Goldman "Unexpectedly" Exempt From Venezuela Bond Trading Ban

When the White House announced on Friday that Trump had signed an executive order deepening the sanctions on Venezuela, and confirming the previously rumored trading ban in Venezuelan debt that earlier in the week had sent VENZ/PDVSA bonds tumbling, we made what we thought at the time was a sarcastic comment that in light of the recent scandal involving Goldman's purchase of Venezuela Hunger Bonds, that Lloyd Blankfein's hedge fund, which now controls the presidency and next year will also take over the Fed courtesy of Gary Cohn, would be exempt from the trading ban:

And, as it so often happens in a world controlled by Goldman (as a reminder, in 2018 the world's three most important central banks, the Fed, the ECB and the BOE will be run by former Goldman employees: Gary Cohn, Mario Draghi and Mark Carney), sarcasm has a way of chronically turning into truth, and as Bloomberg confirmed overnight, one of Venezuela's largest bondholders is "breathing a sigh of relief."

That would be Goldman Sachs Asset Management, which infamously bought $2.8 billion of notes issued by state oil company PDVSA in May, and has since faced sharp criticism for a deal that appeared to supply fresh funds to President Nicolas Maduro. Confirming our initial "sarcastic" reaction, while observers thought the Goldman bonds would be a prime target for new penalties, they were exempt from the order. In fact, the only bonds covered by the trading ban are notes due in 2036 that appear to never have been sold outside Caracas.

“That was somewhat surprising,” said Francisco Rodriguez, the chief economist at Torino Capital in New York. “I guess the logic is that those bonds are already in the hands of bondholders, so you wouldn’t be really blocking new financing.”

Actually no, Francisco, the logic is that if Goldman was forced to liquidate the bonds, or worse was stuck holding them as Venezuela went bankrupt, it would take a huge hit on the nearly $3 billion notional position. As such, Goldman's advisors to Trump made it quite clear that any sanctions against Venezuela would have to be Goldman Sachs revenue netural first and foremost.

That's precisely what happened.

Even more ironic is that the market immediately saw right through Trump's shallow attempt to "punish" Venezuela which however would exempt his top Wall Street advisory, and the market reaction across the board was fairly muted Friday, with both sovereign bonds and notes from Petroleos de Venezuela SA posting gains.

The gains on Friday -- with most notes up less than half a cent -- show investors’ relief after the Wall Street Journal reported earlier in the week that U.S. officials were considering a blanket ban on all trading in Venezuelan debt. Such a move would have left investors stuck holding debt that is considered among the world’s riskiest.

As described yesterday, the new executive order bans Venezuela from raising cash with new debt offerings, and prohibits transactions in older bonds held by government officials and entities... just not Goldman Sachs. The sanctions will likely force the oil-rich nation to reduce imports to conserve cash, thus deepening the already severe economic contraction in the country, according to Rodriguez.

In retrospect, it appears that Goldman will benefit not just once but twice from the latest Trump "sanctions" - the second time will be on the bank's long oil prop position (remember when the Volcker rule prevented banks from putting on proprietary positions for a few months back in 2010... good times) as oil is about to spike should Venezuela finally default: 

“There is also the concern that the order may push Venezuela over the brink and lead them to default,” Rodriguez said. “Certainly the more restrictions on financing that you place, the harder you make it for them to pay.”

Of course, Venezuela's default is just a matter of time, but it won't take place before Goldman dumps its bond holdings to some unwitting retail investor or some German widows and orphans: Goldman’s investing arm is the largest holder of bonds from Petroleos de Venezuela and the seventh-largest holder of Venezuelan sovereign debt as of June 30, according to data compiled by Bloomberg. Andrew Williams, a spokesman at Goldman Sachs Group Inc., declined to comment.

Comments

moimeme (not verified) BaBaBouy Sat, 08/26/2017 - 15:15 Permalink

Yep, all those who thought TRUMP was different can now go in a corner and cry their eyeballs out.

And btw, Trump's NOT born again. It's a tactic (like W did) to fool evangelicals into supporting him.

"Not everyone who says to me, 'Lord, Lord,' will enter the kingdom of heaven, but only the one who does the will of my Father who is in heaven." - Jesus

Doing the will of ZIONIST pigs is NOT God's will. http://wp.me/P4OZ4v-1Lt

In reply to by BaBaBouy

Paul Kersey moimeme (not verified) Sat, 08/26/2017 - 15:26 Permalink

"Yep, all those who thought TRUMP was different can now go in a corner and cry their eyeballs"

Moimeme, face it, no one who gets the Presidential nomination, from either party, is "different". The country is run by, and both political parties are owned by, the same over bloated, militaristic klepto-corporatist state. We human livestock only exist so that the plutocrats can cage (incarcerate) us, shear us (take our wealth), and (as proven by the false-flag Vietnam war, Iraq war, Afghanistan war, etc, etc, etc) slaughter us.

In reply to by moimeme (not verified)

Iskiab Richard Chesler Sat, 08/26/2017 - 15:44 Permalink

Looking back at history and the financial crisis, investors with Goldman. They'll repackage it and call it AAA and sell it to people who're dumb enough to trust them.

I love the line about diversity of assets meaning less risk. Hey, let's bundle all the assets with a 10 percent default rate and magically the default rate will drop to 1 percent! Lets take a piece of garbage from every house on the street and when you combine them it'll magically become a Ferrari instead of a big pile of junk. I'm always torn between feeling sorry for anyone with them and thinking it's their own fault for being so dumb.

In reply to by Richard Chesler

b-sugar Looney Sat, 08/26/2017 - 14:31 Permalink

stfu. PDVSA got them good oil fields as collateral, let a us company own them, they either make profit or get us oil some more work. as for the sanctions, those fat cunts are abusing the official 10:1 us rate exchange and selling good to the 15.000:1 black market, let trump stop that shit, it's helping citizens. do you want obama back? sign a fat big deal with those socialtards and fuck the people as usual? try to reevaluate your narrative, irony at all costs make you say stupid shit 

In reply to by Looney

subversion Looney Sat, 08/26/2017 - 14:46 Permalink

I was trying to tell people about Trump's connections to these people for months and was ignored everywhere I tried. Just looking into his mentor and best friend Roy Cohn should have been enough (he has deep ties to government corruption and helped setup pedo networks used by the government).Looking further into the Ghislaine Maxwell/Epstein connection should have sent up a few more flags for people, but people wanted hope.I still hope that I am wrong and Trump will do more good before he is gone, but that is hope and not reality.Reality is his connections to the (((people))) who run New York, the pedo underground (some recruited from his own club), and his ties to George Soros (forgiven hundreds of millions in debt and co-ownership of the GM Hotel).....and let's not start on Ivanka who would only date jewish men because of the environment she grew up with daddy. She also once dated a Rothschild, but was rejected for marriage because she was a goyim.

In reply to by Looney

veritas semper… Bes Sat, 08/26/2017 - 17:10 Permalink

From Moon of Alabama(the comments are very good too):  Countdown To War On Venezuela - Step II: Trump Imposes More Sanctions A month ago we warned of the upcoming war on Venezuela. Such a war could blow up huge in many nations of the region. The U.S. trained and financed opposition has tried to create violent chaos in the streets but failed to gain traction with the majority of the people. The only support it has inside the country is from the richer bourgeois in the major cities which despises the government's social justice program. Workers and farmers are better off under the social-democratic policies of first Hugo Chavez and now Nicolas Maduro. The coup attempt as step one of a U.S. takeover of Venezuela has failed. Last month a new constitutional assembly was voted in and it is ready to defend the state. The opposition boycotted the election to the assembly but is now complaining that it has no seats in it. One of the assemblies first moves was to fire the renegade General Prosecutor Luisa Ortega Diaz. She had condemned the government for its resistance to the coup attempts. She now has fled the country together with her husband. The Miami Herald admits that she is on the U.S. payroll:

Ortega, a longtime government insider who became chief prosecutor in 2007, is likely safeguarding some of the administration’s most damning legal secrets. And she’s thought to be working with U.S. law enforcement at a time when Washington is ratcheting up sanctions on Caracas.

Word is that Ortega's husband was blackmailed by the U.S. after he was involved in large illegal transactions. U.S. President Trump threatened to use military force should the dully elected President Maduro not give up his position. The CIA head Pompeo recently visited countries neighboring Venezuela "trying to help them understand the things they might do". Did he suggest weapon supplies to some proxy forces or an outright invasion? Today the Trump administration imposed severe sanctions on Venezuela:

The sanctions Trump signed by executive order prohibit financial institutions from providing new money to the government or state oil company PDVSA. It would also restrict PDVSA's U.S. subsidiary, Citgo, from sending dividends back to Venezuela as well as ban trading in two bonds the government recently issued to circumvent its increasing isolation from western financial markets.

Venezuela was prepared for at least some of these sanctions. A few moth ago the Russian oil giant Rosneft acquired a share of PDVSA and at least some oil sales are routed through that company:

Russian oil firm Rosneft has struck deals with several buyers for almost its entire quota of Venezuelan crude for the remainder of the year, traders told Reuters on Wednesday, the first time it has conducted such a large sale of the OPEC member’s oil....Venezuela's oil deliveries to the United States have declined in recent years amid falling production, commercial issues, and sanctions on Venezuelan officials.

The White House statement calls Maduro a "dictator" and his Presidency "illegitimate". Both descriptions are laughable. Maduro was elected in free and fair elections. The former U.S. president Jimmy Carter called the election system in Venezuela the best in the world. The new sanctions will likely increase the support for the current government.  The White House hinted at further economic measures:

In a call to brief reporters on the measures, the [senior Trump] official said the United States has significant influence over Venezuela's economy but does not want to wield it in an irresponsible manner that could further burden the already-struggling Venezuelan people.

Venezuela will now have some troubling times. But unless the U.S. launches an outright military attack on the country -by proxy of its neighbors, through mercenaries or by itself- the country will easily survive the unjust onslaught. With 300 billion barrels the proven oil-reserves of Venezuela are the largest of the world. They are the reason why the U.S. wants to subjugate the country. But neither Russia nor China nor anyone else wants to see those reserves under U.S. control.

In reply to by Bes

buzzsaw99 Sat, 08/26/2017 - 14:30 Permalink

if you wanna buy iranian sovereign bonds, russian polonium, ukranian rocket engines, whatever, you know who to talk to.  who run bartertown?  [/aunty]

Zeej Sat, 08/26/2017 - 14:31 Permalink

Am i wrong to think in many of trump decidedly pro swamp actions he is showing us exactky who the swamp is?  Many already kmew and he just keeps reinforcing it for more to see. he knows whats up he is playing along and has reason to do so imo