Brainstorm Bolsa até Fim do Ano - Comentário Mensal Out / Nov - 2024

Music Hey everyone, my name is João Luiz Braga, I'm an analyst here at Encore, and I'm recording the October/November video, today is November 21st, it's exactly 7:25 PM. So, last month we talked a lot about the extremely favorable external scenario for investing in emerging markets. And that our problems were basically domestic problems.

Well, very little has changed since then. Especially in the external scenario. In the domestic scenario, things have become even more evident.

So we're going to focus on that in this video. But first, as always, a little accountability. Since last month's video, we are looking a little worse, actually, the IBOV.

. . also worsened a little.

We were up 9% year-to-date in the Long Bias, and we had this drop along with the market, unfortunately, but we are still above the IBOV. We are sad to have given back some of the gains. As of today's opening, November 21st, after the holiday, the Encore Long Bias was slightly up, slightly above zero, slightly positive year-to-date, compared to the IBOV, which is down about 4.

5%, and the SMLL, the small cap index, which is down more than 15%. So we are still generating alpha. And in the Encore Long Only, we are also above the index, but just slightly, down around 4%, slightly better than the IBOV's 4.

5%. The Encore LB Prev 100 is the best performer, up about 1%. Anyway, relatively speaking, it's not bad.

But we are talking relatively. As we joke around here, relative performance doesn't pay the bills. So we will work to improve that.

But anyway, going back to the scenario, we. . .

I was thinking about what I was going to bring you all here, and. . .

There are things to discuss and such, but I thought, "I know, I'll do an exercise. " A simple exercise, which is the following: Many people say, "Braga, what's the trigger that will make the market go up? " This is the kind of question I don't like, because we have to believe in some level of market efficiency, and I don't think the market is efficient, maybe some level of efficiency exists, so if there were some trigger to make the market go up, the market would go up.

We wouldn't be here if we knew what that trigger would be. The market wouldn't be so cheap. But still, I stopped to think about what could happen.

The proposal is basically a very simple, internal brainstorming session. It’s basically a brainstorming, super simple, internal. Then I called some people from outside, like Dan Rubin and Ferreirinha from XP.

Shout out to them. A hug to them. Rubinho Alves from Morgan Stanley.

A hug to him too. And a few others. And everyone here at Encore.

And the exercise is super simple, which is: Reasons for the market to go up from here to the end of the year, and reasons for the market to go down from here to the end of the year. As simple as that. Brainstorming, meaning there are no bad ideas.

Then I filtered it a bit here, and I received a lot of input. And I'll show you a little bit of the results of this exercise. And at the end of the video, we'll talk a little bit about portfolio changes, as I always do.

Let's go. So, to start, like when someone asks you, "I have good news and bad news for you. Which one do you want first?

" You start with the bad news to end with the good news. So let's start with the reasons for the market to fall between now and the end of the year. Let's go.

The first reason, which I think is even the most important one, is Haddad's fiscal package. If it comes out bad, or if it doesn't come out at all, let's face it, there is that possibility. The market is tired.

I'm not just talking about the package, but since the beginning of the government, proposal after proposal, idea after idea, and nothing gets done. I'm not going to dwell too much on this topic here. The market's joke in recent weeks has become: "Haddad's package will be announced next week.

" "Next week it will be announced," that's why I put this meme here. But I also put… I also brought this episode It was spectacular, it turned out great from Market Makers, by my friend Thiago Salomão, which was really, really good. He invited another great friend of mine to present with him, Valtinho, Walter Maciel from Quest.

A hug to Waltinho too. And they interviewed Marcos Lisboa, Marcos Mendes and Alexandre Manoel, who is from Quest, and Samuel Pessoa to diagnose the annual situation, The whole episode. .

. of the current situation, sorry. The whole episode is a lesson.

But there's a specific moment, I'll put the link here in the description if I remember, where Marcos Mendes pulls up a list that journalists Adriana Fernandes and Diana Tomazelli from Folha made with all of Haddad's promises from the beginning. And Marcos Mendes adds what he said that was delivered or not, in this case not. And this section of just over two minutes explains brilliantly why the market is tired of so many promises.

And the market doesn't go up anymore when Haddad says, "There will be a package. " On the contrary, the market drops. Because people are really tired of many promises and nothing getting done.

And this package has been [delayed for] weeks. It's been weeks. In this video, I should be talking about what was released a long time ago, but this fact that it keeps being delayed, "Oh, after this," "After that," "Now after the G20…" This delay, this "next week" joke, clearly shows the very low commitment of this government to this fiscal agenda, which is terrible.

So if it continues to be delayed, as I said, this is a reason for the market to continue falling between now and the end of the year. And if something very bad comes out, or if nothing comes out at all, it's terrible. So that's the first reason.

Let's go to the second. Can I fit in the screen? I think so.

Which is upward revisions of inflation for 2025. People keep revising upwards. I think this is a fact.

This will keep happening. This week Itaú and BTG revised upwards. Every Monday, when the Focus report comes out, the numbers have been going up, so I think this is pretty much a fact.

Itaú, look here, Itaú's revision was pretty bad. IPCA for next year from 4. 2 to 5, with less growth.

They revised GDP from 2 to 1. 8, and with the Selic rate at the end of the period from 11 to 13. 5, which is pretty high.

And here, BTG, I'm only looking at the last column, which is the primary surplus, but what matters is the revision of IPCA here from 4. 20 to 4. 80 as well.

So, people have been revising, yes, inflation numbers upwards, which is quite annoying. And, obviously, a consequence of the fiscal [situation], all that I don't need to explain here now. Third reason for the market to fall between now and the end of the year.

This one, I don't know if it's such a good reason, but it came up in the brainstorming, so I'll bring it up: COPOM accelerating the cut, the cut… the cut to a hike, the interest rate hike in December to 75 basis points. It was coming in at 50, and accelerating to 75. I personally think, I don't think this is a bad argument.

I think what is really bad is if it needs to accelerate, you know, and not do it [hike rates], for whatever reason, and usually these reasons are political, right? And another reason that I don't even think is so bad, if it accelerates to 75, is that it's kind of already in the market. already priced in.

These are the estimates that are in the future interest rate curve today, broken down by COPOM meetings. And that's it. The expectation is already almost 75 for the next one, and more closer to 75 than to 50 for the one after.

And another thing that caught my attention here that I wanted to show you is that the market is already pricing in a terminal rate close to 14. This is today. I took this screenshot just now.

I saw this print a few days ago, and it was above 14. So it's improved a little today, but it's impressive. It was trading above 14%, which is a lot for a terminal rate.

So that's the third reason for the market to fall. Fourth reason for the market to fall: The FOMC, the Fed, the Federal Reserve, has finally begun its interest rate cutting cycle. Something I've said a million times in these videos here in recent months, or even years, is that interest rate cuts there are excellent for emerging markets.

But the truth is that in the last two months, more or less since the Fed started its cutting cycle, actually, more or less exactly when the Fed started its cutting cycle on September 18th, I won't forget, I won't forget, and since then all the data that has come out about the American economy has been very strong, indicating a strong economy. And in the last FOMC, Powell kind of indicated that there might be pauses along the way. The market thought it was hawkish, I think, I always have difficulty translating "hawkish" from what I hear, but hawkish in the sense of more austere, higher interest rates there, or less downward movement.

more austere, interest rates higher there, or less downward movement. The fact is that if it pauses now in December, in the next one, I think emerging markets will fall. emerging markets will fall.

Part of this possible pause has already been priced in, this is more or less the same table I showed you earlier, but for interest rates there, and you can see that for the next meeting, what the market indicates today is a 56% chance of a cut. 55. 9%, or 44% for no cut.

So there's a reasonable chance [of a pause] already priced in. But I'm personally still worried. If they don't cut, I'll think it's bad.

Remembering that I said this in last month's video, when I talked about the positive global scenario for emerging markets. But, just as a reminder, I still prefer a scenario with fewer cuts in the United States, but without the risk of a recession, which is what we are experiencing now, than a scenario with more cuts, but a greater risk of recession there. Because, after all, if there's a risk of recession there, no one will invest in emerging markets.

So that would be pretty bad. But if they don't cut in December because the economy is strong, that's bad. So, that's the fourth reason.

Fifth reason for the market to fall between now and the end of the year. For this one, I'll have to go off-screen. I don't know if I need to go off-screen, but let's go.

Which is a strong dollar, which has been quite strong in recent months, with the DXY, the Dollar Index, at its year highs. This reduces the attractiveness of emerging markets. This came up in some topics in this brainstorming I did.

I kind of put them all together here. And there's also the matter of Trump suggesting tariffs on China, and China possibly, in reaction, devaluing its own currency, which also means a strong dollar. This chart on the left shows that around the end of September, when Trump started to improve considerably in the polls, the market started pricing in a strong dollar.

The Dollar Index, this DXY here, this is very much against the yen, against the euro. It's only against developed [currencies], but if you look here at emerging markets, I took it from the beginning of the year just to make my life easier here, it also shows a strong dollar. The worst performing currency is our real, unfortunately.

But it also shows a very strong dollar against the Mexican peso, which was the darling until last year, with the nearshoring story, of everyone moving there and such. This, in the case of Mexico, also indicates their own political problems, as they made a rather strange choice there, but it certainly also indicates an issue with Trump possibly being bad for Mexico. So, if the dollar continues to strengthen, as it has been non-stop here, almost in a straight line, if this continues, I think it's a reason for the market to underperform between now and the end of the year.

Another reason, also, a little less weak… A little less weak… a little weaker, is that there's a negative seasonality for oil at the end of the year. And this obviously affects Petrobras. If you look here, whoever made this chart.

. . By the way, don't ask me why there is this bad seasonality in December, maybe Isabel Safioti, our commodities analyst, knows.

She'll tell me later, and I'll tell you all. But it's a historical fact, this is her table, and it's very clear, here in the average of this century, that at the end of the year you have bad seasonality. And it affects Petrobras.

On the other hand, there's a counter-argument here, which is that we even have oil positions in Prio, in PetroRio, that oil offers some protection against geopolitical worsening. We've been hearing things about Ukraine recently. So, there's this bad side of seasonality, but, on the other hand, there's protection against geopolitics.

To finish up, a few less important reasons that I'll mention all at once. Seventh, foreign outflow driven by another emerging market having a better moment. This came up.

I understand why this came up because there is the story of the stimulus for China. So many people think, "If money goes to China, that's bad for us because the flow goes there. " I disagree with this argument.

I'm bringing it up because it's an exercise, but I strongly disagree, because I think that anything that trickles into emerging markets. . .

if it rains in China, it splashes on us here. And it takes very little, a little trickle here in Brazil to move prices a lot. Anyway, I don't even agree with this argument that much.

Eighth, anything our dear president says between now and the end of the year would certainly make the market fall. I find it hard to believe he'll say anything that will make the market go up. It wouldn't be the first time, not in his term, not this year, not this month.

Ninth, point nine. There's been a flurry of downgrades on Brazil recently. It was in the last two weeks.

On companies, like, for example, Morgan Stanley or Goldman, that was just two days ago. This came up here as a reason for a fall, because if downgrades continue, it's bad for the country, and so on. I also think this is a very weak argument.

First, because there have already been a lot of downgrades. And then it's a bit like Tiririca's saying, "Worse than it is, it can't get. " If you already have an underweight, the most you can revise is up.

But I also think this will move prices that much. So, anyway, I don't think it's such a strong argument. Another argument that came up, which I found curious, and I decided to include, is Haddad not being able to deliver, because Haddad is trying, he’s fighting the good fight.

Just today, news came out with Rui Costa saying that the cuts will be smaller, and that health and education won't be affected. Anyway, if health and education won't be affected. Anyway, if at some point Haddad, in colloquial terms, gets fed up, throws in the towel and resigns because he can't do what he wants, I think the market will plummet, okay?

Who would have thought, right? Two years ago, when Haddad was chosen, the market was a little skeptical. Nowadays, I think nobody wants him to leave because there's great uncertainty about who would come in and all that, and it shows that who would replace him and all that, and it shows that he really is trying to fight for some austerity.

If he, who is favored within the government, can’t do it, it would be terrible. But I think the chance is low. Roberto Reis, a guy I like on Twitter, who does a lot of political analysis, says that the greater chance is that Haddad won't make the adjustment and will stay out of loyalty.

I agree with that. Shout-out to Roberto. And the last point here is kind of silly, but if there continue to be redemptions by local investors or foreign outflow… Redemptions from local investors, we are seeing here some investment in retail, it’s little, every day, but it's still there.

Today we had a small redemption, but we have seen… when I talk to my friends, it seems that the wave of redemptions has improved. So it's stabilized. And from foreigners, actually, I brought this chart here, it's pretty bad, a very small index, but the net foreign flow is this orange line that was falling, falling, falling, falling here until the middle of the year, then it went up and, I don't know, since August, it's been pretty much flat with a net year-to-date flow of more or less BRL 22, 23 billion, which is almost nothing in dollars sold.

So it's kind of flat. I don't know, could it get worse? Obviously, it could, but it's been about 2, 3 months that it’s been flat.

Well, these are all the reasons that came up. Actually, several others also came up, but these are the ones I selected for our exercise of why the market should fall between now and the end of the year. And go up.

Just so you know, I made all these images using Grok, artificial intelligence, very cool. Even I'm able to use it. So, making the presentation a bit prettier.

Let’s go. Reasons for the market to go up from now until the end of the year. The first one is even silly.

It's the opposite of the first reason to fall, which is, if something reasonable or good comes out in the package… And why this is one of the main triggers… I put Haddad playing "Blackbird" on the guitar from my favorite band, the Beatles, everyone knows. Well, first, why this is one of the main triggers is because market expectations for the package, I joke that they are lower than a snake's belly. Nobody has any expectations, none, none and so much so that when news comes out, it doesn't go up, and when no news comes out, it falls.

When news comes out, it doesn't go up, and when no news comes out, it falls. So, in terms of price, I would say that expectations are really, really low. But the main reason why I think a reasonable package, it doesn't even need to be that good, would be a great trigger is a little different.

It's the following: We are clearly seeing a scenario that I call "Winds of Change. " Remember that Scorpions song, "Winds of Change"? Which is a wind of something more centrist, more to the right, and all over the world.

I don't even need to mention Trump. But even here in Brazil, this was very clear in the municipal elections. But of course, I can't use this argument with you all, because that's a long way off.

We're talking about the market going up until the end of the year. Tarcísio [de Freitas] isn't going to make the market go up until the end of the year. But anything that comes out of this government that gets us there has to be interpreted as very good news.

That's why I think this is the importance of the package. It's to do something that doesn't guarantee, because guaranteeing is very difficult, but that at least helps us get to the next election without a grotesque discouragement. So just that I would consider excellent and, for me, would make the market go up considerably.

Now, the chance of that happening is debatable. Second reason here, a special thanks to my friend Dan Rubin from XP, a hug Dan, who brought this argument that I liked, which is the fact that there are a lot of Dan Rubin from XP. A hug, Dan, who brought this argument that I liked, which is that there’s a lot of dividends being paid out.

Just a curiosity, I also made this image on Grok and it was hard to get an image of a currency that wasn’t Bitcoin. It's impressive how AIs have learned. You type in "falling currency" and it's Bitcoin.

You put in "currency falling", and it’s Bitcoin! No, man, I don't want Bitcoin. So, anyway, I managed to make this one.

But back to the argument, there are a lot of dividends hitting investors' accounts toward the end of the year. And these dividends tend to be reinvested, obviously, a large portion of them. And by Dan's calculations, there are already BRL 14 billion in confirmed dividends for the end of the year.

There are also the very likely ones, which, by his calculations, total almost BRL 20 billion. And there's Vale, which, if it goes ex-dividend, which it usually does between November and December, that's another BRL 30 billion. Just to give you an idea of what BRL 30 billion is, that's more than the entire net outflow from foreigners year-to-date.

It's quite significant. Besides that, if you consider the market's volume today, which is BRL 20-something billion a day, you'll say, "João, that's a day and a half of market trading, it's not that much. " No, because in these BRL 20-something billion that the market trades per day, a large part, I don't know how much, but I would argue that it's half or even more, is the little robots, the HFTs, that are constantly buying and selling, so it's not real volume.

So, assuming that, let's say, let's imagine that the real volume of the market is BRL 10 billion per day, that's 3 trading sessions of buying pressure coming from dividend payments. So, it's relevant. It is relevant.

Just a quick addition, it's now a little after 9:00 AM here on the 22nd. As soon as I finished recording the video yesterday, they announced Petrobras's dividend. So, regarding that second argument, that there are a lot of dividends coming in towards the end of the year, it got even better.

That calculation of BRL 14 billion confirmed, BRL 19. 7 billion confirmed, but very probable, and BRL 30 billion with Vale. This is dividends, just to be clear, for minority shareholders, which then becomes a buying force.

So it would be BRL 30 billion if announced by Vale, which hasn't been announced yet, with Petrobras's from yesterday, that goes to BRL 42 billion, so, I don't know, that's a good 5 trading sessions of real buying force coming, so the news that was good just got better. So, the news that was good got even better. Okay, so that's the second reason.

Third reason for the market to go up between now and the end of the year. I'll have to go off-screen for a bit, be right back. Oops, no, I did the opposite.

It's upward revisions of estimates given that earnings season, which literally ended yesterday, was good. Earnings season was very good. And so what happens?

Everyone thinks companies release their results and then, magically, stocks adjust on the first day, and that's it, life goes on. It's not quite like that. Because obviously there's the day's movement, which also has to do, often, not only with the results, but also with how the market is positioned for the results.

But after that, analysts will update their models. And like everyone, including my friends, my analysts here at Encore, everyone projects, when building a model in Excel, future growth in percentage terms. If it’s in percentage terms, the base changes the whole projection, because it keeps growing in percentage terms.

And this ends up creating potentially significant differences in everyone's valuations. It’s an effect I call "the black square syndrome. ” People take what's happening now in Excel, select the column, and there is that little black square that appears at the bottom, they click on it and project it forward.

So small variations cause big valuation changes because of that. And it was a good earnings season. This is data from Ferreirinha at XP.

It shows here, the light blue line are beats, when the company reported above expectations, you have much more light blue here than dark blue, which are misses, when it's worse than expected. And this has already been reflected, this effect has already been happening a little bit, which is in the EPS revisions of the companies, the earnings per share, here, the IBOV's earnings revisions have already started to happen a little bit on the margin here in recent weeks. Two weeks, considerably for '24, a little for '25.

This big drop, I know you are going to ask me what it is. I think it probably has a lot to do with Vale, with Petrobras, but anyway, it doesn’t matter so much. What matters is always from here on out.

Finally, I'll have to, I’ll have to go off-screen a little bit, which is this third chart here on the right. This is the following: You know we use a lot of technology here. So one of the things we do, I've already shown this chart, including in past videos, which is, we take and we use AI to analyze all the earnings analysis from my team here, from our analysts, Encore's analysts.

And the AI tells us, according to its interpretation of all the results we've analyzed, if the results were better, if the results were below expectations, in line, or above. Notice that "above" dropped considerably, but "below" also dropped and "in line" gained. So, our conclusion, looking at our earnings analysis, analysis, is that it wasn’t… this earnings season wasn't as good as the first and second quarters'.

Ferreirinha thought it was good. I thought it wasn't as good, but still good. Notice that the "above" level is still high compared to way back when, and "below" is low compared to way back when.

So even though low compared to before. So, even being an earnings season that wasn't as good as the last few quarters, I'd say that it was still a good earnings season. People will revise this over the coming weeks.

Reason for the market to go up between now and the end of the year. Fourth reason, this one I think is quite relevant. Very relevant.

It’s that sentiment, I don't even need to explain this much to you all, but sentiment is extremely pessimistic. And positioning, how people are positioned, is at a low. There are a million ways I can prove this to you.

Just go on Twitter and write that you're optimistic and you'll see how much flak you'll get, or just watch any interview with any macro manager in any media outlet. They will all paint a catastrophic scenario and badmouth the stock market. But there's another way, one that has method, has deadlines, has history.

What I really like to see is this XP survey. Basically every month they conduct it with the advisors in their base. They tell the advisors, "Hey guys, are your clients looking to increase"—that's the light blue bar here—"their stock holdings?

Not looking to change"—that's this bar—"or looking to decrease"—that’s this dark bar here. Notice that for "increase," we are at the lowest level since May 2023. The level of optimism, this is the lowest since May '23.

Now, here’s a fun fact for you: May '23, look here, May '23, low point of pessimism. This month, the SMLL, the small cap index, went up 15%. So, there's no need to look too much at this data of mine, just compare this blue bar with this black line, which is the IBOV.

You don’t even have to look too much at my data. Just compare this blue bar a bit with this black line, which is the Ibovespa. The Ibovespa is at the end of the month, so this bar, this little dot should be here at the end, but that’s okay.

Notice they are very correlated. When the market improved, optimism went up. Then the market worsened, optimism fell.

So basically, here it also fell, went up, improved, now fell, worsened. Visually, it’s pretty clear that when people are very pessimistic, generally here, here, here and here, generally when sentiment is very low, it's time to buy. So, I think this is a pretty interesting argument, especially this argument together with others, such as the first one about the package.

With positioning like this, if any positive news comes out, it’s what I call a powder keg. Because then everyone will start buying. More arguments for the market to go up.

Let me see if I can be on-screen. I can be on screen here. Let me see if I can be on-screen, I can be on-screen here.

This one is the following: Market seasonality abroad. Here it's also more or less [positive], but abroad it's positive. This is good because the market, it's the famous "risk-on," right?

The market buys. Here I brought the S&P over 30 years, okay? And you see that December is strong.

November too. But look, per month, you have, you see much more… these here are all the years, here at the end is the average, you see many more green boxes here in December, and November too, which, by the way, worked out there. The market is doing well there.

So we are in a phase of positive seasonality for the market abroad. And, fifth argument, for iron ore as well. If you look here… and obviously, iron ore is good because it helps Vale, which helps the Ibovespa.

Obviously, iron ore is good, because it helps Vale, which helps the Ibovespa. If you look here, it's the best month on average for the last 10 years, and if you look year by year here, since 2018, every year it’s gone up. And some years with very strong gains.

I can explain why here. I don't know much about oil, but I know this one. It's restocking.

It's a phase of iron ore restocking in China. That's why it tends to pull [prices] up. January too.

January too. Notice it's not just December. January as well.

So, we'll see. This might be a good argument for Vale and, consequently, for our market. Sixth argument: OPEC has a meeting on December 1st, and they might announce, I believe they will, an extension of the supply cuts that are happening now for another three months.

This obviously helps Petrobras. I presented this chart about three months ago, when we were discussing whether or not this would happen. So there are these cuts.

Actually, there are some cuts that extend until the end of 2025, but there are these cuts here which were until the end of the third quarter of 2024, which are voluntary cuts of more or less 1. 5 Iran production levels per day, or two-thirds of Brazil's production, which are currently idle capacity, which are cut. And these cuts were long-term.

Then they said, "No, now we're going to announce [updates] regularly. " And the oil price fell. So I believe, oil is down, it's around the low 70s, Brent, and high 60s, WTI.

This compared to recent oil prices, it has already fallen. So I imagine that one of the reasons it fell is this risk of this idle capacity coming back. If they announce that the cut will be extended, I think obviously it's good, good for Petrobras, and good for oil.

good for Petrobras, and good for oil. To wrap up, as I did with the reasons for a fall, I also have reasons for a rise here, I consolidated the last ones. There were a lot more that I removed.

Seventh reason is the continuation of the stimulus story from Xi, from China, which will come around mid-December. It’s uncertain, right, but as I said, people are short-term focused. There have been, up to 10 stimulus packages announced, which came in a little worse than expected.

I was going to talk about that, but since we’re already taking up so much time, the video is already half an hour long, with this exercise, I decided not to talk about it this month. But there has already been considerable stimulus, a bit worse than expected, all 10 trillion yuan came, but mostly with help from the local governments, not with injecting this money into the economy, as we had hoped. But it came, and this brings back the point I made two months ago, one month ago, which is: I've never seen China do one little thing and stop.

When they do it, they keep doing it for a while. So I know that, in the short term, it can make [the market] go up or down, depending on the expectation of the next stimulus step, but the wind is in our favor. And if there is something in December, it's certainly good for the market to go up until the end of the year.

Right now… Eighth reason, somewhat silly, but worth mentioning. Right now. .

. Right now, in New York, there are a bunch of fund manager friends of mine there because the Bradesco BBI conference is taking place. This week, literally right now, as we speak, they are meeting there.

So if the CEOs are bullish there, maybe it'll boost things a bit. Ninth, this one is quite silly, but it's. .

. In fact, several things from the brainstorming came up more or less saying the same thing, so I condensed it into this, which I called a reversion to the mean in fixed income. And it’s not just here, in the U.

S. as well. Since Trump… Since a strong Trump… the strong dollar that I showed you also in the bad reasons there, people also revised fixed income upwards there, interest rates up.

This here is the 10-year rate since September, it went up sharply, it’s already at 4. 42, which is a pretty high level, it was at 3. 60 in September.

If this reverts for any reason, I don’t know which, it’s certainly positive. Same thing in Brazil, no need to even mention it, everyone is following this, that the NTN-B is way up there. I brought here the 2050 bond, almost at 6.

70%. These are pretty high levels. It hit 6.

80 here, also coming from very low levels, from the low 6’s to almost 7. Any reason that makes this fall is certainly very positive for the stock market between now and the end of the year, remembering that last year, almost all of the year’s returns for us here happened in November and December. We were up, like, 22% last year, almost all of it happened in November and December, driven by a trigger no one expected, which was Bill Ackman’s tweet, remember?

Here, if you take just the tail end of the move that made interest rates there fall considerably, and the market here rallied like crazy. So really anything can happen to make this revert to the mean here and make the market go up. The fact is that rates went up.

So that’s why I thought this was a valid argument to bring up. That was the exercise, okay? If you ask me, adding everything up, all things considered, will it go up or down?

I think there’s more reason for it to go up than down, because the market has already fallen, rates have already gone up. Anyway, adding all this up, that’s why we’re long. Well, folks, this has gone on for a while, 32 minutes, so let's wrap up by talking about what I like to talk about at the end, which are the portfolio changes, which were few, and our positioning.

We took advantage of these market swings that have been happening in recent days. Different things fall the same way, so we switch things around here and there. We did a lot of switching around.

Like, we increased Equatorial, Vivara, Cirella, which reported excellent results. Rumo, recently, because the soybean harvest improved. We decreased Iguatemi, Energisa a little bit, and we closed a small position we had in Multiplan.

We still like it a lot, we like shopping malls. We even still have it in a long-short, in a specific pair in the Long Bias, but we were left only with Iguatemi now. But all these are small changes.

The portfolio remains very similar to what I've been talking about here, which is very long, because everything is very cheap, but only in solid theses, like Localiza, which reported great results. Everyone was terrified because of the second-quarter results, remember the stock fell 16% that day? We even bought at BRL 40.

The fact is that it has already improved. The results for this quarter were already excellent, and even so the stock is, like, 5% above where it fell after those results. Equatorial, same thing, also had good results, Vivara too had good results.

BTG also had good results. The feeling is of good results. BTG also had good results.

The impression is of good results. Then there’s Prio, which we also have, which has appreciated considerably, Eletrobras, Suzano, which is doing great. Arezzo, which reported good results, Iguatemi, Cirella, which were great.

MercadoLibre, which had results that made the stock soar, but we increased [our position] after the drop and it has already recovered quite a bit. Sabesp, Smartfit, Direcional, which had amazing results. Rumo, and some others.

So, again, it’s a portfolio. . .

We have no cash. The analysts want to buy a lot of things here. I’m having to do that work of relative [value].

That’s why we had to sell Multiplan. And in the Encore Long Bias, there are no hedges, our net long exposure is up there, close to 100%. We are even looking to capture this exercise that we did via options, Volatility is low, including in Brazil, but abroad it’s not.

It’s strange, because when the market falls, implied volatility goes up. But not here, here it fell with low vol, so maybe there's something we can do to position ourselves for this exercise we just did via options. We'll see.

And that’s it. And that's it. So, but despite everything we discussed, the truth is we don't know what the trigger will be that will make this happen.

We’ll stay tuned, as always. I’d like to thank you all, thank you very much for your attention, thank you very much for your attention, everyone, and see you next month. Thank you very much.