Monday, May 29, 2017

Democracy sells, but who's buying?

Wall Street Journal --

CARACAS, Venezuela— Goldman Sachs Group Inc. GS 0.48% bought about $2.8 billion in Venezuelan bonds that had been held by the oil-rich country’s central bank, a lifeline to President Nicolás Maduro’s embattled government as it scrambles to raise funds in the midst of widening civil unrest. The New York-based bank’s asset management division last week paid 31 cents on the dollar, or about $865 million, for bonds issued by state oil company Petróleos de Venezuela SA in 2014, which mature in 2022, according to five people familiar with the transaction. The price represents a 31% discount on the trading Venezuelan securities maturing the same year.

Note the Goldman Sachs trade strategy: for European democracies in 2008 and after, buying their bonds at knock-down prices associated with massive losses being passed on to taxpayers. But for imploding Venezuelan petro-socialist autocracy, that same knock-down price is better than the zero they should be getting, and keeps them in power.

No comments: