Tuesday, December 16, 2014

Brady Bonds

There are a few missing years of interest rates from many Latin American countries in the IMF database.  Ever wonder why?

The answer is many emergent economies - mostly Latin American but including some other regions as well - defaulted on their national debt in the early 1980s.  The remaining debt was reorganized, backed by U.S. treasury debt, and sold as a Brady Bonds, after the United States Treasury Secretary.

By the mid to late 1990s, most of the Brady bond debt was repurchased or repackaged so as not to damage investor confidence in these countries.

Recommended for anyone interested in an economic cycles or Latin America.

News articles:


Guide to Brady Bonds
Swapping Out Debt
Brady Bonds Fading
Brady Bonds Dying Out
Brazil Takes Step Away from Brady Bonds

Friday, December 5, 2014

The Hedge Fund That Also Made Cars

Porsche, The Hedge Fund That Also Made Cars

The luxury car manufacturer generated $13.5 BN in pre-tax profit, and sold a record 98,652 automobiles -- a staggering $136K profit per car sold. Even for a luxury brand, the numbers seemed nearly impossible. Upon closer inspection, $11.5 billion dollars of that profit wasn’t from selling cars -- it was from speculating on financial derivatives: Porsche was furtively amassing a sizable position in call options to buy up Volkswagen shares. As a report from the BBC put it, Porsche was “a hedge fund with a carmaker attached.”

In 2008, the car business was good, but the financial engineering business was even better.