard practice is to adjust my exposure based on market asymmetry, increasing or reducing it as needed. If a company reaches its fair value or its share price rises too much relative to others, I am likely to replace it with another. One way to reduce risk is to always adjust position sizes based on upside potential. Furthermore, if there are positive or negative changes in a company’s fundamentals, additional analysis is required.

BZ: What are your favorite sectors on the Stock Exchange? And the ones you avoid? Why?

DL: No, but I generally end up investing most of my time in areas where I have specific skills and knowledge. There are sectors where I lack expertise, and naturally, I tend to steer clear of them. However, if I can grasp the investment thesis and feel confident about the risk-reward profile, I am willing to invest—even if it means taking a smaller position.

Furthermore, I prefer analyzing smaller companies that don’t receive much sell-side coverage and aren’t included in the portfolios of major investment funds. These companies often present attractive investment opportunities precisely because of their low liquidity. A good example from this year is Plano e Plano, a company in the construction sector. At the beginning of the year, my analysis indicated an upside potential of 350%; because there was limited analyst coverage, I was able to build a significant position and wait for the results to materialize.

BZ: What is the cheapest company on the stock market today?

Read more

I’ve noticed that more and more Brazilians are looking for investment opportunities abroad. This is a very healthy trend, since we’ve long been told not to put all our eggs in one basket—although lately, diversification itself has become more challenging. The track record of investing in the Brazilian stock market has been disappointing, with erratic returns over the past few decades. And since the goal isn’t to trade in and out quickly, it’s only natural for these investors to feel hesitant about expanding internationally.

If you’ve followed me for more than 15 years and have developed some confidence in technical analysis, simply compare the charts of the U.S. and Brazilian stock markets. You’ll notice that the U.S. market has maintained a long-term uptrend, while the Brazilian market has been largely cyclical.

I remember making this decision back in 1999, while working at Deutsche Bank. I was struck by how concentrated the Brazilian market was in just a handful of stocks, and I asked myself: why should I limit myself when there are thousands of investment opportunities abroad? That realization started my learning process, and 25 years later I remain convinced that international diversification is an essential component of any well-built portfolio.

But how should investors approach this process? By studying and analyzing the past—and, of course, by reading Mosca. Today I’m bringing you a long-term study produced by managers at Tamarisk Capital Management and Quoin Capital Analytics that sheds important light on a risk that most investors moving overseas prefer not to confront directly.

The study draws on 155 years of data compiled by Robert Shiller, the Yale economist who won the Nobel Prize in part for building this dataset. Its conclusion is uncomfortable: since 1871, roughly 35% of U.S. stock market history has consisted of “lost decades”—periods lasting between 13 and 25 years during which a buy-and-hold investor earned no real return. There have been three such episodes: 1929–1954: 25 years, with a maximum real drawdown of 77%; 1966–1982: 16 years, marked by the inflationary shock of the era; 2000–2013: 13 years, spanning both the dot-com crash and the 2008 financial crisis.

This challenges the familiar mantra that “stocks always pay off in the long run,” which underpins much of the stocks for the long run philosophy taught in personal finance books. The historical average real return of 7.1% per year is indeed real—but it conceals a crucial detail: across the full historical record, 16% of all rolling 20-year periods delivered less than 3% annually in real terms. In other words, there has historically been about a one-in-six chance that two entire decades of an investor’s accumulation phase would generate essentially no meaningful return.

The reason I bring this up alongside the case for international diversification is the valuation measure used by the study to assess today’s risk environment: the CAPE ratio (Cyclically Adjusted Price-to-Earnings ratio), developed by Shiller himself.

Since 1881, the CAPE’s historical average has been 17.7. Today, the U.S. CAPE stands at 39.9, placing it in the 99th percentile of the entire historical series, exceeded only by the peak in March 2000—the very moment that preceded the last lost decade.

I’m not saying the U.S. stock market is about to repeat 2000. But the study makes an important point: valuation isn’t useful for predicting when markets will fall; it’s useful for assessing how fertile the ground is for a major decline, if and when it occurs.

The international comparison reinforces this point. Japan’s Nikkei Index peaked in December 1989 at nearly 39,000 points and only returned to that level sustainably in 2024—35 years later. The Euro Stoxx 50 peaked in March 2000 and didn’t recover that level until late 2025, representing 25 years of nominal stagnation for buy-and-hold investors. Of the four major developed-market blocs, three experienced generational lost decades beginning around the end of the 1990s. Only the United States has escaped that fate—so far.

The study also makes a technical argument worth highlighting because it dismantles one of the most common myths promoted by advocates of “stay invested at all costs”: the idea of the market’s “best days.” Conventional wisdom says that missing just the ten best trading days over several decades would cut total returns roughly in half, and therefore investors should never reduce their market exposure. But the data tells a different story. Ninety percent of the twenty best trading days in the S&P 500 since 1988 occurred while the index was trading below its 200-day moving average—in other words, during bear markets, not bull markets. The best days and the worst days are born together, during the same periods of market stress. You don’t get one without the other. A disciplined defensive strategy that avoids the market’s worst days will, by definition, also miss many of its best days. Yet over complete market cycles, the mathematics suggests that disciplined risk management tends to reward investors who actively manage downside risk.

That brings us to the natural question raised by all this evidence: how can you remain invested for the long term without falling into the trap of enduring entire decades with no returns? This is precisely where technical analysis comes in—not as a crystal ball, but as a disciplined framework for reading risk.

Those who have followed me for a long time have probably noticed that there are periods when I appear more relaxed, allowing wider stop losses, and others when I work with much tighter stops. The reason lies in the Elliott Wave currently unfolding. Third waves—the strongest and most extended phases of a trend—allow for greater flexibility because the underlying trend tends to assert itself powerfully. Fifth waves, however, are terminal by nature and demand extra caution because momentum begins to fade and reversals can develop quickly. During corrective phases, I become even more conservative and rarely recommend trades because corrections are precisely when markets tend to generate the most false signals.

For long-term portfolio management, however, what matters isn’t timing each individual wave but recognizing structural trend changes. When the market undergoes a genuine change in direction, it’s time to reduce exposure. I combine technical analysis with fundamentals—in that order, not the other way around—which allows me to adjust my equity allocation within a predefined risk range. I realize that may sound theoretical, but only experience and discipline can ultimately build a portfolio that’s properly aligned with your own risk tolerance.

For those who don’t identify with this approach, here’s a simple rule: Set a stop-loss threshold for your overall portfolio—something between a 10% and 20% decline. If that threshold is reached, reduce your position by somewhere between 25% and 75%—never liquidate everything. The difficult part isn’t getting out. The difficult part is knowing when to get back in. And that’s exactly where technical analysis earns its keep. None of this is a reason to retreat from international investing—quite the opposite. I’ve advocated international diversification for the past 25 years, and I continue to do so.

But diversifying internationally doesn’t mean buying an index fund and forgetting about it. It means recognizing that even the strongest long-term uptrend in financial history contains the structural risk of prolonged periods of stagnation—and understanding that reality in time is what separates investors who preserve capital from those who merely accumulate good luck.

For readers just beginning this journey: parts of the study use fairly technical language. Don’t hesitate to use your favorite AI application to translate concepts such as CAPE, drawdown, and market breadth into plain English. That’s simply part of learning this new discipline.

Technical Analysis

In my post titled “The Proof of Eighteen,” I wrote the following about the IBOVESPA:

“It appears that a triangle may be forming, as highlighted by the red parabola below. If that’s the case, further declines should occur before any meaningful correction. Only a move above 175,000 would invalidate this scenario, in which case a red Wave B may already be underway.”

I still can’t take a more definitive stance. What I can say is that the market remains in a corrective phase, contained within the red ellipse. In situations like this, I look for additional clues by analyzing shorter time frames, as shown below. The possibilities are:

1. The red Wave B is underway, which would carry the index toward 187,500 (+10%) or 192,900 (+12%); or

2. The red Wave A has not yet finished, meaning further declines below 168,000 remain possible.

   

I consider the first scenario more likely for the following reason: We can clearly identify a five-wave decline that began in April and totaled roughly 20%. For that reason, I will wait for a breakout above the level marked by the red symbol at 174,200. Stay alert.

The S&P 500 closed at 7,483, down 0.22%; USD/BRL closed at R$5.2241, up 0.90%; EUR/USD ended at 1.1378, down 0.38%; and gold closed at US$4,035, up 0.70%.

Stay tuned!

Original Post: Click Here

This is not an investment recommendation.

About the Author of this Post: David Gotlib has 45 years of experience in investment management. An engineer from Polytechnic School of the University of São Paulo, he was one of the founders of the first Brazilian hedge fund in 1993 (AUM US$ 1 billion). Later, he was Managing Director of Deutsche Bank Asset Management (AUM R$ 2.2 billion) until the company was sold to Bradesco. He is currently the manager of his own investment portfolio and the author of the blog Acertar na Mosca, where, since 2011, he has shared his thoughts on the global economy and the financial market on a daily basis.

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Chapter 1

Remembering: The Children on Charlie

One of the most fascinating aspects of Poor Charlie’s Almanack is that it does not present Charlie Munger solely through his speeches or investment philosophy. In the section “Remembering: The Children on Charlie,” the reader discovers the man behind the legendary investor through the eyes of those who knew him best—his children. Their stories reveal that the principles that made Munger one of the greatest investors of all time were the very same principles he practiced every day at home. Integrity, responsibility, discipline, independent thinking, and continuous learning were not theories he preached to shareholders; they were values he lived consistently.

The section opens with a story from Charles T. Munger Jr., who recalls a family ski trip during his teenage years. While driving home, Charlie unexpectedly stopped to fill the gas tank of a borrowed Jeep, even though it was still half full. Curious, his son asked why they were stopping when they had plenty of fuel. Charlie replied with a lesson his son would never forget: “When you borrow a man’s car, you always return it with a full tank of gas.” Years later, after borrowing a friend’s car at Stanford University, Charles Jr. remembered the lesson and returned the vehicle with a full tank. The owner noticed the gesture, their friendship deepened, and that same friend eventually became one of the groomsmen at his wedding. Only later did Charles discover that the Jeep they had borrowed belonged to Rick Guerin, one of Charlie’s closest friends, who probably would never have cared whether the tank was full or not. That, however, was irrelevant. Charlie believed fairness should never depend on whether someone notices. Integrity meant doing the right thing because it is right, not because it is expected.

This small anecdote illustrates a recurring theme throughout the section: Charlie Munger believed that character compounds just as investments do. Tiny acts of honesty and generosity, repeated over decades, create extraordinary relationships and reputations. In investing, reputation is one of the most valuable assets anyone can own. Munger understood that trust is built one small action at a time.

His daughter Wendy Munger describes another dimension of Charlie’s personality: the family dinner table was his classroom. Rather than lecturing abstractly about ethics, he taught through stories. He often told what she calls “Morality Tales,” where someone faced an ethical dilemma and chose the honorable path. Even more memorable were his “Downward Spiral Tales,” elaborate stories in which someone made a seemingly small dishonest decision that eventually led to catastrophic personal and professional consequences. Charlie had a remarkable talent for describing how bad decisions compound over time until they destroy careers, families, and lives. His children often found themselves laughing at the exaggerated scenarios while simultaneously absorbing lessons they would remember forever.

One story particularly impressed Wendy. Charlie described a chief financial officer who accidentally caused his company to lose hundreds of thousands of dollars. Instead of hiding the mistake, the executive immediately informed the company president. The president responded that while the mistake itself was serious, it could be forgiven because mistakes are inevitable. What would not have been forgiven was an attempt to conceal it. The executive kept his job because he chose honesty over self-protection. Through this story, Charlie taught his children that integrity is tested precisely when admitting the truth is uncomfortable. Investors can draw a direct lesson from this philosophy. Successful investing depends not on never making mistakes but on recognizing them quickly, admitting them honestly, and correcting them before they become disasters.

William “Hal” Borthwick, Charlie’s stepson, remembers growing up in Minnesota, where Charlie taught responsibility through experience rather than speeches. One day Hal forgot to buy Charlie’s daily newspaper while making an errand during a violent storm. Charlie’s response was immediate: go back and get it, despite the terrible weather. The lesson was simple—do the job right the first time. On another occasion, Hal lost the only set of car keys while sailing with friends. Charlie instructed him to keep diving into the cold lake until the keys were found. After hours of searching, Hal finally recovered them. These experiences taught responsibility in a way no lecture ever could. Once someone experiences the cost of carelessness firsthand, the lesson is rarely forgotten.

Hal also recalls that these summers represented much of the time he spent with Charlie because his stepfather worked relentlessly. Charlie left home before dawn, returned around dinner, and then spent hours reading Standard & Poor’s reports or discussing investments with Warren Buffett over the telephone. Even after long workdays, intellectual effort continued. Learning was never something Charlie finished; it was simply his way of living.

David Borthwick remembers his father’s relentless pursuit of improvement through deliberate practice. At the family lake house, Charlie installed a tennis ball machine. Rather than practicing spectacular winners, he spent countless hours perfecting the simple volleys near the net—the easy shots that most players neglected. Charlie recognized that mastering overlooked fundamentals creates lasting competitive advantages. His son notes that, just as golfers win tournaments through an excellent short game, Charlie focused on the unglamorous skills that produced consistent results. This philosophy mirrors his investment approach: instead of searching for brilliant shortcuts, he mastered basic principles and executed them better than almost everyone else.

David also paints a vivid picture of Charlie’s extraordinary concentration. Whether studying stock listings, architectural drawings, or biographies of economists like John Maynard Keynes, Charlie became completely absorbed in his work. Family conversations, noisy children, and even television seemed to disappear from his awareness. His ability to block distractions was legendary within the family. Looking back, David believes this capacity for sustained focus explains as much of Charlie’s success as his intelligence. Great investing requires long periods of uninterrupted thinking, and Charlie cultivated exactly that skill.

Molly Munger offers perhaps the clearest glimpse into Charlie’s influence on independent thinking. While attending college during the politically turbulent 1960s, many students became swept up in protests and ideological movements. Molly, however, carried copies of The Wall Street Journal and Fortune magazine to economics classes. Charlie had taught his children to question fashionable opinions, avoid groupthink, and evaluate ideas based on evidence rather than popularity. At home, he frequently told humorous stories about people who blindly followed crowds or reacted emotionally to events. His consistent message was that both conformity and reflexive rebellion are dangerous. Sound judgment requires independent thought.

Molly also remembers Charlie creating physical experiences that reinforced these lessons. During summers in Minnesota, he had a large wooden aquaplane built for the children to ride behind a boat. He deliberately made sharp turns, forcing them to constantly shift their balance or fall into the water. The exercise became a metaphor for life: remaining balanced requires continuous adjustment rather than rigid commitment to one direction. For investors, the lesson is equally valuable. Markets change, economies evolve, and new information emerges. Success depends on maintaining intellectual balance without becoming captive to extreme opinions.

Perhaps the most striking insight from this collection of family memories is how little separation existed between Charlie Munger the investor and Charlie Munger the father. His investment philosophy was simply an extension of his character. Patience, honesty, discipline, responsibility, fairness, rationality, and lifelong learning were not tools reserved for financial markets—they governed every aspect of his daily life.

For investors, these stories offer an important reminder. Financial success rarely comes from superior stock-picking alone. It grows from habits that compound over decades: telling the truth, accepting responsibility, honoring commitments, thinking independently, practicing continuously, and protecting one’s reputation above all else. Charlie Munger understood that investing is ultimately a reflection of character. Build the right character, and sound investment decisions become far more likely.

The greatest lesson from “Remembering: The Children on Charlie” is therefore not about finance but about the kind of person capable of becoming an extraordinary investor. Behind Charlie Munger’s remarkable investment record stood a man who practiced every day the same values he recommended to others. His children’s memories reveal that his greatest legacy may not simply be Berkshire Hathaway or his investment returns, but the timeless principles of integrity, responsibility, curiosity, and rational thinking that continue to inspire investors around the world.

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The “rule of nine” is an old arithmetic check—a quick way to verify whether a calculation is correct. When I say the dollar has passed the “rule of eighteen,” it is not modesty: I mean it has been tested twice over, under the widest variety of pressures, and emerged intact from all of them. JP Morgan’s special June 2026 report—prepared by Michael Cembalest to mark the 250th anniversary of the American Declaration of Independence—offers the most complete analysis of the subject I have ever seen. And the data from Yardeni Research, published this week, completes the picture with a level of precision that leaves little room for dispute.

In recent years, narratives about the end of the dollar as the world’s reserve currency have proliferated. The argument has emotional and political appeal: enormous fiscal deficits, public debt rising from 60% to 125% of GDP over twenty years, and cascading sanctions against governments and companies around the world. According to the more apocalyptic commentators, all of this is eroding global confidence in the U.S. currency and laying the groundwork for its replacement. I have always disagreed. And Cembalest’s data confirms that position.

JP Morgan tracks six indicators of the dollar’s reserve-currency status: its share of cross-border lending, international debt securities, foreign-exchange transaction volume, official central-bank reserves, export invoicing, and payments through the international transfer system. In all six, the dollar remains dominant. Its share of global reserves fell by 3 percentage points since 2020—but that decline was entirely absorbed by the category of “other currencies,” which includes the Singapore dollar, Swedish krona, Norwegian krone, and similar currencies. The euro, yen, pound sterling, and Chinese renminbi all lost share during the same period. The dollar ceded ground to smaller currencies, not to a serious rival.

The argument regarding gold also deserves demystification. Gold’s share of central-bank reserves rose from 11% in 2009 to 29% in March 2026, which may appear to suggest a flight from the dollar. That is not what the data shows. Almost all of that increase is a price effect: gold appreciated sharply, and its share increased due to valuation gains, not additional purchases. If the physical allocations of 2009 had remained constant and were simply revalued at today’s prices, gold’s share would be 26%—close to the current 29%. If gold’s price were frozen at its 2009 level, its share would fall to 8%. The market is confusing a rise in price with a change in global monetary policy.

As for China as a replacement candidate, the analysis is straightforward: the idea is unrealistic under current conditions. China has built an unprecedented monetary expansion—domestic banking assets have reached 50% of global GDP. For the renminbi to function as a reserve currency, China would need to open its capital account. But if it did so, capital outflows could become so intense that they might undermine the renminbi and trigger a collapse in property and stock markets. Not surprisingly, China maintains strict controls on transfers—and despite that, it still recorded record outflows of between $800 billion and $1 trillion in 2025. A reserve currency and a closed capital account are fundamentally incompatible.

A detail revealed by The Wall Street Journal this week completes the picture: in practice, the yuan functions more as a sanctions-evasion currency than as a reserve currency. Iran received billions of dollars’ worth of oil payments in renminbi, but the money remains trapped within China’s financial system, lacking global liquidity. Hengli Petrochemical, a refinery sanctioned by the United States, announced it would settle purchases in yuan specifically to make U.S. tracking more difficult. The renminbi operates within a closed circuit controlled by Beijing, accessible only to those willing to accept China’s rules. It is not an alternative to the dollar—it is a workaround designed to circumvent it.

The “sell America” narrative has also shown its limits. In March 2025, a series of executive orders by the Trump administration triggered the first such episode since 1982: simultaneous declines in equities, the dollar, and Treasury securities, accompanied by rising long-term interest rates. It looked like a structural break. It was not. Since then, the dollar has fallen only 1% on a trade-weighted basis, U.S. 10-year yields have risen by just 10 basis points—compared with 70 basis points in the rest of the developed world—and U.S. stock markets have significantly outperformed their foreign counterparts.

Yardeni Research’s figures leave little doubt about what foreign investors are actually doing. Net foreign inflows into U.S. equities reached a record $883.9 billion in the twelve months through April 2026. Including fixed income—Treasuries and corporate bonds—the total reached $1.4 trillion over the same period. Nothing comparable has been seen in any previous cycle. Foreign investors are buying American assets at a record pace, not selling them as the doomsayers repeatedly predicted.

And why are they buying? The answer lies in what Yardeni calls FEMO—Fantastic Earnings Momentum—as opposed to FOMO, the fear-driven speculative frenzy. In a FOMO-driven market, valuation multiples expand because investors chase promises rather than fundamentals. In a FEMO-driven market, the opposite occurs: earnings grow faster than stock prices, compressing valuation multiples, and analysts revise forecasts upward because results justify doing so. Today’s U.S. market clearly belongs to the second category. Projected S&P 500 earnings grew 31% over the twelve months through June, while coincident economic indicators rose only 0.8% during the same period. Technological innovation is expanding corporate profit margins at a pace that the real economy has not yet fully absorbed.

There is another frequently misunderstood argument: China’s size. It is true that China’s economy now exceeds that of the United States in real terms. But size alone has never been sufficient to confer reserve-currency status. When the dollar replaced the pound sterling, the U.S. economy was 3.5 to 5 times larger than Britain’s—and even then, the transition took decades. What defines a reserve currency goes beyond GDP: market depth, liquidity, clarity of default mechanisms, legal certainty in contracts, and protection of property rights. None of these attributes is fully available within China’s financial system.

Another factor has entered the equation in recent weeks: Kevin Warsh’s arrival at the Federal Reserve. The new chairman’s hawkish stance—declaring price stability his absolute priority and ruling out any premature easing—has actively undermined the “debasement trade,” the bet that the dollar would be weakened by excessive U.S. fiscal and monetary expansion. Gold and crypto assets, which had benefited from that narrative, retreated. The market has begun pricing in two rate hikes by the first quarter of 2027. Not only is the dollar holding up structurally—the wind has shifted, and those betting against it are being forced to unwind their positions.

Those who predicted the dollar’s decline will have to wait longer—much longer. JP Morgan’s data shows the stability of the six structural indicators underpinning reserve-currency status. Yardeni’s data shows that foreign capital continues to flow into the United States in record volumes, attracted by corporate earnings growth unmatched elsewhere in the world. This is not blind faith in America. It is a rational response to fundamentals that remain superior.

It did not matter. The dollar took punches from everyone, weathered dozens of crises, and still emerged stronger.

Technical Analysis

In the post “What Kind of Luck Does an Investor Need?”, I made the following comments about the IBOVESPA:

I would like to propose something I do not usually do: buy the Ibovespa. The rationale for the purchase was based on three observations: the decline of the orange wave A had reached interesting levels; I could identify five waves on the one-hour chart; and, most importantly, the entry offered an excellent risk-reward ratio.

So far, for those who decided to buy the Ibovespa, nothing has happened—it has neither risen nor fallen significantly. However, observing recent price action, it appears that a triangle may be forming, as highlighted by the red parabola below. If that is the case, further declines should occur before any meaningful correction. Only a move above 175,000 would invalidate this scenario and suggest that a red wave B may already be underway. Under those circumstances, I would rather stay out of the market and remain an observer. After all, it may be wiser to save our energy for football, which will need plenty of support to avoid being knocked out of the Club World Cup.

The S&P 500 closed at 7,358, unchanged; the USD/BRL exchange rate closed at R$5.2154, up 0.33%; EUR/USD closed at 1.1353, down 0.41%; and gold closed at US$3,989, down 2.92%.

Stay tuned!

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This is not an investment recommendation.

About the Author of this Post: David Gotlib has 45 years of experience in investment management. An engineer from Polytechnic School of the University of São Paulo, he was one of the founders of the first Brazilian hedge fund in 1993 (AUM US$ 1 billion). Later, he was Managing Director of Deutsche Bank Asset Management (AUM R$ 2.2 billion) until the company was sold to Bradesco. He is currently the manager of his own investment portfolio and the author of the blog Acertar na Mosca, where, since 2011, he has shared his thoughts on the global economy and the financial market on a daily basis.