Castro's Resignation: The Market Says It Matters

Why do the markets think Castro stepping down will matter?

Me too. And not just because I think that the only good communist is a dead communist.

I'll be drinking a Cuba Libre or two tonight, that's for sure.

Bryan, maybe you could take up drinking for this occasion?

mgroves:

Probably because investors have never heard of Fidel's brother.

I believe that it doesn't matter if Fidel Castro resigned from office. I think government is like a "mafia", doesn't matter what the country is. Now, talking about Cuba, it is more obvious that Fidel Castro has and will have his hands involved in government. The fact is that he will no longer be the phisical or actual dictator of Cuba, but he'll be just as an influential person that can mandate and inforce "new laws".

Do you think that things politics in Cuba will change with Fidel Castro's resignation?

My opinion is that they will change from a communist to a democracy so that it will have open trade with the US. I think that if they came to there senses and changed, it would boom with cigar sells. but more than likely, it will have a big impact with the US cigar industry.

Cuba would also benefit from tourism. They could open up some resorts and advertise. Similar to what some states do. And to make it even better, Cubans would not have to float here anymore. They can take a 2 hour boat trip here and visit.

I know that if the USA lifts the embargo, I would love to go visit Little Havanna

Although in the past he was supposedly the more pro-Soviet and Marxist-Leninist of the two, supposedly more recently Raul has been more pragmatic and open to freer markets than Fidel. That may not translate to the genuine political liberalization that would really open things up, but he has signaled that he wants to deal with the US, and putting him in the top position officially may lead to enough dealing to lead to some loosening of the economic embargo at least, which is what this market index is about.

Maybe the market says otherwise, but it's been acting a little irrationally lately, so we sould probably take it with a grain of salt. The Herzfeld Caribbean Basin Fund's investments include a paltry $16 million of assets, about $1 million of which are U.S. treasuries, and most are small bets under $500K. It's major investments include Consolidated Water (CWCO) at about $1.3 million and Seabord Corporation (SEB), at about $1.5 million. Those individual securities were up yesterday, but nowhere near 17%. I think this disconnect is likely due to the fact that over-enthusiastic investors were drawn to the fund's stock ticker: "CUBA." I blogged more on this Wednesday morning.

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