2 votes

Beer and Populism: good. Private property rights, freedom, privacy, business, price stability: bad.

Sovereign Man

May 17, 2013
Dhaka, Bangladesh

Well, you have to admit one thing-- the United States Senate certainly has its priorities straight.

Early last week they passed S.743, the Marketplace Fairness Act. This bill requires US-based online merchants to charge, collect, report, and pay sales tax to the roughly 9,646 jurisdictions within the Land of the Free which levy such a tax.

And while grounded in well-intended socialist dogma as a means to 'level the playing field', all the bill will really do is stick consumers with a higher price tag on the products they currently purchase online.

Curiously, though, the Senate then introduced S.958 this week. This bill actually aims to DECREASE certain taxes that are currently charged... on beer.

Not to be outdone by such wisdom, though, the government of Spain announced a plan this week to seize homes that have been foreclosed on by banks and developers.

Politicians will then let Spanish families stay rent-free in those homes for up to three years.

It's a bit of a reverse-Cyprus situation; instead of confiscating assets from bank customers, the government wants to confiscate assets from banks.

Again, well-intended. But this will likely destroy the mortgage market in Spain; who in their right mind would want to make home loans in that country anymore knowing that the foreclosure mechanism is unenforceable?

The plan should also do a great job scaring off foreign investors; remember, the Spanish government is desperate to reduce the excess housing inventory, and they recently announced a program offering residency to any foreigner who spends about $200,000 on Spanish property.

But instead of rolling out the red carpet for foreign investors, they're now broadcasting a very loud message: "We do not respect private property rights."

Again, just like the IRS targeting opposition political groups and illegally seizing the medical records of millions of Americans, or the Justice Department seizing phone records from the AP, this sort of Marxist land grab is something that you'd expect in Belarus or Venezuela.

So basically what governments in Europe and the Land of the Free are telling us is-- Beer and Populism: good. Private property rights, freedom, privacy, business, price stability: bad.

These people clearly have their priorities straight.

Before signing off for the week, I wanted to give you a few more thoughts on Bangladesh.

Bottom line, there are definitely opportunities in this country. With such a huge population, cheap work force, and abundant resources, the potential is evident.

At the moment, though, most of the great investments in Bangladesh are private deals. This is the same case as Myanmar.

Public market investing in Bangladesh is fairly uninteresting. The stock market in Dhaka trades at about 17-times earnings with no dividend yield. Right now it's down about 50% from it's all-time high, but it still doesn't strike me as cheap.

One lucrative opportunity is in private lending. So many locals have been shut out of the banking system because of bad policy and tight liquidity, but the need for capital is very strong.

For similar reasons, my colleagues in Mongolia set up a private lending business there, and they're currently making 3% to 4% per MONTH lending to local businesses who cannot obtain loans through the Mongolian banking system.

Given the need for capital and the appetite for development that I've seen on the ground in Bangladesh, I suspect that figure can be exceeded here.

Agriculture is also interesting. Land leases are quite cheap. And the soil is incredibly fertile since the majority of the country is in an alluvial floodplain.

But the prevalence of natural disasters and government policy that inhibits large-scale farming operations really increases the risk level. On a risk-adjusted basis, it's very hard to beat South America for agriculture returns.
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Have a great weekend.

Until tomorrow,
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Simon Black
Senior Editor, SovereignMan.com

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