Kim Iskyan and Brian Tycangco from Stansberry Churchouse Research call in from Singapore and Manila to tell you about opportunities in industrial robotics, the “great infrastructure catchup” taking place all over Asia, and where to find the possibility of 10x investment returns in some of the most unlikely places on earth.
Brian and Kim also explain how they’ve built an entire business on the “bad to less bad” investment theme and recount the best ideas from the recent Asia Investment Opportunities Conference hosted by Steve Sjuggerud in Hong Kong. Watch all eleven presentations for only $49 and get a free year of The Churchouse Letter.
John Gillin, Scott Garliss, and Greg Diamond from The Investors Marketcast podcast join the discussion with their latest analysis on bitcoin and how the world’s top cryptocurrency could easily fall below $1000 before any price recovery.
Editor and Investment Analyst, Stansberry Churchouse Research
Brian Tycangco is an Editor and Investment Analyst with Stansberry Churchouse Research. He's been working in the financial world since 1995 and has carved out a reputation as "Master Stock Picker".
Publisher, Stansberry Churchouse Research
Kim is the Publisher of Stansberry Churchouse Research. He's spent most of the past 25 years exploring and analyzing global markets. Kim has been a stock analyst and research director for a big emerging market investment bank, managed a hedge fund, and sold mutual funds to private bankers. He's also advised Fortune 50 companies on political risk and helped build stock exchanges from scratch in countries that few people could find on a map.
Announcer: Broadcasting from Baltimore, Maryland and New York City, you're listening to the Stansberry Investor Hour. Tune in each Thursday on iTunes for the latest episode of the Stansberry Investor Hour. Sign up for the free show archive at InvestorHour.com. Here are the hosts of your show, Buck Sexton and Porter Stansberry.
Dan Ostrowski: Hey everybody, welcome back to another episode of the Stansberry Investor Hour. I'm Dan Ostrowski, producer of the podcast, and I'll be your host again today sitting in for Buck Sexton and Porter Stansberry. But don't fret, ladies and gentlemen, you'll be hearing the sweet sounds of Buck and Porter as they get back in the saddle with all of you next week. First today – a note of thanks to you, dear listener. You're the reason we produce this broadcast, so I hope you're getting as much out of it as we do.
Our highlight is hearing from you and understanding how our work fits into your life. Are we helping? What can we do to make it better? Who would you like to see us interview on the show? Let us know. Write to us at [email protected], or better yet, go over to the Stansberry Investor Hour iTunes page or You Tube channel and join in on the reviews, comments, and discussion.
Look, I produce the show. I know there are tens of thousands of you that tune in every single week. If you want to share your experience on our iTunes and You Tube pages then we can have a conversation, and at the same time you'll be helping us find new listeners. Now we're grateful for all of you out there that are tuning in, so send us a note and let us know why you do. I'll be fun. OK, today on the show we have a few things lined up to broaden our perspectives.
First, we'll be hosting two of the most interesting analysts we know. They're world travelers, built stock markets in far-off lands, and they go to some of the most unlikely places on earth to find investment opportunities. I like to think of them as the "Indiana Jones" of investment research. I'm talking about Kim Iskyan and Brian Tycangco from our Asia affiliate Stansberry Churchouse Research. You might not know it, but Stansberry has had a real presence in Asia for several years now, far beyond just Steve Sjuggerud's True Wealth Opportunities: China service, and we have this presence in Asia because we're serious about understanding the opportunities presented in this part of the world, so we're paying attention.
In fact, it's exactly why Steve Sjuggerud sponsored two conferences in China last month, in Shanghai and in Hong Kong, and we did so with the help from our friends at Stansberry Churchouse Research. Kim and Brian are here today to talk about how a trade war might affect your opportunities in China, what investment themes in Asia they're following most closely right now, and a phenomenon we witnessed all over in our travels with Steve Sjuggerud, and that's something we call the "great Asian infrastructure catch-up."
Brian and Kim are here today to tell you all about how to take advantage of it, and we're also going to tell you how you can get all the presentations from our recent Hong Kong conference, plus a subscription to the Churchouse Letter – written by Kim Iskyan – for only $49. And the best part about this offer is that you're going to get 11 presentations from our Hong Kong conference with experts like Tama Churchouse from Crypto Capital, trend-following expert Michael Covel, Asia investment legend Peter Churchouse, and of course Kim Iskyan, Brian Tycangco, and our own Steve Sjuggerud. It's a ridiculous lineup of experts.
You can check it all out at AsiaOpportunitiesOffer.com. Also joining us today will be the crew from Stansberry's newest podcast, the Investor's MarketCast. You'll hear from John Gillin, Greg Diamond, and Scott Garliss on why bitcoin is headed below $1,000. OK, let's get started.
Today on the show we have Kim Iskyan and Brian Tycangco from Stansberry Churchouse Research. Kim is the publisher of Stansberry Churchouse. He's spent most of the past 25 years exploring and analyzing global markets. He's been a stock market analyst and a research director for big emerging market investment banks. He's also managed a hedge fund and sold mutual funds to private bankers. He's advised Fortune 500 companies on political risk and helped build stock exchanges from scratch in countries that few people could find on a map.
Kim has lived and worked in ten countries including Spain, Russia, Sri Lanka, and the United States, and he now lives in Singapore. What I find most interesting about Kim is how he explains the reality of the worlds of finance and investing, and how he's able to separate truth from fiction. But most important, he's able to present it in a way that helps everyday investors like you and me look out for our best interests.
Also joining us here will be Brian Tycangco. Now, Brian is a new editor and investment analyst with Stansberry Churchouse Research. He's been working in the financial world since 1995 and has carved out a reputation as a master stock picker. In fact, in the first five months of 2018 alone, Brian closed out seven positions for an average gain of 133%. One of those stocks even delivered a 418% return, so now Brian has seen just about everything there is to see in these markets. He's met with the leading CEOs of every industry in Asia, and he knows the ins and outs of doing business and making money there.
Brian was in Hong Kong last month presenting to our audience for the first time about something he called the "next profit wave in Asia." Please welcome to the Stansberry Investor Hour, Kim Iskyan and Brian Tycangco. Hey guys, how are you doing?
Kim Iskyan: Hey, great, Dan. Thanks very much.
Brian Tycangco: Thank you for having me on.
Dan Ostrowski: Yeah, absolutely. It's great to hear you guys again. we had a wonderful time of course a few weeks ago in China. So let's kind of get right into it. We want to give our audience a taste of what we experienced over there and some of the things we talked about in our conferences, so I'm going to start off right away with the questions.
Maybe just tell me, of course I was in Beijing, Shanghai, and Hong Kong with you guys, and we've talked about China here on the podcast before with Steve Sjuggerud of course. What about the rest of Asia? Why should we over here in the U.S. be talking about investing in Asia? Can you give our listeners something like the top three reasons to even be talking about it?
Brian Tycangco: Sure, Dan. That's a very good question. First of all, this is a place in the world where you can find economies that are growing at rates that you can actually see change happening. But we all know China is growing 6% a year, which is fast for an economy that size, but even the emerging Asian tigers are beating that growth. Vietnam is growing 7%, the Philippines at 6.8%. Cambodia is expanding at 6.9%, and even India is growing at 7.3% a year. I mean these are rates that double an economy's size in 10 years. That's all being driven by a growing middle class, rapidly forming infrastructure, and enormous pent-up savings.
The second point here is value. This is a part of the world where markets are trading at levels you can still consider reasonably cheap, and people tend to always want to get good value for their investment. The MSCI All-Country Asia Index excluding Japan is trading at a 14 times price earnings multiple. That compares with 18.5 times for the MSCI World Index and the Chinese stock market itself is also dirt-cheap, trading at just 7.9 times PE.
You have markets like Singapore, South Korea, Hong Kong, Japan, Thailand, Malaysia, and the Philippines all trading below 20 times price to earnings, and that concurs with developed markets including the U.S. which trade at 25 times their historical earnings. A third is opportunity. Asia is starting from a much lower base than developed markets are, and you're seeing that in the rate of growth, but it also means when you look at the evolution of developed markets you're seeing Asia now following the same general path up.
What worked for developed economies before might not be an exact fit for Asia's growing economies, but in my 23 years of experience here it's so far been a good roadmap as to what to expect, and that roadmap includes clues about the next companies that have a great shot to be the next Ford Motor, AT&T, Home Depot, Caterpillar, and even McDonald's of Asia.
Dan Ostrowski: I'm curious, you say about the savings rates in some of these countries – how much is that really playing into the growth in these areas of the world? What is happening with the people's savings, and is it making its way into the markets or are they starting businesses? What is it about that savings rate that is impacting this? That's just of interest to me because I saw it all over in China.
Brian Tycangco: Well, the high savings rate in Asia is making a big difference here in terms of the spending power. I mean, you're looking at retail sales here are growing anywhere from 8% to 10% a year. You have now a huge market for anything, for any type of goods. That spurs investment. When you see a market wherein there's a lot of people with a lot of savings, it encourages a lot of companies to invest. That's what I see that's going on right now in Asia.
Dan Ostrowski: Kim, what do you think?
Kim Iskyan: I'd also point to what's called a "demographic dividend" in much of Asia, and what that means is there's a certain sweet spot in an economy where a lot of people are entering the workforce, and that's because to increase growth you need more people to work. In a lot of Asia what we're seeing is that the – which people enter the workforce is just hitting its stride. So what that means in countries like the Philippines, Myanmar, Indonesia, Vietnam, the average age is 30 or less, and that means there is going to be a huge surge of growth as this cohort enters the workforce.
Now if you look at China the average age of a person in China is 37 years, and there's already a lot of talk about how the aging of the Chinese population – remember in China for a long time you couldn't have two kids. You can only have one kid. So that means there's going to be this massive wave of demographic force because you're going to have fewer people to take care of the older generation, and that will hurt growth in, we're talking 10, 15, 20 years from now, and that's just when much of the rest of Asia will be hitting its demographic stride. I think I'd add that to Brian's three big reasons to look at other parts of Asia.
Dan Ostrowski: Well it makes sense, and just a couple weeks ago Steve was on the podcast and he was talking about the pending pension problem that's coming in China, specifically to your point of the one-child policy and some of the ramifications of that. So it's interesting because we saw those things, Brian, over in China when we were there. We saw everybody working. Everybody is busy in this part of the world, and we certainly saw the retail space very active. We stayed in Beijing right next to a high-end luxury mall. It was very busy.
There were tons of salespeople working. Lots of people walking around with full bags of merchandise, so very much alive and well. Another thing I think that's probably on people's minds about Asia, just even recently this week is of course there's been a lot of discussion about how the Trump administration's developing trade war might hit companies in Asia.
Brian Tycangco: Well, Dan, it's already hit share prices here. When you look at the Shanghai index in China it's down something like 20%-22% from its recent highs. If you look at Singapore it's down around 10% since early May. You see a number of other indexes that are also down, and I think you also see it in the U.S. there has been some skittishness, although less so than in this part of the world. I think there is – I think that it will continue to hit share prices here and companies here because this part of the world, the entire economic growth of the past 30 years, a lot of that has been built on trade.
Remember it wasn't too long ago that Japan was making cheap things for the rest of the world – any sort of electronics, any white goods were made in Japan. Of course it's long since moved from Japan and moved to China, and now it's slowly leaving China. As the cost of labor increases in China it's going throughout the rest of Asia. So we can look at Vietnam, you look at Bangladesh, you look at the Philippines, they produce a whole lot of the stuff that people in the West and the United States produce, and that's far more important to economies over here than it is in relative terms to the U.S. economy.
I think also the danger is this is a campaign promise by Donald Trump that's actually pretty easy to execute. When the art of the deal is only involving one person, it's pretty straightforward to do what you want. So I think there is a risk that there is more kind of trade saber-rattling rhetoric, and I think that a lot of the economies here are heavily exposed to that. Although I think when I'm looking at the different sectors here there are a lot of domestic consumption stocks and companies and subsectors that will probably be relatively less effective because they're not reliant on exports, and secondly there is still a huge amount of wealth here. So yes, markets might react, but when we're looking at the underlying economies there's still going to be huge strength in a lot of sectors of the underlying economies that won't be touched by this.
Dan Ostrowski: Well, do you guys have a sense of who has more to lose in this situation? Do the Chinese have more to lose or does the United States have more to lose? Are there some things that China has in their back pocket that we might be unaware of?
Kim Iskyan: Two guys in a gunfight, who has the most to lose? The thing is, if they shoot each other they both lose. I don't know. In my view everybody loses. For some of the smaller economies in Asia, the issue is their economies are relatively more exposed to some of these sectors, and when you look at the importance of garment exports to the economies of Vietnam or Bangladesh, and if those are hit by terrorists, that will be catastrophic for the garment industries for those countries, whereas the economy in the U.S. is so much more diversified and so much broader and deeper than a lot of the economies here, and I'd venture to say of China as well. In that sense it might be relatively easier for the overall American economy just to absorb it just because there's so many sections of the American economy that don't rely on exporting. But in my view, everybody loses in this sort of thing.
Dan Ostrowski: I would agree with you on that. Let's shift over to maybe some opportunity because there is always opportunity in any situation, and I know that you guys are experts in finding this all around the world. Maybe we'll direct this towards Brian. So Brian, what are maybe one or two of the investment themes in Asia that are most compelling to you right now, even given the trade war stuff and all that discussion?
Brian Tycangco: It's great that you raise that question. We were talking about the trade wars, the impact it could have on Asia and the United States and the global economy for that matter. The big thing here is we look for themes that will not be swayed by short-term market volatility because of the saber rattling in trade. We want to look at long-term things that are going to be here five, 10, 15 years from now. What we see right now is one of the most compelling investment themes, it has to be robotics.
What we're seeing right now is the advent of the next generation of industrial robots, and it's all in the news. We're seeing a rapid expansion of these robots into non-industrial sectors like agriculture, professional services, elderly care, and especially the military. We're already hearing about robots that build homes, clean living rooms, teach kids in schools, and even cooking your hamburgers, and Asia is leading the way. China is by far and away the biggest robotics market in the world. By the end of 2018, China will account for nearly 40% for all industrial robots sold in the world, and it's not just in China.
Asia is the market for robotics. I mean there are three of the four largest robotics markets here in the world – and that's China, South Korea, and Japan, and they account for over 60% of the global market. This is going to be a market worth hundreds of billions of dollars in the next seven to eight years, so we're keeping a really close eye on this, and we're excited because you have many of the world's leading robotics companies now based in Asia. The second most compelling theme for us is infrastructure.
Just about every Asian economy is now racing to catch up with the rest of the world. China has been spending between 8% and 10% of its GDP on infrastructure for over a decade now. India is building 34,000 kilometers of new highways in the next six years, and that's just highways. Hong Kong, one of the world's most developed cities, just tripled its budget for infrastructure. It did it because it doesn't want to be left behind by Shenzhen, which has now become the Silicon Valley of Asia. The Philippines is spending the equivalent of 70% of its GDP over the next six years all on infrastructure.
That's going to create massive opportunities in building stocks and med stocks, air travel companies, and many more. I've already given a lengthy presentation on this topic during our Asia opportunities conference in Hong Kong a few weeks ago. So I invite our listeners to visit AsiaOpportunitiesOffer.com to get a ton of information about this major investment theme along with an interesting opportunity.
Dan Ostrowski: Well, I mean we saw that for sure big time when we were there a few weeks ago, new infrastructure going up everywhere. Steve and I, we already talked about the massive cities we saw being built between Beijing and Shanghai, just one after another, construction cranes as far as the eye can see. So the infrastructure play is absolutely real.
Now Brian, is this something that China is now exporting this expertise to other parts of the world? I mean they've done such a good job with it already with their high-speed trains and building these cities seemingly out of nowhere. Is there evidence that they're exporting this type of expertise other places?
Brian Tycangco: When it comes to expertise I'm not so sure about exporting the expertise, but they are certainly striking deals with a lot of Asian countries to build infrastructure using Chinese construction companies, Chinese cement companies. They're basically finding ways for them to find new markets for themselves. That also goes hand-in-hand with providing the same technology that they have to the Asian countries that don't have the technology or the construction technology right now. So it's going to benefit a lot of countries overall.
Dan Ostrowski: I see. Do we see robots building roads? Let's combine the two themes here, robotics and infrastructure.
Brian Tycangco: You might see that more in Japan before anywhere else. I mean in Japan they're already building robots to help construction workers to build a brick wall. There are construction workers now that are wearing exo suits to help them lift heavy equipment. That's taking place in Japan, where the need is there because you have an Asian population, you've got a shrinking labor force, and you have less people willing to do the hard labor that is needed to keep Japan's economy going.
Dan Ostrowski: Well, that makes sense, it really does. This technology is going to bring all kinds of wonderful things when you think about it. Once again, we want to remind everyone we're on the line here with Kim Iskyan and Brian Tycangco from Stansberry Churchouse Research talking about all the wonderful things that we saw in China last month and of course about our conference that we had in Hong Kong and the things we learned there. So let's keep going, guys. There's been a lot of talk about North Korea lately.
We had the big meeting between President Trump and President Kim. There's been this talk about the possibility of North Korea de-nuclearizing and peace actually coming to the Korean Peninsula, which we would all love, of course. Now if I'm an investor, is there any type of play there? Is there any type of play in peace on the Korean Peninsula?
Kim Iskyan: You know, Dan, I think that the time horizon for that would be so extended and I think that if you look at probably the closest analog is when East/West Germany unified in the late 80s, early 90s, and it has been a generational evolution, and I'm sure lots of people have gotten rich from getting in early in East Germany, but they were on the ground and they were people who were plugged into all the different networks to understand how to get the right products to the right people and how to benefit from that.
I think that the day that North Korea opens it will be a total gold rush because there will be lots of adventuresome people saying, "Holy smokes, this is going to be just like all these other countries in the past." The day that they were allowed to see the sun and money and they actually could buy things in North Korea, people can't buy anything, so when they were actually allowed to buy things and they begin to have money there's going to be an incredible boom, but that will take a very long time.
I think in the meantime if there were one way to invest in that possibly happening you might either buy a South Korean ETF, which is kind of boring, or you might buy something like Korean Airlines just because you can bet that the day that opens up there will be a lot of travel between North and South Korea. But otherwise I think it's such a long-term, slow-moving possibility, there aren't very many good ways to play that unless you're an entrepreneur eager to rush into North Korea.
Dan Ostrowski: You've been so many places in the world. I've seen the list of the countries. Have you been to North Korea?
Kim Iskyan: No. I wanted to and I had lined up with a guy who had been there before and he was planning a new trip, and then it fell through. The thing with that sort of thing, the politics have to be just right. I went to Iran a few years ago when I still could, people with American passports still could, and it was fine, and actually Iran is fantastic, but then the politics turned sour and people with new passports can't go there. I guess North Korea it was good for a while and then it turned bad and who knows where it is now? But no, I haven't.
Dan Ostrowski: Another thing I wanted to ask is if you had a 10-year view and wanted to invest in markets in Asia that are going to explode, we're talking like go up ten times, where would you guys be looking?
Kim Iskyan: Well, I think one spot to look would be Vietnam just because Vietnam is growing so quickly, although the frontier market has come along way. I think an exciting market I look at, Dan, would be Bangladesh. What you usually hear about Bangladesh is that it's either flooded or it's suffered a terrible garment factory fire, but it's a country that's the size of Iowa and it has 160 million people.
So it has roughly half the population of United States crammed into a country the size of Iowa. Bangladesh is incredibly poor. It's obviously very densely populated. You walk around town, I was there late last year, and there are just so many people at any given moment it feels like a rock concert was just let out just because there's so many people wandering around going someplace.
It's a very young country. The average age is 25 years, so I mentioned earlier this demographic dividend. What's kind of interesting about it is it's a terrible place to do business. It's ranked 176 out of 190 countries in the World Bank's ease of doing business survey that looks at all sorts of different parameters for doing business, and it's also a country that's been growing at between 5% and 7% per year for literally the past 15 years regardless of crisis, regardless of anything. Bangladesh has been growing like a weed.
What this all says to me, it's poor, it's growing fast, and it's a very difficult place to do business, if Bangladesh gets its act together just a little bit, so let's say it moves from 176th to 120th and let's say corruption becomes just a little less worse, and the capital of the country, Dhaka, is usually rated the worst city in the world to live in terms of quality of life, if Bangladesh gets just a few of these things a little bit right then just imagine how fast it could grow and what the opportunities for investors could be. Something that Steve Sjuggerud often says is if things go from terrible to just kind of bad, that's where you want to be, and that's very much what Bangladesh is.
Dan Ostrowski: Yeah, well those are off-the-beaten-path investment ideas, and of course that's what we do hear from guys like Steve Sjuggerud. We've seen it work out over and over again, so that's why I think it's such a compelling and interesting idea. As you're going along this list of why to invest in Bangladesh it's like people are probably listening like, "Why would I want to do this? It's rated so terrible."
I think something that folks, they need to just open their mind a little bit. Even if it's not investing in Bangladesh it's investing in the concept of something going from terrible to just bad, or from bad to just a little less bad. Actually, it's really just finding an opportunity. That's where you find the opportunity. Did you have anything to add to that, Brian, at all about where maybe you see a – Kim is saying Bangladesh and Vietnam. What might you say?
Brian Tycangco: I really think that the Philippines is going to be one market to go up five to tenfold over the next five to 10 years. I think that the Philippines right now, regardless of what you hear in the media about President Duterte, I think that what is going on right now in terms of the economy, everything is going well, investments coming in, and the infrastructure push here is on a scale that I have never seen before.
Living here for the past 44 years, I've never been more bullish about the country than I am right now because of what I've seen taken place. I mean I travel outside of Manila probably every other week, just driving, driving two hours, three hours, just to see what's out there. It's interesting to go to places. Now I'm going farther somewhere with less time because they've opened a new road, because they've opened a new highway that cuts through all these rice fields that takes me to wherever I want to go faster.
What people are not appreciating is what the impact that is on the average person. You have a lot of landowners, farm owners, who used to be just toiling away at their land for years and years, some of them for decades, stuck in abject poverty, and suddenly now they're millionaires because of the land appreciation that's been brought about by all this infrastructure. That's just on a micro scale. On a macro scale the infrastructure build-out here that's on a scale I've never seen before, that actually the spending here eclipses that of the past three presidents is something that is really unlocking the potential of the Philippines.
I think that we are now in that takeoff stage at least similar to where Thailand was in the late 1980s where after that the economy and the stock market just absolutely went crazy and berserk and went up four or fivefold and catapulted Thailand into a developing economy status. That's what I see happening for the Philippines right now.
Dan Ostrowski: OK, so we have Kim saying Vietnam, Bangladesh. You're talking about the Philippines. For the average investor out there, they're not going to be able to find companies in these countries that are maybe related to infrastructure and be able to do the due diligence on them. What would you recommend to the average investor if they want to invest in countries like that we're mentioning, what are the best ways to do that?
Brian Tycangco: There is a Philippine ETF listed in the U.S. called the iShares MSCI Philippines Fund, trading in stock symbol EPHE. There are ETFs – that's one. There are a few blue-chip Philippine companies, U.S.-listed ADRs. Those are possible investment vehicles to ride the boom of the Philippines.
When it comes to Vietnam there are also ETFs there. Not so sure about the Vietnamese ETF though, the VanEck Vectors Vietnam Fund. It's just been a very poor proxy for the economy. It has underperformed greatly because the ETF has been unable to really mirror the index that has performed so well over the past year.
Dan Ostrowski: I see. So maybe it's a matter of looking into with Vietnam, especially trying to look into the companies themselves.
Brian Tycangco: Yeah there are – a lot of what we do over here is we go and visit these countries and find the best way to invest, and with some of them it is very difficult to directly invest. In Vietnam there is a London-listed Vietnamese-focused fund, close-end fund that's very good. For Bangladesh, Bangladesh has currency controls so investing directly in a company in Bangladesh even if you were so inclined is pretty difficult, but there is also a London-listed ETF. The ticker is XBAN and that's pretty much the only way that an individual investor – unless he's extremely ambitious – can invest in Bangladesh.
Dan Ostrowski: Well, that makes some sense and can point some people in the right direction. Let's just shift back to China here again. One of the themes that we're hearing about a lot in our conferences was the China "One Belt One Road" initiative. So with the One Belt One Road initiative – will this really be the economic boom people are expecting, or is there a side of the story that maybe doesn't add up?
Brian Tycangco: You know, Dan, the One Belt One Road initiative is massive. It will create enormous investment opportunities throughout dozens of countries in Asia and it already it, it has been for a while. I think what is probably less recognized in some parts of the world is that it's also a way that China is exerting its political and geopolitical influence over countries. One of the templates it's followed, I lived in Sri Lanka for a few years and I was just there recently and I saw this in person and there was a big article about it in the New York Times just a few days ago, which I found very interesting.
What China does is it extends loans to countries to build a big port or a big highway or whatever it is, and the contractor is a Chinese company and they use Chinese workers and they use Chinese raw materials. So they build this big port, which it turns out is just not viable, not viable commercially at least, but it might have some sort of geostrategic importance, so the country, the target country in this case, Sri Lanka, says, "Gosh, we can't make the debt payments on this because it's not generating the revenue we thought it would." And China comes back and says, "No worries, we can roll over the loan or extend you another loan, and believe it or not, the interest rate is going to be just a little bit higher."
Of course Sri Lanka can't meet the debt payment, so China says, "OK, we'll do you a favor. We'll take over the asset, but we need some extra land and we'll wipe out the debt and we're good, but this asset is now ours." Sri Lanka is a little island just to the south of India and it happens to be on one of the major shipping lanes of the world, and the previous president of Sri Lanka is from a small city on the eastern side of the island, and he decided he wanted to build it up, and China was very happy to build an airport and build a big port there even though there was no commercial sense to it.
And now after everything China owns this port. To most people it's like, who wants a port in some little city in Sri Lanka? But it happens to be geostrategic and extremely important. I think that's one of the risks of One Belt One Road that China is taking advantage of a lot of countries that are very eager for any sort of investment, because these are countries that money doesn't just fall in their laps for massive infrastructure investment and here comes China saying, "Great. We'll help you."
Dan Ostrowski: Well, we can see what they're doing in the South China Sea and the buildup of military there. This might even be part of that strategy, unbeknownst to maybe people like me. So Brian, is there anything on the One Belt One Road, is there anything you see there that the positives and negatives?
Kim Iskyan: I think China is really trying to spread its political influence here, but there's also been a positive side, which is there are companies out there that have benefited from this. A company that I recommended, construction company, before has benefited immensely from the One Belt One Road. No matter what you do, if you fiddle with a trillion dollars into construction there are companies out there that are going to make a lot of money. That's I think what's on investors' mind is whatever the end goal here is, is secondary to what is the opportunity here to make money, and there are opportunities out here to make money from this push and there continue to be opportunities in my opinion.
Dan Ostrowski: Well I know that when we were in Hong Kong you had mentioned there was an infrastructure play, and if folks do tune into the video offer we have in AsiaOpportunitiesOffer.com you can get all the videos from our Hong Kong conference and an entire year of the Churchouse Letter covering all the latest opportunities in Asia and beyond for only $49. Tell you what, Kim, I'm going to take the conversation here in a little different direction and just get off the investment thing just for a moment.
I know you've been to just some far-off places looking for opportunity. When you go to these far-off places of course it can get dangerous. There has to have been a hairy situation or two in your travels. Could you maybe share one of those experiences with us and how it turned out and maybe what you learned from it?
Kim Iskyan: Yeah of course, Dan. I look back and I think I've been very lucky traveling and living in all sorts of obscure places, but there are two places, actually a similar sort of circumstance. When I was in Johannesburg in South Africa and also when I was in Caracas in Venezuela, which are two of the most dangerous cities in the world, but before I went to either I tended to doubt whether they were all that dangerous.
I lived for nine years in Russia, in Moscow, at a time when the sort of perception of the international media presented of Moscow was that it was just this crazy, out-of-control place run by the mafia. The reality was the mafia didn't bother you if you were part of the 99.99% of the population that was just regular people, and as long as you knew where to go and where not to go in the city you weren't going to get in trouble. So I went to Jo-burg and Caracas kind of thinking something similar that, come on, it can't be that bad.
But in both those places I was fortunate to have a friend of mine in South Africa, I met a guy who I met through a former colleague in Caracas and they took me around and they said, "No, it's real. You don't mess around." So if you're just stuck in a traffic jam in Caracas it is – what happened at the time, I can only imagine it's worse now, is that if you're in the wrong place at the wrong time a guy on a motorcycle comes by and he taps on your window with a gun and says, "Give me whatever you have" and you can't go anywhere because you're stuck in a traffic jam.
Dan Ostrowski: Right.
Kim Iskyan: So the guy I was with said, "OK, we're in this traffic jam." It's kind of dusk. "Turn off your phone, turn off your computer, put everything under the seat and just sit there because that's what's going to happen if somebody sees the blue glow of your screen" or whatever, and something similar in South Africa, Jo-burg, where we're driving around and we go through some terrible neighborhoods. My friend says, "OK, we're at a stoplight. Now we're not going to stop. We're just going to roll right through." That's what everybody does because if you stop you're a sitting duck for carjacking at that time was happening all the time.
What I think I've learned over the years is that the – oh, two things. You don't quite get it unless you're actually there, because you can read, oh, crime is high in Caracas, but what does that really mean? If you're there you get it. You see what it means. You see the fear in the eyes of everybody who's there. It's not just something that you read in the FTE. The other thing is the importance of having someone to help you out, someone who knows the lay of the land who is on your side.
Dan Ostrowski: I don't think a lot of people think, "Got to book my ticket to Venezuela. Got to book my ticket to South Africa," maybe. So are you telling me you've been lucky enough to go to all these places in the world and you've never had a situation where you're like, wow, my life is in danger right now? I'm shocked that there's never been at least one moment like that.
Kim Iskyan: No, there hasn't.
Dan Ostrowski: Well, good for you. I'm a little bit shocked. I was kind of hoping that there would be this salacious story, that you pulled some sort of cool James Bond stuff to get out of it. We're just going to have to leave our listeners with the notion that there are dangerous places to go. When you go there you definitely want to have local contacts. That's pretty common sense.
It's also you don't know until you know, and that's really a theme of even why we took a whole group of 40-plus of our subscribers over to China at the beginning of this month to just simply show them this is really what it's like, and I think eyes were certainly open. Well let's stick back onto the theme of our Hong Kong conference here for a moment. So Kim, your presentation, it was a cool title. It was how to invest even though everything we know is wrong. I thought that was kind of curious. Can you maybe just explain the quick thesis between even though we know everything is wrong, this is how we invest?
Kim Iskyan: Kind of the backdrop of that, Dan, is that when you look at what people have believed at any point in the past and what was just taken as consensus, as conventional wisdom, and how that in hindsight proved to be completely wrong. I use the example of Moby Dick and how when Moby Dick was written, as a lot of classic works of fiction, it had all the impact of a pebble. It was not recognized for being this giant American literature or anything else, and Herman Melville died penniless.
He changed professions because he was ostensibly a failure as a writer, and it was only 30 years later that Moby Dick became recognized for what it was, and today Moby Dick is one of the top five works of literature of the American canon. So the relevance of that is a lot of the things that we think right now that are just foundational to how we view the world economy, to how we view stocks, the things that are sure bets, it's just a matter of time before we're proven completely wrong.
I think as an investor if you can get ahead of that and you can say, "OK, now what is something that is going to actually be right in 10 or 15 or 20 years, and can I invest in that, whatever that is, and can I be sure that I get out of the thing that turns out to be wrong." I think we can see it right now in something like General Electric. General Electric for decades and generations was just this foundation of the American economy, and now it's coming apart at the seams, and that's something that we're watching right now.
It's a slightly different thing because it's not a question of being wrong, it's just a question of this company evolving and developing, but I think there are a lot of things that we do see as being just of course it's correct, of course it's true, it's just the way things are, that are in fact will not be. So that's –
Dan Ostrowski: I see. It makes sense. Another thing I wanted to ask you guys, and I know it's of interest to all of our listeners out there because it's a theme we've been following really closely, and that is of course Sjuggerud's MSCI China A-shares thesis. Now I read your stuff and I don't see you guys talk about it as much as we do. So is this like a lesser theme for you guys? I mean do you see some potential risks maybe we're not talking about? We'll start with Kim. What's your take on the China A-shares inclusion? Is that something that we should be paying as much attention to as we are?
Kim Iskyan: What you look for is when different stars align and you have the macro story of China and you have the sort of technical dimension of China opening up and investors actually paying attention to China much more. So I think it's a great story. We haven't focused on it quite as much partly because it's one of the big things that Steve talks about and he does it so well, and I'm not quite sure what more we can really add to it.
And also, a lot of those stocks are U.S.-listed, and we talk about U.S.-listed stocks, but I think a lot of where we can add value is for those stocks that are probably smaller and they also have U.S. listings, but they're not quite as mega-cap as a lot of the big China A-share stocks. But it's a great story and I think Steve has done a great job of getting it out there.
Dan Ostrowski: Well, you are right about that. I know if folks want to go back a couple episodes ago we had Steve on and we covered this in great detail, so you can hop back to that episode if you'd like to get more information. Once again, I am here with Kim Iskyan and Brian Tycangco from Stansberry Churchouse Research. Kim is based in Singapore and Brian is in Manila, the Philippines, so here we are connected with these guys over a super long distance.
I want to thank them both for coming onto the show today, letting us know all about some of the things we talked about in Hong Kong. You can get all the videos from our Hong Kong conference and an entire year of the Churchouse Letter covering all the latest opportunities in Asia and beyond for only $49. It's an incredible offer. You can go to AsiaOpportunitiesOffer.com to get that. Kim and Brian, thanks again for joining us. I know it's late at night over there, so we're going to go ahead and get you guys off the hook now.
Kim Iskyan: Thanks so much, Dan.
Brian Tycangco: Thanks so much.
Dan Ostrowski: Talk to you soon. All right, everybody, up next we're going to hear from John Gillin, Greg Diamond, and Scott Garliss from the Investors MarketCast. This is a new podcast from Stansberry Research. We hope you can tune in. Just search for Investors MarketCast on iTunes or Google or wherever you get your podcasts. So today we're going to hear from the MarketCast gang on why bitcoin is headed below $1,000. We checked in with John, Greg, and Scott earlier this week and this is what they had to say.
John Gillin: Oh man. Another question fro you guys. I read this over the weekend, public sector ransomware attacks are on the rise, and the thieves have been asking to be paid in bitcoin, which is ironic given how awful bitcoin has been trading. So that's the segue. Well, cyber insurance, if you took out a $100 million policy the math now is you've got to pay $200,000 a year to cover that, but let's talk a little cryptos. What have you been seeing, my man?
Scott Garliss: Yeah, I think bitcoin ultimately goes to $3,000, first stop. The bubble has burst. It really has burst. So here's the thing, and I was having a conversation with someone about this last week, I think the technology, I'm bullish on the technology, but I don't know what the true value of all these different ICOs are and all these different coins. I can't for the life of me figure out – OK, we have all these different environments where all these different coins come into effect, and they're trying to place a value within those environments on this coin.
That doesn't make any sense to me from the fact of, look, when you look at it as a currency, which is what you want it to have and be, whereas I go to Australia or I go to Japan I know the value of the currency in that country. But unless we're moving into a whole other world with these new environments where all these new ICOs are coming out, to me it looks like these new ICOs are just a means of other people to take your bitcoin, it really is. It doesn't mean that they're all bad. I'm not saying that.
My point is that the value of these coins is where I struggle with. I think the technology is fantastic. Long-term I'm bullish on that, but the value of bitcoin, ethereum, ripple, and go down the list, there's a thousand of them, what the true value of all those are I'm not exactly sure, but I mean you look at classic bubble price action and it topped in December and it has completely failed to at least make any new highs. Every relative high has been sold into. To me it just looks pretty bad. I think we see a move towards $3,000, maybe even sub $1,000 before things can even try to turn around, but right now it's not looking pretty.
Greg Diamond: I feel like you bring up a really excellent point. It's like if you were to ask people about bitcoin and I think one of the biggest concerns is like what does it really do? What is the value there? In the meantime the other point you bring up, too, is you have all these people that are rushing to cash in on the wave and they're just diluting each other and the market and flooding it and it's like, am I really giving my money to a Ponzi scheme?
Scott Garliss: Look at the guy, the creator of litecoin had I don't know what the number was, let's call it $1 billion that he had made. He created litecoin, rode it all the way up to like 250, and then just – he announced it, fair on him, he sold all of it. This is the creator of it and he's like, "Yours."
Greg Diamond: How does the federal government, how do they not get control of that and be like, "Wait a second, this is out of control"?
Scott Garliss: Look, there's futures now, there's bitcoin futures, they're rolling out with ethereum futures. Again, I think with bitcoin and blockchain you have to look 20, 30, 40 years out. This is just the very, very, very beginning of this. So I think the regulation is coming. Again, I think the technology is there. I just don't know how to properly value what all these coins are, and there's so many of them.
The spread between – bitcoin is trading at, what, $6,000 and then ripple is trading at $0.40? OK, but they're supposed to be able to do the same damn thing. That's ridiculous to me. So once all that gets figured out I think it's awesome and it's probably no secret that I'm not a big fan of the central banking system in this world, so I do think a decentralized way to value a means of exchange between people is awesome for society. So long-term I think that is the way to go.
Greg Diamond: Free market.
Scott Garliss: Absolutely, a true free market.
John Gillin: You think we're going to get any bitcoin hate mail?
Scott Garliss: I mean look, it's not that I hate it. I just call it as I see it. Again I'm bullish on the technology, but the value of it I don't get it.
Greg Diamond: I just feel like there could be a better way to do it than – and I get all these people want to cash in. I just feel like somebody would grab ahold of everyone and be like, "Time out."
Scott Garliss: Too late for that.
John Gillin: Don't we all? We want this incredible period when you have your crypto wallet, you jump on your flight to Mallorca, Spain. There's no converting dollars into euros. You're just stepping up, going to have a sangria.
Greg Diamond: It would be pretty awesome.
John Gillin: A little paella, make it nice, and now you give over your bitcoin and you realize that during your flight it dropped from $6,000 to $5,000. You ain't having as much sangria.
Greg Diamond It's worth less because you're doing your transactions in euros versus dollars too, like huh?
Scott Garliss: That's the other thing, too, is in order to have a legit currency it needs to have some type of stability. You have a 1% move in dollar, yen, or euro, and that's huge move, having traded effects markets in a previous life. But in bitcoin it's 5%, 6%, 12%, 15%. Look at it, it went from $19,000 down to six, in six months.
Greg Diamond: I remember when some people were like, "Hey, I see bitcoin is at $21,000" and somebody else would be like, "What are you talking about? It's at $19,000." They're talking about the exact same instrument on the same day.
Scott Garliss: Just different exchanges.
Greg Diamond: Yeah. You have a price that's varying $1,000, $2,000. That's a big deal.
John Gillin: I asked someone over the weekend, a friend of mine who owns some bitcoin and I said, "Got any sense of what's going on?" And he just said to me, "It's very sad right now."
Dan Ostrowski: OK, folks, that will wrap it up for the Investor Hour this week. Love us or hate us, just don't ignore us. Write us with that feedback, [email protected]. Next week Buck and Porter will be back for your listening pleasure. Thanks again for listening, everybody. See you next time.
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