Editor’s Note: On Wednesday, Doug Casey shared some of the stories behind his most successful speculations during a conversation with his protégé, Nick Giambruno.
Today, he shares more insights on his non-conventional crisis investment plays…
Nick Giambruno: Doug, tell us about the investment you made in Argentina shortly after the crisis there in 2002.
Doug Casey: I was in Argentina at the height of the crisis, and there were no cars on the streets in Buenos Aires. It was like a neutron bomb had gone off in the place. There was no activity. The stores were empty.
Nobody had any money because the government had just destroyed the currency. It was so bad, you couldn’t change a $100 bill at the Four Seasons; the provinces were printing up their own currencies just so they could use something. It was crazy.
But everything is cyclical. So, I picked up a two-story penthouse, about 5,500 square feet, in a great building. It has decks, a barbeque area, 14-foot ceilings, and walls 12 inches thick. Every room has a fireplace.
It’s in Recoleta, which is the best district of Buenos Aires, the equivalent of New York’s Upper East Side. That part of the city was built at the turn of the 20th century, when the equivalent of billions and billions of dollars flowed into Argentina from the cattle business. Cattle—and the invention of the refrigerator ship, which could transport beef to Europe—built these fantastic old French-style buildings.
I paid $900,000 for it. If I had bought a place like that in New York or London, it would have been, at a minimum, $10 million.
At some point, things are going to change and Buenos Aires will become fashionable again. And then, much as I love it, I might sell it. And again, I’ll have been effectively paid for living there.
That’s one thing I did in Argentina. Another thing was, some friends and I bought 250,000 acres of land in the Salta province, in the Northwest.
It’s a great place to hang out. It’s wonderful. I love being there. The government doesn’t bother us. We built a fantastic resort community in Cafayate, and they gave us zero trouble, zero aggravation. If I tried to do that in Pitkin County, Colorado, where I live in the U.S., we’d still be fighting with the county about how many welfare units we’d have to build on the property.
Our project, La Estancia de Cafayate, is a secluded wine and residential sporting estate for like-minded individuals.
I also got into the cattle business. It started slowly, with 250 head, and now we’re up to close to 2,000 head, and maybe we’ll take it up to 10,000 head at some point.
The cattle business is also, at least to a degree, a crisis investment—it’s always in crisis. Because almost nobody makes money on cattle these days. In fact, everybody loses money on cattle. But Argentina is the best place to get into cattle right now, because it’s got the world’s best cattle land.
For the last 60 years or so, everything in Argentina has been price controlled or subsidized. It’s a dog’s breakfast, the criminal stupidity of the government down there. When it comes to economic dysfunction, they’ve been world leaders.
But now, with the election of Mauricio Macri in November 2015, things are changing. Export duties of up to 40% on agricultural products have been eliminated. Cattle prices were controlled at half the world market price, but that’s now a free market; the value of our herd doubled overnight, as did the land.
The new government has fired about 100,000 employees so far. There are many serious, positive changes under way. After decades of Peronist stagnation, Argentina should boom. Vanuatu
Nick Giambruno: What about the castle in Rhodesia (now Zimbabwe)?
Doug Casey: The year was 1979. Rhodesia was in the midst of a civil war. On the ground, it was like a scene out of the movie Mad Max… soldiers, homemade armored vehicles, danger and confusion everywhere.
If you were in a window seat on a night flight, you were told to pull down the shade to reduce the risk of anti-aircraft fire hitting the plane.
I was perhaps the only foreign investor there.
I was absolutely the only person there when I visited Victoria Falls, although two weeks before, another “mazungu” (white person) visitor had been killed by a potshot taken by a Zambian soldier from across the river.
When I flew into the Zimbabwe ruins, where I was again the only visitor, the plane dipped close to treetop level several miles before landing in order to avoid possible rocket and small arms fire.
I took a minibus across the country, hoping to avoid both the rebels and the Rhodesian Army. I kept asking what I should see while I was in the country, and I kept hearing about the Leopard Rock Hotel. So, I went there.
It was a grand castle complex that Italian prisoners (captured by British forces) had helped build during World War II.
It was a fantastical luxury hotel, with 12 enormous suites, oversized fireplaces, crystal chandeliers, broad terraces, miles of horseback trails, a nine-hole golf course, and 200 acres of garden with vast mountain views and 50 acres of coffee trees. It was beautiful and huge. It had everything you would want in a luxury resort hotel.
This was actually the first international property deal mentioned in my newsletter, in the very first issue—November 1979.
At the time, it was available for $85,000. Several colleagues in the investment business said I was crazy for even mentioning such a risky proposition. Six years later, however, it was sold for about $13 million. So, that would have been a nice hit.
I could have bought it in 1979, made a lot of money, and had some great stories to tell. But I couldn’t have done what I’m doing now if I had, so I probably made the right choice.
On the other hand, some of my readers back then were probably just working for a wage, and still are today; they should have gone for it. Choices. Choices. And the clock is always ticking…
Nick Giambruno: I’m glad you made that choice, Doug, and I’m sure our readers are as well. Thanks for sharing your stories with us.
Editor’s Note: At first, marijuana stocks might not seem like a classic crisis investment.
But crisis investing—the strategy Doug Casey has used to make a fortune—is about taking advantage of politically caused distortions in the marketplace. That’s exactly what Doug and his team are doing in the legal marijuana market…
So, you’re invited to join Doug, Nick Giambruno, and their colleague Justin Spittler for a special online event—the Pot Stock Millionaire Summit. This free event is happening on Thursday, April 26, at 8 p.m. ET… Of course, Doug’s reputation means that space is limited, so hurry and reserve your free spot here.
Tags: crisis investing,