Mighty Trump Will Wipe Out Puerto Rico's Debt...


Puerto Rico bond prices fell Wednesday after President Donald Trump said the U.S. territory’s roughly $70 billion in debt may get out wiped out to help the island recover from Hurricane Maria.

“You can say goodbye to that,” Mr. Trump said in an interview on Fox News during his visit to Puerto Rico. It wasn’t immediately clear how the U.S. would do that.

- WSJ

Goodbye says Trump, and so it will be gone!

Is this realistic? If not, why do the bond markets even react to this statement? If yes, how is this conceivable? What needs to happen for PR to be able to file for Bankruptcy? Is bankruptcy the best solution in the long term?

 

His comments on North Korea definitely had effect on gold over the past few months. Why wouldn't the markets react to this?

“The only thing I know is that I know nothing, and i am no quite sure that i know that.” Socrates
 

All that debt is just not going to vanish.

Yesterday I was reading that Baupost still held some of the PR bonds which piqued my interest. Why would a guy like Seth Klarman be holding onto bonds that supposedly have no value?

I believe he will be running the same play that he did with Iceland when their banks collapsed. He bought over bonds, if i remember correctly, of these banks which were trading for cents at the time only to make a huge profit later on.

So its abundantly clear that all that debt is not going to vanish into thin air, and I guess the markets knows this too.

"The markets are always changing , and they are always the same."
 

No, it is not even close to being realistic. President Trump has made so many off-hand promises only to have his very own administration curtail him. Whether it is Chinese tariffs or withdrawing from NATO. OMB Director Mulvaney said that the White House wasn't going to pay off PR's debt less than 24 hours after Trump made the remark.

The other fact is even if the Trump administration was 100% for wiping out PR's debt, it would never pass the House or Senate. Not even the Democrats have been crazy enough to propose simply wiping PR's debt.

 

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