Chris Mayer

GlobalPost is an online news organization dedicated to the idea of “ground truth.” It’s a simple concept. Say you have a satellite image. And then you send a person there to verify it. The latter is ground truth. It is a person on the ground, making a firsthand observation. GlobalPost has adopted this concept as its mission.

GlobalPost expects its correspondents to live in the countries they write about. Co-founder Charles Sennott put together a correspondent’s field guide with key points he expects his writers to live by. No. 1 on the list is simple: “Be there.”

I love this idea. I am also mindful of its wisdom in my own investing adventures. (This is why I rack up a lot of frequent-flier miles.) There is no substitute for being there.

Today, I’m in Nicaragua. It’s morning here as I write you from a palm-fringed house perched on a bluff overlooking a gorgeous stretch of beach at Rancho Santana. Before I visited Nicaragua for the first time, it was simply a place on a map. It was an abstraction. If anything, it was a set of received ideas — bits gleaned from other people, reflecting all the biases you’d expect.

Now Nicaragua means something very specific. It is a house with a pool surrounded by coconut trees. It’s green mountains and white surf and ocean breezes. It’s a warm pile of rice and beans and fried plantains. It’s friendly people and good times.

I was here with a group of readers over the weekend. They were looking at possibly buying real estate here. That is an idea that many people back home in the US would think a bit nutty. Back home, Nicaragua often means something that has little to do with the substance of what it actually is. Nicaragua means Sandinistas. It means Ortega. It conveys a vague sense of menace. To invest here would seem insane.

But the ground truth is different.

On Saturday, Joel Bowman and I delivered the first presentations ever made at the brand-new clubhouse in Rancho Santana. It was a very low-key affair. (I gave my talk in bare feet.) My task was to provide some macro context for Nicaragua. Some of the ideas I included in my talk are below, based on my own ground truth.

The big thing everyone thinks of first is el presidente, Daniel Ortega. Business people and investors in Nicaragua have no particular love for Ortega as far as I can tell. But they also believe he has been good for investors. He has provided tax breaks, carved out free-trade zones and boosted infrastructure investment.

It’s not an ideal free market, of course, but it’s now functionally superior as such to many other markets investors might rank offhand as better. The proof is in the pudding. Hear it from Carlos Pellas Chamorro, the richest man in Nicaragua. He is the controlling shareholder of Grupo Pellas, which has an oar in seemingly every boat: sugar, rum, banking, media, insurance and more.

A reporter once asked him if open and free markets really work in Nicaragua. He said:

“Open and free markets work everywhere when you let them. Of course, there are many obstacles in Nicaragua, as in all emerging nations… Many sophisticated foreign investors like Citibank, GE, Grupo Roble, Cemex, America Movil, Telefonica, PriceSmart, Wal-Mart, Cargill and many others have invested large sums of money in Nicaragua, obtaining very attractive returns.”

Those of us who have been down here have known these things for years. Only recently, though, has the ground truth started to seep into the mainstream press.

Still, most Americans would be surprised to learn Nicaragua is the second safest country in Central America, behind only Costa Rica. Or that the World Bank ranks it as the easiest country in Central America, Panama excepted, in which to start a new business. Or that in “ease of doing business,” Nicaragua ranks well ahead of such perennial darlings as Brazil or India — or even neighboring Costa Rica. A recent IMF report said that Nicaragua was the Central American country that best protected investors’ rights.

There are always uncertainties. But sometimes I think people almost reflexively assume that a foreign place has greater risks than back home simply because they overlook — or have grown complacent — about the risks they’ve lived with for so long.

Realities, too, can change. Places can go bad, like overripe fruit. But they can also re-emerge. In this way, the investor’s chore (or pleasure) is clear: to stay informed, to always seek out and gather fresh insights, to revise opinions accordingly so they do not grow stale and cost you a lot of money.

Great opportunities in markets often emerge simply because investors are relying on old assumptions or on ideas posed by people who have never checked things out up close. There is then an opportunity to get in at good prices and wait for the rest of the world to catch on.

This is always important, but the idea of ground truth seems it will be more important in 2012, as a number of big questions linger unanswered in 2011: What is the fate of the EU? Who will be the US president after the 2012 elections? Will gold get back to $2,000 an ounce? Will the US Treasury bond bubble pop? Will the BRIC countries slow further in 2012 or reverse course? Can commodities rally in the face of tepid economic growth?

It feels like 2012 will be an important year, maybe even a pivotal one, in the changes it could bring. Those who rely on ground truth have a better shot of ferreting out opportunities as the world changes than those who don’t.

So here’s to finding more ground truth in 2012!

Regards,

Chris Mayer
for The Daily Reckoning

Chris Mayer

Chris Mayer is managing editor of the Capital and Crisis and Mayer's Special Situations newsletters. Graduating magna cum laude with a degree in finance and an MBA from the University of Maryland, he began his business career as a corporate banker. Mayer left the banking industry after ten years and signed on with Agora Financial. His book, Invest Like a Dealmaker, Secrets of a Former Banking Insider, documents his ability to analyze macro issues and micro investment opportunities to produce an exceptional long-term track record of winning ideas. In April 2012, Chris released his newest book World Right Side Up: Investing Across Six Continents

  • gman

    “… stay informed, to always seek out and gather fresh insights, to revise opinions accordingly so they do not grow stale and cost you a lot of money.”

    … and always be ready at the drop of a hat to abandon everyone and everything in the blink of an eye in favor of more money. ’cause, you know, getting attached to anything can cost you a lot of money.

    remember. it’s all about getting other people to work for you. it’s never about anything else. just them for you.

  • gman

    “On Saturday, Joel Bowman and I delivered the first presentations ever made at the brand-new clubhouse in Rancho Santana.”

    getting ready to sell and leave? “first in first out” and all that?

  • Sebastian

    For those interested, TexMetals has a great promotion going on sealed boxes of 200 Grizzlies in Thermatron packaging. Spot is $7.95, which is actually really good for the grizzlies (APMEX is $10 over). Only 2400 left. If I had any cash I would buy.
    https://www.texmetals.com/silver-coins/silver-canadian-grizzlies/canadian-wildlife-series-silver-grizzlies.html

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