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November 13, 2007

Books and Babes in Buenos Aires
by Fitzroy McLean

Argentina has a lot going for it these days, not the least of all a renewed interest in free market ideas and entrepreneurship. And as Fitzroy McLean, our editor-in-perpetual-motion, proved during his visit to Buenos Aires, if you keep your eyes and ears open, there's a lot to learn from people on the street.

Fitz here. Taking a quick break during the latest of a series of fact-finding trips to Buenos Aires, a very civilized city.

I'm writing from my coveted spot at a sidewalk café in the city's fashionable Recoleta district. I wasn't planning to stop and whip out my laptop but (a), there are a lot of really elegant women in summer dresses walking by. Pretending to pensively look above the screen of my MacBook while deep in thought is good cover for what really is just unabashed gawking. And (b), I wanted to jot down notes from a very interesting conversation I just had with the proprietor of Distal Libros, the international book store tucked into a busy corner of the Recoleta.

I went into Distal Libros to buy an English language copy of Louis Romero's seminal book The History of Argentina in the Twentieth Century. Imagine my surprise, therefore, when I saw the staff stocking six shelves full of Robert Kiyosaki's Rich Dad Poor Dad series in both English and Spanish.

Normally, I'm not a fan of self-help books or personal finance books dumbed down for mass consumption. Even so, while I won't go so far as to say I'm a fan of the Rich Dad series, I'll happily endorse Kiyosaki's premise that wealth is created by starting and running businesses, by actively investing in operating companies and productive real estate. That, opposed to being an employee and trying to build wealth by saving or by eventually selling your personal residence at a profit.

Whatever you might think of them, Kiyosaki's books undoubtedly champion self-reliance and entrepreneurship and I certainly like that. But six shelves full? I had to ask.

I must have inadvertently communicated my curiosity via ESP (then again, maybe it was my slack-jawed look of disbelief.) However it happened, the proprietor approached and asked, "Senor, may I help you with anything?"

"Yes," I replied, "do you have a copy of Romero's The History... no wait, are these books really that popular?" I stammered, pointing to the purple paperbacks. He smiled. "Yes Senor. We sold out in August and it took us until now to get them in again." To underscore the point, he retrieved a clipboard from behind the counter. "This is the order list for the Spanish version," he said, pointing to a list of about forty names. "And this is for the English version," he added, leafing through an even longer list.

Warming to the topic, he added, "Interestingly, many on the English list have the book in Spanish but also want to read it in English because they don't trust the translation."

"Why is it so popular?" I asked.
He gave a cute little chuckle before responding with a question of his own.

"Have you read it, Senor? You should. It is about being responsible for yourself, not relying on the government or anyone else for your well-being. It also teaches you about building a business. But you are born with that, because you are from the U.S. Yes?"

Okay, so he recognized me for the gringo I am. But there's a certain truth to what he said. In the U.S. we are raised with certain expectations. Sure, more fail to meet those expectations, but most yanks have, at one point or another, at least dreamed about starting their own business. That's a big advantage over the populations of the earth who are raised with an almost serf-like attitude about their future.

Anyhow, I found this unexpected and entirely unscientific survey of one to be quite encouraging because we've been bullish on Argentina for some time now. We've liked it for its lifestyle, reasonably priced real estate and the underlying strength of the country's commodity-based economy. But this was an unexpected surprise because the fly in the ointment for Argentina in modern times has always been a distinct tendency to shift toward destructive socialist policies, given the slightest opening to do so.

Quick sell-outs of do-it-yourself books on capitalism are a definite step in the right direction.

One of the points my Without Borders co-editor Simon Black and I like to stress - and the reason for our constant travels -- is that, in order to get a visceral sense of a country and its future, you need to get into the street. Sure, there is much to be learned from research reports and bankers, but sometimes you can get a less skewed perspective from bartenders in brothels... or bankers in brothels after spending too much time with the bartenders.

The Recent Election

With a little encouragement, my new bookseller friend went on to talk about last week's elections the result of which is that the First Lady and current Argentine Senator, Cristina Kirchner, was elected as the next president of Argentina.

This victory by the center left Peronist party candidate is seen locally as an endorsement of her husband's policies which were credited - right or wrong -- with helping the country recover from the crisis of 2001 when Argentina defaulted on over 80 billion dollars in loans. According to my new bibliophile buddy, the election bodes well for the economy and opportunities for entrepreneurs and, more specifically, women entrepreneurs. He also thinks it will bode well for the Buenos Aires stock exchange.

"Just watch, people are just now ready to start investing in our own markets. In fact, investing books are some of my best sellers, at least to locals. Tourists mostly buy picture books."

For those looking to diversify their money and their lives, the bookseller may be right. Based on our many visits to the country, we think there are still abundant opportunities to earn above-market returns in Argentina.

That's because, while Cristina Kirchner's impact on the economy is yet to be determined (her hubby had odd ideas like capping energy prices, causing an energy shortage... surprise, surprise), the elections are important in that they give the country another four, and maybe eight, years of some form of political consistency.

But How to Act?

While there are a number of interesting Argentine conglomerates that trade via ADRs on U.S. exchanges, there is a closed-end fund that we are now doing our due diligence on that looks to be an excellent proxy play on Argentina, Inc. Taking a broader-basket approach such as that may be the best approach.

Even real estate, which we were buying for pennies on the dollar a few years ago, and which has appreciated measurably since, still offers an excellent value when compared to the bubble-like prices on offer in most of the world.

Another way to play it may be by looking to invest in neighboring Uruguay. Following our noses there, in a few days' time Simon and I will be meeting up in Punta del Este. This "San Tropez of South America" is known for its super models and sandy beaches, but the country is also known for its friendly business climate and a private banking sector that does good business helping Argentines find a home away from home for their money.

With all the commodity wealth being created in Argentina, as well as in other parts of South America, we think Uruguay is destined to do very, very well for the foreseeable future.

As per our usual boots-on-the-ground approach, we'll be meeting with real estate agents and bankers as well as a couple of lawyers who specialize in helping foreigners navigate the issues of investing.

Because we are looking for not only the best places for our subscribers to invest, but also the best places to have a second home or just enjoy their time, I'm thinking of devising a new economic indicator that the global-minded should have in the top right-hand corner of their computer screen.

It is to be called the Elegance Quotient (or EQ, for the cognoscenti). Very simply, the EQ will be calculated by taking the elegance factor of the place (somewhat subjective, to be sure) and dividing it by a weighted average basket of the goods and services that you most enjoy.

So, naturally London and Paris, Barcelona, Singapore, Shanghai, San Tropez and Hong Kong will all have impressive numerators, but they will also have depressing denominators... namely the high cost of pretty much everything.

My basket will include a bottle of good wine, a custom suit, a steak dinner, a gym membership, a cross-town taxi ride, a night in a five-star hotel, a hand-rolled cigar and a maid's monthly salary.

Based on those inputs, Buenos Aires and Punta Del Este will rank right at the top of the index.

Fitzroy McLean is a co-editor of Without Borders, the spirited and highly profitable new monthly advisory service from Casey Research. A former military man turned spy, Fitz eventually came to his senses, trading in his cloak and dagger for a briefcase and a degree from Oxford, then set out to use his unique skills as a successful fund manager and full-time international entrepreneur. Fitz and co-editor Simon Black, another former intelligence operative, are on a nearly non-stop quest around the world looking for the best places to easily diversify internationally (and, in the process, enjoy the best life has to offer).

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Fitzroy McLean, Co-Editor,
Casey's Without Borders

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