Milei: No Dollarization in 2024

[Rich One]

Florida was busy last week when I passed by the caves, lots of people buying (or selling) dollars which isn't surprising.

Next door to my house, Av.Santa Fe 2349, is a legal exchange place gives Blue Rate, is packed until closing 7 pm.
Why? Because the dollar is cheap..! And everyone believed the Official dollar will go to 1000 pesos soon.

 

[SinPulgas]

Next door to my house, Av.Santa Fe 2349, is a legal exchange place gives Blue Rate, is packed until closing 7 pm.
Why? Because the dollar is cheap..! And everyone believed the Official dollar will go to 1000 pesos soon.

Supply and demand suggests that more people are selling, Rich One. Or at best, that things at the moment are relatively neutral.

I see two headwinds for the dollar right now. One is the soy harvest, which could possibly be a record and should keep pressure on the supply side for the dollar (although the government has been buying dollars consistently).

The other is the possibility, suggested by the government and supposedly promised to the IMF, of the end of the cepo, around the middle of the year. If it happens, that will be the end of the blue, and its premium over the official dollar. One would have to expect that the official will rise in some moment, but it will have to rise substantially to reach the current value of the blue.

I've never looked at what happened to the CCL and the MEP when Macri removed the cepo (there wasn't much statistical information available then, but I think there are a couple interactive charts available now that could show what happened), but I imagine that they, too, would be affected, to the down side for the dollar.

 

[Rich One]

Supply and demand suggests that more people are selling, Rich One. Or at best, that things at the moment are relatively neutral.

I appreciate your predictions, however my contacts next door tell me that more people are buying dollars with the expectation that the dollar will jump soon. I'm not selling NOW would you?

 

[SinPulgas]

I appreciate your predictions, however my contacts next door tell me that more people are buying dollars with the expectation that the dollar will jump soon. I'm not selling NOW would you?

I was selling, with the dollar above 1200, both bills and transfers net of fees. What I didn't need short term I put into plazos fijos UVA.

How do you account for the steady, significant decline in the blue these past two and a half weeks if everyone is buying? Maybe all the smart money goes to your place. I don't see how the blue can go down almost 10% if everyone is buying. That's a big move. Somebody has to be selling to push the price down.

 

[Rich One]

,}I was selling, with the dollar above 1200, both bills and transfers net of fees. What I didn't need short term I put into plazos fijos UVA.

How do you account for the steady, significant decline in the blue these past two and a half weeks if everyone is buying? Maybe all the smart money goes to your place. I don't see how the blue can go down almost 10% if everyone is buying. That's a big move. Somebody has to be selling to push the price down.

The dollar volumes traded at cuevas is small doesn't move the Amp meter.
The important volumes are traded by big businesses.
Time will tell.

 

[SinPulgas]

The dollar volumes traded at cuevas is small doesn't move the Amp meter.
The important volumes are traded by big businesses.
Time will tell.

But if we're talking about the dollar blue, it's all "cuevas," right? Just that some are much bigger and better hidden than others. In any case, the blue is a market, and markets don't go down when everybody's buying. I don't think it's reasonable to say that because it's a small market, it's magically immune from the laws of supply and demand. If everybody's truly buying, the price would be up, not down. That's just fundamental economics.

 

[argeiCanuck]

The dollar volumes traded at cuevas is small doesn't move the Amp meter.
The important volumes are traded by big businesses.
Time will tell.

You are right. Time will tell.
Small moves are usually not reliable predictors of market reverse.
More often than not they are predictors of more and stronger continuation of the same.

 

[SinPulgas]

You are right.
Small moves are usually not reliable predictors of market reverse.
More often than not they are predictors of more stronger continuation of the same.

I don't think that you understand the conversation. Or maybe I'm talking to myself.

The blue has dropped almost 10% in two and a half weeks. Rich One says everyone is buying.

I say that those two things are incompatible. Impossible, really.

Now, it is possible that everyone at the cueva near Rich One's house is buying. But it's not reasonable to believe that everyone is buying. If the price is down almost 10%, it's because more blue dollars are being sold than are being bought.

Or it's a miracle.

Or we're witnessing a case of the stupidest sellers in the world, sellers who see that everyone is buying, and yet day after day, they say, "Ok, everyone is buying, so I'm willing to take even less for my dollars today."

 

[antipodean]

It is interesting to see how the government is trying to suck up dollars that have been hiding under mattresses in the informal market into the financial system. Was at the bank the other day and was surprised to see/ overhear a number of other clients paying their credit card balance in USD cash.

For example, if you just returned from vacation abroad spending US$5000 on your credit cards, today you'd need to pay the bank ARS 6.800.000 when the bank pesifies it at the end of the month.

Whereas if you just used US$5000 in greenbacks to pay the bank before pesification, you'd be paying the equivalent of ARS 5.725.000 - saving yourself ARS 1.075.000 simply by visiting a cueva to pick up some dollars, followed by a visit to your bank to deposit them into the system... no questions asked.

 

[Rich One]

But if we're talking about the dollar blue, it's all "cuevas," right? Just that some are much bigger and better hidden than others. In any case, the blue is a market, and markets don't go down when everybody's buying. I don't think it's reasonable to say that because it's a small market, it's magically immune from the laws of supply and demand. If everybody's truly buying, the price would be up, not down. That's just fundamental economics.

The individual customers we see at cuevas are composed of tourists and office clerks, buying one hundred dollars for savings, they rarely operate over US$ 1000. A drop in the bucket.

The Blue Dollar price is based on expectations.
In markets that are intervened ( by Central Bank) plus others, and where politics play a key role, require a more complex analysis. Complex markets are those where the basic supply and demand conditions are changing at the same time. Hence supply and demand laws act somehow differently.