¡Viva La Libertad Carajo!
Javier Milei’s 1st year
Summary
- My favorite sector in my favorite country market.
- Milei isn’t done privatizing and YPF holders could benefit.
- “Argentina out-capitalizing America” — Stan Druckenmiller.
- First posted on StW
Earlier this year I wrote that,
I’m a fan of Argentina’s new president, never more than when he indicated his intent to pay us the money that his country owes us after his predecessor nationalized/stole YPF (YPF). I Texas hedged this one — long both Burford (BUR) and YPF (YPF). The most logical offer from Pres. Milei would be to kill two birds with one stone: reprivatize YPF and pay your debts by compensating Burford and other creditors with the government’s YPF equity stake. It would be good for Burford, good for YPF, and good for Argentina.
YPF is up a bit over 150% since then:
But the thesis has not yet even begun to play out. Pres. Milei started his term by picking Horacio Marin to lead YPF. This is a serious choice and one that indicated Milei’s focus on YPF. Milei is my favorite world leader and the one whose term has most closely matched his campaign. However, in late January he had to suspend plans to privatize YPF. This was completely tactical as he struggles to get his program through a recalcitrant congress. Privatization will be back and once privatized this company will be far more efficient and profitable. I turn it over to Stan Druckenmiller to explain how he ended up long YPF:
DRUCKENMILLER: With Biden, I’m more worried about stagflation — with all the government spending, with all the tricks that Yellen’s been using to manipulate the yield curve with the way the Fed seems to have reignited financial conditions, I think the inflationary outcome could be there. But I also fear regulation and everything else preventing productivity. So I’m basically a guy without a candidate. I’m an old-style Reagan, free market, pro-immigration, anti-tariff Republican. The only free market leader in the world right now bizarrely is in Argentina of all places. Javier Milei. It’s going to be an interesting experiment. This is a highly, highly intelligent leader who was taught in the School of Austrian Economics. And it’s funny because the last time I was on, we talked about entitlements, what would I do? He cut Social Security 35 percent after he came to office. They’ve gone from a primary deficit of like 4 or 5 percent to a 3 percent surplus. They’ve taken a massive hit in GDP, basically a depression for a quarter, and his approval rating has not gone down. In addition to being highly intelligent and knowing economics, he’s a showman and so far, he’s been able to maintain the street because they like the showman part. And I think he’s got a real shot and I’m —
KERNEN: You know —
DRUCKENMILLER: I’m not only invested in Argentina. By the way, do you want to hear how I invested in Argentina? It’s a funny story. I saw — I wasn’t at Davos, but I saw the speech in Davos and it was about 1:00 in the afternoon in my office. I dialed up Perplexity and I said, give me the five most liquid ADRs in Argentina.
KERNEN: Argentina.
DRUCKENMILLER: It gave me enough of a description that I follow the old Soros rule, invest and then investigate. I bought all of them. We did some work on them. I increased my positions and so far, it’s been great. But we’ll see. I don’t know how much time the populace is going to give this guy, but so far, his popularity is maintained and —
KERNEN: Yeah, Elon Musk tweeting about — he met with him I guess yesterday and then tweeted out, I recommend investing in Argentina. I know you met with him as well and I heard from you that this — I mean, it was just so — you were so impressed that you want to tell your friends about this.
DRUCKENMILLER: He’s — he’s over the top in terms of —
KERNEN: I’ve seen some interviews.
DRUCKENMILLER: — the spectrum, but the fact of the matter is the country’s been so devastated for so long. I mean, they were the eighth richest country in the world and now I don’t what they’re — they’re like 150. So, Argentina was ready for this, but it took somebody not crazy but on the spectrum to be able to do these kind of reforms. I — it’s really the inverse of what’s going on here. We’re avoiding all the pain. We have no pain. We’re the richest country in the world and you just wonder if we continue to go down this path toward the public sector over the private sector. Look, I agree. We’re all always going to be the place that you want to invest in, but I just hate to see Argentina out-capitalizing America, and that’s kind of where we’re going with this.
Analyst’s Disclosure: I/we have a beneficial long position in the shares of YPF, BUR either through stock ownership, options, or other derivatives.
