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Subject:  Venezuelan Bonds Date:  12/12/2012  2:35 PM
Author:  trader2012 Number:  34551 of 36649

In another forum, someone who knows nothing worth knowing about investing is touting Venezuelan bonds, which have had a good run up recently over news of Chavez’s surgery (and, probably, other factors like US dollar strength and the price of oil). The issue mentioned in a Bloomberg article is the 9.25’s of ’27, which are currently bid around 101, which is up just a tad bit from where I bought at 73.

The hassle with buying Venezuela’s debt is that you can’t get T&S. You can pull the Moody’s report. But you can’t really get a good sense of how the bond is being traded unless you hand-chart prices, which few investors do any more. Also, though the issue doesn’t carry the worst of ratings, this stuff clearly has to be bought in the proper size: enough to make a difference to overall portfolio returns, but not so much that likely losses are unsustainable. So most investors really would be better off accessing the debt though a fund, and no one would be well-served by chasing prices at these elevated levels. That’s what those who know nothing worth knowing about investing always forget. They look in the rear-view mirror, see fabulous returns, and think that those returns will persist. They might, or they might not. That’s the risk of rear-view investing. “Will past performance repeat itself?”

If you were prudent enough, shrewd enough, foresightful enough, or brave enough to buy a bit of Venezuela’s debt when it should have been bought, then congratulate yourself. But don’t add to the position, nor --heaven forbid-- initiate a new one. There’s better risk-adjusted opportunities out there in bond land than anything the financial press is currently talking about.

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