October 7, 2011 · 8:00 am
During the last weekend, I spent some hours watching the webcast of the annual investors’ conference of Bestinver, a Spanish investment fund.
I find the conference itself not only entertaining and informative but quite funny due to the way the fund managers show their value investing principles and how stubborn they’re with them (luckily for investors). The experience is comparable to that of Berkshire Hathaway annual general meeting.
As in previous years the managers defended how not only to have profits but to defend your savings during recessions it is much better to be invested in real assets than to have your money in cash, state bonds, etc.
This time they raised the case of Mexico during 1979-1988 (in previous cases they had referred to the Weimar Republic or Argentina), based on an analysis by Marc Faber (a presentation containing the same info can be retrieved here, PDF 4.8MB). During those years the Mexican peso suffered an extreme hyperinflation explained in the Wikipedia as follows:
In spite of the Oil Crisis of the late 1970s (Mexico is a producer and exporter), and due to excessive social spending, Mexico defaulted on its external debt in 1982. As a result, the country suffered a severe case of capital flight and several years of hyperinflation and peso devaluation. On 1 January 1993, Mexico created a new currency, the nuevo peso (“new peso”, or MXN), which chopped 3 zeros off the old peso, an inflation rate of 10,000% over the several years of the crisis. (One new peso was equal to 1000 of the obsolete MXP pesos).
Mexican peso evolution vs USD. Source: Ron Griess
Obviously, anyyone who either held savings in cash in pesos or Mexican bonds at that time virtually lost all his money.
However, the same author made the analysis of what would have happened during those years to an individual holding Mexican stock, for which he used the Mexican Stock Exchange Index. The result is that at the end of the decade that person would have kept his wealth in US dollar terms, as the nominal value of the Mexican stocks raised at par with the hyperinflation and peso devaluation going on in the country.
Evolution of Mexican Stock. Source: Marc Faber
Conclusion: better be invested in assets if only to keep your savings safe in the long run.
Filed under Economy, Investing
Tagged as assets, Berkshire Hathaway, Bestinver, bonds, hyperinflation, inflation, investing, Marc Faber, Mexico, peso, Ron Griess, Weimar Republic
July 27, 2010 · 12:00 pm
Beginning of June I bought at Schiphol airport the book “The Next 100 Years; A Forecast for the 21st Century”, by George Friedman (author of “America’s Secret War”). I receive sometimes at the job reports and articles by Stratfor, the intelligence and forecasting firm that George Friedman founded. This was one of the reasons that raised my attention, the other were the headlines that could be read in the front page “2020: China Fragments”, “2050: Global war”…
Cover of "The Next 100 Years".
Friedman’s book tells us that when thinking about geopolitics we should be aware of:
- Experience tells us that we should expect the unexpected.
- We should not be confused by passing chaos and cyclical crisis.
- Humans and countries are not that free when taking decisions, but they see limited their options by several constrains. He goes looking for such constrains.
If he had written the book in 1900 he would have pinpointed the following three things as defining for the century:
- Collapse of European Imperial System
- Quadrupling of World’s population
- Revolution in transportation & communications.
Now, at the beginning of the XXI century he guesses the three defining issues will be:
- The rise of American power
- The end of the population explosion
- The development of technologies to deal with a declining population.
You may wonder “the rise of American power?”, yes he makes the case that North American power has just started and it’s here to last: technology, economic power, control of the World’s seas (US Navy), military power, access to both Atlantic and Pacific oceans…
As he says, the USA “had the ultimate aim of preventing any major power in Eurasia. The paradox, however, is as follows: the goal of these interventions was never to achieve something –whatever the political rhetoric might have said- but to prevent something. […] Its goal was not to stabilize but to destabilize. […] The USA has no interest in winning a war outright.”
With this in mind, he explores what may happen in the next hundred years: Russia trying to reassert itself, China fragmenting, Poland, Turkey & Japan as rising powers, some of them starting a global war, space-based power generation, Mexico challenging the US…
Filed under Books
Tagged as America's Secret War, book, China, communications, George Friedman, Japan, Mexico, Poland, population, Russia, Schiphol, space-based power generation, Stratfor, The Next 100 Years, Turkey, U.S. Navy, USA, World War