Tuesday, June 20, 2017

Investor's Insanity: Argentina's 100 Year Bonds

Argentina has joined the prestigious ranks of countries to issue 100 year bonds.

They just sold $2.75b USD worth of 100 year bonds at a 7.125% rate, and their subscription was 3.6X subscribed. 

Why is this considered insanity?

Because, HISTORY.

Let's see when and how many times Argentina has defaulted on bonds, and how much time between the last bond default, shall we?

(Source: Economist)

#1 - 1827 - no prior
#2 - 1890 - 63 years
#3 - 1951 - 61 years
#4 - 1956 - 5 years
#5 - 1982 - 26 years
#6 - 1989 - 7 years
#7 - 2002 - 13 years
#8 - 2014 - 12 years

Average time to default: 26 years
Median time to default: 13 years

(Source: World Economic Forum)

If we aren't at the cusp of madness yet, I am more than willing to be entertained to see what will top this insanity.

You don't need to trust me to know that this is not going to end well.

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