In April of 2014, before the latest dust-up over Argentinas bonds, legendary hedge fund manager Kyle Bass gave a speech to the CFA Society of Dallas. In his speech he outlined his bullish stance on Argentina which he called the most interesting place in the world to invest for the next 3-5 years.
Heres the video, starting at 20:46 (embedding has been disabled):
The short version of his view on Argentina is that Argentine Euro debt is a good bet.
Prices will go from 65 to 100 over next three years and meanwhile you
get a 13.5% yield. The bad government will go and there will be huge
Foreign Direct Investment into Argentinian oilfields and resulting exports after.
George Soros is also an owner of Argentine euro debt and has also placed a large bet on the Argentine Shale Boom.
Needless to say, with recent events these investments are not working out as well as planned.
With the latest decision by Argentina to attempt to pay bondholders in Argentina the peso on the unofficial exchange rate has plummeted:
However, Argentinas Euro Bonds are currently up since April, trading at around 76 cents on the dollar. On the down side, Bass, Soros, and others have had to file suit and BNY Mellons UK subsidiary to force it to release its latest interest payment, as BNY is apparently concerned that it will be found in violation of the New York order discussed in my first piece on this subject.
My Own View: Argentina has behaved reasonably well towards its creditors. Originally, Argentina reached an agreement with 93% of its outstanding bondholders. Had as US company with financial troubles reached an agreement with 93% of its bondholders, a bankruptcy would have forced the other 7% into line. With better finances after the bankruptcy and a strong willingness to pay, capital would be readily available. As discussed in Part 2 of this series, Argentina has behaved appropriately as a creditor, but is suffering from the lack of an international bankruptcy court to the detriment of all parties.
The Argentine leadership at this moment is borderline incompetent, but the new elections in 2015 should produce better leadership, and this should occur right when a huge amount of Foreign Direct Investment starts coming into the nation.
Basss view on the Euro bonds is correct, and they have a healthy yield. I would be more concerned about the US Dollar debt as at present there is no possibility to receive interest payments. That being said, the dollar debt is plummeting in price as of late:
I am not sure what my entry point would be, but if there is another big move down and you have some cash that can sit for a few years, it might be a rock-solid choice.
This disruption in the repayments to the dollar bondholders will be worked out eventually by a nation that has demonstrated its willingness and ability to pay.