Thursday, December 1, 2011

A Little Bit Of Peru, A Little Of ¨Unambiguous Wealth¨

Many of you readers know that I have just arrived in Peru, on business (visiting and consulting with Ameru Trading del Peru S.A.) and pleasure.  For me, it is wonderful to be here, especially this time of year when the weather is starting to get nice (call it 79 degrees for the high, 65 for the low).  As I write, I hear the traffic noise clong from outside, we are about a block from the Panamerican Highway, which here in Lima is an expressway.  You hear the traffic almost 24 hours a day, honking from vehicles old and new, with more trucks rumbling past at night.  We arrived last night and cleared Customs at about 11:30 PM.  The drive from the airport to my in-laws took about 45 minutes, there was HEAVY TRAFFIC!  At 11:30 PM...  I have seen lots of people out late in big cities in the developing world, when my cousin and I were in Cairo MANY years ago, we wound our way through downtown streets at 1:00 AM after hitting the casino.  But, that´s another story.

The ¨business¨ part of my trip is the same as always: to meet with our managers and salesmen about how business is going and how we should make adjustments based on new conditions -- there are ALWAYS new conditions.  This time I see many changes in the vehicle fleets here.  More Hyundai and Kia (that is good for us).  Fewer Daewoo (not good).  New models of Japanese cars, some (the Vitz) that we do not have in the USA.  What struck me the most, however (in less than 24 hours here), is the sheer growth in the Brazilian fleets of heavy-duty vehicles, buses and trucks.  Brazilian VW buses (new mostly) have captured a pretty decent chunk of the market here in Lima, the buses were essentially non-existent last time I was here (April 2011).  This is yet more evidence that BRAZIL is becoming a world-class and world-scale manufacturer.  And I am not even counting the Brazilian ¨Chevy Taxis¨ now seen all over the place as well.

It will not even be until tomorrow (Friday, 02 Dec) until I really get into detailed conversations with our guys about the bearing markets for vehicles, which as always is of great interest to me.

One thing I have taken note of.  Our Chinese bearings (which for the most part do not overlap our Korean pieces) have been selling very heavily, even to customers who know what they are buying...  In Peru there will always be a ¨Precio Nada Mas¨ group of customers.

With luck I will have more tales to tell in the coming days about Peru!


I turn now to my other topic tonight, which on the surface may not appear to be related to this trip to Peru, but at heart really IS partly related.  The main goal we had in setting up Ameru over 20 years ago was to establish a business that would generate WEALTH.  Generate wealth by selling products (now bearings) at a better value to Peru vs. our competitors.  It has been a long and difficult path, but we are now reaping our harvest (that is, a few years ago we reached a positive Retained Earnings, that is, we finally have accumulated more proft than loss) as we now have the right mix of products and knowledge base.

Generating, accumulating, enjoying and passing wealth on are huge subjects of their own.  Many of us (I would say virtually ALL of you dear readers) spend a lot of time on this subjects of wealth...  Getting it, most of all perhaps.

FOFOA´s article threw off a whole host of thoughts for me, some of which I will explore in future posts.

But, once you have some ¨Wealth¨, what does that really mean?  This kind of question has been dealt with by many, but of most interest to ME this evening is FOFOA´s new article there at his blog:

His latest article, ¨Unambiguous Wealth¨, not surprisingly is about the best wealth preserver that History has shown us: physical gold in your own possession.  His new article is EXCELLENT in that he keeps a tight coherent view on wealth preservation through time and explains why gold did poorly from about 1980 - 2000 (short version: it´s debt accumulation´s fault!), but is now well into its long bull market, one for the ages, when we will see a huge spike in gold as debt is defaulted and hyperinflated away while paper gold is burned when the paper claims all vie for the same physical ounces.

His use of the term ¨unambiguous¨ means just that!  That gold IS wealth, that no one can deny.  Yes there are risks of robbery and seizure, but nothing else through history has been or likely will be taken to extinguish any debt.  There is always someone around who will take your gold as payment of a debt.

FOFOA uses nice graphs to show the peculiar 40 years or so, peculiar in that our financial ¨wealth¨ has grown and yet we see & hear about all of these problems.  Who among us REALLY believes that we are going to pay off the $122,000 + seen just above on the widget?  And that is just the national debt, that does not include credit card debt, mortgages, student loans, etc.

This is a worldwide phenomenon.  Almost EVERY COUNTRY has out-sized debts...  We have all heard about Greece, now we hear about Italy and France.  Soon the the Treasury debt of the USA may get downgraded (again).  Both China and Japan have huge debts, although those two are not much discussed in the Main-Stream Media (MSM).  These debts WILL get worked out, whether by ¨Jubilee¨ (the Bible uses that word, we call it ¨default¨) or by being inflated away or both.  History shows countless examples of both.

So what is left for those who have accumulated ¨wealth¨ in one form or another?  ¨Exter´s Pyramid¨(Google it!) shows various assets ranked as to ultimate liquidity, that is, how easily any asset class can be CONVERTED to pay off a debt.  GOLD is the foundation point of Exter´s (inverted) Pyramid.  I am almost surprised that FOFOA did not refer to the Pyramid, but his article is more about a form of wealth which is unambiguous, as opposed to Exter´s liquidity...

Many things are considered wealth.  Farmland and efficient manufacturers GENERATE wealth for example.  But, both of these are subject to taxation, weather events, strikes and so on.  A small company like ours could be regulated (by forcing us to get an import license each time we purchase bearings for example).  You have to pay property tax on that mansion (or even your humble abode)!  Your savings in the bank are at risk, whether through inflation or a BIG set of bank failures that overwhelms the FDIC being to pay.  Almost any asset you can think of has an AMBIGUITY of wealth, in that there may be a liability or tax on it that makes it less than perfect.

Gold is the closest thing there is to an ¨Unambiguous Asset¨.  Sure, it can be stolen (if you do not hide it well) or seized (if you turn it in, but it is thought that less than 10% of America´s gold was turned in when FDR so commanded...).  Everyone should hold some gold, even if it is just a little.


  1. Just don't put it in your tackle box and go fishing ... it doesn't float.

  2. Damn! It´s almost like eveyone I know has lost their gold in boating accidents! When am I going to learn? I have to be CAREFUL taking my gold out there!

  3. I bought 20 x 5 dollar gold coins at a flea market last week for a crazy low price of 10 dollars a piece. I thought they where fake but when i had them tested, they where all .900!!!
    Almost 3 ounces for 200$!! Now that stuff makes my month :)

  4. EXCELLENT purchase SD!!! You were correct and smart to have them tested. Also, you should try to feel this great while you can, I have a feeling few great offers like that will be seen soon. It´s OK to give yourself a pat on the back, buying almost $5000 worth of gold for $200. If we ever meet, I´ll buy you a beer in your honor!

  5. Disaster!!!! Who in their right mind takes gold fishing!? Scuba gear?

    SD: an AMAZING find - the stuff dreams are made of!

    I would like to draw people's attention to a recent article on government debt at the excellent blog Cynicus Economicus.

    The post is provocatively titled 'One Billion Idiots' and asks a profoundly simple question.



Note: Only a member of this blog may post a comment.