- Porter's Daily Journal
- Posts
- A 50-Year House Of Cards
America’s Mirage Of Prosperity Is About To Collapse
In today’s Daily Journal, a free e-letter from Porter & Co., we’ll explore:
A trip to Argentina… 70 years of economic collapse… From first to 72nd… U.S. follows this model… “Trump Checks” sent to buy votes… Venezuela’s oil world is “univestable”… An attack on Fed independence… AI wars continue… |
Over the holidays, I spent two weeks in Argentina with my wife, Shannon.
A little more than 100 years ago, it was the wealthiest country in the world. It then experienced an incredible decline. From the end of World War II until two years ago, Argentina saw an almost continuous decline into poverty. Its government promised the masses benefits it couldn’t possibly afford. And it started a war with Great Britain to delude and distract the masses.
Meanwhile… virtually all the wealth left the country. By 2023 Argentina was ranked 72 out of 197 countries in per capita GDP. From first place to 72nd . Same country. Same people. Same resources. Vastly different outcome.
One of the few remaining well-kept buildings in Buenos Aires
Once the Paris of the West, Buenos Aires now looks like a bombed-out hellscape. And as we traveled around the country – to Mendoza and Bariloche – we saw failing infrastructure and shocking levels of poverty.
My old friend, Eduardo Elzstain, hosted us for an afternoon at his spectacular farm in Patagonia. Now in his mid-60s, since his early 30s, Eduardo has been one of Argentina’s leading investors. In 1991, following yet another hyperinflationary collapse, Eduardo partnered with George Soros to re-build Eduardo’s grandfather’s commercial property company, Inversiones y Representaciones S.A. (NYSE: IRS). After launching a New York listed ADR in 1994 at $23 per share… the company now trades around $16.
Including dividends, IRSA (as it’s commonly called) has produced an annualized return of 2.34% since its IPO. It is very difficult to build wealth in a country that’s constantly destroying its economy with inflation. But compared to most assets in Argentina, Inversiones y Representaciones’s performance has been heroic.
The key? Long-term financing at fixed interest rates. If you know the currency you’re borrowing is going to collapse, then you want to borrow as much as you can. By the time you pay it back, it won’t be worth anything. Borrow dollars. Repay pennies.What’s changed about the company over the last few years is probably invisible to most investors. But I know these changes make it a vastly higher-quality business. I first described what was happening at Hovnanian back in 2022, when I wrote about the company in one the very first issues of my newsletter The Big Secret On Wall Street.