Rondonomics

During the past few years, as investors have searched for yield, private equity provided attractive returns in exchange for illiquidity risk. Regulations stifling Sales & Trading at big banks, combined with passive investing outperforming active has driven talented young financiers into the private equity field in search of riches. Despite the recent financial deregulation push from the Trump administration – during the 2016 election it seemed both candidates agreed on getting  rid   of  the “carried interest loophole” – the holy grail for private equity investors. Is this a threat to the private equity industry?   The current carried interest tax rate is the same as the capital gains tax rate of 20% (was 15% throughout the 2000s as part of the George W. Bush tax cuts and was increased by 5% in 2013 as part of a broader deal to raise the US debt ceiling) Theory for carried interest:  Same as theory for a lower tax on capital gains: In ex...

Allegations abound that Brazil’s president, Michael Temer, has been caught on tape encouraging the payment of “hush money” to Eduardo Cunha. The former congressman is currently serving a 15 year jail sentence for his role in the Petrobas scandal. Prospects for much needed fiscal reforms have been thrown into a cloud of uncertainty. The BRL and Brazilian rates sold off sharply while Brazilian equities plummeted. Predicting the legal implications of Brazil’s latest political scandal may be impossible. Investors have been given yet another reason to wash their hands of the once great star of the EM complex. They see a country roiled by corruption, anemic growth, unsustainable public debt, and a rigid labor market. Yet below surface level, there are reasons to be optimistic of the nation’s future. Corrupt politicians being brought to justice is a testament to the strength of rule of law. Inflation is finally below the central bank’s target of 4.5% and wage growth is picking...