Significant news about peso exchange rate

[Greg2231]

The defaulted Argentine Bonds are subject to foreign law because that is what was stated in the bonds when they were issued in order to make them more marketable.

Most of the bonds that Greece recently defaulted on were subject to greek law, which allowed them to force the holders to accept a debt exchnage by ammending Greek law and inserting a collective action clause, however there was a few billion in Greek bonds that had been issued subject to I believe English law, and there we holdouts on those who recently got paid back full value, also the new bonds issued in Greece as part of the debt swap are now subject to English law, though I think they do have a collective action clause in them.

 

[el_expatriado]

The defaulted Argentine Bonds are subject to foreign law because that is what was stated in the bonds when they were issued in order to make them more marketable.

Most of the bonds that Greece recently defaulted on were subject to greek law, which allowed them to force the holders to accept a debt exchnage by ammending Greek law and inserting a collective action clause, however there was a few billion in Greek bonds that had been issued subject to I believe English law, and there we holdouts on those who recently got paid back full value, also the new bonds issued in Greece as part of the debt swap are now subject to English law, though I think they do have a collective action clause in them.

If you buy bonds issued with local law you are basically just trusting the government to pay you back. You can forget about going to court.

 

[nikad]

Yes, I will be watching. I for one signed a contract to buy a new car in pesos, but if the dollar really goes to 5.10, I am going to cancel that purchase and buy dollars. I still can't imagine that anyone is going to sell dollars at 5.10 though. It goes against the market.

If there are actually blue dollars at 5.10 on Monday, there will be a blood bath of people selling Boden 2012 and buying dollars with those pesos. If I really believed this, I would be calling my broker now to sell the Boden 2012 as fast as possible. We are talking about a drop of 25% or more. Why would I wait to get official dollars in August if I can sell pesos now and get blue dollars?

If Boden drops at around 510 I will be buying, as this would be all legal usd ( hey and you could do the loop I told you about )

 

[PhilinBSAS]

I'm sorry, but vulture funds serve a useful purpose. They buy up the bonds of the poor pensioners and give them something at least. Argentina offered them NOTHING. Once they buy up the debt they go after Argentina in court with their armies of lawyers and well-connected politicians. And they are making progress.

If I am a pensioner with Argentine bonds, vulture funds are my friend because I know there are people out there in the market that won't let countries just get away with defaulting. And I know that there is someone out there who will buy my worthless pieces of Argentine junk debt.

If Argentina paid its obligations like it should vulture funds wouldn't exist.

Well my friend of the vultures you and everyone else is living the consequences and that includes lots of little old ladies in Argentina as well.

Did you read the article?

People who invest in bonds are paid high interest because there is a risk of default. It is speculation no more no less. And if you gamble then sometimes you loose!

Hasn't it dawned on you there is something wrong with the way the investment market works?

 

[el_expatriado]

Well my friend of the vultures you and everyone else is living the consequences and that includes lots of little old ladies in Argentina as well.

Did you read the article?

People who invest in bonds are paid high interest because there is a risk of default. It is speculation no more no less. And if you gamble then sometimes you loose!

Hasn't it dawned on you there is something wrong with the way the investment market works?

I think the market works just fine.

If you are a country who misbehaves, you have to pay more to issue debt. If you are an investor and buy that debt, you are at risk the country might misbehave with you. When the misbehavior happens, you have specialists who come in and will pay you something for your worthless Argentine papers. Those specialists try to get the government to behave. The country fights back with more misbehavior, sending borrowing costs even higher.

It is all an endless circle. No matter what piece of the puzzle you find yourself in, the market ensures you get what you deserve. There's no free lunch.

 

[PhilinBSAS]

I think the market works just fine.

If you are a country who misbehaves, you have to pay more to issue debt. If you are an investor and buy that debt, you are at risk the country might misbehave with you. When the misbehavior happens, you have specialists who come in and will pay you something for your worthless Argentine papers. Those specialists try to get the government to behave. The country fights back with more misbehavior, sending borrowing costs even higher.

It is all an endless circle. No matter what piece of the puzzle you find yourself in, the market ensures you get what you deserve. There's no free lunch.

Wow having read this I'm actually almost beginning to feel some sympathy for this wretched gov! Of course the market doesnt work - it isnt free and its stacked against those who havnt got the means! Whats all this crap about "a country that misbehaves" . The Market has no morals!

You Sir are an apologist for parasites.

 

[John.St]

What i dont understand is why they want to keep to peso so high against the dollar when most countries that have stuff to export want is to go lower - just look at the REAL in the last few weeks.

I am afraid the present government has learned from what a previous government did in 1999-2001, i.e. wasting a lot of much needed foreign currency on defending the peso exchange rate - out of pure national pride.

 

[el_expatriado]

Wow having read this I'm actually almost beginning to feel some sympathy for this wretched gov! Of course the market doesnt work - it isnt free and its stacked against those who havnt got the means! Whats all this crap about "a country that misbehaves" . The Market has no morals!

You Sir are an apologist for parasites.

The market is free. The problem is when governments decide to pick winners and losers and stop the market from functioning properly. Even then, however, the market will find a way. Capitalism is the natural result of leaving people to their own devices.

And I'm sorry, but countries can and do misbehave as much (or more) than any private person or company. Today when a country defaults on its foreign debts the worse it faces is a credit lockout and vulture funds. Back in the day a default on your foreign debt meant the British blockading your ports with gunships and taxing all imports and exports until the debt was repaid.

Today the penalties for defaulting are not so severe.

 

[nicoenarg]

Wow having read this I'm actually almost beginning to feel some sympathy for this wretched gov! Of course the market doesnt work - it isnt free and its stacked against those who havnt got the means! Whats all this crap about "a country that misbehaves" . The Market has no morals!

You Sir are an apologist for parasites.

You seem to be an apologist for law-breakers, thieves and free-loaders. And if one does not have the means, then one shouldn't dream bigger than one can handle.

Current systems and cultures in place seem to reward stupidity. That's why people assume "oh poor Argentina!" and "oh evil vulture funds".

Perspective gone haywire, it seems.

 

[expatinowncountry]

You seem to be an apologist for law-breakers, thieves and free-loaders. And if one does not have the means, then one shouldn't dream bigger than one can handle.

Current systems and cultures in place seem to reward stupidity. That's why people assume "oh poor Argentina!" and "oh evil vulture funds".

Perspective gone haywire, it seems.

You should have been in Argentina in 1998-2001 when the unemployment rate was 30%, there was a four year long recession and Argentina was the example to follow accordingly to the IMF/WB and market friendly operators... Argentina defaulted in 2001 because there was no way it could pay its debt back then. Both borrowers and lenders were to blame in that occasion. Same in Spain or the US where people were buying 500K houses with a down payment of 30K and annual salaries of 40K. Who is to be blamed there?
If you have a Swiss bank paying you 0.5% per year and you decide to go for an emerging market bond that pays 15% you need put your greed aside for a second to clearly understand the risk involved in that investment.
So the "dreams" you mentioned go both ways: for the country that borrows and for the old lady who wants to achieve financially what she could not achieve economically.