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Analysis – Jail fueled Lula’s determination to tackle poverty over profit. By Reuters

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© Reuters. Reuters/Osley Marcelino Reuters.

Written by Anthony Bodel and Lisandra Paraguaso

BRASILIA (Reuters) – Left-wing allies and confidants say Brazilian President Luiz Inácio Lula da Silva’s 580 days behind bars has given him a renewed sense of social justice, convincing him to prioritize ending poverty over increasing profits.

Lula takes office Sunday for an unprecedented third term, capping a dramatic turnaround for one of the world’s most enduring political leaders, who first ran for president in 1989.

Jailed for corruption in 2018 – the year former right-wing President Jair Bolsonaro was elected – Lula’s convictions were overturned in 2019, allowing him to oust Bolsonaro in October’s elections.

As he seeks to unite a nation riven by economic woes, a chronic pandemic and Bolsonaro’s far-right populism, allies and confidants told Reuters, Lula is looking to his prison days for inspiration.

He learned from three failed presidential attempts to moderate his leftist ideals and make peace with Brazil’s powerful private sector during his 2003-2010 presidency. But Lula 3.0 plans to double down on efforts to combat poverty, end hunger and attack racism, allies said, while also rewarding loyal Labor prison visitors who hold key ministerial posts.

“The imprisonment reinforced the feeling that he had a duty above all to the poor in Brazil,” said Tarso Genro, former governor of the Workers’ Party of Rio Grande do Sul and a confidant of Lula’s. “He went to jail strong and came out stronger.”

His friends and allies said Lula, an ideologue who emerged from prison in 2019, should not be a cause for concern. He remains, they added, the same pragmatist who honed his powers of persuasion as a union leader in the São Paulo auto plants in the 1970s.

Lula’s aides have prompted comparisons to former South African leader Nelson Mandela, who spent more than a quarter of a century behind bars as an opponent of the country’s apartheid.

But many in Faria Lima, the so-called “Brazilian Wall Street,” who fondly remember the business-friendly Lula of the early 2000s holding their breath, worry that increased social spending and a loyal government will damage Brazil’s fiscal credibility and usher in a new era of Graft-stained state.

“The initial reaction to Lula 3.0 on Faria Lima is not favorable,” said economist Andre Perfetto, referring to the market downturn after the announcement of Lula’s spending proposal. “Many investors bet on Bolsonaro winning and they almost got it right, so naturally they are not happy.”

Recent cabinet appointments – including Labor leader Fernando Haddad as finance minister – have also rattled some investors.

Lula also recently appointed senior PT member and economist Aloizio Mercadante as head of the BNDES National Development Bank, which during previous Labor governments lent billions of reais for projects consumed by allegations of waste and graft, although bank officials said they were transparent.

Lula’s spokesman Jose Crispignano said the president supports fiscal responsibility and believes that boosting the economy is the best way to fight poverty.

“He does not see any contradiction between caring for the poor and promoting growth. On the contrary, he believes that caring for the poor and giving them the opportunity to work and consume is what generates sustainable growth,” he told Reuters.

Reading behind bars

Lula’s new social consciousness was ignited by reading books about race, slavery, and hunger behind bars, as well as biographies of Fidel Castro and Nelson Mandela, according to his website. He also read “Lulismo in Crisis,” a critical review of his movement and its mistakes by his former press secretary, André Singer.

His relationship was cemented with Rosângela da Silva, or Ganja, a 20-year-old Labor activist whom he married upon his release and who appears to be a major political player. Lola was widowed when his first wife, Marisa, died the year before he went to prison.

Ganja — who helped organize Lula’s election testimony and inauguration on Sunday, as well as advising on cabinet options — was among hundreds of true Labor Party believers camped out outside his prison in the southern city of Curitiba.

“Good morning, Chief Lula,” his congregation would chant as the day began, followed by “Good night, Chief Lula,” as he went to bed.

From his 15-square-meter cell on the third floor of the Federal Police headquarters in Curitiba, Lula set about reorganizing the PT and running its legal defence. There were plans for the failed presidential campaign of Haddad, a regular visitor who lost to Bolsonaro in 2018.

When he left prison, Lula was determined to make things right with his imprisonment and said he wanted to be re-elected to clear his name in the People’s Court. He described his imprisonment as a political witch hunt, trumped up with the right to prevent him from running in 2018.

Another close aide, Senator PT Humberto Costa, said Lula had matured politically in prison.

“What prompted him to run again was the need to make his mark, not only politically but historically, by creating lasting change in Brazil,” Costa said.

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Economic

We need to pay more attention to skewed economic signals

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The writer is chair of Queen’s College, Cambridge and advisor to Allianz and Gramercy

Inflation was the dominant economic and financial issue of 2022 for most countries around the world, especially for advanced economies that have a consequential impact on the global economy and markets.

The effects have been seen in declining living standards, increasing inequality, increasing borrowing costs, stock and bond market losses, and occasional financial mishaps (fortunately small and so far contained).

In this new year, recession, both actual and feared, has joined inflation in the driving seat of the global economy and is likely to replace it. It’s a development that makes the global economy and investment portfolios subject to a wide range of possible outcomes — something that a growing number of bond investors seem to be aware of more than their equity counterparts.

International Monetary Fund iYou will likely review soon Her economic growth forecasts again, predicting that “a third of the world will be hit by recession this year”. What is particularly notable to me about these worsening global prospects is not only that the world’s three major economic regions – China, the European Union and the United States – are slowing down together, but also that this is happening for different reasons.

In China, a chaotic exit from the wrong Covid-19 policy is undermining demand and causing more supply disruptions. Such headwinds to domestic and global economic well-being will continue as long as China fails to improve the coverage and effectiveness of its vaccination efforts. The strength and sustainability of the subsequent recovery will also require that the country more vigorously renew a growth model that can no longer rely on greater globalization.

The European Union continues to deal with energy supply disruptions as the Russian invasion of Ukraine continues. Strengthening inventory management and reorientation of energy supplies is well advanced in many countries. However, it is not yet sufficient to lift immediate constraints on growth, let alone resolve long-term structural headwinds.

The United States has the least problematic view. The headwinds to growth are due to the Fed’s struggle to contain inflation after mischaracterizing rate increases as fleeting and then initially being too timid to adjust monetary policy.

The Fed’s shift to an aggressive front-load of interest rate hikes came too late to prevent the spread of inflation in the services sector and wages. As such, inflation is likely to remain stubborn at around 4 percent, be less sensitive to interest rate policies and expose the economy to greater risk for accidents from additional policy errors that undermine growth.

The uncertainties facing each of these three economic areas suggest that analysts should be more careful in reassuring us that recessionary pressures will be “short and shallow”. They need to be open, if only to avoid repeating the mistake of prematurely dismissing inflation as transient.

This is especially important because these diverse drivers of recessionary risk make financial fragility more threatening and policy shifts more difficult, including potentially Japan. Get out of interest rate control Policy. The range of possible outcomes is extraordinarily large.

On the one hand, a better policy response, including improving the supply response and protecting the most vulnerable populations, can counteract the global economic slowdown and, in the case of the United States, avert a recession.

On the other hand, additional policy errors and market turmoil can lead to self-reinforcing vicious cycles with rising inflation and rising interest rates, weakening credit and compressed earnings, and stressing market performance.

Judging by market prices, more bond investors are better understanding this, including by refusing to follow the Fed’s interest rate guidance this year. Instead of a sustainable path to higher rates for 2023, they believe recessionary pressures will lead to cuts later this year. If true, government bonds would provide the yield and potential for badly missed portfolio risk mitigation in 2022.

However, parts of the stock market is still weakly bearish pricing. Reconciling these different scenarios is more important than investors. Without better alignment within markets and with policy signals, the positive economic and financial outcomes we all desire will be no less likely. They will also be challenged by the risk of more unpleasant outcomes at a time of less economic and human resilience.

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Macro hedge funds end 2022 higher, investors say, while many others take big losses By Reuters

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© Reuters. FILE PHOTO: Traders work on the trading floor of the New York Stock Exchange (NYSE) in New York City, US, January 5, 2023. REUTERS/Andrew Kelly

By Svea Herbst Baylis

NEW YORK (Reuters) – Some hedge funds betting on macroeconomic trends have boasted of double and even triple-digit gains for 2022, while other high-profile companies that have long been on technology stocks have suffered heavy losses in volatile markets, investors said.

Rokos Capital, run by Chris Rokos and one of a handful of so-called global macro companies, gained 51% last year. Fund investors this week, who asked not to be identified, said Brevan Howard Asset Management, the company where Rokos once worked, posted a gain of 20.14% and Caxton Associates returned 16.73%.

Haider Capital Management’s Haider Jupiter Fund rose 193%, an investor said.

Data from hedge fund research showed that many macro managers have avoided crumbling stock markets that have been rocked by rapid interest rate increases and geopolitical turmoil, including the war in Ukraine, to rank among the best performers in the hedge fund industry. The company’s macro index rose 14.2% while the general index of hedge funds fell 4.25%, its first loss since 2018.

Equity hedge funds, where the bulk of the industry’s roughly $3.7 trillion in assets are invested, fared worse with a loss of 10.4%, according to HFR data. And while that beat the broader stock market’s loss of 19.4%, some high-profile funds posted even bigger losses.

Tiger Global Management lost 56% while Whale Rock Capital Management ended the year with a 43% loss and Maverick Capital lost 23%. Coatue Management ended 2022 with a loss of 19%.

But not all companies that bet on technology stocks suffered. John Thaler JAT Capital finished the year with a 3.7% gain after fees after a 33% increase in 2021 and a 46% gain in 2020.

Sculptor Capital Management (NYSE::), where founder Dan Och is fighting the company’s current CEO in court over his salary increase, posted a 13% drop.

David Einhorn’s Greenlight Capital, which bet that Elon Musk would be forced to buy Twitter, ended the year up 37% while Rick Sandler’s Eminence Capital rose 7%.

A number of so-called multi-manager companies where teams of portfolio managers bet on a variety of sectors also boast positive returns and have been able to deliver on their promise that hedge funds can deliver better returns in distressed markets.

Balyasny’s Atlas Fund (NYSE: Enhanced) gained 9.7%, while Point72 Asset Management gained 10%. Millennium Management gained 12% while Carlson Capital ended the year with a 7% gain.

Representatives for the companies either did not respond to requests for comment or declined to comment.

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German automakers point to easing supply chain problems

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Sales at BMW and Mercedes-Benz jumped in the final months of 2022 as the German premium auto brands indicated supply chain problems plaguing the industry were abating.

Automakers around the world have experienced parts shortages since the pandemic, especially semiconductors, leaving many of them with large fleets of incomplete vehicles that can’t be delivered to customers.

BMW and Mercedes each said their full-year vehicle deliveries fell last year by 4.8 percent and 1 percent, respectively, due to Suppliers Bottlenecks as well as lockdowns in China and the war in Ukraine.

But supply pressures eased in the last quarter of the year, as BMW recorded a 10.6 percent jump in sales, with 651,798 vehicles delivered, and Mercedes fulfilling 540,800 orders, up 17 percent from the same period in 2022.

BMW He said the main effects of supply chain bottlenecks and continued lockdowns were felt in the first six months of the year, adding that “sales were steadily picking up in the second half.”

Mercedes boss Ula Kallenius told the Financial Times last week that the list of problems in the auto supply chain was declining, but added that long waits for cars would continue into 2023.

“One chip is enough to be vital [ . . .] Missing, and then you can’t finish the car, even if you have everything else.

Both brands recorded strong sales growth electric car. Mercedes, which last week announced a plan to build 10,000 charging docks, said EV shipments grew 124 percent to 117,800 last year compared with its predecessor.

Similarly, BMW reported strong growth in electric vehicle sales, with deliveries of fully electric vehicles doubling last year to 215,755.

Analysts at Bank of America said that sales of electric vehicles, including hybrid cars, reached a historic peak last November, with 1.1 million units sold. They attributed this largely to the upcoming phase-out of customer subsidies in Germany.

Participate in Mercedes BMW and BMW prices held steady Tuesday morning as investors priced in an image of an improving showing.

Rolls-Royce, a subsidiary of BMW, announced Monday that sales have hit a 119-year record, driven by strong demand in the United States, its largest market.

The luxury brand has been largely unaffected by the semiconductor pressure, mainly because it makes relatively few compounds and therefore needs fewer chips.

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