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The Daily Reckoning Weekend Edition Saturday, January 16, 2009 Taipei, Taiwan --------------------------------------------------------------- How "survival of the weakest" economics is bankrupting America, Traipsing the shores of one off-the-map investor paradise, Plus, all your weekday reckonings, the "Darwin Short offer" is on the table, and more... Joel Bowman, with a few words about evolution from Taipei, Taiwan... Nobody knows prices like Mr. Market. And that's precisely why the US government is so scared to subject him to any serious line of questioning...it's afraid of how bad the answers might be. But what's really to be scared of? Left to their own devices, there is little doubt that institutions like the nation's largest insurer and its flagship automakers would have already found their place in the corporate tar pit. But instead of letting these dinosaurs die in disgrace, DC greases up the paddles, cranks up the voltage on the world's largest defibrillator and goes to work trying to keep them alive. But to what end? We're told it's because they're "too big to fail." They need to be bailed out...stimulated...pumped full of adrenalin then made to walk in a straight line and touch their nose. Of course, all that medical attention costs money...and lots of it. And, since the government doesn't have any of its own, you get the bill. An army of semi-conscious, half-extinct financial sponges and a multi- trillion dollar tab to keep them all alive... Ain't that just what a struggling economy needs? The curious investor might ask whether that money couldn't be better spent somewhere else, by someone else, and for someone else. That same investor might see these lobbying leeches as a drag on the overall economy. He might even dare to wonder if, after all is said and done, they weren't simply "too stupid to succeed." The problem with impeding the natural selective processes of the marketplace is that you're always left in "survival of the weakest" mode. Corporations that don't have to answer to Mr. Market won't. Instead, they'll invent conjuring tricks like mark-to-model pricing and assorted other shenanigans...always safe in the knowledge that if judgment day ever comes, Uncle Sam will be their to change their bedpan. Here at The Daily Reckoning, we see things a little differently. Don't get us wrong, we relish the opportunity to mock corporate inefficiency and near-criminal idiocy in the boardroom. It makes our job as armchair commentators that much easier. Even so, we prefer to see a quick death...one that doesn't require tax-dollar sponsorship. That's why we've decided to relaunch the Daily Reckoning Financial Darwin Awards. It's our way of saying "thank you" to those companies that, through their own dedication to stupidity and an unwavering inability to adapt to the marketplace, have removed themselves permanently from the corporate gene pool. Incidentally, nominations for this year's prize are now open. We've received votes for an array of individual companies and, unsurprisingly, for just about every level of government bureaucracy you can imagine...from the US Postal Service to the "entire state of California." If you would like to nominate a freshly extinct company for our 2009 Daily Reckoning Financial Darwin Awards, simply drop us an email at 2009darwinawards@gmail.com And, to help celebrate the event, we're also running a $1, one-month trial to our most successful short selling research service. This service actually seeks to profit when dishonest, unprofitable and overleveraged companies are forced to fess up to losses. As you can imagine, these past couple of years have provided ample opportunity for Strategic Short Report readers to cash in on others' foolishness. And, according to editor Dan Amoss, this year is shaping up to be even bigger... You can check out the offer in this simple, single-page information sheet. Dan's research usually goes for about $1,500 per year so, as you've probably already guessed, we can't hold this offer open for long. That means first in, first served. (There's a "survival of the fittest" pun in there somewhere...but we won't belabor the point.) Details Here. --------------------------------------------------------------- And now over to Addison Wiggin, back in frosty Baltimore but wishing his toes were still in the sands of Nicaragua... First you find Managua, then Masaya, then Granada...going south, then you go to Rivas. Rivas is the state capital, in the state known also as Rivas. Rancho Santana, Agora's stake in the region, is the largest and, until recently, the only development in Rivas. There's a new one just next door that has been sponsored by Nicaragua's largest rum family. The lake to the east is cool, too. It's the largest lake in Central America and the 19th largest in the world...and the only lake that sports freshwater sharks. Various Agora people own property along the shoreline of the lake south of Granada. Granada was among the first settlements built by the Conquistadors when they came to the new world. It was built in 1524 and has been inhabited continuously since. We've been excited about Nicaragua since our trip down there over New Year's. Marc Brown, a surfer who's been living on the beach there for six years with his wife and two small children, clued me into another reason the area is a phenomenal destination: the wind. If you're a surfer, you want "offshore winds" - winds that blow outward from the land to the sea. Offshore winds hold the waves up longer and make the water smooth, so you can get a better ride. If you're in California, you get offshore winds in the morning from 5:30 AM or so until 10 AM or 11 AM. Then the wind shifts and the normal Westerlies take over...batting the waves down and making them choppy. You have to stop surfing before noon. The Pacific coastline in Nicaragua, however, benefits from the "trade winds" that blow east to west across the Caribbean. The same winds that blew the Spanish Conquistadors there 500 years ago. When the winds hit Nicaragua, they actually pick up speed...because of the giant lake that spreads across the interior of the land. Surfers get "offshore winds" all day long. They can party all night...and surf all day. And they do. Granted, you might not give a hoot about surfing. But here's why it makes Rancho Santana a unique place. Much of the humidity common to the region gets blown offshore with the wind, making the weather very attractive year round. The homes are at peak occupancy most of the year, rented by surfers. And...ironically, it's one of the world's top hot spots for wind-generated energy. Within a few years, and by the grace of the people of Nicaragua, the property should be self- sufficient and "off the grid." And still...there are very few investors who are even aware of the place. Fact is, the wind benefits - as unique and phenomenal as they are - are icing on the cake. You really have to be there to "get it". The outdoor lifestyle, fresh fish and fruits, stunning views... Another interesting tidbit about Nicaragua: The Spanish settled only the Pacific coast. The Caribbean side, even to this day, is inhabited by a tribal people known as the Miskitos, who are a mix of native American Indians, escaped slaves and British sailors who escaped their conscription on royal ships. The whole area east and northeast of the big lake are autonomous regions with hardly any towns, cities or government. Weird, eh? So, "Is it safe?" That's the first question anyone you talk to about Nicaragua asks. Old news stories containing names like Sandinistas, Contras and Ollie North come to mind for most. "Wasn't there some scandal with guns and the Iranians?" one asks, visions of civil war and death squads dancing around in their heads. "Si, si, si," our driver Damien, a native of Granada, informed us, "but that was my father's generation." The current generation of 20- and 30- something Nicaraguans are much like those in Baltimore, Dubai or Bombay. They're up on communications technology...and want to use it to make their lives better. Damien was born in Managua, educated in Guatemala and now runs the concierge service for Rancho Santana. But his family owns an Internet cafe and he's saving money to start his own networking business. The true benefit of the "information age" is that a guy like your editor can set up shop in a low-cost, low-tax joint with world-class surfing waves (like Rancho Santana) and still keep his life together. Heh. "So what about the Sandinistas?" They did overthrow the US-backed dictator Anastasio Somoza in 1979. But at the time, the Somoza family owned everything in the country...the media, education system, means of production for the country's export crops of plantains, coffee, almonds, rum...leaving anyone without "connections" living hand to mouth off the land. Today, you see a myriad of little businesses and small distribution outfits for all manner of goods and services. After the revolution, the Sandinistas restored the republic and they've been holding elections ever since. Now, according to Interpol (the international police), Nicaragua is "the least violent country in Central America and one of the safest in the entire hemisphere"...including the United Sates. "After 17 years as a free market country," a list of the greatest travel destinations for 2010 published by Scotsman.com echoes, "Nicaragua's economy is growing and according to the Inter-American Institute of Human Rights, it's the safest country in Central America, with a reported crime rate lower than that of Germany, France and the US." In 2007, Daniel Ortega, the strongman behind the Sandinista movement, won the presidency again...but this time around, he's invested in hotels along the coastline and arranged the state to help promote retirement living for aging boomers in the US. The director of sales here at the ranch spent 10 days in Las Vegas this past October, half of it by request of the Nicaraguan government, which had sponsored a booth at the annual AARP convention. In a very real sense, the opportunity to invest down there is a reflection of the investment strategy we use when looking for beaten- down stocks. The hangover from bad press in the '70s and '80s (mostly because the US government lost its insurgent conflict there) has depressed prices for world-class real estate along the coast. I've arranged to lead a group of Reserve members down to check it out themselves for a "chill weekend" March 24-28, 2010. If you're interested in learning more, please take a look at the Web site and contact Marc Brown (marcb@ranchosantana.com). We'll have room for only about 20 people...so you'll probably have to lock your spot in this weekend. Regards, Addison Wiggin for The Daily Reckoning --------------------------------------------------------------- ALSO THIS WEEK in The Daily Reckoning... Time to Invest in China... A Little By Chris Mayer Gaithersburg, Maryland Anthony Bolton may be Britain's greatest investor. He ran the Fidelity Special Situations Fund from 1979 until his retirement in 2007. Over that 28-year span, the fund earned nearly 20% annually, thoroughly beating the market average of 13% over that time. The Biggest Financial Deception of the Decade By Jeff Clark Stowe, Vermont Enron? Bear Stearns? Bernie Madoff? They're all big stories about big losses and have hurt a lot of employees and investors. But none come close to getting my vote for the decade's most dastardly deception... The Future of Silver Investing By James Turk Silver jumped out of the gate to begin 2010 with a flying start. It climbed a remarkable 9.7% in this year's first week of trading to end the week at $18.45. From its $8.79 low barely fourteen months ago after the de-leveraging and mass liquidation of assets resulting from the Lehman Brothers collapse, silver has climbed an astounding 110%. But the upside fireworks have hardly begun. The End of Extend and Pretend By Dan Amoss Jacobus, Pennsylvania Attention REIT investors! The commercial real estate is a disaster-in- the-making - both for property investors and for the thousands of American banks that are carrying outsized exposure to commercial borrowers. The Fallacy of the Fallacy of Composition By Bill Bonner Baltimore, Maryland No unarmed profession has done as much harm as economists. Recently, Yukio Hatoyama, the new Japanese Prime Minister, proved it again...revealing a budget deficit that must have made Paul Krugman drool. The Japanese government will spend 92.3 trillion yen next year, about 1 trillion dollars. Tax receipts will be enough to cover only half that amount, leaving the nation with the biggest shortfall since WWII. --------------------------------------------------------------- The Weekly Endnote: We've run a bit over length for our wee Weekend Edition, so we'll have to leave it there for now. Don't forget to cast your nomination for this year's Financial Darwin Awards and, if you're nimble, to take advantage of our special Darwin Short $1 Offer. There's a good chance it'll be closed by the time the results are announced... Until next time... Cheers, Joel Bowman Managing Editor, The Daily Reckoning   The Daily Reckoning - Special Reports: The US Trade Deficit: Fort Sumter...And The U.S. Trade Deficit US Recession: By far the Weakest Recovery "THE GREAT AMERICAN RECOVERY RP-OFF" Brace yourself for what's about to go down as the BIGGEST