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Lacking imagination is sometimes a good thing. Not in romance, of course. Nor in jail. In both cases, it is wise to reach into your soul and draw out as much poetry as you can.  But in matters of money, it is better to have the imagination of an actuary. We arrived at the airport in Managua on Friday afternoon. Except for the loss of some luggage, we were ready to begin our adventure.

And the view was spectacular. Nicaragua appeared idyllic from the air. Green fields and brown hills -- it reminded me of areas in Northern California. Arriving at the coast did nothing to upset the comparison. There were white sand beaches, rocky outcroppings and Wagnerian cliffs towering over small coves. 

Nicaragua is still very much a Third World country. Laborers earn $3 a day -- and are happy to get the work. Many of the houses are nothing more than junky shacks -- with a few reject boards nailed to posts and covered with rusty metal sheets. Even solid buildings often have an unfinished, ugly look -- with bare earth where there should be grass and trash around the edges. 

But the land itself is attractive. And it is rapidly being dressed with the ribbons and bows of the modern world. Roads are being built -- especially near our property, since the president of Nicaragua owns a neighboring ranch. There are new gas stations that are indistinguishable from those being built north of the Rio Grande. And several new hotels seem to have gone up in Managua since my last visit. Ten years after the Sandinistas were voted out of office, the government seems to be no more of a parasite than our own. Doug Casey, who was with me on the trip, pointed out the irony of Third World politics in his latest issue. People who live in backwater countries with little history of democracy are often freer than those who live in the United States. It is easier, faster and cheaper, for example, to build a house on our land in Nicaragua than it is in the United States.

In many ways, both petty and important, you can do what you want in a place like Nicaragua more so than at home. For example, no one stops you and tells you to put on a helmet when you ride a motorcycle. And if our driver was representative, you can drive down the road as though you were chasing a bank robber -- honking your horn to warn pedestrians off the road -- without worrying about the police. 

Poor nations cannot afford as much government as rich ones. The dog is skinny...and so are the ticks.

The horses are skinny, too. You see them wandering all over the country. They're a small, indigenous breed descended from Spanish horses. They look rather pathetic pulling a cart or a carriage. The oxen -- which also do a lot of pulling-look healthier. It is remarkable to see people using ox-drawn carts in the year 2000, more than 100 years after the invention of the internal combustion engine. And it reminds us that there is still a lot of service left in the industrial economy. Nicaraguans may be happy to get online -- but they'll be even happier to get in-gear and give the animals a break. GM and Ford will make far more of a difference to the average person's life than Amazon and AOL. 

I don't know how much Nicaragua is worth, but I wouldn't be too surprised if you couldn't buy the whole country for the capital values that Amazon, AOL and other New Era stocks represent. This is because, in the curious logic of late fin de Bubble metaphors, the "real estate" on the Web is thought to be more valuable than the kind of real estate with dirt on it.

Internet bulls say Amazon's price is justified -- not by earnings or even by the hope of earnings -- but because it holds such a prime piece of Web property. Jim Davidson elaborates this argument in his January issue. He notes that real estate sells at very high P/E ratios -- for many decades -- and no one thinks anything of it. Raw land might be thought of as an Internet stock...a valuable capital asset, but one with no earnings. If it is located in the right place, however, you can make a lot of money, even if you never receive a single rent check.

Maybe I lack the poetic gifts the idea requires. Or perhaps just the ability to swallow an enormous whopper. As Jim Davidson puts it, my "imagination balks."

It takes a brazen imagination to compare the Internet to actual real estate. Land is the ultimate tangible. It is immoveable and indestructible. It is forever. You can fix its location with a sextant and know that it will be there tomorrow and the next day.

The Web, on the other hand, is the ultimate in intangibility. Where is it?

How did it get there? What is it? What and where will it be tomorrow? No one can say. And it is this very feature -- its ability to expand and reshape itself without regard to tangible restrictions -- that makes it so potentially important. But a fixed location on the Internet? One that you can control, defend and have dominion over?

Hmmm...

It takes little imagination to see that the real estate metaphor, used to excuse high Internet stock prices, works much better for terra firma than for terra incognita weba. Unlike the Web, there is only so much land available on earth. As the population becomes bigger, richer and more mobile, it is at least a decent bet that people will seek out the best places -- the prime real estate of the future -- and bid up prices.

That is why we went to Nicaragua. For all the landmass on the watery planet, most of it is not strikingly attractive. There are vast plains, vast forests, mountains and deserts -- but the available coastline is limited...and coast the quality of California and Latin America is even more limited. As Will Rogers put it, "they ain't making any more of it." He was not referring to the World Wide Web.

I'll follow up on this tomorrow -- and explain why I think Nicaraguan Pacific coast sites are more likely to appreciate than investments in prime web sites.

By the way, you can find out more about the property I visited by going directly to the website at http://www.ranchosantana.com [this is the right address, but the website was offline when I tried it -- keep trying, though].

We sat on the terrace of Antonio's house...listening to the waves on the beach below and eating lobster that had been pulled out of the ocean just in front of us. Antonio's family had owned the property and raised cattle and horses on it. After we showed him what we were doing, he decided to join us. He bought one of the best lots and built a house. It has three bedrooms and a roof made of palm leaves. The bedrooms are air conditioned, but the main section of the house is completely open -- looking out over a pool and the ocean behind it. The temperature is never too cold and never too hot -- with the help of the sea breeze -- so you can spend your time outside comfortably.

Antonio's mother had come over to supervise the meal. She added a touch of femininity to the all-male group. But after she left, the whiskey and cigars came out...and the talk turned to the most popular subject among ambitious, middle-aged, Type-A males -- money. 

Money is a curious subject. We were all there because we had some money and wanted to make more. But what made the place nice had nothing to do with money. The sea breeze takes no account of your personal balance sheet when it rushes by. The ocean was just as blue to a pauper as it was to a George Soros or Ted Turner. The sun was just as bright. Even penniless Nicaraguans ate the lobster they fished out of the sea -- or maybe the red snapper we had the next day. 

We wanted what the locals already had -- to sit around, enjoy the beautiful place, drink beer, talk. But we could not afford it. Leisure time is too expensive. Their time is cheap, because there is little market for it. Ours is so valuable that we have little available to do what we want.

But you don't make money so you can enjoy life. You make money so you can feel good about yourself, that is...feel superior to other people. And that means you have to give up many of the good things in life. You have to work, instead of play. 

But the real trick is to turn work into play...for only when "work is play for mortal stakes is the deed ever really done for heaven and the future's sakes."

...to quote Robert Frost...

This project in Nicaragua has been both work and play. My partners are already designing the homes they will build. I have one in mind, too -- but it is in a section of dramatic cliffs ...which is still unavailable for building. And we are already making money. 

When we first came to Nicaragua a couple of years ago, the Pacific Coast was almost untouched. We thought it was inevitable that it would soon become developed. It is too close to the United States...and too beautiful to be ignored. So we decided to do our own development -- creating a place we could sell and a place that we would like ourselves. Work and play.

I mentioned a piece of property we bought in Baltimore. The price in real terms on that property went down over the last 100 years by at least 80%. But while property values in Baltimore were falling, they were rising on the California coast. In the early part of the century, the "New York Times" carried an ad for a bungalow on the beach in Malibu, California. It was for sale, if I recall correctly, for $6,000. How much is it worth today? I don't know, but I will bet that it is worth many times that amount. 

There is no reason that I can think of why the trend should not intensify. There are more people with more time and money on their hands. And they like living on attractive beaches. There are few more attractive beaches than those in Nicaragua. And, unlike the "real estate" on the World Wide Web, the property cannot be reproduced or rendered obsolete. What's more, the political and logistical obstacles have now been removed.

Adam Smith refers to the computer leasing stocks which blasted off in "The Great Garbage Market of 1968." These companies leased computers and were thought to be on the threshold of explosive growth. Computers at the time were the big mainframe machines that cost millions of dollars. It was thought that companies would not be able to buy them. So, computer leasing seemed like a can't- lose formula. The only question was which company would get the "territory" first. The "first mover advantage" would be not just great, but decisive. Earnings were supposed to double each year for a decade.

What happened? Well, the territory disappeared. The mainframes became much cheaper, and small, cheap computers eventually took the market away. But even before that, the earnings of the computer leasing companies turned out to have been vastly overstated. A moment of truth arrived when investors realized that their expectations could never be met. The stocks fell. Many of them went to zero.

The trends and fashions of real land can change direction, too. But so far, there is no indication that people will tire of good oceanfront property.

Our results have been very satisfying. Others have realized that the land was under-priced. It is moving up. Almost everyone who sees the property wants to buy. One of my partners bought another two lots from the rest of us while we were down there. But since he had fallen off a horse earlier in the day and may have hit his head, I cannot take this as a reliable indicator. Still, it is a good sign I think; we are becoming reluctant to part with the land.

And we are being very careful to develop in a way that will enhance the beauty of the place, rather than destroy it.

I went walking along the beach in the morning. It is amazing how many different shapes a short stretch of beach can take. At one point, the waves crash against the rocks and a spray comes shooting up through a blowhole, as if a whale had made his way right beneath you. I came across a couple of local men fishing. 

"Hola!" I said, in my best imitation of a person who spoke Spanish. 

"Buenas dias," they replied, clipping off the "s." They fished for a living. But they seemed to enjoy it. Work was play for them, too.

Adios,

Bill Bonner

P.S. Bob Fordi is the man to contact if you are interested in joining us in Nicaragua. His phone number is 410-337-7474.