Evaluating
The Gypsies, Real Estate, Stock Market & Culture Of Romania
The first
time I met a Gypsy was in high school, when a member of that tribe defrauded
me in a car repair contract; other than being unhappy, I didn't think anything
of it at the time. Dishonest people come in all races, colors, and creeds.
The second time was in 1966, when I spent a few days with a Hungarian family
on my way to Romania. The Hungarians were appalled I was leaving their
fair land for "a gypsy country,” where they insisted I would be robbed
and generally abused; it was my first introduction to how most Europeans
feel about the Gypsies.
I actually
met a few Gypsies in Romania back then and, contrary to the fears the Hungarians
(who liked to characterize all Romanians as Gypsies) tried to instill in
me, they seemed romantically appealing, rather like the ones in Bizet's
opera "Carmen,” I hadn't given the group any further thought until returning
to Romania in May.
The Gypsies
(who prefer to be called "Roma,” meaning "people") have their own language,
their own religion, their own laws and their own political structure. They're
a virtual country, a nation without borders, and have been since about
the year 1000, when they seem to have migrated from India to Egypt and
then Europe,.
-
4Escape is a search engine that searches our network of websites each of
which shares a common theme: International relocation, living ? investing
overseas, overseas jobs, embassies, maps, international real estate, asset
protection, articles about how to live ? invest overseas, Caribbean properties
and lifestyles, overseas retirement, offshore investments, our yacht broker
portal, our house swap portal, articles on overseas employment, international
vacation rentals, international vacation packages, travel resources,
every embassy in the world, maps of the world, our three very popular eZines
. . . and, as they are fond to say, a great deal more.
It's hard to
quantify their number, although estimates are 8-10 million worldwide. In
the case of Romania, the government says they're only a fraction of a percent
of the population, which is ridiculous.
A better estimate
is 8-10%, the highest proportion in the world. Romania has a total of 22
million people, so that's about 2 million Roma.
You might be
surprised to know that out in the country (where most of them live) Gypsies
can still be found driving their peculiar wagons around behind a couple
of horses and camping by the roadside; it surprised me, in any event. Very
quaint in the year 2000, but it left me asking myself how these people
supported themselves. And it was easy to see how local farmers would have
reason to suspect them if a chicken or some crops went missing. In Bucharest
I encountered Gypsies on three separate occasions, when two children and
a young woman literally attached themselves to me to beg. At first I was
amused and interested in the approach, but the first kid just wouldn't
go away, even after I snarled at him to beat it. I only escaped by entering
a shop.
Exactly the
same scenario re-occurred with another kid, and then a young woman. It
was clear these people were trained professionals, using a technique they'd
practiced to perfection for use on foreigners. Despite my appreciation
for the dedication and enthusiasm they showed for their calling, it didn't
leave me with a warm feeling. A little investigation made it pretty
clear that insofar as urban Gypsies were in business, it was businesses
like drugs and prostitution. I have no problem with these things from a
moral point of view. But in large part because they're illegal, they draw
a sleazy type of character.
Some say the
Gypsies are marginalized because people discriminate against them and they
discriminate against them just because they're Gypsies. There's a lot of
truth to that, and it makes things harder for many individuals. The problem,
however, is that certain groups inculcate certain values in their members
and when you deal with a member of that group you have to make certain
assumptions, or else be taken for an idiot. For example, even where abortion
is legal, a rational person who wants one wouldn't approach a staunchly
Catholic doctor. When you see some young punk with a shaved head, tattoos,
sporting heavy boots and chains you shouldn't expect him to be an NAACP
member.
Different
groups have very different, and often very strong, corporate cultures,
and those cultures define their membership much more than race, language,
or religion- although those things are often essential elements to the
culture. Many groups are very "exclusive,” in the sense they overtly keep
outsiders as outsiders. The problem is that often tends to make the outsiders
resent them. Outlaw bikers, Orthodox Jews, Black Separatists, Nazis, Knights
of Malta, Gypsies, Marine Corps vets, Seventh Day Adventists, Overseas
Chinese, English football hooligans, Greek restaurateurs, and Russian Mafiosi
are just a few random groups that tend to be in little worlds of their
own. They treat members of their groups as a fraternity, united against
the outside world. And, depending on the time and place, the outside world
sometimes responds in kind, and unpleasantly.
The fact is
that people generally like to associate with others like themselves, based
on whatever is important to them; some groups just take that to extremes.
- Began Summer
1998 - Now with almost a half million subscribers, out eZine is the resource
that expats, and wantabe expats turn to for information. Our archives
now have thousands of articles and each month we publish another issue
to a growing audience of international readers. Over 100 people a
day subscribe to our eZine. We've been interviewed and referenced
by the Wall Street Journal, CNN, The Washington Post, London Talk Show
Radio, C-Span, BBC Click Online, Yahoo Magazine, the New York Times, and
countless other media sources. Featuring International Lifestyles
~ Overseas Jobs ~ Expat Resources ~ Offshore Investments ~ Overseas
Retirement - Second Passports ~ Disappearing Acts ~ Offshore eCommerce
~ Unique Travel ~ Iconoclastic Views ~ Personal Accounts ~ Views From Afar
~ Two things have ushered us into a world without borders... the end of
the cold war and the advent of the world wide web of global communications
? commerce. Ten years and over one hundred issues! We're just
getting started - Gilly Rich - Editor
My own belief
is that you can expect thousands and thousands of groupings like these,
based on every possible combination of interests, beliefs, and characteristics,
to become ever more prominent in the future. Especially as the nation-state
breaks down, people will realign in ways that are more beneficial and rational.
The Internet will help them find each other.
I wouldn't
say the Gypsies are the most edifying example of what's evolving, since
they're not really prosperous, and have a lot of what most non-Roma consider
bad habits. But their social structure is so old it's on the verge of becoming
the wave of the future.
But
there's no direct way any of that is going to make you richer. The following
might, if you're adventurous. And a couple of Romanian gold stocks are
even better near-term bets.
The Stock
Market
Long-time
readers know that I always go out of my way to visit the local stock exchange,
if one exists, in countries that few Americans even know exist. Bucharest
offered me perhaps the biggest surprise of my career. I read a brief article
in an English language paper (Romania has several) discussing the market,
and it noted that the Bucharest Exchange had about 130 companies listed.
Fine. Then it went on to discuss the OTC market, called the RASDAQ, saying
there were over 6,000. I felt certain it was a misprint, off by at least
one, maybe two zeroes. But an afternoon at the exchange with some brokers
proved it was an accurate number and each of the companies even has its
own four letter symbol.
Further,
the number of companies is going up, as another 400 firms are privatized
this year (including the national airline) and an estimated 700 next (including
the national oil company). Many will be sold wholesale to foreign buyers;
some will be listed on some basis. As you might expect, BSE companies show
earnings, are larger, and usually pay dividends.
The BSE has
a market cap of about US$375 million, with a typical weekly trading volume
of $500,000; the RASDAQ has a cap of about US$975 billion, with weekly
volume of about $1.3 million. What this means is that in a typical week
most stocks don't trade, especially on the RASDAQ. And the typical trade
is for only a few hundred dollars.
What do all
these companies do, and what are they worth, and who owns them? To investigate
the businesses, income statements, and balance sheets of that many companies—even
in the most cursory way—would take years, even if you had a staff and made
it a full-time job.
My guess is
that many of them are selling at a tiny fraction of what they could be
liquidated for, assuming management was clever (or ethical) enough to do
that. I say ethical, because it's important to recognize that the people
running most of these companies are probably just hacks who like getting
fat salaries and expense accounts, and wouldn't see the point of enriching
shareholders, especially if it cost them their jobs. So, barring something
extraordinary, most of these companies will likely die a slow death---
just like most small companies traded OTC in North America and everywhere
else.
As to who owns
them, it's almost exclusively Romanians. With no liquidity in the market,
it's out of the question for foreign institutions, or even many individuals.
And with elections coming up this November, the occasional violent political
demonstration (although none while I was there) and worries about Communist
sympathizers getting back in office, there's no rush to buy Romanian stocks.
Especially with most world markets headed down.
If I
had a son or grandson who was anxious to make a lot of money, however,
I'd pack him off to Bucharest with instructions to learn what it means
to be a venture capitalist, a white knight, a greenmailer, a takeover artist
and such. The bankroll involved would be peanuts and the upside huge.
What am I going
to do? I'll probably open an account with the broker I interviewed and
put maybe $5000 in each of four or five stocks, some of which have current
yields in the 50% range, just to get my feet wet and have an excuse to
watch the market. Notwithstanding my bearish view on stocks in general,
the eventual integration of Romania into the EC will normalize values here.
And with the typical P/E on the BSE around 3-1 (90% of the companies have
P/E's between 1.5 and 6 to one), I figure it's a superb punt.
I'm
not going to follow Romanian stocks in this letter, because IS is arcane
enough as it is. It just wouldn't be practical and gold mining stocks will
provide all the volatility anyone needs for the next few years. But if
you have plans on going to Europe this summer, it's a good extra reason
to see Romania.
Property
If anything,
property is a better buy than stocks. Bucharest is very cheap by most standards;
I'll guess about 25% of Western European levels for equivalent buildings.
But that's not what got my attention. The fact is that the country probably
has the best farmland in Europe-- flat, deep, rich topsoil in the Danube
basin, combined with a fairly mild climate. Those of you in the farming
business may be shocked to know the finest farmland in the country—which
is to say some of the best in Europe and the world—can be had for US$250-300
a hectare, or US$100-120 an acre, or about 5% or less of what it would
be in North America. There are two reasons for that I can figure. It's
mostly in small, hence uneconomic, holdings of peasant farmers and there
is not enough domestic capital to make it productive. I think it's
a great speculation.
Scenic land
in the mountains of Transylvania is available for US$50 per hectare, or
$20 an acre, and is also a superb speculation. Other than that, it seems
to me there are two parts of the country that are worth looking at. One
is around Timisoara, the university town where the 1989 revolution began
which, since it's on the Western border, is the most culturally westernized,
and most likely to benefit first from Western investment. The other place
to look is Romania's Black Sea Gold Coast, where a 100 room hotel with
10 ha of land can be had for $1 million.
How secure
are these investments? In my view they’re quite secure. Nationalization
is a dead duck the world over. Especially in countries that have been through
the meatgrinder of socialism for a few years, there's usually a special
reluctance not to make the same mistakes again—at least so soon. And that's
usually compounded by a desperate need of foreign capital, further insuring
straight dealings. In any event, title is kept in a central registry, where
any claims or debt are recorded. And, as with Romanian stocks, there are
no restrictions on property purchases by foreigners.
Some Miscellaneous
Opportunities
Oddly, even
though you can buy stocks and property freely, there are restrictions on
the export of large crystals and old furniture (and probably any number
of other things), in the ridiculous view that they're national treasures
that should stay at home. What that's done is depress the prices of these
things, creating an excellent, but very small scale, speculative arbitrage
opportunity. I purchased six fairly large (say eight inches on a side)
crystals of various types for a total of about US$300, less than 1/10th
of what they're worth in the States. Of course they're still in Romania
with a friend, but that doesn't bother me; the restriction on them will
necessarily vanish by the time the country readies for EC entry. And since
superb mineral specimens (advice: always buy the biggest and best you can
afford) will continue to appreciate rapidly as a form of artwork, the things
will be worth even more then.
The same is
true of fine old furniture. Romania is awash with the stuff, and you can
buy it more cheaply than the veneer-covered pressed fiber junk that's so
popular in the States.
The other
thing of interest was old stock and bond certificates. Romania had an active
securities market right through WW2. I especially like the old bonds, where
the coupons stopped being clipped in 1948, after the Communists took over.
Of course it wasn't worth clipping them by then anyway, in that the Lei
was being inflated at about 10,000% annually by the end of 1945. Old bonds
are excellent reminders of what eventually happens to most currencies and
most debt in the long run. I bought a stack of excellent specimens, suitable
for framing, as they say, for about $1 each. Sad to say, each of them may
well have represented someone's life savings.
Romania, with
brief intervals of respite, has been a hard luck story for most of its
history. Unlike a lot of other countries of which that's true, I have a
good feeling about the place. But most investors give the country a discount,
mainly because they're unfamiliar with it. And, insofar as they are familiar
with it, they've heard mostly dated and unfavorable things. That's fine.
It's why the opportunity exists.
