All- there were a lot of great comments and questions this week, I will review several here:
LATVIA
Excellent insights on Latvia and the way to trade the devaluation. Johan from Sweden asks if we are too late shorting Sweden’s banks. I think not, and here’s why:
Swedbank, one of the largest Swedish banks in Latvia, posted a 2 billion kronor ($250 million) second quarter loss just hours ago, compared to the average estimate of 1.27 billion kronor. Loan losses soared to 6.67 billion kronor ($850 million), a 1500% increase over last year’s loan losses.
This tells the story of what has happened to the bank’s loan portfolio *before* Latvia devalues. The post-devaluation carnage will be even worse.
Given the bad news, what happened to Swedbanks’s stock today? It rose 11.6%… simply because management expressed ‘confidence.’ I think this is absolutely insane.
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Tagged as:
Baltics,
investing
A final note on Latvia today before I put the Baltics to bed for now–
Yesterday I argued that Latvia is definitely headed for devaluation, and that European governments are practically bending over backwards to make sure we know about it.
In comments yesterday, the astute Mr. Marriott pointed out that the grey economy is now flourishing in Latvia; this is undeniably true, and we see evidence of dark economies around the world in times of crisis. Argentina and Cuba are great examples.
But I would submit that the grey economy is even more reason for the devaluation– tax revenues become even lighter as dark economies grow, while the government’s fiscal burden remains heavy.
So how specifically do we profit from this?
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Tagged as:
Baltics,
investing
Yesterday I talked about the demise of the Latvian economy and how it will foretell the future of California. Today I want to talk about the opportunity I see to profit from it.
I have seen the face of crisis before, both in the military and as a civilian. But rarely have I seen such a well-telegraphed money making opportunity to profit from crisis.
Sure, there are a lot of cheap assets in Latvia right now– the real estate and stock markets have lost 50% of their value in the last 12 months… but regardless, I would cross off Latvia as a place to invest for now, and here’s why:
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Tagged as:
Baltics,
investing
I found out this weekend that Paul Krugman is wrong about Latvia.
For months, mainstream luminaries like Krugman have been telling me that Latvia is the next Argentina, and that the country is on the verge of economic collapse… wait, stop– what does this even mean? Have the lights suddenly gone out? is the garbage is piling up in the streets? has McDonalds stopped selling Big Macs?
Since I was already close by in neighboring Lithuania, I had to go find out for myself… so I jumped in the car and sped towards Riga, Latvia’s capital city, to get some boots on the ground and find out what’s happening.
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Tagged as:
Baltics
Today I wanted to get down to the business of answering some of your questions from earlier this week:
First of all, I apologize if I failed to make things clear when I started this letter: I am no longer part of Without Borders; Notes from the Field is not affiliated with Casey Research or Without Borders. Furthermore, Notes is free and not tied to any other subscription that you might have.
LITHUANIA:
I received one question about the passport program– Lithuania has a very straightforward citizenship program as long as your ancestors were born before 1940. You can also marry a Lithuanian, and citizenship is granted after 3-years. My understanding from speaking to the Minister of Justice is that there is little red tape in the program.
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Tagged as:
Argentina,
Baltics,
bank accounts,
Gold and Silver,
panama
Yesterday I wrote to you about Lithuania and all the great things it has to offer– it’s inexpensive, has second citizenship, a low flat tax, and beautiful women. These are all great reasons to visit from time to time (and obtain a passport if you are so fortunate), but today I want to tell you why you should not invest any money here, at least not for now.
I don’t trust Russia.
Last winter in a dispute with Ukraine, Russia shut off the gas pipes and brought several European countries to their knees; the episode underscored how vulnerable Europe is to the whims of Putin, and Lithuania sits right on the fault line.
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Tagged as:
Baltics,
taxes
About a month ago I was attending a private, invitation-only meeting with some of the finest unconventional minds in finance. We gathered for three days at a luxurious oceanside resort on the Maryland coast to have an open exchange of ideas, debate our philosophies, and play poker ’til dawn. Lobo Tigre, editor of the International Speculator and my former colleague at Casey Research, approached me with an interesting proposition on the last day.
For several years now, Lobo has been actively organizing and lecturing at foreign youth camps designed to teach libertarian ideals to English-speaking Eastern European students; his latest camp was scheduled for Lithuania, and he asked if I could attend to lecture the students on my international investment and entrepreneurial ventures.
I love speaking and teaching, and when a mutual friend told me that there would be adoring Belarusian college girls there hanging on to my every word, I couldn’t say no.
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Tagged as:
Baltics,
foreign real estate