Argentina is tango-ing itself to the 9th default on its debt since Independence from Spain in 1816.
Having missed a $500M USD interest payment, May 25 will be the end of the grace period. Then War starts.
The investment crowd will once again act like victims and ask why.
Fool me once shame on you, fool me twice shame on me, so I thought.
The last default occurred in 2001 - $100bn USD.
Just in 2017 Argentina issued a $16bn USD 100 year bond was oversubscribed. It yielded almost 8%.
In 2018, issuance was oversubscribed again, with the 30 year $3bn USD bond yielding a juicy 7%.
Even more help came from the IMF with a promised $57bn USD package, that would be distributed with strings attached.
Alas, this time round, it will be messy all over again with Hedge Funds and large Investment Firm Houses (those guys that sell you funds) fighting to get their money back... or should I say your money back.
Gullible Money Managers enticed with a 7% coupon salivating over the plebs who in this environment cannot even manage a 2.5% coupon.
As Fidelity pointed out to the Financial Times today,
When it becomes necessary to negotiate with those who have borrowed our investors’ money, we do so in good faith and in a reasonable, professional manner,” the investment group said. “The interests we represent are those of the millions of individuals and thousands of financial advisers and institutions who have entrusted their money to us to invest on their behalf. ” "
This makes me chuckle.
So this guy or gal is saying that he knew full well the historical prospects of Argentina Debt- since he has a fiduciary duty towards Clients - yet decided nonetheless that this time was different and the investment thesis was sound.
An investment is a speculation gone wrong, I quip.
Sometimes I wonder if these investment allocations are not made just to keep the Compliance/Risk and internal lawyers to have something to do...
Benjamin Franklin advice is simple:
An Ounce of Prevention, is Worth a Pound of Cure.
With this simple analogy, Investment Houses could have saved a boatload of money on lawyers, Overtime expenses, worry and a big bill of Panadol pills. And your investment returns would have been much higher.
I like my investments simple - if someone has a history of defaulting - why are we surprised when they do it again?
Don't cry for them, Argentina. Adelante