One Legend’s Secret To Beating The Government

In the private boardroom of the New York Stock Exchange, Eduardo Elsztain explained his strategy to a small group of investors…

I was there last week with Eduardo, sitting in the NYSE’s impressive boardroom. (I was 10 feet from a priceless Faberge urn… Over 100 years ago, Russia gave it to the exchange as thanks for a $1 billion bond issue. Russia ended up defaulting on those bonds. Years later, the Russians asked for the urn back. The Wall Streeters said, “You’ll get your urn back when we get our money back!” So the urn is still there.)

Eduardo was ringing the opening bell to commemorate a recent business deal, and I came along.

In my career, I’ve been fortunate to meet many extraordinary investors. Eduardo is one of my favorites. He has survived and prospered through more government-debt pileups and busts than any big investor I’m aware of. You see, Eduardo has lived his life in Argentina, which has a history of wiping out investors time and again.

Eduardo’s firsthand knowledge of how to invest through an inflationary time is important right now… The U.S. government is inflating our money at an unprecedented, off-the-charts rate. Nobody is more experienced than Eduardo at profiting from this situation.

And right now, Eduardo is getting aggressive…

U.S. commercial real estate is the classic kind of crisis that attracts Eduardo’s attention. So Eduardo came here looking for acquisitions and partnerships in commercial real estate. That’s why he was in New York: He was commemorating his strategic investment in a U.S. real estate company.

From May of last year to March of this year, shares of this hotel operator fell roughly 90% from peak to trough. The market wasn’t punishing this company in particular. Investors have sold everything related to real estate.

Eduardo knows hotels… He has owned world-class hotels through his Argentina commercial real estate company (called IRSA) for a dozen years. So he stepped up to the plate and bought 11%, with the right to own up to 20%.

Here’s the thing: This company has five times as much debt as stock market value. Those debts aren’t coming due for three years or more. But most people see those numbers and get scared off. Knowing Eduardo, though, I believe he’s making a bet that:

1) The stock is underpriced. People have sold everything related to commercial real estate.

2) The hotel market is getting “less bad.” Investing when things are getting less bad is what I’ve called The Secret to 1,000% Returns.

3) Most importantly, Eduardo expects inflation will arrive. That will push asset values higher in dollar terms and reduce the true cost of the company’s debt.

It’s a bold strategy: buying a stake in a highly indebted company while we’re still in difficult financial times. But Eduardo has been through many crises… and many government inflations. He has conviction.

Eduardo is investing his money in a way that will “beat” the government at its own game. Sounds smart to me. If you’re bold… and you believe the three things above… then you should consider investing like Eduardo, too.

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Comment by Sara

2009-08-28 00:31:59

Investing these days can be hard, but you always have to remember that if you want to make money in the investing game you have to take risks.

Like everyone tends to sell in a bad market. Yes, you don’t lose as much money if you sell quick into the down turn, but if you have the guts. Think about holding on to your investments and wait for the upturn.

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