Peru Declares a State of Emergency

The new government is off to a bad start with the truckers.

Peru declares state of emergency on highways

Peru on Thursday declared a one-month state of emergency on all its highways in a bid to clear road blocks set up by truckers protesting against price increases.

The measure allows for the army to be deployed to clear the blockades, while also suspending certain constitutional rights such as freedom of movement and assembly.

The decree, published in the official newspaper, said "the police will keep control of internal order, with help from the armed forces."

Doomed Banks

As I've said with other bank posts, most of these patterns repeat over and over. Not every example is included. I'm barely into the As and I've already seen several that looks like ABCB.

For ETFs, I like the KRE April 14 $68.50 put for ultra aggressive speculators (if you like taking 100-percent losses in pursuit of 500-percent or more gains) expecting an immediate drop and the KBE May 20 $50 put for those who are highly aggressive. More charts after the jump below.

BAP

Tagged it.

Peru probably done too, maybe along with the rest of LatAm.

The Next Great Short: Peru?

There's a good chance Peru will vote for a change in June. Pedro Castillo leads 42-31 in the first batch of run-off polls ahead of the June 6 election. The guy is all over the map in his public comments, but he consistently sounds like an amalgam of traditional leftist economics and traditional rightist social policy.

Jacobin: With Pedro Castillo, Peru Has a Chance to Vanquish Fujimorismo

The Western press laels him as far-left. He definitely has some traditionally left-wing economic views, but he seems more like a nationalist than a socialist.

The fact that Castillo has issued incendiary statements about the need to dissolve Congress and eliminate the Peruvian Constitutional Court — two unpopular public institutions — further inflames concerns that the current front-runner is a frenzied authoritarian.

But it is important to situate Pedro Castillo’s rhetoric and positions in the context of his background. He first came to prominence in 2017 as the leader of a nationwide rank-and-file teacher strike demanding funds for education and improved wages. The dramatic action, against the neoliberal education reform measures of President Pedro Pablo Kuczynski, proved to be one of the most significant in recent times — particularly noteworthy considering the lingering effects of Fujimori’s efforts to bring all trade union activity to heel. In retrospect, the 2017 strike can be read as part of a wave of building social momentum that eventually erupted in anti-neoliberal protests last December.

From 2005 to 2017 Castillo was affiliated with Perú Posible, a centrist catchall party led by the former president Alejandro Toledo. In 2017 he joined his current party, Perú Libre. Perú Libre proudly claims to be a Marxist-Leninist formation and essentially proposes a conventional left-wing program centered around increased spending on education and health services, the nationalization of key extractive sectors, and a host of anti-corruption measures like salary limits for congressional members. The party belongs to the São Paulo Forum along with organizations like Brazil’s Workers’ Party and Argentina’s Peronist coalition Frente de Todos.

The real sticking point for large parts of the Peruvian left has to do with Castillo’s pronounced social conservatism. Their distrust, however, needs to be placed in its right context.

Fondly referred to by supporters as the candidate for “deep Peru,” the country’s provincial interior has been the source of some strange political ventures in recent history. These include Antauro Humala’s Ethnocacerist movement, a purportedly Marxist-Leninist organization that advocates for military conflict with neighboring Chile and promotes an ethnically based vision of Peruvian nationalism based on Quechua supremacy.

The fact that Castillo has openly claimed that, if elected, he will release Humala from prison — currently serving a sentence for leading the 2000 military revolt against Fujimori — has raised eyebrows. As has Castillo’s embrace of anti-immigrant — specifically anti-Venezuelan — rhetoric.

Castillo opposes the legalization of abortion, same-sex marriage, and policies promoting gender equality — a stance unremarkable on its face given those same positions, in one form or another, are common to many of the region’s progressive leaders.

But Peru is also, along with Brazil, one of the Latin American countries where religious fundamentalism has made the biggest inroads into national politics. Rafael López Aliaga of the Popular Renewal party almost made it into the second round by branding himself the “Peruvian Bolsonaro,” and Peru is home base for the “Con mi hijo no te metas” campaign, a continent-wide propaganda movement that incites hatred against women and the LGBT community.

The Agricultural People’s Front of Peru (FREPAP) failed to cross the 5 percent threshold required to win congressional seats, but the bizarre millenarian cult promoting Christian theocracy and indigenous supremacy remains an important political player.

Unlike other segments of the Left in the country, Castillo hasn’t shown a willingness to critique these formations.

Maybe he's a nationalist socialist? Whatever he is, the Western press is setting him up as a far-leftists. That will be bearish for Peruvian assets and the Peruvian sol should he win. My pick for a play is Credicorp (BAP).

Market Correction: Done or Ready to Run?

Update: I sold my QQQ, still holding TLT. Added some DIS shorts in case the market takes a dive here. Leisure and hospitality will be hardest hit by strict quarantine measures or an outbreak.

Nothing in this post should be construed as trading advice, I'm posting solely to let readers know where my mind's at.

I've been heavily short in the market, but covered a lot of positions today and even took some long positions such as QQQ and short TLT. The VIX came close enough to tagging its downtrend. My speculative thought is the market will bottom when a large city such as New York City announces an outbreak and quarantine measures. However, that might not come for some time. I think today was probably an overreaction caused by not taking this virus serious. Plenty of people were shrugging it off on Monday even after outbreaks hit South Korea and Italy. I don't think we've reached full panic/capitulation by the "it's just the flu" people, but a news-driven correction needs news. On the other side, signals such as the VIX say a bounce is likely.

Palladium is a speculative indicator and it was a nice shade of green today. Meaningless by itself...

Tesla should be rattled in a major correction, but held up relatively well considering.

Virgin Galactic (SPCE) is falling after hours, but as I type this it is still above a recent support line. An extremely steeply sloping line if zoomed out.

Two trades I made today were Boeing (BA) and Domino's (DPZ). I sold a position in BA and used it to buy a position in DPZ (all puts). I'm still short BA. As for Domino's, delivery will not be spared in a pandemic. People will not want contact with drivers, drivers with customers, and workers may not show up. Plus there's a huge gap to fill.

I mentioned Peru and copper awhile back, and noted BAP as a potential short. It is nearing a support level now. Again, breaking it would be huge. But I'm not sure the time is right for the big move.

A Russell 2000 ETF tagged support today, but also fell below its January 2018 high.

The S&P 500 and Nasdaq don't have much chart support here, but both have gaps to fill above.

I'm less bearish today given the downturn in stocks and recognition that coronavirus is a bigger deal than people understand. I expect the ignorant who ignored it until yesterday and today will eventually overshoot. I have been worried about coronavirus. I have made preparations at home in case the government imposes a quarantine or I choose to self-quarantine. Having said that, I was more worried when everyone was ignoring the virus. The faster authorities and the public realize it's a problem and change their behavior, the less one needs to worry. The past two days was the start of that recognition in the USA. Similarly, the sell-off is the initial shock hitting markets.

If Copper, Then Peru