Puerto Rican debt?

As I saw, he said the” PR debt needs to be waived.”   The PR bonds cratered today. 

That remark was quickly walked back by his staff.  And yeah, Sitka's right, bonds crumbled.  They'll bounce back, once it is made clear that the President spoke hastily.

https://www.nytimes.com/2017/10/04/busi … -debt.html

Either way , its doubtful that PR can realistically pay back that debt, and especially now after hurricane Maria destroying so many homes and businesses and an increasing exodus.

If they do pay it back, it'll take forever, and after a severe haircut, and at minuscule annual amounts. How much and how long to be decided by the Federal District Court judge hearing the Title III litigation.

I know a lot of folks say right on, cancel the debt, screw the "Vultures" who bought PR bonds cheap when things got gloomy to make a killing. At least they paid something for them, enough for them to fight to get it back. The sellers are no doubt glad they sold now.

But, WSJ says the Vultures are only 25% of the bondholders, the vast majority are money market funds, And a vast majority of their clients are real people who bought them for their personal portfolio, many in PR. Interviewed a soon to retire PR professor and his wife who'd been buying the various bond offerings from PR for 20 years. $200k worth. Put too much in one basket, they are now the first to admit that.

Similar data has been reported by reliable sources all over the net so if you find this hard to believe do your due diligence.

So when people say cancel the debt and screw the vultures, 75% of the bond holders are saying "easy for you to say". I think it's fair to say PR is going to hurt a lot of "people" P.M.

Thanks for the clarification.

Life has lots of risks. Building on a coastline or on a fault line  or in proximity to a volcano is very risky. Sometimes it works and sometimes it does not.  Going for a drive has a risk. Nothing is guaranteed but life goes on.

2 days ago CNBC as to who owns PR debt

https://www.cnbc.com/2017/10/04/if-you- … wrong.html

dgdlaw,

This is just my humble opinion and it will probably ruffle some feathers.

I completely understand what you are saying and am very sympathetic for the 75%. But it was an Investment. All Investments carry risks. I have lost over 1M in investments, all of which were out of my control. THAT is why I DO NOT invest in the Stock Market, Bonds or anything that I do not have some say and control over my money.

Couple of things to think about:
1. With Wall Street, the deck is ALWAYS stacked against you. The Wall St firms (good, crooks and sharks) create different "OPPORTUNITIES" for all the firms to offer to their Clients. Has there been money made for Clients, SURE HAS, but you are at the mercy of Wall Street and the Banks that look at you like a Milk Cow. If the milk runs low, "Mr or Ms Investor, you need to pony up more funds or get out. Sorry for the losses, they were out of my control". AND he is right!!! But it is not his money that is lost, so the extra care and research is not done to try and mitigate the risk as much as possible.

2. For a hundred (s) of years, governments have offered G/Bonds to investors and have been always called them, "SAFE INVESTMENTS". In present day reality, some G/Bonds carry more risk than most large company stocks. Example: Belgium (Financially Broke) was offering a 100 Yr Bond @ 2.5% ARR. Anyone that would buy those Bonds are crazy!!! We do not even know if the Euro (not looking very good) or Belgium will be here in 100 yrs. Even US Gov Bonds are a huge risk. The US Government is more broke than PR is (per capita). These govs and others like them are walking on banana peels. It is not if, but when they crash!! If you think I am wrong, go look for yourself at each country's public financial report. So WHY would a person buy G/Bonds?

With any Investment there are risks. Everyone wants to hand over the funds they have and sit back waiting for the big check to come in. And folks I do as well!!!! BUT that is not the world we live in today. If people want to grow their finances, they better start thinking outside the box, get creative, learn to be a good steward of your funds and stop depending on the average Financial Advisor that all he can say is, invest in stocks and bonds. If your advisor says that and does not offer you other ideas that are above the norm, then you need to find another advisor and start schooling yourself. Dont Be Lazy!!!! LAZY LOOSES!!!!!

So one of you say, ok mr. smarty pants, what do you do? I have spent many years learning and studying at HK (Hard Knocks) University. I like looking at businesses (startups and ongoing concerns). I invest in 1) people, 2) the vision/idea, 3) the potential and know the partners track record/who they are as a person and 4) THE MATH. The financials have to work!!!!

This is not for everyone, I know. But G/Bonds has been and will be even more devastating (life changing) to many families as time goes on. ALL Investors large and small have to be wise, seek diversified wise counsel, learn the area you are looking at investing in and be a good steward of you funds. NO ONE is going to look after your funds better than YOU!!!! Be Wise and do not fall into the same bottomless pit that the investors did buying the PR Bonds.

Folks, the PR Bond Owners invested and THEY KNEW there were risks. THAT is why a tax free upside and (I think) other bennies were offered, to bait investors to buy in. They invested, and it appears they have made a bad investment just as many of us have done in other areas as well. Dont cry and whine, take it on the chin like an investor should, pick up the pieces and move on. That is what we ALL (whom has lost money in investments) have to do. Write off the losses (should be able to), make more money and keep on trucking!!! LIFE GOES ON!!!!

And then there's that!

Very well put, probably falling on deaf or crying ears but everything you say is undeniably true.

But to those understandably in tears, I say there has been some successful litigation recently against MM fund managers re: PR Bonds.

At least MM's have pretty deep pockets so may be worth it.

The next set of losers are those who think non-US government insurance is going pay up for property damage.

Every state has insurance reg's requiring carrier's to maintain reserve funds at a certain amount. None of them require reserve amounts to cover Armageddon.

I hope I am wrong, but I predict homeowner insurance carriers in PR going belly up.

Happens all over the US in automobile or real estate coverage to what is called "Sub-standard carriers" for various reasons--like this, or accepting too much his risk stuff.

Insured's are then struck to resorting to whatever relief their state provides in litigation against the "Liquidation Fund" or whatever each state may call the relief pool of money.

Boils down to accept their pittance offer or file a lawsuit against the liquidation fund which is an option, but then there's the two-three year endurance test many people can't financially endure when their house was their main asset, like 90% of us.

And though I'm sure PR probably has a similar dispute resolution against liquidated carrier's in place, I doubt there's going to much relief in their taxpayer financed pool. Probably worse for PR car/boat claims in view of a high % of Fannie Mae and otra govt financed home loans. But there are going to 1 million automobile claims in car dependent PR. Think of one million x $4,000= Belly up time.

dgdlaw,

You are right on each front and especially the deaf ear front (LOL). There for sure is a MAJOR mess in PR to start with, and how the PRG has handled the finances in past years is very bad and then the Hurricane comes. NOT GOOD!!! As you stated, there is a major insurance issue on the horizon as well.

But we have to stay positive and look at the cup half full. If not we will completely self destruct or stay in our pity party, never gaining a victory. We make a mistake, learn from it and go on. That is what the PRG should be doing.

That is why I like the ACTs so much and I applaud the PRG for being bold enough to go against the socialist mindset and create an atmosphere that will breed growth, jobs and stability for the Island. They are in a major mess and there has to be ALOT of changes that the PRG needs to implement, but when you are on the bottom, there is no where to go but up.

My friends in the insurance industry used to say "only in the insurance industry, we eat our own dead".    In other words, they carry reinsurance to cover claim in case the primary carrier goes belly up.   

I guess I'll find out the hard way, as I'm working on my homeowners insurance claim now.

When our house was hit by Ike we had a hell of a fight with the insurance company.   Numerous appraisals, appeals and hassle.  In the end, we got a new roof out of it.  Tons of fun.   

Sitka

I pray that all works out well for you. Each of us have our Insurance Stories. LOL Not Fun!!!

Me too.

Reinsurance usually only bought by insurers if there is a statutory requirement. For example, the feds require reinsurance for a carrier insuring commercial vehicles like school buses or tourist coaches or Greyhound or over the road truckers for example, protecting against a mass fatality situation. A statute requires them to buy it, it ain't cheap.  Ins Co''s aren't known for making sure you get yours, more like they get theirs, Not likely they are going to spending big $$ on something if they don't have to, no secret.

For example, medical malpractice carriers are not required to be reinsured. 4 were put into receivership across the US in 2016. Those carriers put those hospitals/docs at risk of an excess judgment. It happens. Cheaper rates can sometimes kick your ass.

Not sure when homeowner carriers are required or if some do so voluntarily. My banks/mortgagors over the years never asked me to provide proof of insurance from an insurance company that was reinsured.

But if your carrier is reinsured, it probably will so state in your policy/contract because your carrier will be touting that as a benefit or because the law requires that to be put in your policy/contract.

Quick answer is call your company--not necessarily your agent because I can guarantee you most agent's don't know much about the intricacies' of 30 page legalese polices, nor much about claims other then calling his company claims department, giving you that number/tel # and good luck. Stateside, they're strictly salesman and all are independent contractors who have no affiliation with your carrier other then they sold the policy. Many of you notice they sell 2 or 3 different brands but those guys remaining are few and far between. Maybe PR is different.

Sitka's results will give us a clue if his home owner carrier goes belly up. I'd love to see his PR carrier be reinsured.

Like you guys stated any form of investment is risky specially those with triple tax free incentives.

Not feeling sorry for anyone loosing on their investments, I lost a bit myself investing and I am not crying, I learned to accept risk and it has served me well. Those too lazy to study the investment risks or naive enough to believe on some investments offered will have a rude awakening sooner or latter. It is just the nature of the beast.

In my opinion the PR tittle 3 litigation was likely to provide a good haircut and now that PR is basically with no income and in a disaster, I think the court will trim it a little more. Hopefully it is trimmed enough that it makes it payable in a reasonable period of 30 years or less before the next storm hits. Fingers crossed.

Very true Rey.

Two reasons to pay what you owe.  The first is moral.  Simple justice requires the payment of your debts.  To do otherwise is theft.

The second is practical.  Only a madman would loan money to Puerto Rico today, and today Puerto Rico needs it more than ever.

Which begs the question, since the entire island needs a new power grid, many bridges were washed out, roads damaged and washed out, etc, etc - How is the PR government going to raise the money needed to rebuild public works? 

No cash, no credit, no hope?     How many think congress will provide the "mana from heaven"?    You may as well pray for divine intervention.   Truly a FUBAR situation if you know what I mean.