Jefff1234
These Argentine bonds, the Bonar 24, are issued in US dollars and the principal and interest is paid in US dollars. Very cool!
I would not necessarily buy them today because they are selling at a premium, and they start paying off principal next year. Thus, at today's prices, your actual rate of return will be much lower than 8.75%, but then, with all the turmoil happening in ARgentina in the last few days, they are quite attractive again. I bought them during Cristina's time, and they were selling below par. They were originally issued to pay Repsol for the expropriation of YPF. When Repsol received them, they turned around and immediately sold them in the open market, where I bought some.
Buying real estate as a hedge against inflation may not, in fact, be a real hedge against inflation. Inflation is a very complex phenomena, especially in a country like Argentina, that loves to spend beyond its income; loves to close it doors to imports; loves monopolies, and has perhaps the strongest unionization laws in the world. By the way, we in the US are going that way too. We''ll shortly have a trillion dollar federal deficit, and the trade deficit is about $400 billion a year, which is horrendous. And Trump is closing the economy too with all his tariffs. Do you see the similarities between Argentina and the US? Scary for those of us that spend most of our time in the US.
In the US, since 2012, real estate housing prices have gone up a lot; depending on the area, anywhere between 50% to 100% or more. But there was little or no inflation, so why the jump? The reason was mainly due to the Federal Reserve's policy of keeping interest rates super low, so it made affordability very easy, which combined with low prices after the crash, made it a great deal to buy real estate in the US. Now, with interest rates starting to go up, you will surely see housing real estate prices drop. Coincidentally, inflation is starting to accelerate in the US, which will cause interest rates to go higher too. As these increase, housing prices will drop further. Notice that inflation is going up and real estate prices will drop. What happened to real estate as a hedge against inflation?
In sum, don't buy the typical argument that real estate is a good hedge against inflation. The issue is a lot more complex than the simplicity exposed in that statement.
My wife is calling me for dinner, so I must go. Plus, I am sure she has cooked a fabulous dinner, so I wouldn't want to miss it!