December 24, 2010
Santiago, Chile
It’s a long flight from Auckland to Santiago. Hell, it’s a long flight from Auckland to anywhere. You know, Australia is about 15 hours from anywhere, and New Zealand is 3 hours from Australia… so it’s out there.
My primary mission over the last three weeks in New Zealand was to spend time all over the south island looking at agricultural property. I wanted as much information as possible to make a final decision on where to base our sustainable community, and ultimately it came down to a handful of choices.
I’ve recently ruled out Uruguay due to its relatively weak economy that is sensitive to what happens in Argentina. I’ve also ruled out Panama as I’d prefer a country with a less cozy relationship to the United States.
I’ve been leaning heavily towards Chile, though New Zealand was a viable candidate… as such, I wanted to spend a few weeks on the ground gathering intelligence so I could be absolutely certain of my decision.
New Zealand is definitely a wonderful country… though it’s not the right place for our community: too far from anywhere, high taxes, and a bit socialist in its cultural mentality.
Most of all, I want the community to be in a strong, thriving economy that represents the future, not the western hierarchy of the past. Chile is the answer.
I’ll have a lot more to say about that in future letters once I return. For now, I’m transiting on to Argentina where I’ll spend the holidays with a few friends, sort out some personal business, and then hopefully drive across beautiful Patagonia back into Chile and up towards Santiago.
For now, I want to answer a few quick questions and wish you all the best for the holidays.
First, I wrote an article earlier this week about some indicators we’ll see in the future once gold reaches a top– I think that all those “we buy gold” signs will become “we sell gold” signs. In response, reader James asks:
“Simon, you mention that the ‘we buy gold’ shops capitalize on people’s ignorance. The free market is comprised of nothing more than voluntary transactions between two or more parties. Do you feel that what they are doing is immoral?”
No, absolutely not… and I certainly didn’t mean to imply that. Perhaps I should have expounded a bit more. I know there are multitudes of honest, upstanding gold dealers out there (my favorite being Van Simmons of David Hall Rare Coins).
Right now, the public is largely unaware about what’s happening in the gold market. Some people find themselves short of cash, and they see a sign that says ‘cash for gold’. Poof, problem solved.
This is nothing more than a lawful transaction between a willing buyer and a willing seller, and I’m all for it.
But let’s be honest… if you scrap together an ounce of gold and someone offers you $400 for it, and you take it simply because you don’t know the spot price is $1400, they’ve just made $1000 (less melting and assay costs) on your ignorance.
Again, there’s nothing wrong with this. My only point is that these outfits are able to generate huge margins simply because of public ignorance… indicating that we are a long, long way from the top.
Eventually their margins will be squeezed because public ignorance has faded. The average person will know the price of gold because it’s on the nightly news, billboards, weekend infomercials, and all over the Internet. When this happens, it will be a sign that we’re near the top.
Next, Hans asks, “Hi Simon, I was wondering if you could address Cuba. I know it is quite communist but how do you see it as a place of refuge since it is so anti-American? It has a lot of potential if only they would migrate to a more pro-business approach.”
Cuba is a complete disaster, but it’s hard to imagine the place getting much worse. There does seem to be a lot of potential, and the country could turn into a boom town overnight given the right conditions.
Two things need to happen in order for Cuba to substantially improve– first, the government needs to reduce its control over the economy and start allowing private employment, private ownership, and private businesses. This is already happening.
The second thing is that the ridiculous trade embargo needs to be lifted. I’m convinced that Barack Obama is keeping this card as his ace in the hole, and he’ll use it in 2012 if the Presidential race is tight. Lifting the embargo would help him tremendously with the Latino vote and likely win over Florida.
In the meantime, I would recommend the country for pioneer expats who don’t mind putting up with squalor and the lack of amenities… but Cuba makes up for it in other ways, like warm weather, gorgeous women, great salsa culture, and zero crime against foreigners.
Last, Stephen asks, “Simon, I’ve enjoyed the New Zealand guide that your friends Mark and Chris put together. I’m interested in moving there, what is your impression of the small business opportunities?”
As I’ve written before, New Zealand is an exceedingly beautiful country, though I think there’s better opportunity here for retirees than investors and entrepreneurs. The tax situation is a bit cumbersome and the regulatory environment is bureaucratic.
But if you’re looking for a place to lay low and enjoy some peace and quiet while still being in an English-speaking, civilized country, I highly recommend it.
That’s all for now, I’m off to catch my plane. I hope you have an absolutely wonderful weekend, and we’ll talk again soon.
