How Milei’s Surprise Win in Argentina Defied the Market

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Speaker 14 Today's number?

Speaker 15 1,100.

Speaker 15 That's how many chairs were recently stolen from restaurants in madrid the heist took place over two months and targeted the patios of 18 different restaurants damages are estimated at nearly 70 000

Speaker 15 and authorities are calling it the lowest margin crime since joker part two

Speaker 15 Welcome to Property Markets. I'm Ed Elson.
It is October 28th. Let's check in on yesterday's market vitals.

Speaker 15 The major indices closed at record highs on hopes of a US-China trade deal. The S ⁇ P ended the day above 6,800 for the first time ever.
Meanwhile, gold dipped below 4,000.

Speaker 15 And finally, Qualcomm shares popped 11%

Speaker 15 after the company announced new AI chips that will compete with NVIDIA.

Speaker 18 Okay, what else is happening?

Speaker 15 Argentina President Javier Millay led his party to victory in Sunday's midterm elections. His party doubled their representation in Congress and won nearly 41% of the national vote.

Speaker 15 President Trump congratulated Millay on social media, saying, quote, he's making us all look good. The peso surged 9% against the US dollar, its biggest one-day gain in over 20 years.

Speaker 15 Argentinian stocks and bonds also rallied. This win should help Millay push through his economic agenda.

Speaker 15 Over his first two years in office, Millay has slashed spending, unified exchange rates, cut energy subsidies, and laid off tens of thousands of public sector workers.

Speaker 15 That will all likely continue because the recent $40 billion bailout from the US is tied to the condition that he makes further progress on those reforms. Still, Millay has his work cut out for him.

Speaker 15 Inflation, though down, remains above 130%.

Speaker 15 Unemployment is rising and real wages have fallen over 20% since 2023. The election turnout was 68%,

Speaker 15 the lowest in a national election in decades. And even after the win, his party does lack a full majority.

Speaker 15 Here to explain what this all means for Argentina, we are speaking with Oliver Stunkel, associate professor at FTV's School of International Relations in Brazil.

Speaker 15 Oliver, thank you very much for joining us on the show.

Speaker 14 Thanks for having me.

Speaker 15 So we want to hear about this election.

Speaker 15 Just at a very basic level, walk us through the election results. What does this mean for Javier Millé and what does this mean for Argentina going forward?

Speaker 14 So those were the midterms.

Speaker 14 Half of the House of Representatives and a third of the Senate were up for voting and renewal.

Speaker 14 And it has been a surprisingly good result for Javier Millé, the self-declared anarcho-capitalist who's been in power for two years. And the elections were sort of a referendum on his

Speaker 14 policies. He's a libertarian, so his key argument has been that it's necessary to radically reduce public spending, to reduce inflation, to finally stabilize Argentina after decades of instability.

Speaker 14 And he did bring down inflation. However, the economy is still reeling from

Speaker 14 his policies of dramatically reducing public spending. So the economy is not growing.

Speaker 14 But he is saying that he still needs some time for the economy to finally recover, that this is the medicine which initially has a negative impact, but which will eventually put Argentina's economy on a stable footing.

Speaker 14 And the voters have, despite the negative short-term impacts, given him a vote of confidence and said that basically signaled that they would like him to continue the liberalizing reforms.

Speaker 14 Over the next two years, he now has enough votes to override vetoes

Speaker 14 in Congress, which were employed during the past years against his decrees when he tried to liberalize the economy. So I think we can expect him to continue like that for now.

Speaker 18 Now,

Speaker 14 he still needs to deliver. So basically, voters have given him a lifeline.
And we'll now see how this experiment will unfold.

Speaker 15 Yeah, help us with the context there. I mean, from my understanding, Argentina's been in the news a lot recently.

Speaker 15 We had this other election, this local election in Buenos Aires, which, again,

Speaker 15 us, we Americans weren't very aware of what was happening. But what we know is that it wasn't good for Millet.
You saw this implosion in the bond markets,

Speaker 15 massive collapse in the peso, which was what led the U.S. to come in and intervene and give them that $20 billion.

Speaker 15 So this is quite a reversal as just an observer. It seemed as though Millet was in trouble.
Now apparently he isn't. Help us with the context there.

Speaker 14 Absolutely. So he had a pretty bad result in municipal elections in the province.

Speaker 14 of Buenos Aires, which is traditionally more Terranist, so which has been supportive of the traditionally more populist, economically populist policies.

Speaker 14 And it was seen as a double weather election for yesterday's election. So expectations were low.
And the Trump administration made a big bet. I mean, they basically, you know, the U.S.

Speaker 14 government promised a rescue package, a lot of financial support, seemed to somehow condition that on a good result for Malay.

Speaker 14 And that good result now came to pass. I think that the

Speaker 14 U.S. certainly did have a role in that because a lot of voters are aware of the fact that the Belay's policies haven't yet stabilized the Argentine economy.

Speaker 14 A lot of investors are still very concerned about the capacity to pay its debt. Argentina is one of the countries that has most frequently defaulted on its debt.

Speaker 14 So that lifeline, obviously, from the world-largest economy, does play a role. So it's a vote of confidence.

Speaker 14 And in that sense, it's also a win, a political, a geopolitical win for Trump, because a lot of countries in Latin America are moving closer to China or are sort of multi-aligning, preserving ties to the United States, but also seeking strong ties to China.

Speaker 14 And Malay kind of stands out. He actually has actively sought to move closer to the United States.
And in that sense, the U.S.

Speaker 14 government has now kind of offered a reward, so to say, for that strategy.

Speaker 14 And I think in many ways, a successful government in Argentina will certainly inspire similar figures in other electoral cycles in the coming months.

Speaker 14 So basically, Millet has now gained another two years to reform Argentina's economy. But I think, I mean, were markets overly pessimistic? Perhaps a bit.
I mean, last week I

Speaker 14 did speak to several investors and everybody expected Millet to not gain sufficient votes. So there was a sense of, you know, maybe investors will abandon Argentina.

Speaker 14 And I think that may have influenced voter behavior because they said, you know, they're actually concerned about a Malay loss

Speaker 14 and said, you know, let's give him that vote of confidence in order to help stabilize the economy.

Speaker 15 I'd also like to get your reactions to the $20 billion, which may become $40 billion

Speaker 15 bailout.

Speaker 15 And I call it a bailout because I think it is a bailout. They were in trouble, and the US came in and they intervened to try to help Argentina.

Speaker 15 There are debates over whether it was to help Argentina or whether it was to help Treasury Secretary Scott Besson's buddies who are invested in Argentina. We don't need to have that debate.

Speaker 15 But what does it say about the Millay agenda and the libertarian agenda, which was supposed to be about reducing spending, shock therapy, let's get rid of our addiction to spending in the short term to fix our problems.

Speaker 15 Let's figure out long-term solutions.

Speaker 15 Let's get this inflation thing under control. And then suddenly they actually need an emergency wire transfer of $40 billion

Speaker 15 to prevent financial ruin, essentially.

Speaker 18 Right.

Speaker 14 Yeah. So,

Speaker 15 I mean,

Speaker 14 the first part of the question is, some progress has been made in reducing public spending. I mean, you had a massive reduction of, let's say, ministries, for example.
Yeah.

Speaker 14 You did have

Speaker 14 tens of thousands of public workers which have been let go.

Speaker 14 But at the same time, these kinds of adjustments are inherently painful. And Argentina's economy

Speaker 14 has had low indices of productivity for a long time. You need, initially, at least investor confidence.

Speaker 14 And of course, Argentina's history

Speaker 14 generates a lot of caution among investors. A lot of people got their fingers,

Speaker 14 they're got burnt over the past decades betting uh on argentina and then argentina uh defaulted it's still uh there's no other country in the world that owes more money to the international monetary fund uh than argentina so in that sense it continues to be sort of a high-risk uh investment and it may still very well fail uh so the the the current this recent result is so good news for malay uh he can continue to implement his reforms he'd actually i think even accelerate reforms because he didn't have a governing coalition in Congress.

Speaker 14 He still needs a party which is sort of center-right, tied to former President Macri.

Speaker 14 So I expect him to advance faster now than during the past two years. But there's no guarantee.
I mean, the country

Speaker 14 has had for a long time a very bloated public sector,

Speaker 14 which attracted a lot of talent. This is a problem in several Latin American countries where the smartest people seek to enter government where not necessarily

Speaker 14 they make the greatest contribution to economic growth.

Speaker 14 So these are structural issues, of course.

Speaker 14 There is

Speaker 14 a problem of still excessive bureaucracy,

Speaker 14 an excessive dependence on exporting commodities. uh

Speaker 14 issues with education with infrastructure so you know these things take time. And

Speaker 14 it's a big question, Mark, particularly now that, you know, we sort of see increasing state intervention in the economy around the world.

Speaker 14 You know, the United States, actually, you know, you have the U.S. government,

Speaker 14 you know, purchasing stakes of strategic companies.

Speaker 14 You see protectionist trends. You see sort of a geopoliticization of the global economy.
So

Speaker 14 it's going to be really interesting to see whether this kind of libertarian approach is still viable in this age of great power competition where everything seems to be politicized, right?

Speaker 14 I mean, it's not like Trump promotes free trade or China or any other major power. We're kind of in this

Speaker 14 completely different age where very few political leaders embrace the kind of ideology we're seeing in Argentina.

Speaker 18 All right.

Speaker 15 Oliver Stanco, associate professor at FGV's School of International Relations in Brazil. Oliver, we really appreciate your time.
It will be very interesting to see how this all unfolds in Argentina.

Speaker 15 Thank you.

Speaker 14 Thank you very much.

Speaker 15 After the break, a look at the latest inflation report. If you're enjoying the show, give Profit Markets a follow.

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Speaker 15 We're back with Profit Markets. After a 10-day shutdown delay, the consumer price index is in.
Prices rose 3% from a year earlier, the highest since January.

Speaker 15 Still, the result was under the 3.1% estimate and was up 0.1% from August.

Speaker 15 Major stock indices rose to record highs on the news, and the report all but seals the deal for a rate cut at the Fed's meeting, which takes place tomorrow.

Speaker 15 Here to explain this report and what it means for the economy. We are speaking with Robert Armstrong, U.S.
Financial Commentator for the Financial Times and author of the unhedged newsletter.

Speaker 15 Rob, great to have you back on Property Markets.

Speaker 18 Great to be back.

Speaker 15 So, we want to get your reactions to this inflation print, this CPI. We're up to 3%.

Speaker 15 We were at 2.3% earlier in the year. Now we're at 3%.
All that's on my mind is the tariffs and the fact that this is a reflection of tariff impact.

Speaker 15 But I want to get your angle, your initial reactions.

Speaker 18 Well,

Speaker 18 better is what I would say, but better with an asterisk next to it.

Speaker 18 So both on the good side, the series I like to look at are durable goods, which tends to be a series, as you mentioned, that's very much affected by

Speaker 18 import tariffs. So, you know, cars, refrigerators,

Speaker 18 everything but kind of clothes and food. And then at core services, services without energy.
And both of those dip down a little bit. And that's welcome news.

Speaker 18 We're still about a percentage point above the Fed's target, but at least we're trending in the last month or two slowly in the right direction. But I haven't gotten you to the the asterisk yet.

Speaker 15 Yeah, let's say the asterisk.

Speaker 18 The asterisk is there were two very big items that went down a lot, sharply down in this in September. And that was on the services side, that was housing, rent and owner's equivalent rent.

Speaker 18 And on the goods side, it was new and used cars. And these are big series that have a lot of weighting in the index, but they're lumpy and they move around a lot month to month.

Speaker 18 Also on the housing side, it's a very lagging number. It tells you a little bit more about the world six months ago than it tells you about the world today, but both of those were low.

Speaker 18 And so it could be that we sort of rolled the dice and got a lumpy month to the low side on those two things. And if you take those two out,

Speaker 18 we're still pretty warm. We're still well above 3%.
If you take out those two, now it's not fair to just take out whatever you want.

Speaker 18 You can't go month by month and say, well, this month we're not going to count housing. This month we're not going to count autos.

Speaker 18 What this is just telling you is that the numbers are lumpy and we have to be a little bit careful about reading too much into September.

Speaker 15 There are some items that are tariff sensitive that we are seeing rising in price. I think that probably the best example would be coffee, which is up almost 20%

Speaker 15 year over year. I look at what's happening with inflation, the fact that we went from 2.3, the month of Liberation Day, it went up to 2.4, it kept going up, it went up to 2.7, then it went up to 2.9.

Speaker 15 Now we're up to 3%.

Speaker 15 Is it in doubt at all that tariffs are passing through?

Speaker 14 I don't think so.

Speaker 18 I mean, we know that tariffs are being charged at the border to the tune of many tens of billions every month. And we know who's paying those tariffs as of right now.

Speaker 18 It's mostly the importers and the wholesalers who are doing the importing. But we know they're passing a little bit, maybe a third or a quarter of the tariffs onto the consumer.

Speaker 18 So that's what shows up in this report. Not the full impact of tariffs, but just the bit that the companies aren't eating.
So one of the big questions for the next six months or so is,

Speaker 18 are

Speaker 18 companies going to stop eating as much of the tariffs as they're going to eat? In which case, you could see

Speaker 18 goods inflation, you know, which is not even half of the picture, but it's a significant amount of the picture, total inflation.

Speaker 18 You could see good and goods inflation heat up in the next month, six months, year.

Speaker 18 And that's something I'm going to be watching really closely.

Speaker 15 We have no September jobs report. We'll have no October jobs report.
This is obviously all very important in terms of the Fed's interest rate decision, which is happening,

Speaker 18 going to be happening tomorrow. I mean, the whole picture, I'll tell you, and I think the whole picture is one where

Speaker 18 I think market commentary and the market itself has gotten a bit ahead of itself in terms of how many rate cuts we're going to get.

Speaker 18 We're a solid percentage point above the Fed's target on inflation. If you look at things like the Goldman Sachs Index of financial conditions, financial conditions are very loose.

Speaker 18 Markets are extremely hot. And indeed, the economy, with the very important exception of the jobs reports, and we talked a little bit about those on the show in the past, looks pretty hot too.

Speaker 18 So, you know, I don't think any

Speaker 18 rational person would look carefully at the numbers we're seeing right now and say inflation is beaten, the economy is slowing down, we have a percentage point or more of cuts coming.

Speaker 18 I just don't see the case.

Speaker 15 And yet we're looking at a, I think, near 100% certainty of a rate cut.

Speaker 15 And the market appears to be unanimous. And in a lot of the reporting,

Speaker 15 I was seeing, which surprised me. I agree.
I think the commentary is a little

Speaker 15 got itself in a bit of a spin because the commentary says, this seals the deal. Now that we're at 3% inflation, hooray,

Speaker 18 now we're going to get a rate count.

Speaker 15 It's like, hold on. We were at 2.3%.

Speaker 15 I thought we were trying to get to two. We're at 3 now.

Speaker 18 And that is something that is

Speaker 18 sort of in the background on everyone's mind, I think, which is,

Speaker 18 does 2% now mean the number starts with a 2? Right. Do you know what I mean?

Speaker 18 Not 2%.

Speaker 18 Like 2.7% counts as 2 now. Round up and up.

Speaker 18 And

Speaker 18 I don't really know. I don't really know what the Fed's position on that is.
And look, I sympathize with the people

Speaker 18 on the Monetary Policy Committee or the Federal Open Market Committee who are more dovish because the job situation is a little weird. Yes.

Speaker 18 You know, you're looking at a very low level of job creation every month. You're reading a lot of announcements about layoffs.

Speaker 14 And

Speaker 18 the fact that the rest of the indicators we have of

Speaker 18 the economy look pretty strong other than that jobs number,

Speaker 18 that's only so reassuring. I mean, the Fed's mandate is employment.
Right. Right.
The Fed's mandate is not economic growth. It's employment.

Speaker 18 So they've got to take the jobs numbers, which are a little spooky. They have to take them seriously.

Speaker 18 But everything else that I can see is saying the economy's warm, financial conditions are loose, and inflation is too hot for comfort.

Speaker 15 What would be your predictions for the next several months or so when it comes to inflation? I mean, I can just tell you where I stand on this.

Speaker 15 Prices are going up, tariffs pass it, beginning to pass through. We're starting to see it in the data and we're cutting rates.
I think it's only going to get worse from here.

Speaker 15 I just want to sit here if you agree.

Speaker 18 I agree with you on the good side. Yeah.
I think

Speaker 18 there's good reasons to think that there will be more tariff pass through to consumer inflation. We're already seeing it in

Speaker 18 you know, producer inflation. It's going to move towards consumer inflation.
The services side is the real question. Wage growth is still pretty good,

Speaker 18 but again, if you take housing out, services inflation, you know, haircuts, legal services, health insurance, all that kind of stuff, that stuff's pretty hot too.

Speaker 18 So I think, but I just don't know. I feel less confident about what that's going to do.

Speaker 18 If the jobs number are telling us something about underlying weakness in the economy and we continue to see very low job creation, it makes sense that non-service, that service inflation would come in a little bit.

Speaker 18 Because that stuff is really driven by wages and wages is driven by how tight the job market is. Yeah.

Speaker 15 We're also seeing a lot of sentiment reports coming out. You, Michigan sentiment down 22%

Speaker 15 from a year earlier.

Speaker 15 Trump is just increasingly polling badly when it comes to his handling of tariffs on the economy.

Speaker 15 I mean, I know that I struggle with these sentiment reports because I find them so political, just

Speaker 15 by nature. But

Speaker 15 are you looking at these sentiment reports? Are they playing into your view of the economy?

Speaker 18 I look at them. The problem is, and I've written about this a little bit in recent weeks,

Speaker 18 is

Speaker 18 they're less and less predictive. Right.
That the sentiment sentiment has been bad for a long time.

Speaker 18 And in the last couple of years, it just hasn't been a great guide

Speaker 18 to what markets are going to do, what employers are going to do. I think there is no question

Speaker 18 that the Liberation Day fiasco

Speaker 18 put employers in a mood to wait and see.

Speaker 18 I don't think there's any question

Speaker 18 that

Speaker 18 people like to hire when the future looks predictable.

Speaker 18 And we haven't had a lot of that in policymaking. But I think we might be getting over that a little bit.

Speaker 18 The shock and horror of that absolutely bizarre news conference is receding a little bit into the past.

Speaker 18 And hopefully there's been some lessons learned there

Speaker 18 and

Speaker 18 sentiment will slowly recover.

Speaker 15 Okay.

Speaker 15 Just while we have you, we only get to speak every so often. What else is on your mind?

Speaker 15 Anything happening in the markets right now that you're paying particular attention to that you're finding quite significant?

Speaker 18 It's fun watching gold wobble here

Speaker 18 because gold was an interesting case where it started out as a fundamentally backed story.

Speaker 18 So a year or two ago, it was like central banks were buying more gold as as a kind of way to diversify their portfolios. Gold was cheap.
The The dollar weakened a little bit.

Speaker 18 You know, all of this stuff was getting behind gold. But then the trade kind of took on a life of its own and became a kind of FOMO momentum retail trade.

Speaker 18 And in the last couple of days, it's kind of been like, whoa, let's slow down here a little bit. And I'll be fascinated to see what that does.

Speaker 18 And, you know, it's been a great case of when you have a price that's going up, the narratives will fall in place. Like, you know, gold went past 3,000 up to 4,000.

Speaker 18 It was like, let's just make up stories about what's driving the gold price.

Speaker 18 But what was driving the gold price was the gold price. Exactly.

Speaker 18 There's nothing else to it.

Speaker 15 It's a classic case of FOMO. And it's so interesting how the price increases in gold.
We did see in the reporting, oh, it's because the central banks are buying gold.

Speaker 15 But that only explained a fraction of the price increase.

Speaker 18 And explained it like two years ago. You know, the banks have actually backed off now, right? Yes.

Speaker 18 Because if you're a central bank, you have an allocation to gold and it's a percentage allocation of your portfolio. Price of gold goes up 50%.
Suddenly you're over your allocation.

Speaker 18 You have too much gold. Yes.
Right. Exactly.

Speaker 18 So

Speaker 18 it's a very funny story. And of course, we have to, the other thing I would mention is just we, you know, we have big tech earnings rolling in this week.
And

Speaker 18 we always kind of hold our breath because, you know, this is a third of the market by value or whatever it is now. And we have five of the big ones reporting this week.

Speaker 18 And we're going to be waiting, of course, with bated breath for all of that.

Speaker 15 Any thoughts on what you think we can expect in the next week or so?

Speaker 18 I mean,

Speaker 18 any time

Speaker 18 I've been skeptical of these businesses' ability to just keep growing despite their incredible size, I've been wrong.

Speaker 18 So I'm just not going to step in in front of that steamroller again. I mean, these businesses are just their ability to grow.

Speaker 18 And of course, everyone's worried about their spending right now, but the fact is they've got the money. Yep.
You know, sales are growing. So, I mean, these, these things are an incredible story.

Speaker 18 And I think chances are good, they'll just report another good quarter.

Speaker 18 It's the tail risk you worry about, the small percentage chance that one of these guys says, ah, we've, we've been doing some thinking and maybe we have to change our strategy with regard to these data centers a little bit.

Speaker 18 And then it's going to be game on. But I think the probability of that is low, but it's just going to be a high-consequence event if it does, if the dice come up that way.
All right.

Speaker 15 Robert Armstrong, U.S. financial commentator for the Financial Times, author of the Unhedged newsletter, which, as everyone knows, is my favorite newsletter.
Rob, great to have you on the show.

Speaker 15 Thank you.

Speaker 18 Pleasure to be back. Invite me anytime.

Speaker 15 So, the data is in. Inflation is up again.

Speaker 15 Last week, we predicted that this would happen. We said that inflation would rise again and that it would continue to rise.
Indeed, prices in America are now up 3% from a year ago.

Speaker 15 That's up from 2.3% inflation just a few months ago. Now,

Speaker 15 why did we predict this?

Speaker 15 Well, quite simple. Our thesis is one, that tariffs raise prices.
And two,

Speaker 15 that it takes some time for tariffs to raise prices. That's why we weren't surprised when inflation was only 2.4% in May because the tariff impact hadn't taken effect.

Speaker 15 And it's also why we were so angry when we saw Treasury Secretary Scott Bessingt going around parading that number to the media as his evidence that tariffs don't raise prices.

Speaker 15 No, tariffs do raise prices, but it takes time. And that's exactly what we're seeing now.
We had 2.3% in April, the month of Liberation Day, then it went up to 2.4%.

Speaker 15 Then it went up to 2.7%, then to 2.9%. And now we are up to 3% inflation.
There is absolutely no question tariffs are raising prices. That's also why the tariff-sensitive items are exploding in price.

Speaker 15 Audio equipment prices up 14%.

Speaker 15 Beef prices up 15%.

Speaker 15 Coffee prices up 19%.

Speaker 15 This is the tariff impact. This is what we're seeing.
Now, for those of you who say, hey, you're wrong, economists had expected 3.1% and we got 3%. So this is actually good.

Speaker 15 All I can say to you is that you are missing the point.

Speaker 15 Just because a group of economists were 0.1% off on how large the tariff impact would be in this specific month, that doesn't mean there is no tariff impact.

Speaker 15 And it certainly doesn't mean the experts were wrong. The debate that we were having back in April was whether or not tariffs would reignite inflation.

Speaker 15 Many people said they wouldn't, including people in the administration. Well, we were at 2.3, now we're at three.

Speaker 15 So there is no debate. Tariffs have reignited inflation.
Tariffs have made America more expensive. And so long as the tariffs remain in place, prices will continue to rise.

Speaker 15 Our prediction, next month, when we get the next CPI report, inflation will be even higher.

Speaker 15 Okay, that's it for today. This episode was produced by Claire Miller, edited by Jill Patterson, and engineered by Benjamin Spencer.
Our associate producer is Alison Weiss.

Speaker 15 Our research team is Dan Shalon, Isabel Kinsell, Kristen O'Donoghue, and Mia Silverio. And our technical director is Drew Burroughs.
Thank you for listening to Prof G Markets from Prof G Media.

Speaker 15 If you liked what you heard, give us a follow. I'm Ed Elson.
I will see you tomorrow.

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