Drug Cartels, Contrarian Investing, and the Best Value in Global Real Estate Today
by Nick Giambruno, International Man
“Isn’t it dangerous? Aren’t you afraid of being kidnapped or killed?” “Why would anyone want to go there?!”
Tell someone you’re going to Colombia, and you’ll likely hear something like this. As a contrarian investor though, it’s music to my ears. It’s exactly the kind of sentiment I look for. But only if I know it’s misplaced. And with Colombia, I’m certain it is. The legendary Jim Rogers once told me “As an investor, nearly always if you buy panic and you know what you are doing, and then hold on for a number of years, you are going to make a lot of money.” I recently met with Jim in Medellin, the country’s second-largest city. We discussed investing in crisis markets like Colombia. After visiting, it’s clear to me the country has turned a page to a better future. The middle class is vibrant and growing. There’s an energy and dynamism in the air that tells you this place is on the upswing. Colombia isn’t a crisis market anymore. It’s just perceived to be one. When the average person hears “Colombia” they still think about drugs, violence, and movies. They still think there’s a crisis. Thirty years ago, there were plenty of facts to support that image. But not today. Today, violence-torn Colombia is just a cheap Hollywood cliché. I’d bet anyone who’s been there recently would tell you the same. It all amounts to an enormous misperception… but that’s not a bad thing. It keeps prices not just low, but at some of the lowest relative values in the world. Colombia should make any contrarian investor salivate. Real estate and Colombian stocks are your tickets to get in on the action. I’m partial to properties in Medellin, nicknamed “The City of Eternal Spring” for its year-round pleasant weather. Medellin is nestled between mountains and has spectacular views. There’s modern infrastructure. Locally grown food is abundant, inexpensive, and delicious. Medical care is world class and affordable. There’s a vibrant restaurant and nightlife scene. The people are hardworking and genuinely warm. I could go on… Most North Americans and Europeans can live a higher quality of life for much less. There are few places in the world that could rank higher on the quality of life to cost of living scale. From a lifestyle perspective, Medellin is hard to beat. From an investment perspective, I don’t think it can be beat. When I was there I saw countless luxury two-bedroom apartments selling for under $150,000. Some were going for under $120,000. All were in the heart of the most desirable neighborhood in the city. And they all had jaw-dropping views. (I also visited Terra Viva, a sprouting libertarian community in the breathtaking mountains outside of Medellin.) In recent years, double-digit rental yields on Medellin apartments have been common… something almost unheard of in a world where conniving central bankers have driven interest rates negative. Property appreciation has been even better. But that doesn’t mean you’ve missed the boat. Prices are still dirt-cheap, thanks in no small part to the average person’s misperception of Colombia. If you can find better comparable values on real estate anywhere in the world, I’d love to hear it. While real estate is compelling, there are easier ways for your investment dollars to touch Colombia. A number of Colombian stocks trade in New York, just like any other US stock. They are only a few mouse clicks away. And they are a bargain thanks to the Boobus Americanus discount. But it won’t last forever. The world is figuring out the tremendous value Colombia offers.