“Reviewing charts in the library some months ago I noticed the meteoric rise in the Venezuelan stock market index. I put it in my favorites so as to see how it played out. It continued the rise. It now reminds me of uranium in 2005-2006. The weakness in the local currency is certainly part of the story here but I am wondering if there is a play in Venezuela particularly, and in hyper-inflation impacted markets in general. Are there rules of thumb? Any comparisons to previous hyper-inflation markets of yesteryear like Argentina?

“All my best from a cool and wet American heartland,”

Eoin Treacy's view Thank you for this interesting question I agree Venezuela is an interesting case study.

Venezuela's nationalization of oil assets in 2007 soured investor sentiment towards the country and the additional measures taken by Hugo Chavez to cement his grip on power do not correspond with our view of what constitutes good governance. As investors we are often most interested in the return on our money but sometimes the return of our money is a more relevant consideration.

Banks represent at least 90% of the Venezuelan Index. These institutions are also the organs of the government's power. By investing in a market such as Venezuela one is running the risk both of currency devaluation and nationalization of the banking sector. So yes, there is the potential for capital appreciation in the stock market but is it worth the risk?