…80 pajaritos in the bush


So what does this have to do with anything?

The payment schedule on mexico's billion dollar bond

The Mexican government just borrowed almost $1 billion repayable in 21101 at a 6.1% rate. Yes, the world just gave the Mexican government a billion dollar bird.

In 34 years we will have collected our 2 from the bush (assuming that the Mexican government or its placeholding drug cartel keeps paying its rental rate).

Looked at another way, the present value of the cash flow coming from that Mexican bond will only justify the world’s investment if Mexico keeps current through 2037.2

Can the Mexican government pay its interest for the next 27 years?

Well its last default, by coincidence, occurred 28 years ago (though it was a near thing in ‘94), and they’ve defaulted 3 times over the past 110.3 At that rate, in 4 out of 10 futures the investment will not be justified.

Put another way, at a 3% default rate the present value of the world’s investment measured over the entire lifespan of the bond works out to 80 cents on the dollar (that’s a pretty meager bird).

Just another case of the quail-blind leading the quail-blind I suppose.


  1. not a typo []
  2. as discounted at the 30 year treasury bond []
  3. This Time is Different, Reinhart and Rogoff []
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A bird in hand…


To depart for a moment, from somewhat sobering reflections on mortality (to which I’ll return), let’s examine a different kind of cost: is a bird in the hand really worth two in the bush?

Well, it depends upon how good a shot you are.

To simplify matters imagine that you’ve got a Charleton- Heston-like deathgrip on your trusty .22 and Bruce Lee-esque reflexes. In short, the moment you see feather-one of either of those two birds in the bush it’s as good as yours.

Surely, then, they’re worth more than that dead bird you hold in your hand, and so you trade it away and wait.

And wait.

And wait.

Years later, when they find your desiccated skeleton, the rifle still poised, the NRA card still laminate and unblemished it won’t merit much mention until they discover the quail colony not ten yards distant. A source of scientific debate: for can they still be considered “quail” when they have so completely adapted to living, breeding, preening without ever leaving the confines of a single bush?

But even if you hadn’t perished in your pursuit, would trading away that bird in hand have been worth it if it had taken a year to catch those two in the bush? How about a day? An hour?

It depends.

It depends upon the value of a bird and the value of your time (and the value of the experience, sitting around and waiting for those birds, and the value of the story you get to tell, the value of the ammo you have to waste and the dollar-value of damage that ammo does to your gun in firing, not forgetting, either, the psychological damage you may yet do yourself for watching two additional living creatures perish by your direct and purposeful acts, and can that really be valued?1), but there is a third (eighth?) variable I’d like to focus on, and for the sake of clarity, I’ll reset the scene.

It is not you in that quail-blind but, rather, your indestructible auto-shooting bird-net-gun (steam-powered by renewable geothermal energy); you have already caught one bird, and another hunter has the next reservation (there’s some kind of chalkboard sign-up system – kindof like a bar’s coin-op pool table). Now he offers to take your single bird bounty off your hands in exchange for his slot on the chalkboard (where he’s signed up for the next 30 years), and though there are two birds left in the bush, they’re just chicks, so it will be five years until they peep their little beaks out. Do you make the trade?

To distill the problem into comprehensible form: is two birds five years from now worth more than one bird today?

Well it depends upon your rate of return.

If you imagine that your indestructible auto-shooting bird-net-gun also does taxidermy (powering itself with the flesh of the bird in order to do so – yes, it’s a carnivorous taxidermy cannon) and you can rent out a stuffed bird at an annual rate of 25% of its full cost, then by renting out the first bird you could earn enough to buy yourself a second in four short years.

Two birds in four years versus two birds in five? I’ll take the former, thanks.

But, if there’s not a tremendously demanding rental market for stuffed quail, and you can only command an annual rate of 10%, then it’s two birds in five years versus two birds in ten, so you’ll gladly trade away your keeper in exchange for another slot in the quail- blind.

The bird in the hand might be better, depending on the rental rate
So, in answer to the age-old question: a bird in hand is neither better (nor worse) than two in the bush, so long as the taxidermy rental fee is equal to 20% of the value of the bird (and so long as the birds in the bush are fifth-year-flying quail.)

You follow?


  1. NB: yes []
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