Buenos Aires

If you enjoy good food, great weather and buckets of culture, to my mind, there’s no better place on the planet to live than Argentina. In fact, if living in Argentina were an investment, I’d argue it would have the best cost-benefit ratio of any country in the world.

I used to live in Buenos Aires, and I was back there recently to research emerging market opportunities. One night (over a 14-oz. tenderloin steak and a glass of malbec) I chatted with a contact of mine—a retired British banker named Rob Marstrand. He shared with me his thoughtful take on some “street smart” wealth-protection lessons the Argentines have mastered. We’d all be wise to follow suit. I’ll show you how in a moment. But first, a little context…

Rob is an expert on high-growth economies, particularly China, where he worked for a Swiss bank. Two years ago, he left China to live in Buenos Aires. I asked him why he finds his newly adopted country such an attractive place to live.

Rob’s answer surprised me: “Argentina is the greatest place on earth for an investor. Not because its finances are such a success. But because they’re such a failure!

“You see, in terms of learning about how to hold onto the money you already have, Argentina is perfect,” Rob explained.

“This place has suffered every kind of economic disaster you can imagine—military dictatorship, hyperinflation, government debt default, currency collapse, recessions, depressions and confiscations of private pensions by the government. But all this turmoil has made Argentines some of the most street-smart people in the world when it comes to protecting wealth.”

Rob says he’s learned four invaluable lessons about preserving wealth from living in Argentina.

1. Keep a chunk of your savings in cash, not on deposit at the banks. Argentines have learned the hard way not to trust the banks to stay in business. If you live in the U.S. or Canada, your bank deposits are guaranteed by the government. But it never hurts to have a small amount of cash funds on hand. No matter how safe you think banks are, it is never a good idea to keep all your eggs in one basket.

2. Buy hard assets. The trick here is to buy things that governments can’t devalue through inflation. Hard assets are tangible “things”: gold and silver, high-quality diamonds, real estate, timberland, farmland, etc. This has never been more important. The Federal Reserve is engaged in a massive experiment in monetary inflation.

3. Keep a chunk of your assets offshore. Wealthy Argentines keep about 80% of their financial investments in accounts outside the country. Thanks to U.S. legislation slipped into the recent “jobs bill,” after Dec. 31, 2012, if you want to deposit more than $50,000 in an offshore bank the Internal Revenue Service doesn’t approve of, the government could hold on to 30% of it…as a penalty for using that unapproved bank. Having an offshore account gives you a ready launching pad if you ever need to move large amounts of money offshore in a hurry.

4. Be an opportunist. Argentines pile in and buy when there’s a crisis. A lot of street-smart Argentines have made fortunes from patiently waiting, then aggressively investing in real estate or stocks when the markets crash. (One friend of Rob’s turned $100,000 into $1.5 million in eight years from two residential property deals.)

One of the most successful money managers in history, Jim Rogers, put it best when he described his approach to investing. “I just wait until there is money lying in the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime.”

Financial calamities are no longer the preserve of far-off places with unpronounceable names. The recent meltdown had “Made in the U.S.A.” written all over it. It wasn’t an isolated event, either. The 2008 stock market crash is the second time the Boomer generation has seen 50% plunges in stock prices in the last decade.

The four rules above can help you protect your own savings…even if you live in a “stable” country like the U.S. or Canada.

Put simply, you only invest when the odds are overwhelmingly in your favor.

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SIDEBAR

Protect and Grow Your Wealth

Chris Hunter is the Investment Director for Bonner & Partners Family Office, This group, the brainchild of International Living’s founding publisher, Bill Bonner, has one simple goal: to protect and grow members’ wealth so that it can be enjoyed by future generations. For more information about how you can become a part of it, see: www.internationalliving.com/bonneroffice.