110617 venezuela cds

Venezuelan sovereign credit default swaps have priced-in imminent default.

The end game for economic policy gems such as “deficits don’t matter,” “printing money for the people,” and “corruption is the cost of doing business” is here. Hyperinflation, debt defaults on non-domestic currency bonds, medicine shortages, starvation, civil unrest and military dictatorship rule are tragically the new normal for Venezuela. Its leaders waged a war on basic economics for more than 15 years and lost. The result is an absolute crisis of epic proportions for humanity.

There is nothing funny about the human tragedy but one has to scratch their head over why those who invested in Venezuelan bonds in the past few months took the plunge? Sure, there will likely be court proceedings where bond investors can fight over the scraps and maybe a few walk away in decent shape, but was it really worth the resources to do so? Of course, hindsight is always when we all become geniuses because we all error regularly in real time.

Below you can find a distressed debt bond investor walking into Banco Venezolano de Credito last month to scoop up some Venezuelan fixed income products on the cheap. Enjoy.