| Some Thoughts
From A Cautious Contrarian |
| Early And
Alone, Not Late And Surrounded |
| by Jurgen Klemann |
| October
2005
Colima,
Mexico
After wrapping
up my classes in summer and before starting my classes in the winter semester,
I could enjoy a break for a couple of weeks. Because it’s increasingly
difficult – almost impossible – to get me out of Colima, I spent these
two weeks primarily at my favourite restaurants in Colima and at home.
Because I’m utterly convinced that “la caja idiota” (Spanish slang
for the box) has been invented to keep the hoi polloi occupied, I
don’t have that sort of thing at home. |
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| When I spent
time at home during these two weeks, you could find me either on my roof
terrace or on my bed. My favourite place on earth is – for the time being
at least – my roof terrace. In the evening, stressful things like watching
the sunset and the mountain range in the background kept me busy there.
When the weather didn’t allow it – in particular in the afternoons or evenings
you can always expect a tropical rainstorm in Colima in summer – the alternative
was my bed.
Since my days
as a student, I’ve always liked reading on my bed. The fiction that I read
on my bed during these two weeks was the novel “The Storyteller” by
Mario Vargas Llosa. Mario Vargas Llosa may be characterized as my favourite
Latin American author. Some folks reckon that he’s the most European Latin
American author. After heaps of years in Africa, the South Pacific and
Latin America, there aren’t heaps of German genes left in my body. Maria
Vargas Llosa’s Europeanness is thus unlikely to explain my affinity
for him. His worldview appears to be Thatcherite, in loads of respects.
His Thatcherite
perspectives are more likely to explain why I feel drawn to his literature. |
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| The novel
“The Storyteller” revolves around a Peruvian writer who recognizes
on a photo in an art gallery in Italy an old friend who lives with an Indian
tribe in Amazonia. The story leads the reader from our modern world to
mankind’s origin, reflected by the Indians in Amazonia. As usual, Maria
Vargas Llosa doesn’t disappoint the reader.
As usually,
I try to maintain some balance in my life, and appear to succeed in it.
I can no longer claim to be a workaholic. Since shifting into college teaching
in the less developed world, I tend to work about eighteen hours a week.
As a workaholic, you may make a pile of money a lot faster – through both
work and investments. But the quality of you life does suffer. You may
accuse me of being a little too selfish to cut that sort of deal.
It’s a bunch
more fun to make a bundle – again through work and investments – over your
life on earth. |
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Offshore Resources Gallery
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| Sussing out
investments now falls into the category of fun for me. Moreover, after
gaining a little experience in business and law all over the globe, I’ve
gradually turned into a true blue contrarian instead of following the thundering
herd.
All this means
that my reading material during my break included stuff covering financial
markets and investments. As usual, it included Richard Russell, who – based
on a heap of practical experience – emphasizes stuff that you hardly hear
from your private banker or broker – e.g. the concept of compounding. To
quote Richard: “….this is the time to go against the crowd….the retail
public is deep in condos and deep in debt….it’s the time to go opposite
the retail public….this means building safe, liquid assets”. I’m almost
tempted to remark in rather colourful Spanish “A huevo”. Francois Sicart
– a partner in Toqueville Asset Management – puts it very well: “….experience
has taught me that, in times like this, it is better to be a cautious contrarian
than a bold trend follower”.
Mining In
Botswana
Bold trend
followers usually stay away from exotic places off the beaten track. |
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| Cautious contrarians
– while practicing common sense – tend to deviate from what everybody else
does. Doing what everybody else does almost always turns out to be neither
exciting nor rewarding. Cautious contrarians may deviate from what everybody
else does – among other things – by living or investing in emerging markets.
In case you put the accent on “cautious” in this context, it may be wise
to pick your place very carefully or put some safeguards in place or do
both. A country in the less developed world that has managed to develop
a reputation for stability and predictability is Botswana.
During my more
turbulent phase in life – which I’m now quite fond of referring to as my
wild days in Africa – I spent a while in Botswana. Botswana may not be
everybody’s cup of tea as far as traveling is concerned. Assuming that
I’m still up to date, you won’t find an AMAN resort there. However, spending
some time and nights in the Kalahari desert deserves to be called a one
of a kind experience that you won’t forget for a while. |
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Offshore
Resources Gallery
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| Besides being
a choice place for radical individualists to travel, Botswana has also
become a safe haven in the less developed world for investment, in particular
for the mining industry. The significant players in the mining industry
– majors like Rio Tinto, Anglo American and BHP Billiton – all operate
and explore in the country. It doesn’t really surprise me considering that
Botswana produces about twenty five percent of diamonds by value worldwide.
That rare African
success story seems to continue. Because of climbing commodity prices and
a mining friendly environment as well as an attractive investment climate,
Botswana continues to attract foreign direct investment. Moreover, a few
of the mineral explorers there appear to be turning into producers. The
Australian outfit Gallery Gold produces gold in Botswana since last year.
The outfit African Copper seems to start with its production rather sooner
than later.
All this implies
to me that the less developed world does have a bunch more on offer than
the established industralised world in terms of both lifestyle and investment
opportunities. As far as investment opportunities are concerned, it appears
to be curently a little difficult to locate meaningful opportunities. The
explanation for the lack of meaningful investment opportunities may be
that loads of liquidity is flooding the world.
However, there’s
a difference between liquidity that is earned and liquidity that is borrowed.
Earned liquidity derives from savings. Borrowed liquidity derives from
debt. The word debt comes originally from the word death. Debt means death.
Apply that insight to the real estate bubble we’re experiencing almost
at a global scale. Then just wait for the bubble to burst, sooner or later.
It’s gonna have an unpleasant effects on folks who rely on liquidity derived
from debt.
Then may be
the right time for folks who rely on liquidity derived from savings to
join the party – when prices crater. To summarize all this in my usually
cocky style: It may be wiser to be early and alone than being late and
surrounded by the thundering herd.
The following
is a list of articles written by Jurgen for the magazine:
To contact Jurgen
Click Here |
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