Actuarial Outpost
 
Go Back   Actuarial Outpost > Actuarial Discussion Forum > Finance - Investments
FlashChat Actuarial Discussion Preliminary Exams CAS/SOA Exams Cyberchat Around the World Suggestions


Upload your resume securely at https://www.dwsimpson.com
to be contacted when our jobs meet your skills and objectives.


Finance - Investments Sub-forum: Non-Actuarial Personal Finance/Investing

Reply
 
Thread Tools Search this Thread Display Modes
  #181  
Old 02-11-2019, 01:02 PM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 89,908
Blog Entries: 6
Default

RUSSIA

https://www.bignewsnetwork.com/news/...gn-debt-rating

Quote:
Moody's upgrades Russian sovereign debt rating

Spoiler:
NEW YORK, New York - Russia got some good news on Friday as Moody's announced it was upgrading the country's sovereign debt ratings.

Russia's government of issuer and unsecured senior debt ratings has been lifted from Ba1 to Baa3 and its other short-term rating to Prime-3 (P-3) from Not Prime (NP).

In addition, the rating agency's outlook on its issuer rating has been changed to stable from positive.

"The upgrade of Russia's ratings reflects the positive impact of policies enacted in recent years to strengthen Russia's already robust public finance and external metrics and reduce the country's vulnerability to external shocks including fresh sanctions. The stable outlook reflects evenly balanced upside and downside credit risks," Moody's said in a statement published on Friday.

In a related decision, Moody's has raised Russia's country ceilings on foreign currency debt to Baa2/P-2 from Baa3/P-3, its country ceilings on foreign currency bank deposits to Baa3/P-3 from Ba2/NP and its country ceilings for local currency debt and deposits to Baa1 from Baa2. "Generally speaking, each of these ceilings indicates the highest possible ratings level that can be assigned to the relevant liabilities," the Moody's statement said.

Moody's noted Russia's vulnerability to external shocks, low oil prices and interrnational sanctions, more of which it is anticipating.

"However, in Moody's view, the government's capacity to withstand external shocks including further sanctions has improved since the sovereign rating was downgraded to Ba1 in 2015. The ongoing reduction in external vulnerability is reflected in the sovereign's still-strong balance sheet and increasingly robust external position, both of which Moody's expects to be sustained. These strengths are attributable in large part to the authorities' policy response to the terms of trade and sanctions shocks that have negatively impacted the economy since 2014. More recently, the adoption of pension reforms shifts labor force trends in a positive direction and will support fiscal strength over the longer term," the ratings agency statement said.

"Russia's external finances are more robust than a year ago and in some respects stronger than in 2014 when the external shocks initially struck the country. The central bank's foreign exchange reserves cover 80% of external debt (including direct investment), compared to 57% of external debt in June 2014. Even though capital outflows including net external debt payments rose last year, they were more than covered by the current account surplus, which widened to $115 billion or 7% of GDP, significantly strengthened by higher oil prices and a strong performance from non-oil exports."
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #182  
Old 08-15-2019, 02:39 PM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 89,908
Blog Entries: 6
Default

ARGENTINA

https://www.wsj.com/articles/argenti...ds-11565721325
Quote:
Argentine Vote Slams U.S. Bond Funds
Some mutual funds allocated more than 10% to Argentine bonds that crashed this week

Spoiler:
Yield-seeking investors everywhere are getting singed this week by the meltdown in Argentina's markets following the victory of a populist candidate in the nation's presidential primary election.

Argentina's 8.75% dollar-denominated bond due in 2024 traded Tuesday for about 45 cents on the dollar, down from 73 cents before populist presidential candidate Alberto Fernandez soundly defeated pro-business incumbent Mauricio Macri in a primary election Sunday, according to data from IHS Markit.

Falling bond prices have foisted heavy paper losses on the fund managers that took outsize bets on the country's debt. Some large mutual funds had invested more than 10% of their assets under management in Argentine bonds, which lost about one-third of their value in the past two trading days. Argentina comprised 2.3% of the most widely tracked emerging-markets bond index managed by JPMorgan Chase & Co. last week.

A $5.7 billion fund managed by T. Rowe Price Group Inc. held a 7.2% allocation to the country at the end of July, according to a spokesman for the firm. T. Rowe increased its overweight position in Argentina last year, betting that the market was overestimating chances that Mr. Macri would lose re-election or that, if he did lose, his successor would default on the country's debts, said Ben Robins, a portfolio specialist at the firm.

"We now have a more cautious view," Mr. Robins said.

Fidelity Investments manages a $1.4 billion emerging-markets fund that was 11.3% invested in Argentina as of June and an $8.6 billion fund that had a 6.35% allocation to the country in June, while Ashmore Group PLC's $1.5 billion short-duration emerging-markets fund was 10.5% invested in Argentina as of June, according to data from Morningstar. A spokeswoman for Fidelity declined to comment. Ashmore didn't respond to a request for comment.

The price of derivatives that pay out if Argentina defaults more than doubled this week, according to data from IHS Markit.
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #183  
Old 08-23-2019, 01:42 PM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 89,908
Blog Entries: 6
Default

CHINA

https://www.cnbc.com/2019/08/23/chin...acebook%7Cmain

Quote:
China’s enormous debt ‘no longer can be ignored,’ analyst says

Fraser Howie, an independent analyst, told CNBC: “China is very much past the tipping point where the debt simply no longer can be ignored.”
The trade war has put a dent in efforts to pare its massive debt as Beijing sought ways to boost its slowing economy, which was at its lowest growth in 27 years this year.
In what some analysts called effectively a rate cut, the People’s Bank of China also this week launched a key interest rate reform — the loan prime rate — that would make borrowing costs for companies cheaper.
But Howie told CNBC that the issue was really whether there would be demand for more credit.

Spoiler:
The world’s second biggest economy, which is slowing, is past a point where it cannot ignore its enormous debt anymore, according to an analyst.

Fraser Howie, an independent analyst, told CNBC Tuesday that there’s a “whole host of hidden debt” in China, which had kick started stimulus this year as its economy slowed.

“China is very much past the tipping point where the debt simply no longer can be ignored. The cost of servicing the debt ... simply distracts from almost everything else,” said Howie.

China’s total debt — corporate, household and government — rose to over 300% of its GDP in the first quarter of 2019, slightly up from the same period a year earlier, according to a report by the Institute of International Finance.

“China ... (had) this huge stimulus and turn on the credit taps and they drove all this global demand,” Howie said. “But there clearly was going to be a cost ... and now they are suffering (from) it.”

China’s debt levels rapidly shot up a few years ago as its banks extended record amounts of credit to drive growth, which led to the Asian giant undertaking deleveraging efforts, or the process of reducing debt.

But the trade war has put a dent in its efforts to pare its massive debt as Beijing sought ways to boost its slowing economy, which was at its lowest growth in 27 years. Earlier this year, banks started to increase its lending again, with new loans surging to a record high.

In what some analysts called effectively a rate cut, the People’s Bank of China also this week launched a key interest rate reform — the loan prime rate — that would make borrowing costs for companies cheaper, and theoretically boost investment.

But Howie told CNBC that the issue was really whether there would be demand for more credit.

“The Chinese economy is clearly slowing, there are a lot of headwinds, there’re companies leaving China. China’s becoming a much harder investment case for a number of reasons. So is the underlying demand there or not?” he asked.
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #184  
Old 08-29-2019, 04:36 AM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 89,908
Blog Entries: 6
Default

ARGENTINA

https://www.bloomberg.com/news/artic...eserves-tumble


Quote:
Argentina Seeks to Extend Maturity of $101 Billion of Debt
Economy Minister Lacunza called the measure a ‘reprofiling’
Lacunza blamed the measure on liquidity, not solvency issues

Spoiler:
Argentina’s government is seeking to extend maturities on tens of billions of dollars of debt and delay repayments to the International Monetary Fund after a collapse in the peso and its bonds.

The government will postpone $7 billion of payments on short-term local notes held by institutional investors this year and will seek the “voluntary reprofiling‘’ of $50 billion of longer-term debt, Economy Minister Hernan Lacunza said. It will also start talks over the repayment of $44 billion it has received from the IMF.




“The government is aiming to clear the outlook for the financial program in the short, medium and long-term horizon,” Lacunza said. “This is due to short-term liquidity stresses and not due to problems with the solvency of the debt.”

The announcement follows a dramatic week for Argentina that saw bonds fall to a record low and the peso slump. By the end of trading on Wednesday, investors were pricing in a near 90% chance that the country will default in the next five years. Today’s measures will ease some of the immediate pressure on government and central bank finances.

For details on the government plans, click here

The government will start talks to reprofile debt that matures in less than 10 years under foreign legislation using collective action clauses and will invite banks to submit proposals as of the end of the day Thursday.

“I think it’s neutral to positive,” said Ezequiel Zambaglione, head of strategy at Balanz Capital Valores in Buenos Aires. “In the worst case scenario, nobody accepts the offer and you are in the same situation as yesterday. And if they reach an agreement and are successful in the swap, you’ll have less funding needs for the next years.”

As the crisis worsened during August, the central bank rolled over less than 10% of Treasury bills falling due and held by the private sector.


”One of the metrics we’ve been monitoring for our clients has been the rollover rate for domestic T-bills,” said Roger Horn, a senior emerging-markets strategist at SMBC Nikko Securities America in New York. “Today’s 10% success rate apparently made it clear to the finance team that something big needed to be done.”

Argentina’s financial markets have tumbled since a shock primary result on Aug. 11 showed President Mauricio Macri trailing his leftist rival by 15 percentage points ahead of the Oct. 27 election. The next administration would take over on Dec. 10.

Opposition front-runner Alberto Fernandez’s team will comment on the government measures on Thursday, according a spokesman.

“We are surprised by the timing of the measure and skeptical that it will achieve the desired results,” Bloomberg Economics analyst Adriana Dupita said. “Postponing payments may provide temporary relief, but does not change the crux of the matter.”

Officials from the IMF were in Buenos Aires this week to meet with policy makers and the opposition. The fund was expected to disburse another $5.3 billion next month from a record $56 billion agreement though that is far from certain under the current crisis.

The IMF officials are “in the process of analyzing” the measures announced Wednesday, according to a statement. “Staff understands that the authorities have taken these important steps to address liquidity needs and safeguard reserves.”

Foreign-currency reserves have plummeted more than $10 billion in the past month as policy makers sought to shore up the peso after the primary.

The currency has tumbled 28% since the obligatory nationwide primary election, even as the central bank takes increasingly drastic action to defend it. The bank sold $367 on the currency market Wednesday and $302 million the day before, according to a people with knowledge of the matter.

Tens of thousands of people marched through the streets of the capital on Wednesday to demand the government do more to mitigate the impact of the economic crisis in a country that has defaulted on its debt eight times since independence from Spain.

“This is the first time I’ve ever seen this -- a president in the middle of elections proposing a debt re-profiling,” said Francisco Ghersi, managing director of Knossos Asset Management, which holds some Argentine bonds. “Still, if Macri succeeds with the swap, this could help his political standing before the vote.”
https://twitter.com/cate_long/status...87145459605504
Quote:
This will be 9th default in about 200 years.
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #185  
Old 08-29-2019, 09:36 AM
ElDucky's Avatar
ElDucky ElDucky is offline
Free Mason
 
Join Date: Jul 2004
Location: In a van, down by the river
Studying for Let me worry about blank
Favorite beer: Trappistes Rochefort 8
Posts: 43,590
Default

The two sweetest words in the English language!
__________________
I live near the cows.
Reply With Quote
  #186  
Old 08-29-2019, 09:45 AM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 89,908
Blog Entries: 6
Default

9th default?
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #187  
Old 09-06-2019, 10:33 AM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 89,908
Blog Entries: 6
Default

ARGENTINA

https://www.wsj.com/articles/argenti...ay-11567675872
Quote:
Argentina Is Investors’ Groundhog Day
Capital controls, a controlled exchange rate and an outright default may prove to be the country’s best option
Spoiler:
They say humans are the only animals to trip twice over the same stone. This is the ninth time investors have tripped over Argentina.

Argentina's government is renegotiating the terms of its $57 billion bailout package with the International Monetary Fund. A 30% slide in the Argentine peso against the U.S. dollar this year forced President Mauricio Macri to impose capital controls this week to avoid the ninth default in the country's entire history as a sovereign nation.

Capital flight has worsened since Mr. Macri finished disappointingly in an August primary. The government has pledged to extend the maturity of $100 billion of debt. The lesson for investors should be that a pro-market, IMF-friendly government isn't enough to justify optimism on Argentina -- and may give them a dangerous sense of security.

Mr. Macri's pro-business agenda reopened the country to financial markets after a 15-year battle with creditors over its 2001 default. Foreign-currency debt surged by 50% as investors piled into the country's new paper.

Mr. Macri convinced investors that the debt would be manageable if enough pro-market reforms were implemented. However, this isn't how things work in developing countries, where capital rushes out the door when markets get scared.

Currency falls trigger a dangerous feedback loop. Prices of imported goods surge and workers push for wage rises, fueling inflation and pressuring the currency. This dynamic is particularly entrenched in Argentina because unions are very strong and utility prices dollarized.

The IMF hasn't helped. This time, in exchange for the loan, it demanded tight monetary and fiscal policy, fueling discontent that is likely to topple the government. It faces a conundrum, because Argentina does indeed suffer from the short-term cash crunch that the fund is best suited to fix.

However, the country's total external debt pile may be too large to grow out of. In July, the IMF increased its debt forecast to 60% of gross domestic product by 2024, due to slower growth and higher interest rates.

The IMF's new policy of choice for cases in which the sustainability of a country's debt is in question is to "reprofile" it by pushing back the payment schedule. However, this is likely to prolong the pain until the debt is eventually deemed unsustainable and restructured. It would be preferable to do this right away, as part of an effort to permanently reduce the country's dependence on overseas money.

As much as it may feel like Groundhog Day for investors, capital controls, a controlled exchange rate and a ninth default -- as contentious as that could be -- is probably the best way for Argentina to climb out of its hole.


https://www.wsj.com/articles/a-dolla...na-11567724262
Quote:
A Dollar for Argentina
Argentines prefer to hold greenbacks. Why not bury the peso?
Spoiler:
Argentina is back in the soup, as it so often is. The prospect that Peronists might retake power has Argentines fleeing the peso for dollars, and on Monday the center-right government of President Mauricio Macri imposed capital controls. Here's a better idea: Replace the peso with the U.S. dollar as Argentina's legal tender.

The actual election is in October but the August primary victory of left-wing populists -- presidential candidate Alberto Fernandez and his running mate, former president Cristina Kirchner -- has triggered a monetary panic. The demand for dollars has soared, the peso has fallen some 20% against the dollar, and central bank reserves are declining.

President Macri has done nothing to shore up confidence. After the primary vote foreshadowed a likely defeat in his bid for a second term, he announced a gasoline price freeze, a minimum-wage hike and new subsidies for special interests. This Peronism-lite did nothing to restore government credibility.

Last week Argentina failed to roll over its maturing dollar-denominated debt, and candidate Fernandez, who is promoting the impression of chaos, said the country is in "virtual default." The capital controls will limit access to dollars for businesses and individuals. Exporters will be required to bring their hard-currency earnings back to Argentina.

Argentina needs access to capital markets but its history of stiffing creditors makes it high risk. Economist Steve Hanke recently wrote in Forbes that Argentina had "major peso collapses" in 1876, 1890, 1914, 1930, 1952, 1958, 1967, 1975, 1985, 1989, 2001 and 2018. Each time Argentines have had their savings, earnings and purchasing power diminished.

Now the government is telling investors that if they put their money in Argentina, they can't be certain they can take it out. This is sure to be a drag on growth. The economy is expected to contract this year and next.

Dollarizers face resistance from the Peronist party, which relies on the inflation tax to fund its populism when revenues run low. Yet demand for dollars suggests that Mr. Macri would have popular backing for adopting the greenback as the national currency. Lawyers in Argentina differ about the legality of dollarization under the Argentine constitution, but our sources believe Mr. Macri could dollarize with the backing of a majority in Congress.

Panama has used the dollar as legal tender since 1904, and El Salvador and Ecuador dollarized in 2000. Ecuador did it to resolve a banking crisis and El Salvador did it to bring down interest rates. El Salvador and Panama now have the lowest domestic borrowing rates in Latin America and the longest maturities. Ecuador has price stability not seen in at least a half century.

One objection to dollarization is that Argentina would lose the profits a central bank earns by printing its own currency, known as seigniorage. But this is a political excuse disguised as economics. What is lost in seigniorage will be more than offset by ending peso crises.

Setting the right exchange rate also matters. Several Argentine economists propose converting short-term government paper to longer-term bonds to reduce the number of pesos that need to be exchanged for dollars in the short run. But the best rate is probably the black-market rate where the peso now trades.

Dollarization eliminates the moral hazard that central-bank rescues encourage in the banking system; international capital markets become the lender of last resort. Another benefit is that it would be nearly impossible to reverse, unlike Argentina's one-to-one convertibility law with the dollar of the 1990s, which politicians violated when they were back in hock in the early 2000s. Argentines also ought to have the right to keep their dollars abroad if they choose. This would alleviate the worry that the government might "corral" bank accounts as it did in 2001.

A Macri decision to dollarize would break this ugly cycle by giving Argentines a store of value and a medium of exchange they can rely on. It might not save his Presidency, but it would ensure a legacy for Mr. Macri as the leader who dared to defend Argentine savings from a marauding future government.


__________________
It's STUMP

LinkedIn Profile

Last edited by campbell; 09-06-2019 at 10:58 AM..
Reply With Quote
  #188  
Old 10-14-2019, 03:12 PM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 89,908
Blog Entries: 6
Default

VENEZUELA

https://www.wsj.com/articles/bondhol...cy-11570995565

Quote:
Bondholders and Venezuelan Democracy
Maduro’s default could cost opponents control of Citgo and bolster the dictator.
Spoiler:
On Oct. 28, $913 million in principal and interest will be due on a bond issued by Petroleos de Venezuela, the state-owned oil monopoly, known as PdVSA. The contract says the bond, which matures in 2020, is secured by a controlling stake in U.S. oil refiner Citgo. Venezuela's expected failure to make the payment will trigger an immediate default.

In that case the 2020 bondholders, as the creditors are known, are expected to go after the shares of Houston-based Citgo that were put up as collateral when the contract was written. The shares are sitting in a vault in New York.

On Wednesday Citgo chairman Luisa Palacios called on the Trump administration to keep that from happening. But even without help from the White House, the bondholders may find it more difficult to collect than they expect -- despite the powerful argument that contracts are sacrosanct. That's because there are serious questions about whether the contract is valid.

Venezuela has lots of unpaid creditors. But only the 2020 bondholders have a contract backed by control of Citgo. The bonds were issued by the regime of dictator Nicolas Maduro when Venezuela was having trouble rolling over debt. A fat coupon of 8.5% didn't attract sufficient risk capital, so Mr. Maduro collateralized the bonds with 50.1% of the shares of Citgo. The Russian oil company Rosneft lent money to PdVSA that was secured by the remaining 49.9% of Citgo. Analysts project that the Rosneft loan may be repaid by year-end.

U.S. sanctions on the Maduro regime prohibit U.S. persons from engaging in transactions with either PdVSA or Venezuela. But in July 2018, to ensure that the sanctions wouldn't protect Mr. Maduro from his obligations to the 2020 bondholders, the U.S. Treasury's Office of Foreign Assets Control issued General License 5. The license allows the 2020 bondholders to take possession of the Citgo shares in the event of a default as the contract stipulates.

Since then things have changed. Mr. Maduro's 2018 re-election was widely held to be fraudulent and in January his first presidential term expired. Constitutionally, Juan Guaido, who was the democratically elected president of the Venezuelan National Assembly, had to step into the role as interim chief executive.

The U.S. quickly recognized Mr. Guaido, and his interim government took control of PdVSA's assets in the U.S. -- chiefly Citgo. Mr. Guaido named an ad-hoc PdVSA board of directors, which U.S. courts have recognized. He also named an ad hoc Citgo board.

Retaining control of Citgo is important for Venezuelan democrats. Mr. Guaido's supporters fear that if the bondholders seize the company's shares it will strengthen Mr. Maduro. The 2020 bondholders would collect not only for the missed payment later this month but for a payment of roughly the same size due October 2020.

Citgo isn't in financial trouble and naturally the ad hoc board wants to stop the 2020 bondholders from coming after the company. To that end it argues that the general license carve-out ought to be lifted and the sanctions applied to all parties equally. "After the support that was given in order to save Citgo from Maduro, it seems to me contradictory that the same effort would not be made here to save Citgo from Maduro's bondholders," Ms. Palacios said Wednesday.

The Trump administration hasn't said why it hasn't lifted the GL5 and there can be little doubt that creditor groups are applying pressure. But the courts may provide a better long-term outcome for Citgo.

A compelling legal argument is that Mr. Maduro didn't have the authority, under the constitution, to pledge the company as collateral. In an opinion column last week, academics Mitu Gulati, Ugo Panizza and Mark Weidemaier

questioned the validity of the bond contract. Under U.S. law, they write, "a creditor cannot enforce a debt contract made through an agent of the corporation whom the creditor knew was not authorized to conduct such a transaction." That would seem to describe the 2020 bonds since the National Assembly loudly warned that it didn't approve the collateralized bond.

The Venezuelan Constitution requires that the Assembly "approve contracts of national interest," note Messrs. Gulati, Panizza and Weidemaier. In the case of the 2020 bonds the approval wasn't granted, raising the question about the sanctity of the contract. Given that the bond was not authorized by the National Assembly, Mr. Guaido's government "might have legal defenses if creditors try to seize CITGO," They could even proactively ask a court to invalidate the pledge of shares.

It would be preposterous to suggest that the creditors didn't understand the anti-democratic nature of the Maduro regime even as they were lending to it. They ought to also have known that the National Assembly didn't approve the issuance of the bond.

There was money to be made in dealing with Mr. Maduro. There was also risk, which creditors may now have to eat.


__________________
It's STUMP

LinkedIn Profile
Reply With Quote
Reply

Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off


All times are GMT -4. The time now is 09:32 PM.


Powered by vBulletin®
Copyright ©2000 - 2019, Jelsoft Enterprises Ltd.
*PLEASE NOTE: Posts are not checked for accuracy, and do not
represent the views of the Actuarial Outpost or its sponsors.
Page generated in 0.28990 seconds with 9 queries