In the private boardroom of the New York Stock Exchange, Eduardo Elsztain explained his strategy to a small group of investors...
I was there last week with Eduardo, sitting in the NYSE's impressive boardroom. (I was 10 feet from a priceless Faberge urn... Over 100 years ago, Russia gave it to the exchange as thanks for a $1 billion bond issue. Russia ended up defaulting on those bonds. Years later, the Russians asked for the urn back. The Wall Streeters said, "You'll get your urn back when we get our money back!" So the urn is still there.)
Eduardo was ringing the opening bell to commemorate a recent business deal, and I came along.
In my career, I've been fortunate to meet many extraordinary investors. Eduardo is one of my favorites. He has survived and prospered through more government-debt pileups and busts than any big investor I'm aware of. You see, Eduardo has lived his life in Argentina, which has a history of wiping out investors time and again.
Eduardo's firsthand knowledge of how to invest through an inflationary time is important right now... The U.S. government is inflating our money at an unprecedented, off-the-charts rate. Nobody is more experienced than Eduardo at profiting from this situation.
And right now, Eduardo is getting aggressive...
U.S. commercial real estate is the classic kind of crisis that attracts Eduardo's attention. So Eduardo came here looking for acquisitions and partnerships in commercial real estate. That's why he was in New York: He was commemorating his strategic investment in a U.S. real estate company.
From May of last year to March of this year, shares of this hotel operator fell roughly 90% from peak to trough. The market wasn't punishing this company in particular. Investors have sold everything related to real estate.
Eduardo knows hotels... He has owned world-class hotels through his Argentina commercial real estate company (called IRSA) for a dozen years. So he stepped up to the plate and bought 11%, with the right to own up to 20%.
Here's the thing: This company has five times as much debt as stock market value. Those debts aren't coming due for three years or more. But most people see those numbers and get scared off. Knowing Eduardo, though, I believe he's making a bet that:
1) The stock is underpriced. People have sold everything related to commercial real estate.
2) The hotel market is getting "less bad." Investing when things are getting less bad is what I've called The Secret to 1,000% Returns.
3) Most importantly, Eduardo expects inflation will arrive. That will push asset values higher in dollar terms and reduce the true cost of the company's debt.
It's a bold strategy: buying a stake in a highly indebted company while we're still in difficult financial times. But Eduardo has been through many crises... and many government inflations. He has conviction.
Eduardo is investing his money in a way that will "beat" the government at its own game. Sounds smart to me. If you're bold... and you believe the three things above... then you should consider investing like Eduardo, too.
Of all the stock market "comebacks" this year, you'd be hard-pressed to come up with one more remarkable than the IYF.
Around November 2007 – well before the credit crisis took shape – we produced a chart of the IYF and predicted the chart would end up looking worse and worse.
Like copper, Intel, and Cummins, the IYF is an asset we keep a close eye on. This investment fund is loaded with the "who's who" of American finance. Major holdings include Bank of America, Goldman Sachs, Visa, JP Morgan, and Wells Fargo. These are the businesses that rise and fall with America's ability to pay off credit cards, service mortgages, start new businesses, and just generally "get along."
On cue, this fund was crushed from November 2007 to March 2009... losing over 75% of its value. But as we've been saying in DailyWealth for a while now, "It's amazing what several trillion dollars will to do goose an economy." Buttressed by taxpayer bailouts, the IYF has made a remarkable comeback. It now trades at the same level it did last October. Whether you agree with the bailouts or not, this is one chart we have to watch... For as long as the IYF is high and rising, it's a sign folks are still throwing money around, no matter if it's "real" or not.
These Prices Are So Cheap, They're Stupid By Tom DysonTuesday, August 25, 2009
It appears the soft market is close to turning into a hard market. This is great news for the best quality insurance companies. They're about to earn higher prices... and enjoy a larger market share at the same time.
How to Join a Compound Interest Club By Tom DysonMonday, August 24, 2009
Compound Interest Clubs have no management fees, no performance fees, and they trade on the New York Stock Exchange. The minimum investment is one share.
The Best Way to Beat Higher Taxes By Dr. Steve SjuggerudFriday, August 21, 2009
So who does pay taxes? The top 25% of taxpayers (those with an income of $66,000 or higher in 2007) paid 87% of the taxes. Basically, the top 25% of taxpayers will be the ones paying this enormous debt.
China Is About to Buy a Lot More Silver... By Matt BadialiThursday, August 20, 2009
The average urban Chinese household has about $1,300 in disposable income to invest. While that doesn't seem like much, when you add up all those households, there's about $36 billion that could move into the next big investment opportunity – precious metals.
