If Venezuelan and PDVSA bonds are worth some US$ 60 billion, then today a computer virus made them gain about US$ 1.2 billion, just like that, as the virus was embedded in an email with a headline mourning the death of none other than Hugo Chavez.
The whole thing was bizarre. Venezuela and PDVSA bonds were sort of mixed in the morning and all of a sudden, around noon, I noticed they were up strongly, but there was no news explaining it. Then, a friend calls and tells me New York is full of rumors suggesting that Chavez may have died. I got a dozen calls or cahts on the topic within minutes. Given that he supposedly signed some documents mid-morning, it was hard to believe this could be true.
But the rally kept going. It was only later, that another friend sent me this denial by La Prensa:
You can read it better in the original, but basically it says that this email purportedly showing a page from Panama’s La Prensa was circulating, saying “All of Venezuela in Mourning” because of Chavez’ death. But the whole thing turned out to be a virus, as if you clicked in the video of Chavez, it would download a virus which supposedly takes over your PC.
Well, some people did not even click, they believed the news and it spread all the way to debt markets, where it had a not insignificant effect. Even Panama’s Police felt it had to issue a warning.
Go figure!
Some people speculated the virus came out of the Presidential Palace. Others joked it had to be fake, how could it say “All of Venezuela in Mourning”. But in the end, the underlying truth is that debt markets would have an incredible rally if there wa the possibility of political change in Venezuela. And I understand why. What I don’t understand is how not knowing how orderly or disorderly that transition may be, does not make a difference. Just think, if the news had been right, Venezuela’s President would be Elias Jaua, a lightweight politically. Jaua just happens to be in Russia today, I wonder what his enemies would have done about that if the news had been true.
But the effect is there, an orderly political transition in 2012 will lead to the rally of a lifetime in Venezuelan paper. In fact, the possibility of such a transition should n itself provide a rally for the books.
The Devil's Excrement 
December 9, 2011 at 2:03 am
Seems to me that this was a cleverly disguised pump and dump and some people made a lot of money in a few hours.
To pull it off however, it takes more than a couple of script kiddies or even Blackhats. Smells like the Cubans were in on it and not just for the money, but creating a political trial balloon to observe how the country would react in the case of Chavez’ death.
December 8, 2011 at 4:13 pm
As for the source of the virus, one should ask, “Cui bono” (Who benefits)? Since it occurred at the moment that Venezuela is buying bonds to pay Cemex, it would appear to be the current bondholders, and certainly not Venezuela, the country. However, we may assume that many insiders in the Venezuelan government are current bondholders and know exactly what buttons to push to move the markets.
December 8, 2011 at 4:00 pm
Ira is right. It speaks volumes that the market actually prefers a high level of political uncertainty over the status quo.
And yes, the statement “All of Venezuela in Mourning” would be wildly overstated.
December 8, 2011 at 1:39 pm
It should be further noted that ‘inside’ information on political events (deaths & military actions) have historically been the explanation of massive accumulations of wealth. If you know a significant world event is about to take place, such as Chavez’s death, you can place yourself in a position to make a lot of money.
One of the most famous cases was that of the Rothschild’s. In 1815 there was no such thing as a telephone or even telegraph. Information was provided by horseback. The Rothschild’s in London, not sure which one, had devised a scheme of getting information on the outcome of the Battle of Waterloo ‘quicker’ than anyone else. Not only did you have to have faster horses, you had to cross the English Channel in a larger-sailed boat. Once he, the Rothschild, realized that Wellington won, he immediately ‘sold’ all of his shares on the London stock exchange. Yes, that’s right,…sold. When other traders saw this, they sold in droves as well. Once the market had crashed, Rothschild quickly bought up all the shares he could on the exchange, at rock-bottom prices, …and,…and,…well you know the rest of the story.
December 9, 2011 at 2:59 pm
Loved this story.
December 8, 2011 at 1:36 pm
The rally yesterday was due to the virus. They corrected and then this morning they went up on a story that the Government was buying bonds to pay Cemex.
December 8, 2011 at 1:31 pm
Miguel, is that why the PDVSA bonds have been going up so strongly in the last couple of days? Is that is the case, shouldn’t the market be correcting itself by now?
December 8, 2011 at 5:27 am
Hah! Great story, Miguel–because your analysis of this all is so fantastic!
And you also hit the nail on the head without even realizing it:
The possibility of a chaotic transition post-Chavez is STILL preferable to investors over the assured economic chaos caused with Chavez still in charge!