In 2001 Argentine defaulted in its debt and refused to pay. Argentine bonds could be bought at 16% of its face value. Slowly, Argentina is getting used to the idea that debts should be paid and there is talk that it may pay about 52 dollars for each 100 dollar bond. Those speculators who bought Argentine bonds in 2001 and waited, may make a nice profit. I am not among them.
Thursday, March 25, 2010
Argentine Default Bonds Now Worth 52%
In 2001 Argentine defaulted in its debt and refused to pay. Argentine bonds could be bought at 16% of its face value. Slowly, Argentina is getting used to the idea that debts should be paid and there is talk that it may pay about 52 dollars for each 100 dollar bond. Those speculators who bought Argentine bonds in 2001 and waited, may make a nice profit. I am not among them.
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The amazing thing is that investors will one day lend to Argentina again. Who in their right mind would ever trust the Argentine leadership with their money? And yet they do, over and over - each generation forgets the lessons of the past.
K
K, the famous comedian George Burns said that one of the great things about being a comedian is that each new generation forgets the jokes of the past. One problem is that those who lend to Argentina might be paid as CEOs without skin in the game ... they have to do something to justify a $2,000,000 per year salary so ... they might as well lend $ billions to Argentina.
Generation? At Wall Street they are fighting who will lend the money to Argentina - the commissions are paid upfront, of course. The rest is unimportant. The British bankers made money selling bonds of the King of Patagonia, so Wall Street will find whom to unload Christina bonds.
Yes, that is the problem that needs to be fixed if our capital markets are ever going to recover. The brokers who call you up to sell you stuff have conflicts of interest up the kazoo and they are never punished for losses. They need to have skin in the game - if you make money from bonuses, you should be liable to give that money back and more if there are losses later. What we have now is worse than a casino.
K
Sometimes, in a casino, you win.
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