The Future of Tourism
In May, I spent four days on Tobago, the more interesting part of the
Caribbean republic of Trinidad and Tobago. Trinidad is where all the
population (1.2 million of them) and activity is; Tobago, just a few dozen
miles off the coast of Venezuela, is where all the beauty is-and only 50,000
people. I was there to inspect a couple of properties, totaling about 790
acres with several miles of beach front, that a small partnership I belong to
has purchased.
It must have been back in about 1970, when I was only two years out of
school, that I read a book called, I believe, How to Profit from the Coming
Land Boom in the Caribbean. If I'd acted on the thoughts in that volume,
rather than those in Harry Browne's contemporaneous How to Profit from the
Coming Devaluation, much of my subsequent life would likely have been quite
different. The advice in both books was excellent.
There's no question in my mind that as the world gets wealthier and more
populous, there will be an accelerating increase in the price of beautiful
and out-of-the-way land. We stayed at the Manta Lodge (809-660-5268, $80),
an excellent new hotel of only 22 rooms on the far side of the island. I
spent a lot of time with Sean Robinson, a world-class ex-commercial diver,
and the lodge's owner; give him a call if you like. The main attraction here
is diving, something I've done whenever possible since the early '70s.
Tobago has some of the world's best remaining coral reefs and, other than
Yap Island, is about the only place where you can usually swim with manta
rays.
The future of tourism is away from what are known as BFHs (Big Freaking
Hotels) and toward things like this. Why would anyone want to go to a
gigantic Grand Hyatt, Westin, Four Seasons, or the like, be with hundreds of
tourists, pay several hundred dollars a day, and not know whether you were
in Hawaii, Acapulco, Miami, or any of a hundred other places? The hotels
themselves, the beaches, the people, and the prices are identical. Small
niche hotels can be built nicely, but inexpensively, and run far more
profitably than a BFH, while charging a third as much.
Does the Caribbean land boom have further to go? Yes, especially in
undeveloped, but completely delightful, places like Tobago. This country,
too, is joining the free market revolution, having already cut taxes from
50% to 33%, and anticipating going to 20% by 2000. The personal exemption is
big enough that 90% of the population isn't even on the tax rolls. Tobago
offers a complete 5-year tax holiday (easily extendible to 10 years) for new
tourism projects.
This is not to say the government isn't still corrupt. They sold BWIA
airlines for US$20mm last year, a scandalous giveaway, and the buyer is
turning around and flipping it for $100mm. The only question is which
ministers got paid off, how much, and in which Swiss bank accounts. Of
course it's no different than what happens in the U.S. and Canada, just more
blatant. I've long held that the only ethical way to privatize is to
distribute shares of state enterprises pro-rata to every citizen, since
(theoretically) the citizens own the government and all of its assets. The
way it's done now, the cash from sales of government assets either winds up
in the treasury, with the politicians squandering it and even using it
destructively; or, all too often, it's siphoned off through corruption even
before it reaches the treasury. As PJ O'Rourke says, giving money to
politicians is like giving the cars keys and a bottle of whiskey to a
teenage boy.
If you're at a stage in life when running a small hotel sounds good, there
are plenty of places where it makes a lot of economic, as well as lifestyle,
sense. There will always be a demand for BFHs. But the sophisticated
upmarket traveler will be going to places like the Manta.
I desperately hoped to get down to Venezuela to look at the ranch I want to
buy, but will probably have to buy it sight unseen time is so short. Prices
are low enough that I'm actually willing to rely on friends. It's hard to
get hurt buying good land at $10 an acre.
A similar situation exists in Surinam. A friend is buying a 3,000 acre
ranch with a large, first-rate house and barns, located on the river about
20 klicks up from Paramaribo, for about US$135,000. A few years from now, he'll
look like a genius. Of course, the fact is, he's already very smart.
POST MORTEM
I continually look for deals in Third World property, especially when it's
on the water, in a resort area, or in the path of obvious growth. New
Zealand, Vanuatu, Romania, Argentina, and Thailand are a few of the places
I've researched in some depth in recent issues.
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The Brookings Institution has just released a study indicating that the
total cost incurred by the U.S. government since the Manhattan Project to
develop, build, deliver, clean up, etc, etc, nuclear weapons has been about
$4 trillion in current dollars. I suspect if that capital had been left in
the hands of those who created it, instead of flushed down what amounts to a
sewer, this country would now be further ahead of Japan in wealth and
technology than Japan is ahead of Vietnam. $4 trillion amounts to about
$16,000 for every man, woman, and child in the country-or around $50,000 per
household. And that's just the cost of nuclear weapons alone.
POST MORTEM
Of course, biochemical weapons are the way to fly in todays world. Anybody
with the capacity to brew beer can be a global power, and for a delivery
system, Fed Ex is far cheaper and more reliable than some clunky ICBM.
********************
Could it be the signal that the top is finally here? I was in Miami a
couple of weeks ago, riding in a cab with two other guys, talking the market
on the way back to the hotel. The cab driver volunteered that he, too, was
in the market, and had just bought some Planet Hollywood. The fact that a
cabby was in the market is significant itself. The fact that he was touting
us on a T-shirt shop cum hamburger emporium with a market cap of $3 billion
has got to be about the final nail in the market's coffin. I'm not sure how
many stores Planet Hollywood has, maybe about 30. That adds up to about
$100mm per store. I think I'll redouble my selling schedule. It's
reminiscent of 1987, when a masseur was telling me how he was going to take
a health club public.
POST MORTEM
Of course, as it turned out, it wasn't a sign of the top for the market.
But it was for Planet Hollywood, which filed for bankruptcy in xxxx.
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There are people around, rather incredibly, who don't like to have
inexpensive, cheerful, hardworking foreign people do things considered
beneath the dignity of spoiled native Americans. These, understandably,
include Pat Buchanan supporters, most of whom are barely in a position to
pay their rent, much less employ someone to do their house and garden work.
But it also includes Alan Simpson (R-WY) and Dianne Feinstein (D-CA),
backers of S.1394, The Immigrant Reform Act of 1996.
The bill would curb illegal immigration by giving every American an ID card
with biometric identifiers, including retina scan analysis, voice ID,
fingerprint, or the like.
Who says you don't get anything for your taxes?
POST MORTEM
That bill was, fortunately, quashed. But something like it will almost
surely get through someday soon. Other than peddling influence and getting
reelected, the entire focus of politicians is passing laws. And the essence
of law is taxation and regulation.
********************
Every time I see the chart of where the Federal Government spends its
money, I'm amazed.
Social Security is 21% of the U.S. budget, and with the population getting
older rapidly, this is going to grow. I know it's supposed to be
"untouchable", but it should be either totally privatized or better yet,
abolished, with its "assets" distributed to those over 50. It's a Ponzi
scheme that's devastating the poor and the young, creating intergenerational
warfare, and will bankrupt all concerned unless something dramatic is done.
"Other entitlements" are 31.8% of the total. These include Medicaid,
Medicare, and more "programs" than anyone can possibly keep track of. All of
these should be abolished post-haste. Not so much because they're reducing
the average American's standard of living now, or because they necessitate a
vast and intrusive bureaucracy, or because they'll bankrupt everyone. They
should be abolished because they have totally corrupted the poor and
minorities, cemented them to the bottom of society, destroyed the family
structure, and helped create a chronic crime wave.
"Defense" is 21.6% of the budget. Of course that's a complete misnomer,
since if any foreign government were to launch a massive nuclear or
biological attack on the U.S.-and there's no such power either in existence
or on the horizon that's capable of that feat-there is no "defense", only
the threat to destroy the people under that government's control. More than
likely, attacks will come from terror groups with no territory or real
identity. Meanwhile, the military goes a long way towards bankrupting the
U.S.-making it truly indefensible. And making scads of new foreign enemies,
who very well may attack America with backpack nukes or biochemical weapons
in response to the provocations of an expansive U.S. Government.
"Interest" is 14.4% of the budget, and this figure will inevitably rise
with each year's deficits. But it's artificially low at the moment, since
new government borrowing is at 6% or less, and mostly in the form of
T-Bills. With the cyclicality of all things, interest rates will double, or
more, in the future (although I'm loathe to attach a time to that
prediction). I feel no moral obligation to those who lent money to the
government; it's a matter between the two of them. And a pox on both their
houses.
Lastly we have the category of "general government" at a relatively trivial
11.3% of the budget. This, presumably, includes "essential services", like
tax collection and regulation. Perversely, the essence of government is the
very thing most sane people would like to get rid of first and foremost.
The conclusion I'm left with after this exercise is that the U.S.
Government serves absolutely no useful purpose. If you think I'm kidding, go
over the numbers again. It's a disgusting charade to see the so-called
"radicals" of the Republican Party dance around debating inconsequential
trivialities.
Let me again urge you to pick up a copy of Harry Browne's new book, "Why
Government Doesn't Work", from your bookstore. After you read it, you'll
probably want to send a thousand dollars to his campaign, and order a case
of the books for distribution to friends.
********************
You may not have heard that U.S. taxpayers, via the U.S. Government, will
pay $300,000 for each wage-earner and $150,000 for each non-wage-earner (a
total of $62 million) killed when the USS Vincennes shot down an Iranian
Airbus over the Persian Gulf in 1988. Most people won't give it a second
thought, even if they hear about it. You might ask a few questions, however:
Does it make any more sense for a U.S. warship to be in the Persian Gulf
than for an Iranian warship to be in the Gulf of Mexico? What would the
likely consequences of an Iranian warship shooting down a U.S. passenger
plane have been? Is this evidence that the U.S. military is really just a
more heavily armed version of the Post Office?
**********************
I visited the bank to get some cash a few days ago, and received a couple
of the new $100 bills. Notwithstanding some high-tech touches, I think they
look more like Monopoly money than the old ones. The change is more than
just a curiosity in the Third World, however.
Press reports indicate that the Iraqi government was quick to take
advantage of the confusion the new C-notes will inevitably cause for some
time to come. Newspapers there ran stories to the effect that the U.S.
government had canceled the old bills, which most people in the Third World
use for serious savings; an incredible 2/3 of U.S. currency circulates
outside this country's borders.
Before the black PR campaign in the Iraqi press, the dinar changed hands at
3,000 to the dollar; it's now in the 700-1 area, since citizens panicked to
dump dollars and buy dinars. The Iraqi government benefited hugely, as it
was able to garner millions and millions of dollars in exchange for its
funny money.
In theory, what a superb speculation it would have been to go long dinars,
in anticipation of such a coup. But it would have been impractical, since
there's no market for the things outside of Iraq, and money changing inside
the country is legal only at banks. This type of thing is bound to happen in
numerous other places around the world, at least in controlled economies or
out in the boondocks.
What's really amazing to me, however, is that governments that pull stunts
like the Iraqis did are able to consistently get away with it. It just shows
how ignorant of economics the average man is. That, and how when his
government takes advantage of him, he reacts like a whipped dog.
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