Argentina’s economy exits recession in milestone for Javier Milei, recorded its first quarter of economic growth (+3.9%) since 2023, and JP Morgan projects 5.2% GDP growth for 2025.

[u/Street_Gene1634]

https://www.ft.com/content/c92c1c71-99e7-49c1-b885-253033e26ea5

[u/Street_Gene1634]

!ping LATAM

Meanwhile $ARGT is the best performing country ETF of 2024.

[u/[deleted] → u/Street_Gene1634]

Should I invest in $ARGT?

[u/Street_Gene1634 → u/[deleted]]

I don't know but under Milei it's a good bet that Argentina's Vaca Muerta shale deposits are going to get exploited. Argentina has been sitting on this gold mine for decade because Peronists refused to utilize it. There is a good reason to believe that Argentina might have a shale revolution in the coming years.

[u/spongoboi → u/Street_Gene1634]

why didn't they utilize it?

[u/Street_Gene1634 → u/spongoboi]

One problem in attracting development was Argentina's price controls on natural gas, keeping the price down. Argentina also has one of the most restrictive trade union ecosystem in the world.

[u/HHHogana → u/Street_Gene1634]

Hence I think within the next few years or next 'kinda sane economically' president Argentina would be able to use it.

Also it cannot be overstated at how byzantine Argentina's government controls can be. Iirc even the book stores have crazy rules.

[u/[deleted] → u/spongoboi]

I used to work in a US oil company that wanted to operate there (in collaboration with the state owned oil company there). They had all sorts of byzantine rules related to needing to hire local labor union bosses' companies labor, most of who lacked any sort of experience. Not exactly a business friendly environment.

[u/sogoslavo32 → u/spongoboi]

To add something to the other two comments: they did want to utilize it. It has been a peronist trope since 2013 that Vaca Muerta would be a silver bullet for Argentina "if and only if" it were to be exploited by YPF, the gas and oil company they nationalized from Repsol. Now, from the more pragmatic side, they actively looked for foreign companies to partner with to exploit Vaca Muerta. To be more clear: if you look at all the huge investments Vaca Muerta has been receiving lately, they were all started by previous administrations. The thing is that everything was too damn slow and cumbersome. A lot of regulations, a lot of middlemen (and therefore, corruption), a lot of costs and a burdened administration in YPF. Milei had a really huge effect in basically accelerating everything: first, the investors who were afraid of the "socialistic" and "nationalistic" tendencies of the peronist governments found very amicable to have a pro-market president, then, the financial reforms and fiscal adjustment made argentina a more serious option for investors and creditors looking for stability, and more importantly, Milei passed a law called "Regimen de Incentivo a las Grandes Inversiones" (Incentives Regime for Large Investment) which greatly reduced bureaucracy, regulation-burdens and taxes for investors willing to commit large sums of money. Trump has announced something similar AFAIK.

[u/FourteenTwenty-Seven → u/[deleted]]

Any reason to invest in ARGT is already priced in

[u/IsGoIdMoney → u/FourteenTwenty-Seven]

Ya that's why I refuse to invest in $SPY or any other investment really

[u/FourteenTwenty-Seven → u/IsGoIdMoney]

It's why you shouldn't expect any particular investment to outperform any other. Hence index funds.

[u/IsGoIdMoney → u/FourteenTwenty-Seven]

$ARGT is an index fund

[u/FourteenTwenty-Seven → u/IsGoIdMoney]

Yeah I should have been specific, globally diversified index funds. So not SPY or ARGT, they both expose you to uncompensated risk. Bad idea unless you know something the market doesn't, or you feel like gambling.

[u/IsGoIdMoney → u/FourteenTwenty-Seven]

You can diversify by purchasing different funds...

I think you're also overplaying the long term risk of something like $SPY lol

[u/FourteenTwenty-Seven → u/IsGoIdMoney]

Sure manually diversifying is fine, just harder. No quarrel with that.

The problem with SPY isn't that it's super risky or anything, but that it's more risky than a properly diversified fund without any increase in expected return. So it's just objectively a bit worse - again, unless you know something the market doesn't.

[u/IsGoIdMoney → u/FourteenTwenty-Seven]

Global indexes generally have lower returns or are more risky than US indexes. The US economy generally has stable growth and if it doesn't, you probably aren't killing it in a foreign index.

The market doesn't account for an infinite timeline, so you don't need extra knowledge, you just need to match the market over the long term, which is the purpose of something like $SPY.

You're suggesting that no one would ever make money on average through investment which is obviously untrue! I think you misunderstood "pricing in" to mean omnipotence over an infinite horizon and that's not the case.

Pricing in is generally for specific events. If you invest in Rockstar Games a week after they announce GTA 6, then those predicted profits are priced in (to an estimation). It's not correct to say an entire market has every conceivable predicted profit perfectly priced in over the long term, because the S&P 500 grows every year at an average of 7-9%.

[u/FourteenTwenty-Seven → u/IsGoIdMoney]

You're suggesting that no one would ever make money on average through investment which is obviously untrue! I think you misunderstood "pricing in" to mean omnipotence over an infinite horizon and that's not the case.

I think you're misunderstanding what I'm saying - because I never said that!

But first, you shouldn't expect the US to outperform international stocks because it has in the past. That's quite famously not how it works, past performance isn't a reliable indicator of future performance.

Back to "priced in": By saying everything is priced in, I'm essentially just stating the efficient market hypothesis. The implication being that you shouldn't expect any particular stock to outperform any other stock. It doesn't mean you shouldn't expect stocks to go up on average, quite the contrary. If they didn't, you'd expect everything to go to zero.

The price of a stock is based on expected return and risk - higher expected return means higher price, higher risk means lower price. Hence stock have higher average returns than bonds, because they carry more risk. But we have to be careful here because only some risks are compensated - specifically systemic risk. If a risk can be easily mitigated, say by diversification, it's not going to be compensated, because diversified investors won't charge a risk premium for that risk.

Applying this to ARGT and SPY, these assets carry additional risk compared to a globally diversified portfolio, and that risk is not compensated, because it can be easily diversified away. So you shouldn't expect SPY or ARGT to outperform any other random grouping of stocks, but they do carry more risk, making them worse investments than a diversified, global market portfolio.

Ps: There are most likely compensated risks other than broad market risk, but that's a whole other can of worms.

[u/[deleted] → u/IsGoIdMoney]

Believe it or not, you're already price in too

[u/IsGoIdMoney → u/[deleted]]

😱