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Are Bond holders going to be nice this time, or are they going to start domino effect?

I could imagine many other countries are in similar situation right now and hardly hit by COVID 19 crisis.

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Argentina? Again?

Who keeps lending to them then?

I guess they must have ways of getting most of the money back over a longer time, which in conjunction with higher interest each time equals result.

Coming to Britain later?

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13 minutes ago, Bluestone59 said:

Argentina? Again?

Who keeps lending to them then?

I guess they must have ways of getting most of the money back over a longer time, which in conjunction with higher interest each time equals result.

Coming to Britain later?

http://ftalphaville.ft.com/2019/04/30/1556614127000/Why-investors-keep-coming-back-to-Argentina/

According to a paper published earlier this year by academics Josefin Meyer, Carmen Reinhart and Christoph Trebesch, countries that default more frequently on their debts offer higher total returns for investors. Of course, the trade-off is that volatility is also much higher.

To come to this conclusion, the researchers compiled and studied a database of 220,000 individual foreign-currency bonds from 91 countries since the Battle of Waterloo in 1815. They also put together a separate database tracking more than 300 sovereign debt restructurings since 1815.

Through this massive endeavour, they found that countries like Ecuador, Mexico and Colombia, which have defaulted nine or more times on their debts since the 19th century, have paid out returns to investors that are on average three times higher than those from the US, UK and Canada:

Investing in countries prone to default is not for the faint of heart, however. The researchers find that cumulative returns drop by about 15 per cent around the time of a default event before stagnating for a few years.

After about four years, investors that scooped up the country's debt two years prior to the default tend to break even. A lucky 25 per cent of all defaults see investors almost doubling their investment five years after the event, while an unlucky 25 per cent end up deep in the red after six years:

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2 minutes ago, regprentice said:

http://ftalphaville.ft.com/2019/04/30/1556614127000/Why-investors-keep-coming-back-to-Argentina/

According to a paper published earlier this year by academics Josefin Meyer, Carmen Reinhart and Christoph Trebesch, countries that default more frequently on their debts offer higher total returns for investors. Of course, the trade-off is that volatility is also much higher.

To come to this conclusion, the researchers compiled and studied a database of 220,000 individual foreign-currency bonds from 91 countries since the Battle of Waterloo in 1815. They also put together a separate database tracking more than 300 sovereign debt restructurings since 1815.

Through this massive endeavour, they found that countries like Ecuador, Mexico and Colombia, which have defaulted nine or more times on their debts since the 19th century, have paid out returns to investors that are on average three times higher than those from the US, UK and Canada:

Investing in countries prone to default is not for the faint of heart, however. The researchers find that cumulative returns drop by about 15 per cent around the time of a default event before stagnating for a few years.

After about four years, investors that scooped up the country's debt two years prior to the default tend to break even. A lucky 25 per cent of all defaults see investors almost doubling their investment five years after the event, while an unlucky 25 per cent end up deep in the red after six years:

Thanks Reg, your message is clear then.

Invest in Argentina!!

As I half suspected.

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This is how it works: its normal for higher risk to mean higher rates.

Its exactly why credit card interest is higher than mortgage interest, or high risk borrowers pay higher rates than low risk borrowers. its why returns on shares  are higher  (on a long term average) than returns on corporate bonds which are higher than returns on government bonds in their own currency.

You average it out and it comes to much the same return in a diversified portfolio, except for the premium for undiversifiable risk (the bit you cannot average out because of things that affect the whole economy at once).

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Argentina defaulting on its debt is hardly news. Their problem is that they have to borrow in Dollars as no one will lend in andrex Pesos and have massive internal inequalities which are visible in very short distances in Buenos Aires. So alternate between monetarist borderline Junta right wing governments and Peronist moneyprinting left wing governments. Neither of which move a country rich in natural resources forward.

Complaining about 'Las Malvinas' is a convenient distraction from internal problems. Though in its current state, their Navy would probably sink if it tried to get there, even without the intervention of any Astute class submarines.

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This times its different.

This default is huge, as its involved the largest IMF bailout. Ever. And it was a very political bailout, in the face of a lot of people saying No.

And, most importantly, the bail out was Chistine Lagardes big clever idea.

Huge fall out, due to her new position.

 

 

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9 minutes ago, spyguy said:

This times its different.

This default is huge, as its involved the largest IMF bailout. Ever. And it was a very political bailout, in the face of a lot of people saying No.

And, most importantly, the bail out was Chistine Lagardes big clever idea.

Huge fall out, due to her new position.

 

 

https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/spanish-us-banks-most-exposed-to-crisis-stricken-argentina-53618624
 

bad timing wirh the spanish tourism business on the ropes too

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2 hours ago, spyguy said:

This times its different.

This default is huge, as its involved the largest IMF bailout. Ever. And it was a very political bailout, in the face of a lot of people saying No.

And, most importantly, the bail out was Chistine Lagardes big clever idea.

Huge fall out, due to her new position.

 

 

Largest bailout ever eh?

Does this mean there won't be anything left for us when we put in our request for assistance?

Oh good! 

Or maybe I shouldn't think that.

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1 hour ago, Bluestone59 said:

Largest bailout ever eh?

Does this mean there won't be anything left for us when we put in our request for assistance?

Oh good! 

Or maybe I shouldn't think that.

Yep. For the IMF.

https://www.theguardian.com/world/2018/sep/26/argentina-imf-biggest-loan

Sep 2018.

All of ..... 20 months ago ....

Total, massive, career ending fukup.

 

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18 hours ago, msi said:

Argentina. The darling South American country of the Right wing.

Chile is the South American country the right wing like (it is probably the country in South America with most migration from other South American countries as  a percentage of population).  Argentina no one has held up as an example for a long long time.

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16 hours ago, iamnumerate said:

Chile is the South American country the right wing like (it is probably the country in South America with most migration from other South American countries as  a percentage of population).  Argentina no one has held up as an example for a long long time.

I think Columbia is.

Not that its particular right wing. Just the misfortune to be next door to Corbyns Latin American cousin.

Strange  that, people running for (very) left governments. I blame Trump.

 

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Don't understand why the IMF gets involved with the likes of Argentina.

Surely the IMF is there to protect against systematic meltdown - I guess that it is why countries fund it, because it is in their better interest to prevent country collapse and possibly systematic contagion than let countries go to the wall.

Argentina has been on the rocks for so long that no one invests there without understanding the risks. The debt there surely is a very specialist market, the chances of an Argentinina collapse leading to systematic collapse must be microscopic, otherwise we would have had about 3 systematic collapses in the past 20 years.

Can't help feeling they are best off being left alone to sort their own problems out.

 

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  • 417 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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