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Goldman Buys $2.8B Worth of Venezuelan Bonds, and an Uproar Begins

nytimes.com

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Re: Goldman Buys $2.8B Worth of Venezuelan Bonds, and an Uproar Begins

#41

Post by chiph »

tgb wrote: post #17
tyingq wrote: post #13

Earlier quoted context omitted.

The original letter has more detail as to why Borges believes that. I'm no expert, so I have no idea if it's plausible. On the other hand, if I were a citizen suffering under Maduro's regime, I'd be pissed at any sort of foreign investment that Maduro could spend as he wanted. In short, "provides a financial lifeline to his authoritarian regime" and "desperate desire to gain resources needed to secure weapons and oth…

It's not directly useful for Maduro. They bought the bonds in the secondary market for a seventy percent discount. Maduro made no money off the sale. And at that large of a discount I don't think he'll have an easy time selling new bonds to anyone either.

At that quantity, I expect they just set a new price for them.

Re: Goldman Buys $2.8B Worth of Venezuelan Bonds, and an Uproar Begins

#42

Post by jevgeni »

1zq wrote: post #26
tgb wrote: post #17

Earlier quoted context omitted.

It's not directly useful for Maduro. They bought the bonds in the secondary market for a seventy percent discount. Maduro made no money off the sale. And at that large of a discount I don't think he'll have an easy time selling new bonds to anyone either.

From the article: > While Goldman Sachs defended its trade by saying that it bought the bonds on the open market from a broker, bankers and traders say the money ultimately ended up in Venezuela’s treasury because the seller was an institution with ties to the government.

Which still doesn't matter, if it's the secondary market. You can't borrow $100 and get more than that.

Re: Goldman Buys $2.8B Worth of Venezuelan Bonds, and an Uproar Begins

#44

Post by conanbatt »

TorKlingberg wrote: post #2

It looks like Goldman Sachs is betting that Venezuela will sort it self out by 2022, and getting a good discount. I'm not sure how that is “making a quick buck off the suffering of the Venezuelan people”, or how the people would benefit if nobody buys the bonds.

I agree with you in general economic concepts but begin from argentina, I tell you, that all the money coming in for this will be poached by the current government in its corruption, and the next government will have to deal with that debt.

Re: Goldman Buys $2.8B Worth of Venezuelan Bonds, and an Uproar Begins

#45

Post by jevgeni »

DarkKomunalec wrote: post #15
eeasss wrote: post #12

Earlier quoted context omitted.

The purchases happened at the secondary market. This means that this bond are already issued... this means that what you say above is not true.

Where the bonds were purchased does not affect Goldman's ability or motivation to pressure Venezuela.

Or any creditor's motivation for that matter. Debt must be paid back, regardless of who the creditor is.

Re: Goldman Buys $2.8B Worth of Venezuelan Bonds, and an Uproar Begins

#46

Post by netsharc »

bobcostas55 wrote: post #7
DarkKomunalec wrote: post #3

Earlier quoted context omitted.

As happened in Greece, such purchases result in pressure applied to the country to pay off its debts, rather than help its people. It's good in the short term, but in the long term, government debt ends up as a massive transfer of capital to the lenders.

>As happened in Greece Greece had the largest default in history[0], virtually all private debt holders were forced to take a ~70% haircut. [0]: https://en.wikipedia.org/wiki/Private_sector_involvement

Except, it has not defaulted to the ECB, Eurozone or IMF... these institutions are insane, when asked "We owe you x billion dollars at the end of the month. We can either pay you or pay our pensioners. What should we do?", the answer was, "Well, pay us!".

Re: Goldman Buys $2.8B Worth of Venezuelan Bonds, and an Uproar Begins

#47

Post by ant6n »

jessriedel wrote: post #33
Retric wrote: post #9

Earlier quoted context omitted.

That 'haircut' is based on interest assumptions not actual costs. The actual haircut was only 53.5% of the face value so if you bought it from someone else at a higher discount you made significant profit. Assuming you sold it or there will be no second default.

Sorry, are you saying that if a bond is supposed to pay a certain interest which isn't actually paid, that this isn't a partial default because the interest is only an "assumption"? And we should only count the face value of the bond?

I think the point is more that by the time the default happened, the market already considered the bonds to be worth less then what they ended up being worth.

Re: Goldman Buys $2.8B Worth of Venezuelan Bonds, and an Uproar Begins

#48

Post by [deleted] »

mjfl wrote: post #36
supernumerary wrote: post #34

Earlier quoted context omitted.

Been going on for a while - this is from 2007: Vulture funds buy up sovereign debt issued by poor countries at a fraction of its face value, then sue the countries in courts - usually in London, New York or Paris - for their full face value plus interest. https://www.theguardian.com/business/2007/oct/17/debt.law

As they have every right to do. Taking out a loan is making a legally enforceable promise to pay back the money, and enforcement actions like that are the only reason that people make the loans in the first place. I sure as hell wouldn't buy a Venezuelan bond.

[deleted]

Re: Goldman Buys $2.8B Worth of Venezuelan Bonds, and an Uproar Begins

#49

Post by conanbatt »

jevgeni wrote: post #40
conanbatt wrote: post #38

Damn, this is argentina all over again. And this was a HUGE bet also, they must think the government is going to come down any moment.

No, they are betting for either the government to survive, or the new government to honour its previous debts.

I would find it hard to believe that GSachas believes that this government will have an economic recovery. Specially considering the maturity of the debt, its surely a bet that the next government will honor the debt.

But that is pretty terrible for the next government, that today would like no new debt to be issues, since it will all be spent today against them, and they will have to pay it in the future.

Re: Goldman Buys $2.8B Worth of Venezuelan Bonds, and an Uproar Begins

#50

Post by kolbe »

We are approaching the point where helping the Venezuela is akin to helping North Korea. I suppose Goldman was able to squeeze in some business a few days/weeks before we start officially sanctioning support for their corrupt and inept government, but it's 100% fucked up that anyone would offer support for this regime. And every dollar that Maduro gets to help sustain himself is a dollar that will functionally be used to kill another civilian through starvation/malaria/etc.

And do not mention the secondary market. The Fed buys off the secondary market, but that doesn't mean it's not the one providing liquidity.

https://www.nytimes.com/2017/05/30/opinion/venezuela-needs-i...

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