Tuesday, October 8, 2013


Indeed, it was a wonderful Tuesday.  Yesterday evening, the Supreme Court of the United States announced their refusal to hear Argentina's appeal of the 2nd Circuit's decision in the suit brought by Aurelius Capital and Elliot Management, holders of unrestructured Argentine debt subject to a pari passu clause under New York law.  While the Fat Lady hasn't begun to sing, she is certainly warming up in a terrific victory for the rule of law.  The Argies will exhaust every legal means to get a rehearing but my odds are very long against this happening.  The odds are almost impossible.  As I have admitted previously that my dislike for Argentina is surpassed only by my hatred for Venezuela, there is really no question that this is the proper decision and one that was certainly expected.  When the final effort on the Argies part comes to nought, the really interesting thing will be watching the plaintiffs trying to bugger every Argentine payment option around the globe in order to cash in...if it comes to that.  They have superb counsel who, while not objecting in principle to collecting enormous fees, will no doubt at some point nothing more can be done and a settlement is in order.  We shall see.

Of course, what of the claims (to be expected) of the plaintiffs that Argentina has destroyed its credit forever?  And of the howls from those creditors who settled for 20 cents on the dollar as the hold-out walk away with a huge windfall?  I regret to say that in the first case, once the dust has settled, some fool will be prepared to lend to Argentina once again if the yield is deemed sufficient despite the fact that this must be God-only-knows how many times Argentina has defaulted on some debt obligation in the past 150 years.  As for the second, here's a dirty little secret: during the Latin American debt crisis c. 1980, numerous lenders (mostly smaller banks) stood firm against restructuring and were quietly repaid--either straight up or by having their obligations purchased by banks who had a lot more to lose despite assurances that this would never occur or that all those involved had participated in the end.  As the world famous financier of years past, Rocky Balboa once put it, "Ya do what ya gotta do."

And so we come to the present day.  We have our government shutdown.  Will we have a default?  I  really don't know but I think not.  But if we do, what happens?  Don't know that either, but I do know that ever nation that has been a dead beat in the past, at some point borrowed money again.  Or to put it another way, you got your Argentina and you got your United States.  Who's bond do you buy?

Visiting grandchildren starting tomorrow at 0 dark 30.  Might be a bit spotty for the next few days.

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