The Spoils of War

One of the bloodiest wars in history has turned a potential
economic powerhouse into one of the world’s ten poorest
nations. Here’s the kicker: the fortunes of this country
look to have turned the corner, yet the investment
community has no idea.

This war, which officially ended in 2002, was the world’s
deadliest since the Second World War: 3.8 million people
were killed.

Nine nations were directly involved in the fighting, as
well as over twenty distinct armed groups, which make this
the widest interstate war in this continent’s history.

For perspective, 300,000 died in the Balkans as Yugoslavia
split up. In the second Gulf war, still in progress, the
body count is less than 30,000.

They call it the African World War and it took place in the
Democratic Republic of Congo, formerly known as Zaire.

DR Congo is a very rich and fertile country. It is the size
of Texas, California and Alaska combined. It’s loaded with
natural resources, including large deposits of copper,
diamonds, tin, silver, gold and tungsten. More importantly,
DR Congo’s climate is one of the wettest in the world,
which means anything will grow, including cash crops like
coffee, rubber and cocoa.

But in DR Congo’s case, these resources are a curse;
they’re the only things in DR Congo worth fighting for…

I decided to mug up on the DR Congo’s history after reading
Investment Biker by Jim Rogers again last week.

Jim Rogers is a former Wall Street money manager. He was so
good at beating the market, that by age 37, he was able to
retire with more money than he knew existed in the world –
his words – and start traveling. He wrote Investment Biker
in 1994. It was his first book and it became an immediate

In the book, Jim rides around the world on a motorcycle,
observing and analyzing every country he visits from an
investing perspective. He’s very good at this. His analysis
is interesting, well thought out and ten years later, many
of his predictions have come to pass.

Back to the Democratic Republic of Congo…

When Rogers rode through there in 1994, the country, then
called Zaire, was a mess. He wrote:

"The railroads, built back during colonial times, ran
infrequently because of a lack of fuel. Most of the roads
had fallen into ruin. Schools had no books and paper and
very few capable teachers. There was very little equipment,
labs or drugs in the hospitals. Commerce had come to a
virtual stand still. Zairians along the Congo River were
lucky that they could still trade. We passed falling-down
barns, houses and water towers, large inland cotton and
rubber plantations turning back into jungle. What little
rubber and cotton was raised often went unharvested because
trucks could no longer reach the village."

"We explored many towns… all of which saddened us. Water
towers rusted and were falling down. Two- and three-story
buildings on either side of once prosperous main streets,
in ruins now, boarded up, crumbling. An entire people had
spent money, energy and the capital of their souls erecting
and maintaining these now-collapsing structures. Not only
was city after city in ruins, but also the farms,
plantations and ranch houses we passed; vast amounts of
capital and energy and lives tossed away by careless

"Zaire hasn’t had its final civil war yet. That horror will
come as local chiefs and barons snatch at the country’s

Rogers’s prediction came true. Zaire plunged. But this
wasn’t warfare. This was wholesale massacre… these
conflicts contained some of the most horrific war crimes
ever witnessed. Gang rape, genocide, AIDS, amputations…
the weapons of this war were as devastating as any nuclear
bomb, if not more so.

The first Congo war started in 1996. After two years of
fighting, Mobutu, the 30-year dictator, was sent into exile
and subsequently died. Rebel leader, Laurent Kabila,
assumed power. The second Congo war started in 1998 as
Kabila took on the forces of Rwanda and Uganda, among
others. In January 2001, Laurent Kabila was assassinated
and his son Joseph took power. The second Congo war
continued until December 2002, when a comprehensive
ceasefire between all parties was signed.

In the midst of war, one of the world’s potentially
wealthiest countries had been reduced to one of its

"As an investor, I wait for until the wars are fought, the
borders are redrawn and the newly elected governments are
eager to make something of the country’s resources," Rogers
concludes his chapter on DR Congo, "Here there ought to be
a period of stability once the borders are redrawn and
Mobutu is gone. That would be the time to pile in."

Now Mobutu has gone and the power-sharing administration,
agreed to by the different factions in the country’s civil
war, is about to be replaced by a democratically-elected

Yesterday, Reuters reported that voter registration has
started in two provinces outside Kinshasa, as DR Congo
prepares for elections in 2006 and its first democratic
government in 40 years…

If the DR Congo hasn’t already reached rock bottom, it
can’t be far away. Maybe time to pile in…

Did You Notice…?
By Tom Dyson

Copper just made a new all-time high. We found this
compelling bearish argument in June’s issue of Marc Faber’s
Gloom, Boom, and Doom Report…

"[T]hroughout post WWII history, copper has been
susceptible to substitution when prolonged price peaks
occur. In the 1960s, in Western Europe, copper’s market in
power cable was threatened by aluminium; in the 1970s and
1980s it was the switch from copper based heat exchangers
to aluminium and in the 1990s copper used for DWS purposes
has been threatened by plastics.

"Now we hear of plastics making significant inroads into
the DWS market in the USA, of new power networks
considering the use of aluminium for MV power cables, and
of plastics starting to encroach onto copper’s market for
DWS tube in Western Europe.

"Indeed, some brass mills in Europe talk about the
‘aluminisation’ of the industry. In China, steel is
replacing brass in locks, connector producers are beginning
to use brass instead of bronze, and auto radiator producers
are replacing high copper content brass with low copper
content brass…"

And the Markets…



This week

















10-year Treasury





30-year Treasury





Russell 2000


























JPY 112.52

JPY 111.42



Dollar (USD/EUR)





Dollar (USD/GBP)





The Daily Reckoning