Some hedge fund managers walk onto an Argentinian navy ship • Hacker News Board

Re: Some hedge fund managers walk onto an Argentinian navy ship

#31

Post by Dylan16807 » Thu, Oct 04, 2012, 7:01 PM UTC

molmalo wrote: post #28

Dylan16807 wrote: post #26

Earlier quoted context omitted.

I have to think that in that case it's the original lender that resurrects the loan, it just took a reminder. A vulture wouldn't buy a loan that was truly dead. I guess you can blame vultures for incentivizing old lenders to resurrect loans but that's a pretty indirect thing to be upset about.

As sethg pointed out, there's a difference between privete companies and sovereign countries. When you lend money to a company and that company can't pay you back, bankruptcy law gets in the game. But when you lend money to a state, you know that there's a calculated risk that they won't be able to pay you and you won't be able to do anything to force them to pay your money back. You protect yourself by adjusting the…

So the 'screw you' should transfer along with the debt and vultures aren't a legitimate problem?

Re: Some hedge fund managers walk onto an Argentinian navy ship

#32

Post by Dylan16807 » Thu, Oct 04, 2012, 7:12 PM UTC

kylebrown wrote: post #30

Dylan16807 wrote: post #17

Earlier quoted context omitted.

I'm having a bit of trouble understating the problem with vulture firms. Is it the fact that they bought a lot of risky debt at low prices? That is how risk works; I feel like objections along these lines are focusing on specific cases where the vultures got lucky and are ignoring the big picture. Is it the fact that they are demanding money out of bankrupt countries? This seems odd to me; wouldn't the original debto…

> Is it the fact that they bought a lot of risky debt at low prices? That is how risk works; The risk was already taken by the original lender, it was risk of default and was the reason for charging interest. The ability to default by declaring bankruptcy is a legal principal which distinguishes our society from a barbarous past full of relentless loan sharks. So The risk assumed by debt collectors is less legitimate…

Sure, the risk was originally on the primary lender. But later on they can sell their stake to get rid of the remaining risk. There's nothing wrong with buying a lot of debt that is likely to default. I agree though that if the country actually defaults then the vulture shouldn't get anything.

Re: Some hedge fund managers walk onto an Argentinian navy ship

#33

Post by molmalo » Thu, Oct 04, 2012, 7:30 PM UTC

Dylan16807 wrote: post #31

molmalo wrote: post #28

Earlier quoted context omitted.

As sethg pointed out, there's a difference between privete companies and sovereign countries. When you lend money to a company and that company can't pay you back, bankruptcy law gets in the game. But when you lend money to a state, you know that there's a calculated risk that they won't be able to pay you and you won't be able to do anything to force them to pay your money back. You protect yourself by adjusting the…

So the 'screw you' should transfer along with the debt and vultures aren't a legitimate problem?

If you have a useless paper, and you sell it to someone else, it's still a useless paper...

They are more of an inconvenience, and if they have deep pockets (like in this case), they can keep trying to fight legal battles, over and over for years. Making the other spend money in lawyers. Depending on the amount, it may be cheaper to just pay them and forget the whole thing, just like what happens in some patent cases with the hated patent trolls.

But when there's a huge sum at stake, sovereign states will fight in court. Until now, this fund has lost every case, but they keep appealing the verdicts. A few months ago, the US Supreme Court ended some of the demands, but they have opened a few more.

You get the idea... the kind of lawyers that make their profession look so bad.

Re: Some hedge fund managers walk onto an Argentinian navy ship

#34

Post by anamax » Thu, Oct 04, 2012, 10:31 PM UTC

kylebrown wrote: post #30

Dylan16807 wrote: post #17

Earlier quoted context omitted.

I'm having a bit of trouble understating the problem with vulture firms. Is it the fact that they bought a lot of risky debt at low prices? That is how risk works; I feel like objections along these lines are focusing on specific cases where the vultures got lucky and are ignoring the big picture. Is it the fact that they are demanding money out of bankrupt countries? This seems odd to me; wouldn't the original debto…

> Is it the fact that they bought a lot of risky debt at low prices? That is how risk works; The risk was already taken by the original lender, it was risk of default and was the reason for charging interest. The ability to default by declaring bankruptcy is a legal principal which distinguishes our society from a barbarous past full of relentless loan sharks. So The risk assumed by debt collectors is less legitimate…

> The risk was already taken by the original lender, it was risk of default and was the reason for charging interest. ... So The risk assumed by debt collectors is less legitimate, and a collector's claim is on shakier legal basis

Not so fast.

The price that I'm willing to pay for something, the risk that I'm willing to take, depends on whether I'm able to sell my interest to someone else.

Curiously enough, other people aren't very willing to buy worthless things.

If debt collectors have "less legitimate" claims than the original lenders, they're not going to pay as much as they will if their claims have the same legitimacy. As a result, original lenders are going to demand more interest and protection for their interests.

If you want people to make risky loans, you must protect the rights of folks who buy loans that have fallen on hard times.

Re: Some hedge fund managers walk onto an Argentinian navy ship

#35

Post by jonnii » Thu, Oct 04, 2012, 11:15 PM UTC

arbuge wrote: post #7

antr wrote: post #5

Earlier quoted context omitted.

This ain't no vulture fund; and we all know about Argentinian "diplomacy". This fund invested in Argentina, because it believed in its economy - it went long. Like many other funds who invest in US treasuries, German bunds, JGBs, etc. We all know the Argentinian government is no example for a well-run government, and this fund is taking a stance (i) against the mal-practice/mis-management of the Argentinian finances,…

No. Elliott capital does not work this way. Google them. They don't go long on anything. They buy debt from funds that did for pennies on the dollar when it doesn't look like that debt will be repaid. They then try to collect on it aggressively and turn a handsome profit in most cases. It's been a very successful strategy for them - that's how their founder is now a billionaire.

Unless you work for Elliott Management you know nothing about their investment strategy, other than it makes profit.

Re: Some hedge fund managers walk onto an Argentinian navy ship

#36

Post by kylebrown » Fri, Oct 05, 2012, 4:57 AM UTC

anamax wrote: post #34

kylebrown wrote: post #30

Earlier quoted context omitted.

> Is it the fact that they bought a lot of risky debt at low prices? That is how risk works; The risk was already taken by the original lender, it was risk of default and was the reason for charging interest. The ability to default by declaring bankruptcy is a legal principal which distinguishes our society from a barbarous past full of relentless loan sharks. So The risk assumed by debt collectors is less legitimate…

> The risk was already taken by the original lender, it was risk of default and was the reason for charging interest. ... So The risk assumed by debt collectors is less legitimate, and a collector's claim is on shakier legal basis Not so fast. The price that I'm willing to pay for something, the risk that I'm willing to take, depends on whether I'm able to sell my interest to someone else. Curiously enough, other peo…

> If you want people to make risky loans, you must protect the rights of folks who buy loans that have fallen on hard times.

Maybe lenders shouldn't be making such risky loans. Perhaps that could have averted the housing bubble. Maybe college tuition in the US wouldn't be rocketing sky-high past inflation. Its hard to know who is real benefactor of such willingness to lend. Far from clear that its the borrower..

Re: Some hedge fund managers walk onto an Argentinian navy ship

#37

Post by dguaraglia » Fri, Oct 05, 2012, 5:03 AM UTC

antr wrote: post #5

molmalo wrote: post #2

A vulture fund doing its things. ARA Libertad is a school vessel and is used for diplomacy. I doubt they can do something useful with this

This ain't no vulture fund; and we all know about Argentinian "diplomacy". This fund invested in Argentina, because it believed in its economy - it went long. Like many other funds who invest in US treasuries, German bunds, JGBs, etc. We all know the Argentinian government is no example for a well-run government, and this fund is taking a stance (i) against the mal-practice/mis-management of the Argentinian finances,…

Yeah, I'm really sorry the Argentinian government didn't let the country go to the vultures in detriment of a few rich people... we should just let the FMI take over and run the country so a few funds don't lose money.

Seriously? You are telling me that a government protecting it's citizens interests is wrong? I'd like to see you repeat that argument when the Chinese start kidnapping American citizens to get their money back.

Re: Some hedge fund managers walk onto an Argentinian navy ship

#38

Post by 100k » Fri, Oct 05, 2012, 4:53 PM UTC

arbuge wrote: post #19

Aside: There seems to be a strange (one-way) attraction between creditors and sailing ships these days. Another example: http://en.wikipedia.org/wiki/Sedov "Sedov has regularly been targeted by unpaid creditors of the Russian Federation such as Nissim Gaon (of now defunct Swiss group NOGA, an anagram of Gaon) and also by French holders of defaulted Russian bonds; in 2002 Sedov was forced to precipitously and unexpect…

I was curious AFBER because of the Russian Empire thing. It is indeed the association of holders of Tsarist Russian bonds. They are trying to get paid back two successor governments and 100 years later.

Re: Some hedge fund managers walk onto an Argentinian navy ship

#39

Post by Dylan16807 » Fri, Oct 05, 2012, 7:39 PM UTC

kylebrown wrote: post #36

anamax wrote: post #34

Earlier quoted context omitted.

> The risk was already taken by the original lender, it was risk of default and was the reason for charging interest. ... So The risk assumed by debt collectors is less legitimate, and a collector's claim is on shakier legal basis Not so fast. The price that I'm willing to pay for something, the risk that I'm willing to take, depends on whether I'm able to sell my interest to someone else. Curiously enough, other peo…

> If you want people to make risky loans, you must protect the rights of folks who buy loans that have fallen on hard times. Maybe lenders shouldn't be making such risky loans. Perhaps that could have averted the housing bubble. Maybe college tuition in the US wouldn't be rocketing sky-high past inflation. Its hard to know who is real benefactor of such willingness to lend. Far from clear that its the borrower..

On the other hand any loan to a small business is automatically risky, looking at the failure rate. I would hate for small businesses to be unable to get money.

Re: Some hedge fund managers walk onto an Argentinian navy ship

#40

Post by anamax » Sat, Oct 06, 2012, 5:06 AM UTC

kylebrown wrote: post #36

anamax wrote: post #34

Earlier quoted context omitted.

> The risk was already taken by the original lender, it was risk of default and was the reason for charging interest. ... So The risk assumed by debt collectors is less legitimate, and a collector's claim is on shakier legal basis Not so fast. The price that I'm willing to pay for something, the risk that I'm willing to take, depends on whether I'm able to sell my interest to someone else. Curiously enough, other peo…

> If you want people to make risky loans, you must protect the rights of folks who buy loans that have fallen on hard times. Maybe lenders shouldn't be making such risky loans. Perhaps that could have averted the housing bubble. Maybe college tuition in the US wouldn't be rocketing sky-high past inflation. Its hard to know who is real benefactor of such willingness to lend. Far from clear that its the borrower..

You want lenders making risky loans - that's where the growth and innovation comes from. Plus, risky loans are how poor people, companies, and countries make it.

Safety leads to narrow margins, and they're a serious problem. If you're running on a 10% margin, a 1% hickup is no big deal. If you're on a 1% margin, 1% wipes you out.

The housing bubble was a combination of regulation (insisting on subprime loans plus subsidies of fannie/freddie) and govt agencies screwing up everyone's risk assessment (fannie and freddie lied about their portfolio, so everyone's risk assessment models were broken).

College tuition lending is the same sort of disaster. Govt guarantees and (now) govt loans - what could possibly go wrong....