I have no dog in this fight, but the small Wall Street "vulture" funds fighting Argentina have become a serious headache for world finance. They are fighting now for the eleventh year to be fully paid for the Argentina sovereign bonds they have bought, representing the 7% "holdouts" that never accepted the 2001 debt restructuring at 75% loss. Clarin says that Argentina, in a show of good will, is now offering the holdouts a window to allow them to accept the original arrangement. It is a pathetic delaying tactic and no vulture worth its name will accept it. Argentina's lawyers are argueing that if the hooldouts win the appeal, then all former debt restructurations (Greece, Portugal, Iceland) will be reopened and all future debt arrangements will become impossible. Who will accept to paid less than the 100% if those who hold out enough will be fully repaid? It is the end of the sovereign debt restructuring business. The Federal Reserve has registered itself as an interested party in the case.
If the vultures win, which now seems quite possible, the almost worthless Greek and other sovereign bonds will suddenly rise. In fact, the value of Argentine bonds is varying daily following the ups-and-downs of Judge Thomas Griesa's appearance. He says "Good Morning" with a smile - the bonds crash; he looks angry and dejected - jubilation in Buenos Aires. Well, not exactly so, but the Argentine government is much worried. The operational question is: Should one buy dirt-cheap Argentine defaulted bonds?