YouSaid · the spoken record

Jay Newman

lines on the record: 42
first: 2022-06-27
most recent: 2022-06-27
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“To the point about reparations, it's an issue that's on the table. It's obviously being discussed, but I think it can't be discussed in a vacuum, and it really has to be discussed in the context. And you look at a country like Haiti, where elites have really destroyed that country by milking it consistently over decade after decade after decade. How can you talk about reparations without going after the elites that have stolen the country blind? This is how you get there. I'm not quite sure, but I know that you have to get there to have a fair and sensible conversation about all those questions.”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, investors are fundamentally optimistic, and there's a whole other level of investment that we haven't talked about, which is, and you just mentioned this, Joe, which is the foreign direct investment. And you have recent cases in particularly involving India, world's largest democracy, which when it's faced with arbitration awards because it's confiscated property decides to vilify investors and avoid payment. So it applies not just to debt, but direct foreign direct investment. And this fundamental optimism on the part of investors, because we are, you know, every time you lend money or invest money, you're being optimistic about not just your own process, your own analysis, but the capacity and willingness of your investee and your borrower to honor their obligations.”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“It's bad government is unfortunately a huge, huge problem. And I'm completely sympathetic to the idea that people that live in these horribly corrupt and opaque regimes are punished. But how do you break the cycle?”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Around Vladimir Putin go after their bank accounts, their companies, notably their yachts and their planes, and at this point, most have just been seized. They haven't been confiscated. But I've never been involved in a sovereign debt situation in which if you were really thinking about the balance sheet of a country, corruption and ill-gotten gains shouldn't have been an issue. And just if we just imagine a world in which creditors became, in a way, private attorneys general and were licensed to go after people that had been milking a country for decade after decade, which unfortunately is all too prevalent. You just have to look at the Transparency International rankings to understand that. Whether the whole dynamic wouldn't change in a very positive way.”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“The word that comes to mind when we embark on this kind of conversation is the C word. Which is And I don't think there has ever been a sovereign debt crisis or sovereign debt problems where corruption isn't an underlying issue. And this is another place where Western governments could take a very insistent role, a place where the IMF could take a very insistent role and focus on corruption and not just the existence of it or the past effects of it, but the possibility of recovering ill-gotten gains. Thinking out loud now, I wonder whether what's happening with sanctions in the case of Russia might be a watershed, because Western governments have become very willing to sanction the vast numbers of individuals.”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“So let's just take the simplest possible question. You're the G7, and you know that China is the big dog, and you know they've invested and lent huge amounts of money. You just want to see the contracts. You just want some transparency. So Western governments should be insisting as a condition of any restructuring that involves sovereign debt, whether it's private sector or public sector, that all the creditors come to the table and put out their cards and show what they've got. And that would seem to be a very easy position to coalesce around, but will it be?”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“I think there's no question that that's the case, but it's, can you imagine Western governments being having a cohesive and a coherent policy?”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“That appears to be what it wants to do. I think we really can't talk enough about China and the role of China in developing economies on every level from the perspective of controlling natural resources, from the perspective of being a direct foreign investor, from the perspective of being a lender. China will be the dominant question for the next several decades unless things change. And it's unclear what could cause anything to change because China still has the ability to pump out huge amounts of money and people to develop projects around the world.”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“I agree with you that that would make sense for China if it wants to be part of our current Western liberal tradition and system. But China gives no indication of wanting to be part of that system. China has, I think, a very different view, has a different system. It wants to go its own way. And if it can disadvantage and crush other creditors in the course of restructurings,”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Many creative attachments and arrests. You mentioned the Libertad, planes were arrested. In France today, the plane of the President of Congo is under arrest and is about to be auctioned. Sometimes people have attached oil cargoes. You have all sorts of creative avenues, but debt cases don't get resolved through attachments and through execution against assets. They always get resolved through settlement. So the goal is always to get the attention of the debtor, but not push them away. Unfortunately, sometimes creditors do things that do end up pushing them away. And then the only opportunity is really regime change. And that is what happened in Argentina. While Christina Kirchner was in charge, it had become impossible because she loved creditors vultures and she loved her stature as someone who was... Standing up against them”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Most countries pay what they owe, and whether they pay it early on or later on, they have a willingness to actually make good on their obligations. So we're talking about the hardest cases making the worst law. So the very few countries that have a kind of cultural indifference to making good on their obligations create a lot of need and opportunity for creditors. And so that's where the creativity comes in. When you have a country that really doesn't want to pay what it owes, you're in a position where you just have to keep getting their attention. And the Argentine saga, which, and again, it wasn't just Elliot Management, it was many firms that were involved in that over a long period of time. The goal was always to get Argentina to the table because even though”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“It's always a problem. I think you described that, Tracy, at the very beginning of the hour. As prices for new debt go up, The ability to refinance goes down, and that's where countries run into trouble. But the 100 year, maybe we should think about 100-year bonds as a bellwether. You know it's a bad sign. Somebody's able to borrow essentially a country that doesn't have a hundred year history of borrowing can borrow from 100 years. That's just madness.”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“And it's a massive reserve of hydrocarbons. That should have been exploited through drilling, through pipelines, through exports over the last many decades. But because of Argentina's fractious politics, it hasn't been. So you have a country as ever, in the case of Argentina that ought to be incredibly wealthy. That isn't because of its own peculiar psychology”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I think it was great for Argentina in the sense that Argentina now has a much more manageable level of debt. It's got a bond contract that really does make repayment an option. It can pay or not pay, depending upon its view of its financial situation and its market access. So I think that Argentina is, for the moment, in the catbird seat, except that it doesn't have the kind of market access it needs. It doesn't have the kind of credibility it needs. And one example of that is the Vaca Merta. So this huge formation of oil and gas, it's shaped like it's called Vaca Muerta, and I've fractured the Spanish, but because it looks from the sky like a dead cow.”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“And what Argentina said flat out was absolutely not. We're going to give you the same garbage covenants and the same garbage paper that we're currently sitting at this table talking about. That would have been a moment to say, we can't live this way. We can't live with a default, a massive haircut, and a bond contract that makes it completely optional, whether you ever pay us another dime again.”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“The case of Argentina as a discussion went on, it moved to Argentina saying, we're going to pay what we're going to pay. And creditors then, at the behest of some of us who were encouraging a restructuring of the bond contract, some creditors said, well, if you're going to give us a 50% haircut, even though you may not need it, and even though you haven't put forth a fiscal plan that describes your capacity to pay. If you're going to do all those things, at least give us new bond terms that are going to create what I call a super bond, a bond that is actually enforceable and would be senior to any other kinds of debt.”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Jump in too quickly because Mockery was there for a very short period of time. He did restructure the debt, he did bring Argentina back to capital markets, but as soon as he was gone, Argentina was back in the tank.”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Think you do get shunned. I think Argentina is currently being shunned, will be shunned. But I think it takes a long time for markets to develop that kind of muscle memory. And in the case of Argentina, it's taken decades and decades for people to realize that fundamentally, Argentina is not a reliable counterparty. I think for most other countries that don't have that kind of history of aggressive defaults and repeated defaults, investors are willing to give new governments a chance. I think the question is going to be whether, in the case of Argentina, when and if there is a change of regime, markets will give that new regime a chance. The mockery administration is perhaps one reason that investors shouldn't”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“When you're faced with a situation in which you have no leverage and the debtor is being aggressive and obstructive and obstreperous, which is defines Argentina, sometimes you just have to back away from the table. But that is the most difficult thing to do because there is a propensity on the part of participants in any situation to want to stick with it. Remain at the table. And sometimes you just can't. But that's the one element that if creditors could really understand that, embrace it, and resort to it, it would be much better.”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“But I think that the idea of collective action is something that I think about a lot in terms of restructuring is generally and emerging market restructurings in particular. And you see that ability to act collectively fading. The diversity of creditors in Argentina, I think, produced in most recent restructuring, produced a very bad result with massive debt forgiveness that was completely uncalled for because creditors really couldn't agree amongst themselves. And this is what I call the just say no moment.”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“That it's easy to be grandiose and take credit for the Argentine restructuring, but in fact many creditors work together in that. And I think that one of the things that I'm most pleased with is the ability of the creditor group to really stick together and be thoughtful about what was possible in terms of an Argentine restructuring. And that collegiality persisted to the very end through the restructuring and ultimately resulted in the restructuring that was extremely good for Argentina and extremely good for the creditors that remained standing. But a lot of creditors, of course, were peeled off along the way by the Kirchner's aggressive tactics and populism.”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“They'll realize that these are not the bond contract isn't a safe place to place your bet. History being what it is and Marcus being what they are, I don't think we're going to really see much change.”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't expect there to be a lot of fundamental change. I think we'll get through this period. And the other important piece is that the absolute amount of developing country debt is rather small. In international financial terms, it's not big enough to in and of itself cause a problem except for the debtors themselves who get trapped in a cycle that takes many years to work through. But what is somewhat different in this cycle, and we saw it two years ago in the case of Argentina in their most recent restructuring, is that the bond contracts are so weak. So creditors realize that they don't have a lot of leverage. And because they don't have a lot of leverage, they agree to deals that are much, much better for the debtor and much worse for creditors. And I don't see that changing. I think if investors study the details,”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Would expect it to, and I think it's actually what you're describing is actually one big perfect storm. All these things are related. Because we haven't seen this kind of a boom and a bust in financial markets or this kind of a bust in, what, about 15 years and maybe on the tech side over 20 years. So there is so many elements that conspire against sovereign debtors continuing to be able to pay what they owe.”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“I think the short answer to that is no. I think a lot of people are not going to be taking ESG into account and there'll be less of a market for certain debtors. But if you're going to cast the ESG net over developing countries generally, you're going to run into trouble because we're talking about countries that on average, and it's unfair to malign people as an average, governance is poor. And in many cases, corruption is rampant. And at the same time, countries are a producer of natural resources that are desperately needed by Western industrial countries. So people are willing to turn a blind eye to all those factors because of the geopolitics and the geo-economics.”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Completely flawed, completely rotten if it were up to me and I had my magic wand, I would repeal the sovereign immunities act and I'd repeal the state immunities act. And I would go back to the principle of absolute immunity because if you're looking at absolute immunity, and maybe the Russians have the right idea, perhaps not borrowing in a currency not their own, but the right idea in saying you're looking at, if you look at me as a sovereign, I'll pay you what I want when I want. And you have to trust me And that would put investors on a very different footing. It wouldn't make the underwriting community at all happy about it because it would mean that they couldn't sell as many bonds. But wouldn't that be psychotary?”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“If we go back to basics, and I wrote a little piece about this that I called unsafe at any price, comparing sovereign debt to the Corvair. Sovereign debt, the idea of a sovereign borrowing in a currency that isn't its own. Is fundamentally flawed. It's a really bad idea. But the entire structure of the sovereign debt industry is, you know, it supports the idea that it's not a bad idea. But if you take the case of Sri Lanka, if Sri Lanka had borrowed in its own currency rather than in the dollar or in the euro, it wouldn't have a problem because it could just print its own currency. Now the response to that, and we get this all the time, people saying, well, but they couldn't borrow. If they couldn't borrow that much money unless they agreed to borrow dollars. And isn't that just the point?”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Because Russia was a great payer. They kept paying throughout, even after the sanctions imposed post-Crimea in 2014. And they showed no indication of not intending to honor their obligations. So Russia looked like a strong credit. And in fact, Russia, even in the beginning of this crisis, post February 24th, Russia insisted and did make payments. So Russia really appears to all intents to intend to be a responsible debtor. Right now, because of sanctions, it's foreclosed from doing that.”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Exactly. You can go to court typically in either the US or the UK, or both. And that is an essential element. The other one of the other critical pieces is not just waiving immunity, but agreeing where you can be sued. So if Russia says, I don't wave immunity, we're back to a world that we haven't seen in sovereign debt since the 50s, well before the Foreign Sovereign Meanings Act and the State Immunities Act, where the sovereign is a beneficiary of absolute immunity. It's what sovereigns are. They do what they want when they want. They pay what they want when they want to pay it. And that's the position that Russia staked out for itself.”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Have never bought a Russian bond. I never would buy a Russian bond. Russian, and in fact, I hadn't looked until recent days I hadn't looked at the Russian bond contract for a very long time. And I had forgotten this, that Russian debt, Russia does not waive sovereign immunity. The critical element of contemporary bond contracts is a waiver of sovereign immunity, which means that you can sue by agreement.”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“There are a few Few really important elements to any investing, and particularly sovereign debt investing. One is that the contract has to be strong. And sovereign bond contracts have gotten much, much weaker over the last 20 years, really a concerted effort on the part of the official sector and the G7. The Europeans have been at the forefront of this diluting covenants and making it more difficult to enforce in the event of a default. But the most critical element is your basic financial analysis of the country. And Tracy, you're absolutely right. At Elliott, we were extremely selective in the debt that we bought because you really had to believe, you always have to believe when you're buying sovereign debt, that the debtor is capable of honoring its contracts. And so those are the two critical elements. Is the data”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Think what's happening even in the last three months with prices of energy and foodstocks is something we haven't seen in a long, long time. And it puts a lot of pressure on every country because the first obligation of a government is to keep its people warm and fed. And I think to the extent that that's put at risk, and it is at risk now in dozens of countries, countries really have no choice but to prioritize those needs over payment of foreign debt. It doesn't mean that they don't respect foreign debt or intend to restructure it or repay it at some point in time. But I think in the near term, they'll make a correct political decision for themselves to delay, defer, or deny those payments.”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“So you have this huge force in the room and outside the room that won't tell you how much they owe and isn't willing to take a discount to make things fit together. So it's almost in that climate. It actually becomes, in my view, impossible to have restructurings that really get countries out of the woods and put them on a strong financial path because you've got one. It used to be that we would complain about the IMF insisting on being super senior. Now you've got a creditor that is placing itself super senior to the IMF.”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, how they behave in pretty much every commercial situation, they're right and you're wrong. And they're implacable foes on many levels, but particularly when it comes to the debt. I'd like to just go back to this very little geeky but I think important point, which is, can you imagine a sitting down at a negotiating table with a group of creditors? You've got the IMF, the World Bank, other multilateral institutions, and you've got different creditor groups, banks, industrial lenders, investors, and bondholders. Everyone's at the table. Everyone's documents are on the table. Except for China”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“We can't talk about that. It's part of our agreement. And I don't think even the IMF has a clue what the scale of those investments are, which means that when you face a restructuring, you've got a creditor, a very aggressive and important creditor, China, which doesn't want to take a discount at all. So you have a super senior element there that we've never seen before in the history of EM lending.”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“I think China is the critical element in emerging market lending. The one road initiative has meant that China has provided money, either loans or investments in dozens of countries around the world for ports, for rails, for communications infrastructure, you name it, the Chinese are promoting it and lending money to developing countries. So China has become, and this is the critical element, China's become a huge lender, an investor in developing countries, but no one knows how big they are. No one knows. I mean, the Chinese know, but no one else, because the contracts under which they invest are secret. I've asked on many occasions to see a copy of these loan agreements, and it's always...”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Easier and easier for a variety of reasons. One you've mentioned, which is that markets have short memories. That's certainly true. But the other pieces that when a country runs into trouble, the multilateral organizations all rally around it and actually other governments rally around it. So if in the case of Sri Lanka is just a case in point, we're going to see, we will see the IMF and the World Bank and the Asian Development Bank and the G7 and the G20 all saying, oh, poor Sri Lanka, not blaming Sri Lanka for their problems, but looking for an opportunity to fleece foreign lenders. And that is a consistent pattern. What's different today, and I know we'll get to talk about this, is the role of China. China is increasingly has the whip hand in essentially in developing country lending.”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“So many questions nestled and nested in what you just asked, Joe. It's always political. Countries don't typically borrow with the intention of default, but on some level, it's always in the back of the mind of a politician, because they borrow to get money they can use for their own purposes, whatever those are, whether they're for legitimate infrastructure and building or corrupt purposes, which in many cases they are. But it's a political decision. And it's only when the money is cut off or threatened to be cut off that political figures in borrowing countries decide that, well, maybe it's not worth the trouble.”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“It's. It is a complicated ecosystem and its rotation because what happens in the first instances at the buyers tend to be real money buyers, retail investors through mutual funds that are responding to advertisements. You've seen those ads in the paper which show past performance and they always show the best performing funds. And periodically, those are emerging market funds. And that's when sales pick up. And the mutual fund investor and buyer is driven by indices. So there's always a buyer if the country's in the index, whether it's Argentina or Russia, those bonds have to get included. And that's why they're bought. Then what happens is after default, they get puked and other more opportunistic investors like hedge funds come in and the cycle starts over again.”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“They default because markets closed to them, and that's what typically happens. The initial defaults in Poland and in Mexico made lenders very nervous, and when it came time to roll over the debt, there were no takers. That's what's happening today. I mean, it's almost an inevitable process when things are good and money is easy, people pile in and the underwriters find plenty of buyers. But all of a sudden, when one country defaults, let's take Lebanon, let's take Sri Lanka, which you mentioned. Everyone says, Whoa What about country X and country Y and country Z? And then they become nervous and then the dead can't get rolled.”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“This was in, but the default started in the late 70s, but they extended into the 80s, and they weren't resolved really into the 90s. Of course, in the case of Argentina, which went on even longer. But we're talking about a period that could be very, very stressful and distressing for developing country borrowers.”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it's almost the perfect storm for EM, and the only real comparison I can draw is from the very beginning of third world debt crises, which is the 80s. The Foreign Sovereign Immunities Act was passed in 1976, the State Immunities Act in England 1977, and then we saw a huge, huge volume of lending. It's the time when Walter Riston famously said, to excuse lending to developing countries, he said, countries don't go bankrupt, which is completely accurate and totally useless if you're a creditor. But what we saw there was a period in which something like 25 countries defaulted.”
2022-06-27 · Odd Lots · Jay Newman on the Coming Crisis for Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source