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- Al Gore 'Not Very Smart,’ But Became Filthy Rich Using Simple Investing Formula - Charlie Munger
- U.S. Regulators, Lawmakers Support Volcker Rule Revamp at Hearing
- Morgan Stanley Opts for Frankfurt as New EU Hub
- A New Risk for Goldman, Morgan Stanley in Stress Tests (subsc reqd)
- A Trump Bump for Law Firm of President’s Lawyer - Kasowitz Benson Torres
- JPMorgan, BofA, Goldman, Citi, Wells Fargo Pass Fed's Stress Test
- Blackstone Stock Still Trading at $31 - Its IPO Price From 10 Years Ago
- NJ Resident and NY-Based Global FX Club Charged with Solicitation Fraud, Misappropriation - CFTC
- Senate Republicans Release Plan to Replace Obamacare - The Details
- Berkshire Hathaway Throws $1.5Bn Lifeline to Canada's Home Capital
- Inside Nomura: Day in the Life of a Junior Banker
- Inside Travis Kalanick’s Resignation as Uber’s C.E.O.
- Creative Planning, KS Investment Firm, Spurring Change on Wall Street
- SEC Obtains Judgment Against Attorney Who Defrauded Escrow Clients
- SEC Files Fraud Charges Against Stock Promoters in Market Manipulation Scheme
- Power Lunches and Dinners in New York, London, Washington
- Banks to Cut $1.2Bn in Research Spending, Analyst Jobs - McKinsey
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NEWSLETTERS & ALERTS
Goldman Sachs’ $2.8Bn Bond Deal – Is the Outrage Justified?
So, Goldman Sachs purchased $2.8 billion worth of bonds issued in 2014 by the state oil company Petroleos de Venezuela, or Pdvsa, at a 70% discount. At that price, the bonds will throw off an implied annual yield north of 40%.
Was it wrong for Goldman Sachs to invest in bonds issued by a country whose citizens are in near revolt and where the treasury has barely enough ready cash to feed its people - let alone enough to pay off its mountains of debt?
Falling oil prices and years of economic mismanagement when oil revenues were high, have led to triple-digit inflation. Most Venezuelans can barely afford the necessities, while those who can are having trouble finding basic supplies.
Opposition lawmaker Julio Borges, who leads Venezuela’s National Assembly, thinks Goldman was wrong. He wrote a letter to Lloyd Blankfein accusing Goldman Sachs of looking to make a “quick buck off the suffering of the Venezuelan people” and helping to support a government that reportedly has used violence against its protesting citizens.
Goldman responded by saying it didn't purchase the bonds from or interact with the government, and that the bond is held by numerous other institutional investors – including mutual funds and ETFs.
And Goldman implicitly shares the conviction of other global investors who bet that emerging market economies, regardless of their political and economic challenges, will continue to, not only, pay off their existing debt, but will sell more of these types of bonds. After all, how can a country like Venezuela, where oil revenues accounts for 95% of the country’s foreign currency, dare to default on its monstrous debt.
The bottom line, in our opinion, Goldman Sachs was justified in making its purchases, and that the expressed outrage was simply a political statement by Venezuela’s opposition.