Investment Biker Read online

  Tabitha was impressed, but still not as impressed as I was. Although the guidebooks barely mentioned the site, I cannot recommend it enough for those with the turn of mind to appreciate the beauty and imagination of such a monumental human accomplishment.

  The political situation engendered by the dam was interesting, too. Paraguay, with only 4.5 million people, owned the dam fifty-fifty with Brazil, which had a population of 155 million. Naturally, the Paraguayans couldn’t use all of their half of the electricity, so they had sold 90 percent of theirs to the Brazilians for hard currency. With this infusion of hard cash, the Paraguayans were retiring their foreign debts. Someday they will be sitting very, very pretty. With a great balance sheet, they will be able fully to develop their country.

  I did see a political problem that could arise in twenty years. When their economy was grown, the Paraguayans might well want their electricity back. Rather than surrender its vital supply, Brazil would likely come up with a ruse to invade its smaller neighbor, or “renegotiate” the treaty. A treaty infraction would develop or a national slight would occur to justify such an invasion or renegotiation, and there wouldn’t be much tiny Paraguay could do.

  With the winter largely south of us, we decided to stop for a few weeks in Buenos Aires, which became one of our favorite cities, full of energy and bustle, nightlife and street activity. Here restaurants didn’t start filling up till nine at night, and even people accompanied by their children came in at eleven. The days were back to regular length, and the climate was mild. Buenos Aires was about the same distance from the equator as Charleston, South Carolina.

  We decided to take Spanish lessons. I had always thought Spanish would be one of the languages of the twenty-first century. Ever since I’d quit working so hard, I’d had it in the back of my mind to come to Latin America for six months to learn the language.

  Why will Spanish be so important? There are two major languages in the western hemisphere, English and Spanish. Chinese will also be important to the world, but China is a long way from the Americas.

  In the next century, as the South American countries become more vigorous and richer, and as our own geographic area becomes less dynamic and poorer, a Spanish separatist movement will develop. There will be political and historic justification for its arguments, because after all we did steal California and New Mexico. Alaska and Louisiana we bought, but not the other two. People have long, long memories for such depredations, as evidenced by Poland, the Ukraine, Russia, and Hungary. It wouldn’t be hard to make a case that we stole Florida, Arizona, and Texas, too, states with large Hispanic populations, and the last two of which are contiguous with Mexico. In the end, half of Mexico wound up as part of the United States.

  At the other extreme are the Yukon and Alaska—the northern end of our trip. It’s clear these areas, too, are ripe for future change. I am not surprised to discover that some U.S. and Canadian visionaries want to create a separate nation out of their part of the world, a country to be composed of Alaska, British Columbia, Alberta, Washington State, Montana, Oregon, and Idaho. They propose to call their new nation Cascadia. Geographically it would be larger than the European Community. This region now ranks as the world’s tenth largest economy in terms of its annual gross domestic product, with $250 billion in sales.

  Will these two provinces and five states secede? Probably not, or not soon. This is more a growing regional identity rather than an ambitious politician’s grand design. This is a grassroots revolution, the product of a changing world, a new way for the region to see itself. Cascadia is a state of mind, one in which its inhabitants are throwing off the shackles of European and East Coast thought for a freer, less stodgy way of life.

  In the twenty-first century, with every people yearning for more control over their lives, the world will be full of new regions like Cascadia.

  Splits and recombinations of nations will be a historical theme of the next fifty years. In addition to Canada splitting into three parts, I expect India to split into three, too, probably Hindu, Muslim, and Punjab; Italy to divide into North Italy and South Italy; and Brazil into North and South Brazil.

  After seventy years of mismanagement, the countries of Latin America are finally getting rid of the old practices that destroyed their economies, except for legalizing what are now illicit drugs. If and when they do that, the continent will become even more dynamic.

  Latinos in the United States will say to us, “Historically, this land is ours. You took it by force of arms, and we want it back. You’re discriminating against our people. Our people no longer want to be with you because you’re a bankrupt country. They want to be back with us; we’re prosperous.” The familiar provocations that produce war will reoccur and intensify.

  People have different goals. If our goal is to keep this country together as one, it’s a huge mistake to educate immigrant kids solely in their parents’ language instead of English. It only breeds separatism, which worldwide is a leading cause of strife. If our goal is to bring along kids in the language in which their parents are the most comfortable, then by all means teach them in Spanish, Chinese, and Urdu. If the overall goal is to make whatever political entity we’re talking about survive and be dynamic and successful, then we need everybody to speak the same language. In a country like the United States, a melting pot of many immigrant groups, a common language is the only thread connecting all of us. Multiculturalism—the philosophical, political, and pedagogical movement—will lead to the destruction of the United States as its borders are drawn today. All you have to do is look at what the French-speaking people are doing to Canada’s unity.

  In the past twenty years a malaise has crept over America. Everybody here knows there’s something wrong. Most Americans don’t know quite what it is, but they know their standard of living has not become better. Average real American wages haven’t gone up for twenty years, largely because so much money has gone into nonproductive uses, into consumption, which has led to gigantic debt, which has led to the twenty-year decline of our currency.

  All this will become worse, much worse, and will feed the separatists. Nobody’s plotted, infiltrated our society, and corrupted it. We have handed over our birthright.

  Nobody has said, “Okay, what we’re going to do now is make all our kids fluent in Spanish by teaching them only that in school, forcing them to identify with our Latin culture. We’ll have Spanish neighborhoods, Spanish athletic teams, and Spanish newspapers, radio stations, and TVs. We’ll wait thirty or forty years till hard times come. Then we’ll develop a separatist movement, pull away, and destroy the United States.”

  That’s the way it’s going to work, although the scheme won’t be consciously plotted. Through multiculturalism, we will have given it to them. Our politicians, ever seeking votes in the short term, will have sold our destiny.

  We’re pandering to everybody. In California you can get a ballot in any language you want. In its last election there were a handful of ballots cast in Eskimo. There are always a hundred amendments on the California ballot, so somebody had to sit down and translate all that complicated prose into Russian, Eskimo, Vietnamese, Urdu, whatever anyone asked for.

  Americans have been spoiled by the past hundred years, and spoiled by our special, one-time dominance over countries like Japan and Germany during the first few decades after World War II. We think we are exempt from universal laws, but we are not. People who think they are exempt from universal laws have a moral disease called hubris, frequently fatal.

  I am not trying to be clever or outrageous; this is simply history, the way the world has been ever since we’ve been recording it. Separatism is a fact of history at all times of economic distress. Most people will maneuver to maximize their economic lives, always have and always will, and in the process new societies and structures will be established. Sooner or later political structures around them must shift to deal with the change.

  Americans find it hard to believe that such laws apply to the
ir country, that even their borders can change. They shouldn’t. Borders and governments move to follow economic interests, which shift constantly, as Adam Smith, Marx, and Keynes all noted; then come religious, ethnic, and linguistic reasons. There is no border in the world that has lasted centuries, much less forever. With our short-term myopia, we think it’s different this time.

  For example, an investor will say, “This stock has a lock on the market—a monopoly—it will grow at twenty-five percent a year forever.”

  I ask, “What about high returns on equity bringing in competition or substitution?”

  “Yes, that was true for IBM and Penn Central and oil, but this time it’s different because of [its patents, its management, its market position …]”—you fill in the blank.

  Well, in the laws of economics, in the laws of history, in the laws of politics, and in the laws of society, it’s never different this time. The law of gravity isn’t ever suspended for someone’s convenience, and these laws are just as rigorous, though more subtle and complex. If they weren’t universals, we wouldn’t call them laws.

  “Oh, come on!” I hear all the time. “This is America. It’s different here.”

  I wish it were, but unfortunately, it’s never different anywhere, never different anytime. Every piper has to be paid. Fall off a cliff, and no matter whether you’re Spanish, Argentine, Chinese, or American, gravity still operates, no different from any other time.

  …

  We enrolled in Spanish classes. Tabitha had a far better facility for languages than I. I am lazy, dyslexic, brain-dead, or grew up tone-deaf—who knows? Equally important, I was diverted by a lot of other things. It was that motorcycle-mechanic’s school back in New York all over again. I didn’t have time to go to classes as much because I was worrying about the stock market as well as the endless details of the trip.

  Now that I could make telephone calls easily—Siberia and Africa had been hopeless—I was constantly talking to New York, buying new bonds because the old ones had matured, or moving money to Europe. We needed spare parts and chart books, so I called Judd in the New York office and had them flown in.

  I decided to invest more in the New Zealand stock market. I sent Judd a check to record and send on to the brokerage. Despite my following up daily, the check never arrived in New Zealand. I debated whether to wait a few more days or cancel it and rewrite it. My hands were too full for intensive Spanish classes.

  Tabitha, on the other hand, studied six or seven hours a day and lapped it up. Her French was good, so she made amazing progress.

  I was investigating the Argentine stock market, visiting the president of the exchange, brokers, finance ministers, and lawyers, trying to dope out whether it was a market worth investing in. I sensed that here was a country that was beginning to realize, after decades of failure at trying, that the state had limited powers to make prosperity happen. The newspapers said the new president and the new finance minister were determined to change the face of Perónism, which had nationalized everything, as the Labour Party in England had. Perón, of course, had promised “the shirtless ones” that the government was going to buy the important industries and businesses and save the people, guarantee them jobs, provide for them. He printed money, put on regulations, guaranteed jobs, and protected the economy. A free lunch, if you will, not to speak of breakfast, dinner, and afternoon tea.

  You don’t have to be too knowledgeable about finance and politics to know such statist policies ruined the economy. It led Argentina into a long-term downward spiral. I wish politicians could order economies to create and protect jobs and make money grow on trees, but unfortunately the world doesn’t work that way. It didn’t work for King Canute to order the ocean to roll back, and it doesn’t work for a politician to protect jobs and an economy from the world’s ceaseless change. Perhaps it will work for a short time—until the next elections, say—but never long-term.

  In the late eighties the Argentines had bouts of 20,000 percent inflation. The currency collapsed. If Americans think a mountain of debt is hard to live with, wait till they go through a collapsing currency. Just read about Argentina, Zaire, Russia, and Germany during hyperinflation. If something’s not done, and done quickly, the same thing is likely to happen in the United States.

  Argentina suffered during the Great Depression. Unlike many countries, however, World War II didn’t bail it out. Juan Perón offered to save his people, who were not as rich and glorious as they used to be. Which is probably what will happen in the U.S., too. Somebody will come along and “save” us, another Roosevelt, another false savior who will gather all the votes. Our mythology says Roosevelt saved America, but most don’t realize that in 1940 unemployment here was still 16 percent, a situation that wasn’t corrected until World War II broke out.

  Not only was the former Argentine political establishment discredited, but so were the generals. If the military launched a coup in Argentina today it wouldn’t be successful because the people wouldn’t allow it.

  I liked what I saw. The country seemed to have learned its lesson. The public had learned what we in the States have yet to learn, that even if the government hands it to you there is no free lunch, that everything has to be paid for, now or eventually.

  Now interested in investing here, I asked these officials if they thought the government or the country would go back to the old ways.

  “I can understand why you’re so suspicious,” said one. “Nobody knows for sure if the government means it this time—we’ve heard a lot of this before. But every time in the past when they put on currency controls, you could always go down to the corner and change your money.” He meant, of course, on the thriving black market.

  “We might be talking about a lot of money.”

  “You aren’t the first person who’s needed to get a lot of money out of Argentina. We’ve been doing it for decades. I won’t help you, but dozens will.” In other words, he was letting me know my capital wouldn’t be trapped even if things went wrong again.

  I was convinced. The government had announced it was targeting three industries for growth—telecommunications, tourism, and mining—all three of which made sense for Argentina’s development. Argentina would ease taxes on these three, which, without any investment or micromanagement on the part of the government, would cause them to boom. Mining had been woefully underdeveloped because in Argentina a landowner didn’t own the mineral rights to his own land. All those people on cattle stations of 750,000 acres could not drill for oil or dig for gold or diamonds because they didn’t own the rights to them. That was Perón. Of course, nothing became developed.

  Argentina fit my two basic investment criteria. One, change was coming—I’d been in the country several weeks and could see it—and two, investments were still dirt cheap. Money would now be thrown at these three industries and others, and shares would skyrocket. I wanted to buy the biggest companies because when the market started to move up, various money-center institutions would be interested and create special country funds, establish local offices, buy seats on the exchange, and spread the word about Argentina throughout the world. This crowd would buy the biggest, strongest companies, bulling them up yet further.

  I looked over the market and bought nineteen of the stocks whose industries made sense to me, companies with strong balance sheets to give me downside protection.

  “Oh, there it is again!” cried Tabitha, grabbing my arm.

  She pointed to a gold necklace in the jeweler’s window. She was right; it was the same necklace she’d admired in a fancy jeweler’s back in Iguaçu Falls. Gold with medium-sized links, the chain sported nearly two dozen green, red, blue, and yellow semiprecious stones in a clean modern design. We went in and she tried it on again.

  Her birthday was coming up in December and I wanted very much to make her happy. Hoping to surprise her, I snuck back around to the jeweler’s that afternoon and bought the necklace.

  Back on the street in the sun, I asked myse
lf how the hell I was going to get it back home. I didn’t want to carry it across the remaining fifteen borders, where repeated searches were likely to expose it to her view. Since I didn’t trust the Argentine post office, I arranged for a courier.

  We were now five thousand miles away from the United States, and we began to plot our way homeward. We knew we’d covered the easiest part of South America, that north of us in many countries, including Peru, Ecuador, Colombia, and Brazil, were a cholera epidemic, civil wars, bandits, bad roads, drug dealers, and greedy policemen and guards.

  Unlike crossing the United States, where you can huddle with a guide from AAA and receive accurate information about routes and hazards, we had to piece the situation together from a variety of sources. Not the least problem was finding maps.

  Two routes presented themselves: up the east coast or up the west coast. Most of the east coast was taken up by Brazil. The route west would allow us to see Chile, Bolivia, Peru, Ecuador, and Colombia, a real cross section of South American cultures. In addition, I wanted to see the economies of these countries, for I wanted to invest in several, even though this route also led us through guerrillas, drug wars, bandits, and epidemics.

  Everybody knew about the Pan-American Highway, but the local touring clubs knew little about any other route. The Brazilian Automobile Association in Iguaçu Falls had one map of the country, which I induced them to sell to us, but they knew nothing of how to drive through Brazil to such exotic far-north locales as Colombia and Mexico. This ignorance of travel conditions is precisely what you can expect in most parts of the world.

  With little more intelligence than this, we decided to head west to Santiago and make the rest of the trip up the west coast. I also hoped to visit Easter Island, Machu Picchu, and the Galápagos Islands, sights I’d long read about and was eager to see.