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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

#51

Post by jevgeni »

tyingq wrote: post #25
whatok wrote: post #23

Earlier quoted context omitted.

The only reason why this is even made public is because Goldman is a big and easy target. There are mutual funds that I wouldn't be surprised a bunch of people here hold that easily dwarf GS in this space.

Sure, but that seems logical. If you want to make a deterrent, use a big name that will get press coverage, even if they bought on a secondary market. For example, I'd be loath to buy Sudanese investments, even if I could prove it was a secondary market buy. The association just has bad optics.

It isn't much of a deterrent, if you know that only a single competitotor of yours or just a few companies will be singled out for the outrage. Time and time again. There are fund managers, pharma companiess, and industrial conglomerates that acted way more shitty than most banks, but people tend to ignore that or forget that very quickly.

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

#52

Post by jevgeni »

isubkhankulov wrote: post #43

goldman's asset management arm bought the bonds for client portfolios- not goldman itself. I don't see any controversy here.

I agree with you, but also your comment made me think about the absurdity of how most people perceive banking. I.e. "if a bank does it to be profitable, it's bad; but if somebody else does it, it's OK".

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

#53

Post by mark_l_watson »

This article and a similar one about India are on the HN front page right now. In addition to simply taking advantage of people in countries with political problems, there is also probably a trend of wanting to divest some investments to alternatives out of the USA, England, etc., to smaller countries with huge natural assets. I don't think it will happen in the short or medium term future in the USA, but someday our economic system will pop due to the debt of government and individuals.

I took my assets out of the US stock market in 2007 and avoided some pain, and a few years later when I wanted to start investing again, I diversified a bit more to international funds. I understand the desire to do that now also.

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

#54

Post by jevgeni »

conanbatt wrote: post #49
jevgeni wrote: post #40

Earlier quoted context omitted.

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.

It is a difficult situation, but then again, revolutions are tough.

I'm not sure about this debt package, but I'm betting this was issued by the Venezuelan government to fund some real assets, like oil rigs or whatever. If that's the case, then the capital is still there, one just must make sure it generates profits.

A worse situation would be if the gov't loaned out the money, put it in suitcases and ef'ed off.

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

#56

Post by tyingq »

jevgeni wrote: post #51
tyingq wrote: post #25

Earlier quoted context omitted.

Sure, but that seems logical. If you want to make a deterrent, use a big name that will get press coverage, even if they bought on a secondary market. For example, I'd be loath to buy Sudanese investments, even if I could prove it was a secondary market buy. The association just has bad optics.

It isn't much of a deterrent, if you know that only a single competitotor of yours or just a few companies will be singled out for the outrage. Time and time again. There are fund managers, pharma companiess, and industrial conglomerates that acted way more shitty than most banks, but people tend to ignore that or forget that very quickly.

Well, it did give the opposition a podium that they didn't otherwise have. I would guess many of us wouldn't have thought about Venezuela today otherwise.

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

#57

Post by supernumerary »

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.

I think the issue is that the enforcement happens in the West, and not so much that it happens. There are big law firms that stand to make a lot of money from the litigation. Furthermore there is likely a contractual obligation that this be litigated in the West. All of which incentivises buying up dubious debt that needs to be run through the legal system, basically it pays twice... see (mjfl's comment above)

Furthermore, in the context of western exploitation/interference with these countries' economies, many of whom have not had recourse to a judicial process for reparations - your notion of what is rightful or fair is perhaps too narrow.

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

#58

Post by jessaustin »

jevgeni wrote: post #42
1zq wrote: post #26

Earlier quoted context omitted.

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.

What stops Maduro from issuing a bond for $1000 and selling it for $100? After all he knows he'll be dead or in Switzerland when the bond matures. He just cares about the $100 now.

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

#59

Post by conanbatt »

jevgeni wrote: post #54
conanbatt wrote: post #49

Earlier quoted context omitted.

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.

It is a difficult situation, but then again, revolutions are tough. I'm not sure about this debt package, but I'm betting this was issued by the Venezuelan government to fund some real assets, like oil rigs or whatever. If that's the case, then the capital is still there, one just must make sure it generates profits. A worse situation would be if the gov't loaned out the money, put it in suitcases and ef'ed off.

The latter is what happens on an unstable government that thinks its going down. Poeple scramble to get the last piece and get out.

IT might not happen with this, but it might and being south american, its likely.

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

#60

Post by varjag »

supernumerary wrote: post #57
mjfl wrote: post #36

Earlier quoted context omitted.

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.

I think the issue is that the enforcement happens in the West, and not so much that it happens. There are big law firms that stand to make a lot of money from the litigation. Furthermore there is likely a contractual obligation that this be litigated in the West. All of which incentivises buying up dubious debt that needs to be run through the legal system, basically it pays twice... see (mjfl's comment above) Furthe…

> I think the issue is that the enforcement happens in the West, and not so much that it happens.

Well face it, it either happens in the West or is not happening at all. And it's not like some obscure footnote, the arbitrage conditions are fully disclosed beforehand.

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