Work And Play In Nicaragua

We sat on the terrace of Antonio’s house…listening to the waves on the beach below and eating lobster that had been pulled out of the ocean just in front of us. Antonio’s family had owned the property and raised cattle and horses on it. After we showed him what we were doing, he decided to join us. He bought one of the best lots and built a house. It has three bedrooms and a roof made of palm leaves. The bedrooms are air conditioned, but the main section of the house is completely open — looking out over a pool and the ocean behind it. The temperature is never too cold and never too hot — with the help of the sea breeze — so you can spend your time outside comfortably.

Antonio’s mother had come over to supervise the meal. She added a touch of femininity to the all-male group. But after she left, the whiskey and cigars came out…and the talk turned to the most popular subject among ambitious, middle-aged, Type-A males — money.

Money is a curious subject. We were all there because we had some money and wanted to make more. But what made the place nice had nothing to do with money. The sea breeze takes no account of your personal balance sheet when it rushes by. The ocean was just as blue to a pauper as it was to a George Soros or Ted Turner. The sun was just as bright. Even penniless Nicaraguans ate the lobster they fished out of the sea — or maybe the red snapper we had the next day.

We wanted what the locals already had — to sit around, enjoy the beautiful place, drink beer, talk. But we could not afford it. Leisure time is too expensive. Their time is cheap, because there is little market for it. Ours is so valuable that we have little available to do what we want.

But you don’t make money so you can enjoy life. You make money so you can feel good about yourself, that is…feel superior to other people. And that means you have to give up many of the good things in life. You have to work, instead of play.

But the real trick is to turn work into play…for only when “work is play for mortal stakes is the deed ever really done for heaven and the future’s sakes.”

…to quote Robert Frost…

This project in Nicaragua has been both work and play. My partners are already designing the homes they will build. I have one in mind, too — but it is in a section of dramatic cliffs…which is still unavailable for building. And we are already making money.

When we first came to Nicaragua a couple of years ago, the Pacific Coast was almost untouched. We thought it was inevitable that it would soon become developed. It is too close to the United States…and too beautiful to be ignored. So we decided to do our own development — creating a place we could sell and a place that we would like ourselves. Work and play.

I mentioned a piece of property we bought in Baltimore. The price in real terms on that property went down over the last 100 years by at least 80%. But while property values in Baltimore were falling, they were rising on the California coast. In the early part of the century, the “New York Times” carried an ad for a bungalow on the beach in Malibu, California. It was for sale, if I recall correctly, for $6,000. How much is it worth today? I don’t know, but I will bet that it is worth many times that amount.

There is no reason that I can think of why the trend should not intensify. There are more people with more time and money on their hands. And they like living on attractive beaches. There are few more attractive beaches than those in Nicaragua. And, unlike the “real estate” on the World Wide Web, the property cannot be reproduced or rendered obsolete. What’s more, the political and logistical obstacles have now been removed.

Adam Smith refers to the computer leasing stocks which blasted off in “The Great Garbage Market of 1968.” These companies leased computers and were thought to be on the threshold of explosive growth. Computers at the time were the big mainframe machines that cost millions of dollars. It was thought that companies would not be able to buy them. So, computer leasing seemed like a can’t- lose formula. The only question was which company would get the “territory” first. The “first mover advantage” would be not just great, but decisive. Earnings were supposed to double each year for a decade.

What happened? Well, the territory disappeared. The mainframes became much cheaper, and small, cheap computers eventually took the market away. But even before that, the earnings of the computer leasing companies turned out to have been vastly overstated. A moment of truth arrived when investors realized that their expectations could never be met. The stocks fell. Many of them went to zero.

The trends and fashions of real land can change direction, too. But so far, there is no indication that people will tire of good oceanfront property.

Our results have been very satisfying. Others have realized that the land was under-priced. It is moving up. Almost everyone who sees the property wants to buy. One of my partners bought another two lots from the rest of us while we were down there. But since he had fallen off a horse earlier in the day and may have hit his head, I cannot take this as a reliable indicator. Still, it is a good sign I think; we are becoming reluctant to part with the land.

And we are being very careful to develop in a way that will enhance the beauty of the place, rather than destroy it.

I went walking along the beach in the morning. It is amazing how many different shapes a short stretch of beach can take. At one point, the waves crash against the rocks and a spray comes shooting up through a blowhole, as if a whale had made his way right beneath you. I came across a couple of local men fishing.

“Hola!” I said, in my best imitation of a person who spoke Spanish.

“Buenas dias,” they replied, clipping off the “s.” They fished for a living. But they seemed to enjoy it. Work was play for them, too.


Bill Bonner

Ouzilly, France February 8, 2000

P.S. Bob Fordi is the man to contact if you are interested in joining us in Nicaragua. His phone number is 410-337-7474.

*** Well, the gold price went up like a rocket…but it fell almost the same way. Barrick announced that it would not follow the lead of Placer Dome and stop hedging. The price of gold fell back from more than $320 to close at $302.

*** Stocks continued a familiar pattern. More stocks fell than rose — 1,787 compared to 1,223. More stocks hit new lows than new highs — 79 against 139. The Dow fell 57 points. And the Rocket Chips just kept going up — the Nasdaq rose by 76 points.

*** In short, the Old Economy was down…and the New Economy was up. You can look at it two ways — either capital is moving from worn-out, low growth industries to fast-moving, fast-growing industries of the future. Or the greater fools are chasing capital gains in the most volatile, risky and overpriced bubble in history.

*** My guess — both things are happening. The techs, Nets and biotechs all went up yesterday. GM, Ford, Honda and most other old industry stocks went down. This has been going on since — roughly speaking — April 3, 1998, when the Advance/Decline ratio began going down.

*** And it has produced attractive current prices for the Old Economy companies that have been hit hardest — such as GM. Meanwhile, the money going into unproven techs and Nets (and now biotechs) has bid up prices to hallucinatory levels.

*** Euroland’s central bankers are trying to talk up the euro. The euro has its own little niche in the spectrum of currencies — somewhere between the dollar and Internet stock options. It is the Esperanto currency — backed neither by gold nor by the power of a sovereign government to tax its citizens. It is backed instead by good intentions and a number of treaties. Jean-Claude Trichet(whose name means “cheat” in French), France’s equivalent of Alan Greenspan, said he was “not satisfied” with the current level of the Euro. But the euro did not move — it’s still at about 97 cents.

*** The New Economy may run on electrons…but the Old Economy runs on oil. And everything the New Economy workers live in, eat, drive and consume is either powered or lubricated by oil. Oil skyrocketed last year. And it is holding its gains. As Lord Rees-Mogg points out in “Strategic Investment,” the United States imported 5 million barrels of oil per day in `84. Now it imports 12 million. At $10 per barrel, the cost of importing all this oil would be about $70 billion per year. But at $30 per barrel, it’s $210 billion. Oil imports already account for half the current trade deficit.

*** That’s why oil is so important. It becomes an important geopolitical issue as well as a purely economic one. Germany ran out of oil in WWI. Hitler’s disastrous campaign in Russia was inspired by the need for oil. The Japanese attacked Pearl Harbor after the United States cut off oil shipments.

*** This leads to a thought…if it is true that Third World nations are 100 years behind the West (including Japan)…and if they have to relive the industrialization of the Machine Age…must they also relive the Machine Age wars? Is there a historical dialectic, deeper than the nonsense Marx invented, that links politics to stages of technological development? The West is moving away from politics and war — but are China, India and much of the rest of the world moving in the opposite direction?

*** While the price of oil has more than doubled, the level of exploration has gone down. About 1,374 wildcat wells were drilled in the United States in 1998. In 1999 the number declined to 905. Oilmen do not appear to trust the higher oil prices.

*** I’m back at Ouzilly, in the French countryside. The kids have two weeks off for a winter vacation. The wind is howling…it is raining.

*** Bill Clinton has proposed big increases in health, education and defense spending. Why not? It’s not his money. Meanwhile, Bill King says that Clinton met a pretty 29-year-old massage therapist at his wife’s official campaign announcement on Sunday. “I could use something like that,” he was overheard to tell the therapist. “He seemed so enthusiastic,” she reported.

*** Meanwhile, Saint Hillary told voters that her goal as a senator would be to “lift people up.” This is the same woman, notes Bill King, who returned to the White House after telling the nation that a “vast right wing conspiracy” was out to get her husband and made the comment, “I’ll teach them to f*** with us.”

The Daily Reckoning