Brazil's Getting Annihilated

Brazil is selling off on the news that current President Dilma Rousseff has taken in the lead in polls predicting next month's presidential election. This augurs poorly for prospects of reform.

The Brazilian stock market, the Ibovespa, is down 4%.

The Brazil ETF, a basket of Brazilian stocks that trade as one security, is down 5%.

Petrobras, Brazil's massive quasi-state oil company, is heavily weighted in the ETF, and is leading stocks down with its own 10% plummet.

Wall Street superstars like Fortress Investment Group's Mike Novogratz have been betting on regime change to turn Brazil's economy around. Inflation is high, wages are rising but corporate margins are low, and difficult reforms are necessary.

Morgan Stanley sees the country's GDP going negative in the first half of 2015, contracting -0.4%.

However it looks like that change may not come - not from the top at least. The latest polls put Dilma Rousseff ahead of her most serious contender, environmental activist/politician Marina Silva, from 1% to 4%. In early September, some polls put Silva up by as much as 10%.