Those who have been reading my weblog know that I follow developments in South America. I have written about Argentina, Bolivia, and Venezuela. I have discussed how the continent is becoming more left of center.
Today in Street Insight (an expensive subscription site), Doug Kass (General Partner for Seabreeze Partners Short L.P.) wrote his list of 25 possible surprises for 2006. His surprises are not predictions, but rather potential events that you should put on your radar screen. His first possible surprise concerns South America.
1. Anti-American rhetoric in South and Central America becomes kinetic in 2006 and has broad market and economic implications. A plethora of left-wing presidents (creating another anathema to the Bush administration) are elected in this volatile and important economic area of the world as elections of leaders in nine countries from Nicaragua to Chile are staged next year. Most importantly, with the recent election of Evo Morales in Bolivia, a projected victory of anti-American Nicaraguan leader Daniel Ortega, a surprisingly easy victory in Mexico of Andres Manuel Loez Obrador (an anti-President Vincente Fox candidate) coupled with more aggressive nationalistic moves by Venezuela's Hugo Chavez turn into an epidemic of anti-American policy. This new wave of socialism and left-wing presidents contributes to a series of moves to nationalize certain industries, and supply disruptions in certain countries in South America are destabilizing, resulting in much higher commodity prices during the year (including oil, natural gas, copper, tin and grain). The CRB Index approaches 375 (now at 326). Fears of stagflation befall economies and markets dependent on imports of goods from South America like the U.S. Crude climbs to over $80/barrel, and the Dow Jones Industrial Average bottoms at 9000-9250 during the early summer (and closes the year at the 10,000 level). Gold trades above $675/ounce sometime during the year.
Keep South America on your radar screen. Most of us pay little or no attention to South America.
As I have mentioned in the past, Street Insight (a sister site to TheStreet.com) is a valuable service. Those serious about the markets should consider subscribing.