Is a regulated financial system good or bad for your investment?

Is a regulated financial system good or bad for your investment?

In the usual movement to ride on rumors and anticipate the truth, the stock market is falling today after the adoption of the system yesterday in the dead of night.

Today’s fall in the stock market does not mean that the system was bad, in fact it has more to do with fear of a fall in the United States.

The US only has cash for about 1 week and cannot reach an agreement to raise the debt limit, increasing the risk of default. (It is not only Brazil that is in demand).

The system approved yesterday, like everything else in life, has its positives and negatives.

Among the good things I mention:

  • The law became more difficult and expensive than the project, instead of more lenient, and the introduction of incentives in case of non-compliance;

  • Some penalties in the case of violating the law can use only 50% of the collections in the following year, and restrictions on new costs such as public tenders and salary increases;

  • The inclusion of Fundeb in the spending limit, making the law more strict;

Among the main negative points, I highlight:

  • In a simplified way, the system talks about the use of 70% of what is collected, but the events include an increasing collection, the origin of which is unknown. Would there be more taxes?

  • No one is quite sure where the income on which the new system is so dependent is coming from.

  • Fewer action plans and less focus on cost cutting and reducing government. The ideal would be a state of greater efficiency and lower consumption, and not higher accumulation through higher taxes… but this does not seem to be the goal of the new system.

  • Failure to comply with the primary outcome is no longer considered a violation of the LRF and there is no longer an urgent need for compliance.

  • Not following the goals and relaxing the punishment for this is what some people call a weakening of the Financial Responsibility Law (LRF).

In short: the worst case did not happen, which was the most weakening of the project, and that is good, given that the project was already known and its impact absorbed.

The fact that the system was approved is good, given that the standard of use was never respected.

Moreover, we were working in this situation: an approved system is better than nothing and the fear was to further relax the presented project (worst case).

As it was approved, more rigorously in relation to the original project (such as the inclusion of Fundeb in the costs) the worst case scenario did not occur.

The idea of ​​having a law that is respected for a long time seems good.

Approval allows us to move on to other items on the agenda, like important tax reform!

The approved system has a positive impact on the reform of the tax and inflation target debates…

All this leads to the main issue: the decline of interest rates, which is very important for the market and for stocks.