Editor’s Note: PBRG Founder Tom Dyson has been hard to get a hold of. He’s been abroad conducting research in some of the most exotic—and dangerous—places on the planet. He discusses the opportunities (and pitfalls) he found, below…
J. Reeves, editor, The Palm Beach Daily: Tom, you’ve been traveling the world for several weeks. Where did your trips take you? Why did you go?
Tom Dyson, editor, The Palm Beach Letter: I went to the U.K., Colombia, Cuba, Mexico, and Venezuela. The main reason I went is because I write an investment newsletter—it’s my job to understand what’s going on in the world. You can’t figure out what’s happening by reading the newspaper or surfing the Internet.
There’s an important new trend building in the markets right now. It’s the U.S. dollar. It’s rising against almost all other currencies. This doesn’t happen often. And it has massive ramifications for all other markets.
For example, Venezuela is in the midst of a full-blown economic crisis. But the U.K. is booming with new money and wealth.
The rising dollar is a big part of both of these stories… and I needed to understand what’s unfolding.
J.R.: Two of the places you visited—Cuba and Venezuela—are undergoing massive socioeconomic stress/change. What was the No. 1 lesson you learned from witnessing them firsthand?
Tom: That’s easy—free markets. They work. The more you leave people alone, the more they produce… and the richer everyone becomes. The more you regulate and control, the less well-off everyone is as a whole.
While renting an apartment in Havana, I made friends with the apartment’s caretaker. He suffers from a bowel disease. The medicine Imodium helps—but you can’t buy it in Havana. So he’s taken to asking tourists for it.
I promised I’d send some to him when I got home. He was so happy, he cried. Thousands of basic medical supplies we take for granted in America are unavailable in Cuba.
Venezuela has price controls on many basic products. Toothpaste costs 6 cents a tube. The idea is everyone should have access to these products for cheap.
The problem is the market won’t supply these products at these prices. So there are shortages. Enormous lines form at the supermarkets and pharmacies. Most people end up buying these goods on the black market, paying five times as much.
Venezuela and Cuba are both textbook case studies of how market regulation makes everyone poorer.
J.R.: PBRG friend Doug Casey is a famed international speculator. One of his mottos is (to paraphrase), “Find a place where a war’s just ended, then investigate it for potential opportunity.”
America’s “Cold War” with Cuba officially ended in 2015. Did you find investment opportunities for Americans there?
Tom: Not for most Americans. There are billions of dollars just waiting to flood into Cuba the moment their economy opens. There’s a whole industry poised to invest in Cuba: Cuban people living in Florida and other parts of America… the big hotel chains… the big real estate companies. It’ll be hard to compete against that money. Plus, Americans can’t own property in Cuba yet. You need to have Cuban partners. So forget the obvious ideas.
There will still be big opportunities. But to capitalize on them, you’ll have to move to Cuba and be a local. You could open a business there (think anything to do with technology, Internet marketing, or advertising—Cuba is behind in these areas).
It’s a beautiful island with amazing beaches. Cuba could also be a huge cruise ship destination. It could end up looking like Cancun, Mexico.
J.R.: Venezuela’s in the middle of a terrible socioeconomic catastrophe. Describe the conditions there… especially in the world’s worst ghetto. What is your investment outlook on oil-rich Venezuela?
Tom: I’ve never seen anything like Venezuela is now. I was there for 11 days, in the capital city Caracas.
Venezuela is dangerous. It has one of the highest murder and violent-crime rates in the world. The State Department has ruled any U.S. embassy employees in Venezuela must travel in bulletproof cars. You can’t go out anywhere after dark. (The worst parts of town are total no-go zones. Even for the locals.)
No one wears jewelry. No one stops at red lights—they’re afraid they’ll get car-jacked. (I actually spent two hours walking around the toughest slum in Caracas. I’ll tell that story another time.)
Why is it so violent? Crime pays. There’s no justice… no downside to getting caught… and someone can make 10 years’ worth of average monthly wage with one kidnapping or robbery.
Inflation is another big problem. There are long lines every day, all over the city—people queuing up to buy bread, milk, eggs, and soap.
Six bolivars (Venezuelan currency) used to get you one American dollar. Now, it takes 800 bolivars to equal a dollar. This has wiped out people’s savings. Venezuela’s divided into two groups… those who have dollars and those who don’t.
My investment outlook on Venezuela is dire. There’s going to be some extraordinary pain before anything gets better… and that’s assuming they can form a government not full of crooks and liars… which is unlikely.
Forget Venezuela unless you love the country, you speak Spanish, and you’d be willing to travel there often (which is risky). If so, you could buy an apartment in Caracas. It might not be a good investment for another 10 years, but there’s nothing to lose (except maybe your life every time you go to collect the rent).
Venezuela is run by morons. That makes its problems more acute. But it’s also suffering as a direct consequence of my rising-dollar thesis.
As the U.S. dollar strengthens against all other currencies, it’s hurting places that sell things denominated in dollars… since fewer dollars are needed to buy goods than before. Like oil…
Oil prices have fallen 80% from their peak in 2014. Oil is Venezuela’s only export… its only way to earn dollars. So the country’s now running out of money. That’s why its currency is devaluing and the stores are empty.
J.R.: PBRG readers may also be interested in some of the countries you visited from a “Retire Next Year” perspective (Mark’s program to help Americans unable to afford retirement in the U.S. move overseas for a great, affordable retirement lifestyle).
Did any place you visited offer a good “Retire Next Year” setup?
Tom: Cuba works. It’s so cheap there… you could live on about $500 a month. I met many expats who live there. The people are nice and there’s little danger from robbery or murder (unlike Venezuela). The downside is it’s dirty, noisy, and the food is awful (since there’s no variety in fruits and vegetables).
Cartagena, Colombia, and Cancun, Mexico, are both excellent choices… I can travel from my house in Florida to a hotel in either of these cities in less than five hours. Both countries are cheap because of the exchange rates right now… and they’re both beautiful places. Cancun has amazing beaches (and amazing food). Cartagena’s old town is one of the wonders of the world. It feels like you’ve been transported back in time 200 years.
These countries are already cheap. And as the dollar rises in value, they’re going to get cheaper.
J.R.: That’s good news for a lot of Americans. Thanks for sharing these insights, Tom.