government debt

When Hedge Funds Trump Governments

vultureWhile Greece suffers to the point of revolution and suicide, hedge funds made out like bandits on Greek sovereign debt.

Greece had reached its target of buying back enough bonds at a discount to retire 21 billion euros, or about $27 billion, of its debt. The bigger winners, though, were hedge funds, which pocketed higher profits than many had expected, in yet another Greek bailout financed by European taxpayers.

To some experts, this latest chapter in the long-running Greek drama is another reminder of how private investors have managed to outmaneuver European officials at various stages of the debt crisis. And they caution that each time it happens, future debt workouts in the euro zone will become even more costly.

When Europe wanted to give the Greek bond holders a hair cut, the hedge funds threatened collective action against a host of European countries. They wouldn't buy any European sovereign bonds in retaliation against the Eurogroup taking a hard line against them.

The warning was blunt: If Athens set off legal mechanisms in the bond contracts known as collective action clauses, forcing bondholders to accept lower prices, investors would stop buying the bonds of struggling European countries. That would be bad news for Spain and Italy — to say nothing of Portugal and Ireland when they return to global bond markets in 2013.

Farrell and Stockman - Latter Day Prophets of Doom

Michael Collins
Paul Farrell of MarketWatch caused quite a stir with his recent article, Reagan insider [David Stockman]: GOP destroyed U.S. economy, Part 2, May 24. Farrell breaks some new ground in the strident critique of long standing policy trends and offers a highly functional description of the destructive personalities controlling Wall Street. This article describes the several high points of the Farrell-Stockman thesis, a frontal assault on the modern Republican Party. It also provides important cautions on key information absent from the Farrell-Stockman broadside. (Image: Art & Perception)

Farrell makes his case by using Stockman's July 2010 New York Times OpEd, Four Deformations of the Apocalypse, New York Times and his recent book, The Triumph of Politics: Why the Reagan Revolution Failed.

The Weird Have Turned Pro

"When the going gets weird, the weird turn pro."
- Hunter S. Thompson

When you live in interesting times it is sometimes hard to distinguish the real news from the fake news. For instance, I read this today.

WASHINGTON—A new report has revealed that when it comes to the important matter of owing large sums of money, Americans display a level of expertise and proficiency unrivaled throughout the world.

The same day I also read this.

The Treasury Department said Thursday that it will sell a record total of $115 billion in new notes next week, more than market participants had expected.

They both look like the could be real news, don't they?

Treasury Trouble: Is the government giving bad TIPS?

A little story passed by the radar of most folks this past week. A piece of news that really shows the US reaching a watershed moment. What is this oh so awesome thing? Well it isn't awesome, in fact, it isn't good at all. Investors are starting to reject government securities.

Treasury Inflation Protected Securities (TIPS) has been a staple investment for a long time, finding a home in portfolios big and small. So what are TIPS, and why should I care?

So what's the deal on TIPS?