World Watching

The Sunday Edition

Sunday, May 22, 2005
Paris, France

Dear International Living Reader,

There are around 200 countries in the world. At any point in time, in these dispatches, on our website, and in our monthly print issues, we tempt you with suggestions for adventures you might pursue in, say, two dozen of them.

How do we decide which of the 200 should be fixed on our (your) radar screen?

Some places always make sense. Paris. Florence. The Mediterranean coast of Spain. But this list of perennially appealing destinations is short, especially if you're looking at the world map more as an investor than a tourist.

Beyond these places of world-class charm, romance, history, and beauty…things get more complicated. Few locales are attractive all the time, regardless of current political regimes…current currency exchange rates…or current costs of living. A developing nation can be charming when cheap but less so if prices rise.

We take a Rothschildian point of view, searching continually for booms and busts, paying attention when the proverbial blood appears in the streets. When CNN, et. al, are screaming, "Disaster!" and everyone wants to sell and no one wants to buy…we dispatch a scout immediately.

We pay attention to other factors, too. For example, a disaster in one country may make that place an appealing investment haven…but it also can have a knock-on effect. The impending "disaster," for example, of the turn over of Hong Kong to the Chinese in 1997 meant the monied population of that island nation, in the years leading up to that event, were in search of safe havens, for themselves and their money. Predicting where they might relocate in the Pacific Rim and investing ahead of the migration was a profitable strategy for one friend in particular.

"Blood in the streets" is a metaphor, of course. The secret is to be on the lookout, early, for turning-point events…and then to identify ways to profit as they play out. An investment in property is one way, but there are others. Levi Strauss made a fortune from California's gold rush. Not because of death and destruction…and not by buying up California real estate…but thanks to hysteria and his entrepreneur's imagination. All those miners, Strauss observed, needed work pants.

We favor countries with the tradition of the free market or that appear to have seen the light and adopted the idea of the free market. In other words, we invest for growth. The best recent case of this kind is Nicaragua. That country has pursued an agenda of peace and prosperity for the past 15 years, and property values, especially for beachfront along this country's Pacific coast, have risen steadily over that period as a result.

Which leads to another axiom we pay attention to: Buy beachfront because beachfront sells. Not only Americans, but people with money the world over (and this segment of the world population is growing) prefer coastline to any other kind of real estate. This will remain true as the Baby Boomer revolution proceeds, and competition for the world's best beaches will grow ever fiercer. Few can afford beachfront in the States anymore. But the U.S. has no monopoly on pretty coastlines. We make a business of paying attention to other places where the water meets the sand…but where the per-meter cost of that sand remains undervalued as a result of some local distortion.

We also favor brands. This idea was articulated best recently by Bill Bonner, founding publisher of International Living, in his address to IL readers in attendance at our Live Overseas Conference in San Diego in March.

By brands we mean certain cities. Cities that have developed personalities and cachet…that have become brand names. Living in them says something about who you are. If you meet someone at a party, and he tells you he lives in Duluth…you make some assumptions (no offense intended, of course…I'm sure Duluth has a lot to recommend it). If, on the other hand, he tells you he lives in London or Paris or Santa Fe…well, that communicates something else.

Again, it's not only Americans who recognize and prize these city brands. There are three-billion Asians getting richer all the time. They, too, are vying for limited worldwide inventory.

Finally, generally, we favor the Third World, where the prospects can be greater, the risks and costs lower. In the emerging markets of Latin America, for example, the generally shrinking Greenback still carries considerable weight. Furthermore, not only American dollars, but also American know-how and experience can take you far in these markets. The average American has skills, connections, and attitudes that can have far greater value beyond American borders.

Are these Third World markets riskier? Could be…but they're also far cheaper.

And we recommend you put your money in them only if you like what you're buying. In that case, if you invest in something you perceive as having intrinsic value, you don't have to worry over rising (or falling) values. You take pleasure from your investment…you spend time there…with your family and your friends…maybe you rent it out and generate some ongoing revenues…and, at the end of the day, you sleep soundly.

Kathleen Peddicord
Publisher, International Living

P.S. Where do these investment axioms lead us today? Dead center of our radar screen these days are markets longtime International Living readers have come to know well, including Nicaragua and Panama…and several we're planning to help you get to know better in the coming months, including Croatia (especially Istria), Albania, and Vietnam.