Greetings! I’m going to dive right into the questions from this week:
== TRANSPORTING GOLD OUT OF THE COUNTRY ==
I appreciate all the comments and anecdotes in response to Tuesday’s letter about my run-in with TSA. . Based on the questions I received, there are a couple of things that should be clarified:
1) In most cases (see below), you don’t have to tell the US government that you’re leaving the country with gold. However, that doesn’t mean that you don’t have to tell your destination country.
Some places in the world that require you to file paperwork if you enter the country with gold, such as Uruguay and Taiwan. Check before you go.
2) American Eagles are considered legal tender at face value ($50 for a 1-ounce coin); keep this in mind if you are a high roller and happen to be traveling with 200 of them– you will be over the reporting threshold and need to file the paperwork.
3) Similarly, some foreign minted coins may be considered foreign currency at face value.
4) If you need to fill out the paperwork, ask the airline check-in agent at the airport; s/he should be able to point you in the right direction.
== PANAMA ==
Depending on your perspective, Panama can either be the land of opportunity or a total headache. This week, in two separate letters, I tried to portray both views. If I left you confused, here’s the bottom line:
Panama is on an upward trend. Miami (and most of the US for that matter) is on a downward trend. At the moment, the difference between the two is vast– Panama has only been modernizing for about 10-years, so it’s going to take some time to catch up.
Meanwhile, the US is beginning to deteriorate very quickly… so while life improves in Panama, things are getting worse in the states.
Panama is not perfect, and will never be. There are problems– social, institutional, environmental, etc. But taken as a whole, I am convinced that both the business environment and quality of life will surpass those of the US, and Miami in particular. Eventually.
For now, one of the chief problems (that I wrote about yesterday) is that pricing inflated far too quickly… it was as if Panama was pricing itself on par with Miami without having actually reached parity yet.
This fundamental value imbalance is what needs to be sorted out in the local property market with sellers capitulating to the lack of demand, at least at existing prices.
It will happen. In the meantime, value investors can find extraordinary bargains in closely held foreclosure listings, as well as buying distressed contracts.
I will provide more information on both of these topics in my forthcoming Panama Black Paper, which is nearing completion. To be clear, there will be a charge and limited distribution– the Black Paper is only intended for people who are truly serious about living or investing in Panama, not tire kickers.
== CHINA ==
The issue of China’s growth is a surprisingly divisive issue in the financial community. Many people are ‘suspect’ of the country’s growth, while others zealously invest in every Chinese issue they can find.
Do I believe the official GDP statistics released by the Chinese government? Of course not. I think they use the same mathematicians to calculate GDP growth that they used to compute the age of their female Olympic gymnasts last August.
HOWEVER, and this is the important point– real, fundamental, long-term economic growth is fueled by two things: the accumulation of savings, and advances in technology.
China has both… in immeasurable abundance. We’re talking about a culture that values producing, saving, and studying; thus, in my opinion, China’s long-term growth fundamentals are very solid.
=== KEY INVESTMENTS ===
People ask me a lot whether or not I think the US is going to experience significant inflation or deflation. This assessment is core to an investment strategy: in deflation, accumulating cash makes sense. In inflation, accumulating cash is foolhardy.
I will address this issue in future letters, but suffice it to say that there are indications of both at the moment.
This is why one of the best, no-brainer investments in my opinion is buying cash at a discount– growth companies whose market values are worth less than their net cash. You split the difference and stand to benefit in either case– inflation or deflation.
Believe me, it is hard to find great companies trading for less than cash; usually such valuations are linked to one time market anomalies when investors become completely irrational.
Dr. George Huang, who I have mentioned before, does a phenomenal job of finding these companies, and his returns have been spectacular. He recently recommended QLT on June 24th, for example, and the stock is already up 85%.
I like his recommendations because I feel like the downside risk– buying cash at a discount– is covered, and there is still tremendous upside potential (like the QLT pick).
If you’re interested in finding out more about these types of investments, I strongly suggest you get your hands on Dr. Huang’s FDA Report.