Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

nytimes.com

Post reply on HN
Print view View original

61–70 of 119 posts

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

#61

Post by cm2187 »

bhouston wrote: post #22

Goldman bought a lot of Greece debt that it knew wasn't great and made tons: https://www.thenation.com/article/goldmans-greek-gambit/ Goldman Sachs was also very involved in selling subprime mortages to unwitting investors. Goldman Sach has had to deal with lawsuits that it wasn't acting in its clients' best interests: http://articles.latimes.com/2010/may/16/business/la-fi-hiltz... If Goldman Sachs is involved, you a…

If they go long these bonds they are nasty speculators who are betting on the fact that Venezuelans will bleed themselves to repay. If they go short the bonds they are nasty speculators who are trying to make money on a country going bust. At this game it doesn't matter what they do, they will get this sort of reaction.

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

#62

Post by privateprofile »

conanbatt wrote: post #44
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.

Exactly what happens in Portugal and Greece with most of the money from the EU and the IMF, sadly...

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

#63

Post by mhuffman »

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.

>> and enforcement actions like that are the only reason that people make the loans in the first place.

And also that delicious interest. You forget that the lenders already intend on getting something out of it. The reason they are getting interest at all is that there is a risk. If there was zero risk, there would be no need to pay interest.

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

#64

Post by Spooky23 »

Retric wrote: post #9
bobcostas55 wrote: post #7

Earlier quoted context omitted.

>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

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.

I'm all for knocking on predatory bankers, but that's not a very compelling argument.

The borrower sold a bond at par -- so they got their $1. As the entity who bought that bond, you're fucked... the borrower isn't making interest payments and the debt is looking like a bad debt. So you sell it at a distressed value, in your example $0.53, losing half your principal investment + interest, to cut your losses.

The entity buying the distressed asset knows it's junk, which is why they buy it at a steep discount. The fact that they may make a significant profit if the borrower starts making payments is irrelevant.

At this point people start whining about predatory Goldman Sachs, etc. Notice that there was no outcry when places like Greece and Venezuela were happily borrowing and squandering money based on German credit (Greece) or temporarily inflated oil revenues (Venezuela). In the case of Venezuela, they managed to also kill the golden goose by deferring critical investments in oil infrastructure and making dumb political decisions.

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

#65

Post by jessriedel »

ant6n wrote: post #47
jessriedel wrote: post #33

Earlier quoted context omitted.

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.

The fact that the market priced in the haircut does not mean there was no haircut. It just distributes the loss between different creditors. The bonds are just as much in default, representing a net transfer from creditors to borrowers.

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

#66

Post by eonwe »

mhuffman wrote: post #63
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.

>> and enforcement actions like that are the only reason that people make the loans in the first place. And also that delicious interest. You forget that the lenders already intend on getting something out of it. The reason they are getting interest at all is that there is a risk. If there was zero risk, there would be no need to pay interest.

Only a part of the interest comes from risk.

One important part is that if I were to give you 10$ in 10 years, it has less value to you than me giving you 10$ now (which is the difference between lending you lending to me and you not lending to me if you were 100% sure I would pay back).

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

#67

Post by imiller »

mhuffman wrote: post #63
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.

>> and enforcement actions like that are the only reason that people make the loans in the first place. And also that delicious interest. You forget that the lenders already intend on getting something out of it. The reason they are getting interest at all is that there is a risk. If there was zero risk, there would be no need to pay interest.

Interest is because of the time value of money and risk, not just risk.

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

#68

Post by usrusr »

jevgeni wrote: post #37
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

Isn't it shocking that people dare ask for their money back? Surely, this is some kind of scam. /s

The interesting bit is that the debt buyers are making money from some advantage they seem to have in enforcing repayment relative to the original lenders.

Under proper rule of law, the original lenders would have exactly the same chance of getting money back as Goldman, eliminating all need to sell the debt at a massive discount.

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

#69

Post by gech »

mjfl wrote: post #31
bhouston wrote: post #22

Goldman bought a lot of Greece debt that it knew wasn't great and made tons: https://www.thenation.com/article/goldmans-greek-gambit/ Goldman Sachs was also very involved in selling subprime mortages to unwitting investors. Goldman Sach has had to deal with lawsuits that it wasn't acting in its clients' best interests: http://articles.latimes.com/2010/may/16/business/la-fi-hiltz... If Goldman Sachs is involved, you a…

Also realize that the biggest factor in buying bonds at a discount is having the ability to force the borrower to pay you back in full (the reason people are selling at discount is because people don't think they will be paid back). Goldman Sachs is one of the few organizations with the political clout to make sure that happens with Venezuela.

I don't think our poor sons and daughters should be involved in a military that will be used to enforce things like this

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

#70

Post by mhuffman »

imiller wrote: post #67
mhuffman wrote: post #63

Earlier quoted context omitted.

>> and enforcement actions like that are the only reason that people make the loans in the first place. And also that delicious interest. You forget that the lenders already intend on getting something out of it. The reason they are getting interest at all is that there is a risk. If there was zero risk, there would be no need to pay interest.

Interest is because of the time value of money and risk, not just risk.

Time value of money is also based on risk. You are betting that there is an alternative sure thing at which you could earn some expected rate.
Post reply on HN