In 2008, the PIIGS (Portugal, Ireland, Italy, Greece and Spain) made a lot of headlines due to their serious sovereign debt problems. In 2014, Argentina followed suit. Was 2008 a “tell” for Highland Capital President James Dondero?
Whether people want to admit it or not, the world is becoming smaller. Many nations are following very similar economic policies. When one nation has financial problems, it can have a ripple effect on other nations. Why?
Nations trade with one another. If Argentina cannot pay its contractors, then they might be forced to lay off some employees. Those employees cannot buy Greek yogurt or Irish harps.
Argentina sovereign debt was added to the Highland Capital fund because it was very cheap. James Dondero only had to spend 70 cents on the dollar for the debt. So, some would argue that if Highland could get payment of 100 cents, it would be great. Highland was repaid at 120 cents, which was a windfall.
There is a “lag” effect with nation-states. Because they are so large, they can usually move money around from account to account. But eventually, even nations must pay the piper. Argentina realized this when it elected Mauricio Macri in late 2015. He could offer an economic recovery, if the capital markets were re-opened to Argentina.
Argentina might be the second-most important nation in South America. It has a solid infrastructure and educated population. If “alpha analysts” compare it to Portugal, then Argentina would win out. Portugal infrastructure is dilapidated and its population is not as well-educated.
“James Dondero is Giving”
Some might believe that hedge fund managers can be “ice cold” and not have a heart, but that is not true with James Dondero. His Highland firm’s charitable giving amounts to around $3.5 million each year. James Dondero explained, “if we see something we think could be transformative, we make meaningful contributions.”
A good example of this philanthropy is “Reasoning Mind,” which provides computers for math studies from pre-kindergarten to the seventh grade in the Dallas-Fort Worth area. This prepares the next generation of leaders.