Sunday, May 23, 2010

Chavez can rip you off but not your stockbroker even if you are consenting

I have been following in awe how suddenly the stockbrokers that the regime created have become the bad guys of the currency exchange flick. I am not a financial expert like Miguel, but I do try to understand his blog and I have learned a little bit about what the Government does and what the swap market does.

The other day Giordani and Chavez made a big deal about the thieves in the brokerage industry who would do a swap with a TICC, an inflation protection bond, which is offered in US dollars but trades in Bolivares. According to Chavez and Giordani these scummy brokers would buy a TICC in Bs. for the client at 100% of its face value, say 1,000 dollars at an exchange rate of Bs. 2.6, or 2,600 bolivars and then, lo and behold, sell it in USD, for something like 325 dollars, give or take a few.

Thus, according to these financial wizards it was a real rip off, because the owner of the TICC worth 1,000 dollars only got USD 325.

It turns out I remembered that late last year PDVSA sold a combo of three bonds in Bs. at about 140%  of their face value at Bs. 2.15 (the exchange then). That is, folks got them for Bs. 2.96 per dollar. But on top of it when these bonds began to trade they traded around 50% of their face value. Thus you were paying 2,960 to buy 1,000 dollars, and yet in the end what you really got was about Bs. 6 per dollar.

Which means it is OK for Chavez to rip you off like that, but not for them nasty brokers. Another bright example of revolutionary double standard of the revolution.

By the way, in all of their sanctimonious speeches Chavez and Giordani failed to mention one thing: why are so many people so willing to take such an alleged hit from their brokers (bookies for Chavez?) just in order to put their savings outside of Venezuela in US dollars instead of keeping them in Venezuela in the glorious bolivarian monopoly money....  No self doubt for them here.......

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