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Friday, June 16, 2006
Cafayate, in Salta province Argentina, is a small oasis between two rivers, at the center of a large mountain valley. A circle of silent granite giants surrounds the valley on three sides: 15,000-foot Andean mountain peaks, capped with snow.
As my wife said last month, with dawn spreading over the valley, “this is the most beautiful place in the whole world...”
There are blue skies here more than 300 days of the year and the weather is essentially always the same – warm during the day, cool at night. Add this climate together with dry, rocky, mineral-rich soil, and you see why Cafayate is one of the best places in the entire world to grow highly concentrated grapes for winemaking.
These features, along with massive amounts of water from artesian wells, also make Cafayate a truly exceptional place for human beings.
I’ve been following a group of investors working to develop the first golf course resort community in Cafayate. (Members of this group wish to remain anonymous, for now, but the group includes several billionaires and some of the world’s most renowned resource investors.)
A few months ago I went to Buenos Aires, Salta, Cafayate, Punta del Este (Uruguay), and Montevideo (Uruguay) with my wife and two of the top executives of my publishing company. Although we found some excellent opportunities in Uruguay, which is truly a first-class country, the value in Cafayate was the most compelling, by far.
Now you’re probably thinking... “Porter, are you mad...? Argentina is a basket case country with a worthless currency, corrupt politicians, and an economy that goes nowhere but downhill...”
My ideas about Argentina are based on the commodity cycle. Argentina’s economy is driven by commodity prices. The country is justly famous for having the earth’s richest topsoil. It is also rich in mineral deposits and petroleum reserves. Salta is one of the wealthiest and most conservative parts of the country because much of Argentina’s mineral and oil wealth is found here, in the foothills of the Andes.
Argentina then, is a lot like an option of the commodity cycle. It’s a great hedge against inflation. And I believe we are heading into a long period of rising inflation – one that will be much worse than the 1970s. In fact, I believe we are seeing the very early stages of a great monetary crisis that will, eventually, lead people (and then their politicians) to return to gold-and silver-backed currencies.
In about ten years, Buenos Aires will, once again, be one of the most expensive cities in the world.
If I’m right about this coming monetary change, Argentina will be the single best real estate investment you can make for at least the next 20 years. And that’s why so many wealthy, smart people are buying property there now. They know the history. They know what’s coming.
If you have the means to travel to Cafayate, go see it for yourself and buy property now. If you don’t have the means to invest directly, consider buying shares of Cresud (CRESY), a publicly traded Argentine land holding company that Steve has written about in these pages before.
THE RUSSELL TAKE ON GOLD
Richard Russell has been battling the markets for over 50 years.
His Dow Theory Letters investment advisory is the oldest service continuously written by one person in the business. Around the office, we just call him the “R-man.” And we always pay attention to what he’s saying about his investments.
Richard recently made one of the smartest comments on gold we’ve seen this year:
“I've been reading dozens of papers on gold, endless papers. The truth -- nobody, and I mean nobody, knows what's coming up for gold. I have only three conclusions.
In other words, Russell sees higher gold prices in the future. The investment public hasn’t participated in gold’s multi-year rally… but they will.
Russell is smart as a whip… and DailyWealth is a paid up subscriber to hisDow Theory Letters advisory. You can visit Richard's website here.