YANKEE HOBO IN THE WORLD EMERGING MARKETS
Bo Keeley 6-02
“Gentlemen, there are two things you should know about the American company
Around me, the Korean eyes narrow; in India they had opened with curiosity, in
Philippines they had sparkled… And on, for nine emerging markets worldwide.
“The Niederhoffer Fund is known for its unorthodoxy, and its success.”
At this, I plop the arsenal of company clippings onto the shiny conference table
and breath easier as their eyes trail from mine to those. “Shoeless trader,” “Sly
like a fox,” “Niederhoffer voodoo, it works.”
In the past three months, I‟ve visited the exchanges, brokers, banks and streets
in Pakistan, Sri Lanka, India, Egypt, Philippines, Indonesia, Thailand, Turkey and
S. Korea. The purpose in each is to feel the pulse of the economy, identify
indicators for an investment edge, and make contacts to utilize that edge. The
knot of the tie loosens in each succeeding place as I get the hang of appraisal.
The emerging markets in „97 are multiple multi-trillion dollar ventures that control
half the world, with the juiciest cuts in the Mid-east and Southeast Asia. The
progress of the Pacific Rim countries, collapse of the Soviet Union, world
westernization, and expanding market-driven economics have swung the flood
gates. “Whenever I make big money in a country, Victor Niederhoffer, wrote in
his autobiography Education of a Speculator before the onset of this trip, “I take
out a map and look for the countries that are the nearest… I have a big Rand
McNally map posted in my trading room, and I frequently consult it in this regard.”
From „93 to ‟96, his firm had a compound annual rate of return of about 40%. In
‟95 and ‟96, Niederhoffer was the #1 commodities trader in America. My return
‟96 appearance on his doorstep after four years globe-trotting was timely. “Doc,
I‟d like you to go to the Mid-east to make contacts. Then go to Southeast Asia.
I‟m going to invest there too. Live the high life and look at the lower indictors.”
The motive soon bared at a Jacuzzi chat on Niederhoffer‟s patio one midnight
between his trades and my autobiography chapters. I questioned his
abandoning a secure position as reigning champ of the American market to enter
unknown territory. He put chin to knee and stared at the bubbles a moment, then
said he‟d give an answer later. In two days, a secretary delivered a standard
The best fish often swim deepest, the savvy investor knows that the best opportunities often lie
beyond the reach of the average. With wealth in his dreams, he turns his attention to investment
around the world, not just in his home country. The emerging markets, those countries with
common stock widely available to the public for say 30 years or less, provide ideal picking in this
regard. The 30 countries considered to be emerging markets in 1996 are listed on attached Table
1. Together their stock holdings total more than $1.2 trillion as of year end 1996.
We are decided to set off to these countries with a view to finding out which are going to be the
stars and dogs. But the fact is too we have to see the commonplace, everyday things that people
are doing, to concentrate on the common people in their normal activities. $1.2 trillion is about the
total market of all US securities in 1987 which in the subsequent ten years have ballooned to about
$6 trillion. So, in aggregate the total emerging market represents the most opportunity, and a
“Emerging market trends in Asia” observes the Daily News (2-28-‟97) and lists
hotspots Indonesia, Thailand, Singapore, and Philippines before I spring into
tour. We toss in five Mid-east picks from the mentioned Table to comprise the
full nine-country swing. Each is characterized by strong economic growth
supported by recent market liberalization. History repeatedly shows wealth
waiting in far-off places where some dare travel for money and others for
adventure. Niederhoffer investors rub their hands, as do I at the awaiting bank of
experiences. This will be the ultimate working vacation.
This is the adventure version of a global business trail from the original nine 30-
page reports written and expressed from each country to Niederhoffer that
accumulated into a fat Yankee Hobo binder that stands in his library. The
voyage includes: Introduction, Country Stops, Impact, 50 Things I Learned, and
Broker Questions. Abbreviations are: NiedCo for Niederhoffer and Company, LI
for lower indicators which are italicized, and $M for USA millions of dollars.
Businesses are correctly named, but the individuals are changed for privacy.
The author, NiedCo and publisher guarantee neither accuracy nor the readers‟
wallets, though I‟ve an exacting eye.
Preface: My previous visit as a tourist a decade ago to this country found me
lost in the 33-mile Khyber Pass on a muddy mountain track with camels and men
in sheet-like outfits. Suddenly a uniformed figure tapped me on the shoulder and
motioned me the other way. I‟m led to an adobe hut with the Pakistani emblem
on the door where an interpreter is found. “Mr. American, why do you pass from
Pakistan to Afghanistan,” the circle of smiling immigration officials look in wonder.
“Don‟t you like our country?” It was unintended of course, and gratefully they had
no computers to input my illegal exit, otherwise I might not be back for this
emerging market visit.
The exchange is like a circus. There‟s a ring 20-yards in diameter with 100 men
gesticulating wildly and yelling, then two smaller, less active rings. Trading is by
outcry, then handwritten orders pass hands between traders who rush them to a
clearing desk for recording. Each trader has a radio to contact broker offices
above the rings. Skyward still, a circular viewing gallery spills over with
screaming observers. I‟m told that below and above it‟s “usually civil” with only
spitting and a few weekly fistfights. One recent year, for the first time in history, a
female tried the big ring where there‟s much pressing, and the same morning
retired to a remote office. Make a note to send wife Susan Niederhoffer, the first
NY pit lady trader, without delay to put them in place. The Karachi version of the
„big board‟ is under installation above the center ring at this instant. It‟s 3 X 5
meters with wires sticking out like spaghetti, but the board should be complete in
six months to electronically handle 90% of the floor trades via computer. Today
is a moment in history to witness.
Here‟s the step-by-steps of a trade till the board‟s done: Client Niederhoffer
phones the broker with a trade, and backs it by fax. Confirmation is while waiting
on the phone as the trade is transmitted via walkie-talkie to and from the floor,
with fax support. Then client wires dollars to the custodian bank, from which the
broker draws the trade amount. Settlement is Mondays, so money should be in
the account by Sunday night.
A brokerage office at the exchange, a requisite for trading, costs $1M. This is a
strong commitment, more so as it cannot be sold. My tour here was arranged by
MNS Brokers with a prestigious office location above the big ring. 700
companies are traded at the exchange where the hours are 1000 to 1430 hr.
Sun. - Thur. The other exchanges are in the cities of Lahore (200 companies
traded) and Islamabad (100 companies).
The four are MNS Brokers, KASB Brokers, Crosby Securities and JSBS
I‟m first whisked to MNS Brokers, likely to highlight them by my guide and his
father, the latter who‟s entwined. I meet the owner, chairman, department heads
and main researcher –find the cards attached to the literature. They court me
more richly than any other firms, hopping to my smallest need often before I
anticipate it. All on their side have hungry looks of traders with singular eyesight
The house is young since ‟95 and small compared to the three others. They
claim to provide more personalized service and to be a major source of Nastaba,
my guide‟s, radar-like market intuition. They‟re less knowledgeable than the
other firms, but “What we don‟t know, we find out quickly.” There are repeated
examples via immediate phone calls with solutions.
The meetings are at the downtown Karachi office, medium size with five rooms, a
few modern computers and team of five. However, their office at the exchange is
impressive, occupying 50% more space than most others and staffed by three
traders and a dozen clerks. They‟re all men, and it‟s seen the 10%
businesswomen workforce in this Islamic nation is at menial jobs. I jot on the
business cards (and shall continue in each country) who speaks English, a grave
consideration in a flurry of trading activity.
The main exchange trader, Irfa, is most often called by others for detailed
answers. A couple other voices deserve mention before diving into the material.
Solda, the vice-chair is a wealthy, mid-twenties merchant of jewelry, mainly
watches. He runs the family business having branches throughout the country
with 300 employees. He‟s traveled, sophisticated, business-headed, good
English, and unctuous. I don‟t like dealing with him personally but would not
hesitate to do so in business. On the other hand, chairman Grona is the most
delightful charismatic I‟ve met on tour. Fifty-ish and hard driving, some call him
the true founding father of Pakistan because of efforts in industry, politics, and
customs, the last which he headed. He was secretary of commerce, then
communications. I ask him why he shifts from positions, and he shyly replies it
was luck that let him into the first government job, and after a year‟s hard work
“those who be” decided to give his „magic‟ a try in another job, then another... He
“cleaned up customs”, gave “jaws” to the steel industry, wrote poetry books and
so the stories go. I suppose one day he‟ll be an inspirational hero in history
books, if not already. His extensive contacts ease many a bureaucratic bump in
this nation of deserts and mountains, and are worth heavy regard.
Inquiries answered: The house has offices throughout Pakistan. Commissions
appear to run equal among brokers, 1% in and out, reduced to .6% on big trades;
and fast turnarounds of a week or less enjoy just the in-fee. No custodian is
required but one‟s counseled, and they‟ll set it up. The bank account can be in
dollars or rupees and may zero between trades. Opening with the enclosed
forms is simple and after a week‟s processing the first trade‟s made. Closing and
cashing out in dollars is as straightforward, takes a day and any amount of
dollars may be taken from the country per any instructions. Importantly, taxes on
profits are zero for a non-corporate investor, and here‟s where a firm‟s contacts
come to play. Otherwise, the corporate tax is 30%. There‟s no difficulty in
executing Niedco trades in the style of speed and high volume. There‟s no
margin trading or short selling by foreigners. This company has no foreign
investors presently, but wants them. Their impression of the market is it‟s at
„rock bottom‟ now. The national budget is clarified in 120 days, after which they
expect a steady rise. They can suggest specific stocks at that time.
The second broker is KASB. I sit in the firm‟s open and currently equipped
building and interview just the top man, Nasif. His English is good and body
language better as he motions to the ornate chess set you view on their brochure
cover. I offer as an opener, “Speculation and chess have many angles and
parallels.” He travels to NY often, so I‟ve invited him to stop by our shop, and
he‟s given an advance gift of a hardcover of Pakistan‟s history.
One of the oldest Karachi houses, Nasif‟s father founded it forty years ago, and
for the past three years running it ranks #1in the country. It hosts many foreign
clients the world over. Their methodology includes intra-day data and, knowing
our fondness, they‟ve sent samples. Nasif‟s historical review of the market is
maintains a level until there‟s a “shake”, and the next is in a few months when the
government finalizes the budget. “The hopes of the people balance on these
shakes, and the hopes are what drive the market.”
I call on Crosby Securities third. Where the first house was young, small and
local, the second old, large and local, Crosby is a giant spanning the globe.
Before the Yankee tour initiated, Crosby in NY set a meeting with the “big three
guys” at Crosby Karachi. They court me in the corporate offices and at meals.
The facilities are medium-size and modern, and the men are of assorted ancestry
who‟ve studied in England or America. They‟re dapper and slick, proud of their
They stress being with the biggest on the block is good, and graciously offer the
entire data bank of their “renown” research division. Account opening, trade
steps, commissions, etc. follow suit to the other brokers. New information is 25
of the 750 exchange stocks are of sufficient volume and liquidity for our trades.
Soon the interviewees become inquisitive; I swell that such a giant should stand
at attention to Niedco‟s reputation and that my “Head of emerging markets” card
prompts them to quiz me on the relationship between classical music and price
patterns. I think the three would go to work for our company at the drop of a hat.
Crosby is a natural choice and I find not a fault during our two days together.
The fourth broker is JSBS, until recently associated with Bear Stern. The
manager of equity sales and I chat amenably for an hour in the downtown office
which is, like the rest, is modern and well-supported by computers. The roll of
the Q & A‟s is familiar. This firm has an average daily volume of 18M shares for
$25M and deals high speed, large volume transactions with ease since it need
not enlist other brokers to meet sizeable orders. Many of their clients are Middle-
eastern desiring trade scenarios similar to ours. He offers to contact us instantly
with few-minute window trades. “I can create a market psychology because we
are a big firm”, he asserts.
There are three custodian banks but I attend only Standard Charter. (The
others are Deutshbank and Citibank.) The initial vault tour reveals a tiny mine,
but the manager escorts me across the street to the new site under construction
and due to open in two months. It‟s princely, and the certificates of ownership
will be stored on high shelves or in cabinets laid in rows inside steel walls. The
procedure for using the bank on a trade is: Niedco notifies the bank usually by
wire to release funds to a broker about to make a trade. The client may maintain
funds in dollars or rupees or sends them by settlement day, Monday. The
advantage to using local currency is the Exchange rules don‟t require registration
of shares, but with foreign money they do. Registration lengthens turn-around
time, a short-termer spoil. This bank is favored by foreign accounts, the manager
is thorough and cordial, and they are the main custodian candidate.
Some priceless engagements match athletic peak experiences. Burning the
midnight oil with Nastaba produces material to share delicately except the
following. Foremost, the sessions are fruitful because he's an astute, energetic
businessman from handling the considerable family textile industry. Such an
extended family business is an oft-missed joy these dys. The cohesive goal is
family honor followed by money, from sweeper to apprentices through executives
about town and nation, each doing his job as did the preceding generation, and
shrinking back to the founder, a great-times-X grandfather. Nistabe, the head, is
busy as a bull at fly time hence the late meetings. Now 28, he took honors in the
Pakistan math Olympics before continuing college in America, after returning to
the family business. He‟s our ideal inside advance man and comes to NYC so
I‟ve arranged a visit at Niedco.
The six brokers I visited and Nastaba uses are the biggest of Karachi‟s 100. He
supplements facts for the foreign investor in Pakistan. "Sometimes there‟s no
formal agreement beyond a verbal one between broker and client. The
reputation of the broker is his future. This is what keeps everyone in line." Intra-
day trades of $1M create slight market ripples, but a $2M one causes a tidal
wave. There's no margin trading but it's possible to get a rupee loan against an
existing account to finance trading, or to carry a stock past settlement date and
roll it over for a month. A custodian bank stores certificates, does back office
work and pays 6.2% interest on dollar deposits. Repatriation of funds is free with
no maximum. A common 'parallel' market may be used to change rupees to
dollars or back at an unofficial rate with a 3% advantage. I'm familiar with the
“black market” used by tourists in dozens of countries, but what happens here
with big bucks is grander. A security van is hired at the cost of $100 per trip.
The van picks up the customer's rupees at the bank and transports them '"
essentially risk free" to the unofficial changer, then returns with dollars to the
bank. Big changers can convert $1M per day. One sees these security vans
performing daily on Karachi‟s streets. Another accepted method is to hire a
person to physically carry back and forth ten lots of $100,000 to reach a $1M
total in 24 hours. Finally, there's a special group that transports any amount of
any currency to any doorstep of the world "virtually risk free" for a fee of about
2%. As for buying into local companies, he asserts textiles is the largest sector
for bad debt so is greatly undervalued at present, and he will place management
if desired. Nastaba is a valuable tool If Niedco enters Pakistan.
A 30-minute meeting with Hawn, head of UBL is another honor. I was advised
ahead of time to shave to meet the #2 man in this powerful bank. He‟s older with
a spry step and eyes that twinkle when he says, “Please have Mr. Niederhoffer
contact me before he invests in this country.” The bank itself is for sale if you‟re
interested, and note my interview is not for custodian but for angled business
opportunities. This is the second bank ever that the government has authorized
for private sale, and with 2000 branches worldwide it isn‟t as though the owner
would stand out. A price tag of $17M is said to be a bargain since the
government needs money. The other option discussed is attractive and supports
Nastaba‟s offer. Textile operations are a good buy from now through six months,
and Hawn has the contacts. There are typically three divisions per site:
spinning, weaving and dying. A crisis that soon should be relieved is putting
holes in the industry, and companies are for open sale or investment. A good-
sized one may cost $10-20M. No license is required, no hindrance to the
foreigner, taxes run about 35%, and the expected rate of return is around 90%.
“It‟s a safe investment one can make a killing on,” he remarks. He explains the
economic fate of the nation depends on foreign investor activity. With more, the
government will be strong in the coming two years and the economy will rocket;
with less it will fall. Hawn, Nastaba and the brokers all wear serious faces when
discussing business reminding of the Arab proverb “Live together like brothers
and do business together like strangers.”
Malcontent citizens hike the streets of Karachi. Militia and armed guards are
everywhere balanced, I‟m told, by each household with a gun. This circumstance
married to the people‟s durable intelligence - one can build a wrestling or chess
team with a saunter around a city block - foretells troubled times. Consider before
investing that these folks won‟t stay pinned under a thumb long without
Recall the “lower indicators” were conceived at jacuzzi chess after I toppled the
king, pulled aside the board spanning the pool and told Niederhoffer about
American hobos and the Wall Street Journal. “The way to tell a tramp from a
hobo is both stuff the paper under their clothes for insulation, but hobos read it
first. The fewer Wall Street Journals in boxcars and freight yard, the lower the
unemployment and better the times.” Years and hundreds of LI‟s later, I like
Niederhoffer quoting Moby Dick where Herman Melville talks about sailors
getting the fresher air than the captain because they get it first; and they know
what‟s happening by the time it gets wafted about the ship to the helmsman. Yet,
lower indicators are small threads of the whole sail.
The single clipping of you holding the world champ squash racket is worth five
pounds announcing Niedco as the best American trader here where the sport‟s
the Pakistan businessmen‟s choice. The aims to investigate and make contacts
in the emerging market are complete. The meetings include four brokers, a
custodian, an international banker, and frequent insightful visits to the exchange.
The market businessmen have integrity stamped on their foreheads, and seem to
be community pillars. Our guide rises above the rest. He assures the reliability
of a „merchant network‟ that covertly achieves financial scenarios we can take up
in private. Capitalism, he says, should seed well here, so I advise jump starting
entrepreneurs as we tried in South America except using Nastaba to key
prospects. But wait
The lower indicators conflict: Honesty is positive, bullets are negative, optimism
is positive, discontent is negative, unofficial channels help, yet ill-advised to the
fat greenhorn. Enter warily. One large broker reports that local houses “run up
the books” to lower commissions and, without batting an eye, offers that their firm
does a little of the same and that it‟s widely accepted. It seems brokers see a
foreign investor take a large position, and also take it to keep the commission
down. “It should be figured as a tiny fixed operating cost of about .5%.”
Broker choice is more clear-cut: I like MNS for the shape of reasons above.
KASB is next with strengths of rank, experience, and class. Crosby and JSBS
are nearly as competent. You can use some or all four with one custody bank.
Timing is easy: Look at Pakistan in three months when the budget‟s clarified,
then pause two months for completion of the Exchange board with computerized
trading. Consider delaying an additional period until the guns are replaced by
smiles on the streets.
Preface: I survey every bulky person. A suicide pedestrian strapped with bombs
blew up the fish market. What am I doing here?
I enter, after a requisite frisk in these troubled times, into a fifty-yard square floor
scattered with fifteen manned terminals, one for each broker in the country.
There‟s a chalkboard as long on one side divided into industries such as tea and
minerals, with a writer of bids and sells who‟s fat magic marker lays idle. The
gallery is an elevated ghost walkway. But wait! Every ten minutes there‟s a
screech of voices on the floor and the magic marker flies to confirm a trade.
The process begins when Niedco calls an order to our Sri Lankan broker who
phones it to the floor broker, who writes it on a buy slip while yelling the price.
The chalkboard man puts it up, and the wait period begins for the offer to be met,
and when it does the board‟s erased. The floor broker phones his outside firm
who calls Niedco to confirm, then official confirmation comes by fax in the
evening after the exchange sends the printed order to the broker. The total
market volume peaked at $24M daily in ‟93, and has held steady at $5M for the
past year. The exchange personnel are sharp and optimistic, pointing around the
The electronic big board will be installed in two weeks, followed by direct
computer link from the brokers to exchange floor. The big board now rests in a
corner of the trading floor, and the freshly uncrated direct-link computers sit on
the floor brokers‟ desks next to the older ones in present use. When everything‟s
hooked up and the switch is thrown, it‟s said the volume should jump. This
moment is to be seen in countries along the world tour, and it would be prudent
to quantify the market moves proceeding, during, and shortly after instating the
modern technology. Establishing the pattern of a few forms a model and edge
for investing in the next.
The brokers are John Keelis Holdings, C.T. Smith Stockbrokers, CDIC,
Somerstill Brokers, and Bartleet Mallory Ltd.
I‟m greeted at the fence surrounding John Keelis Holdings by Diam and Suran,
traders and our contacts, and learn they‟re competent with good English by the
time we walk to the main building. The brokerage is part of a sprawling
conglomerate, largest in the country, with divisions in luxury hotels, tea
plantations, etc. Two securities floors are divided into employee cubicles where
the staff is 36, halved from the „golden era” of „93. Young, quick-eyed traders at
modern computers take me in at a sweep and pause, for alas there‟s not much
cooking in the kitchen. When the market soared there were smiles and money
on all, but all slumped badly three years ago and now they‟re stuck. These
surviving traders are the best by evolution, twenties and crew cut, eager for
sweets once tasted.
The answers to our stock questionnaire come via a dozen meetings with the
managing director and various specialists throughout the day. Keels Holdings is
#1 among the 96 brokers and holds 19% of the market and 24% of foreign
trading by dollar volume. The standard commission fixed by the exchange of
1.5% on the in and out slides to 1% minimum for trades of $.25M. “There are
other advantages given the diversity of the company,” and they display a photo
gallery of extravagant hotels. There are no other costs except the custodian
bank fee. No leverage, but a stock may secure other trading. Settlement is T+5
buy and T+7 sell. No special restrictions to foreigners, no capital gains tax, and
the only tax is 15% on dividends. T-bills are traded but disallowed to foreigners,
and there‟s no bond market.
Let‟s cut to the chase here. A rebel group holds the north jungle of this island
and recently occupied the main city there. The government just days ago
recaptured the northern city under a hail of bullets, and the rebels retreated into
the jungle. Remember, this island‟s radius is about 100 miles. “It‟s become a
„people‟s war‟ because no one can tell the white from the black hats any more.
People from the cities and bush jump to one side or the other, get arms and start
shooting.” Once a week, a tag of the rebel group of 3000 pops from the jungle
for a firefight or bombing here in Colombo. “Walking suicide bombers” blew up
the Colombo train station and a couple government buildings. Construction has
shut down except cleaning the rubble, shops have closed doors, and the city‟s at
a standstill though citizens venture outdoors. Quickly noted, the government has
amassed an army of 250,000 troops that sifts the northern jungles even as I
write. Yet people in this firm and on the streets still smile, for it seems their
“The standard of living here is good, and an even better quality of living. People
are generally happy.” Inflation is 15%, averaged 9% over the past 5 years, and
should drop next year. “The government has shifted funds from the economy to
the armed forces and soon shall quash the rebellion,” I‟m told.
C.T. Smith Stockbrokers is in a huge, handsome building where the décor
speaks of business a century-and-half ago. I‟ve been evaluating, with deference,
an older secretary indicator for decades, recalling the string at Niedco. The
higher the value the more qualified outfit. The reasons are many, from greater
competence to a higher reflection on the hiring boss, to lessened distraction for
male traders. Niederhoffer recalls in the early company years disallowing
females in the office during trading hours, and later clamping down less hard on
his wife Susan, the first female Comex trader. The secretaries appear old as the
carpet from aforementioned days, to house credit, and indeed the brokering staff
of 25 runs gray. The manner, answers and English during two hours of meetings
with the heads in sales, research and trades are impeccable.
This house flung open doors in the ‟91 modern era, and in the ‟93 hit year did
$1M volume daily, and in ‟96 were the top firm. They now hold 75% of the
country‟s foreign accounts by number rather than by dollar volume. The
responses to our standard questions match the earlier broker and aren‟t restated.
Their answers throughout are precise with body language indicating honesty.
“The big „road shows‟ to gather foreign clients in ‟93 were royal, for things were
going through the roof,” the research manager reminisces. “Nowadays, the
market‟s in the basement and there are no road shows.” They want our
business. The market bio is: ‟91 – Market opens as it‟s known now in the
„modern era‟; ‟92 – Performance is strong with an average daily volume of $7M;
‟93 - Best performing market in the world; ‟94 – The big decline from the
previous year‟s growth of 74%; ‟95 – A flattening of the decline defining rock
bottom; „96 – The market climbs a fraction of it‟s potential and holds steady; ‟97
– It‟s as flat as all get-out.
Their future and our insert? Watch the March national election, and an April
mandate put to the citizens regarding the Tiger war. It‟s said the government‟s
generous offer will cause the rebels to throw down their arms and unify the
nation. I‟ve heard the mandate will pass, the country‟s fortune will turn, and this
will be a nest in which to invest.
The city center has every big broker within ten minutes taxi from each other.
CDIC is in a tall, bank building with one floor for securities. The space is
sectioned into trading, research and accounting. The staff of 30 is equally
divided and westernized. They‟re young, attended USA colleges, and chomp at
the bit. They‟ve prepared for me, having reviewed our package and sporting Salt
Lake City and Bloomington, Indiana shirts. Find the cards of the bigwigs
interviewed, and now some of their responses.
I‟m seated to tea and a computer slide show of the market, then we delve into
our concerns. Where other brokers delivered generalities, CDIC answer
specifics. “For the first time in fifty years, the monsoons do not come to Sri
Lanka. There‟s no water to run the dam generators, nor to water the crops.
Here, even in the business part of town, there were recent daily blackouts lasting
six hours for a month. Exports were not met. People did not eat.” On the
rebellion: “The weekly city bombings are hard to control because, instead of jets
that can be shot down, the carriers are people like any other except they strap on
explosives and walk into key buildings or crowded places, then ignite.” Is it a
wonder those who can afford it move to another country?
This house commands 5% of the total market share, and 13% of the foreign
share. We know from other brokers that commissions are fixed and slide from
1.5 – 1% based on trade size. The “rebate” loophole is interesting. If X and Y
are different American funds who decide to pool invest under one name (let‟s say
X) in a issue, not only does the commission likely drop to the minimum 1%, also
the Sri Lanka broker handling the trade rewards the “official” investor for bringing
aboard the other. This rebate is then split among X and Y. Nifty.
There are 15 brokers in Colombo, six have foreign clients and I‟m interviewing all
but one. These five are on an onerous treadmill that breaks them even, only
because foreigners input a few substantial trades daily. Their future read is for a
quick, short market move after the March election, an amplified one in the dust of
the April mandate, a spurt if the regular June monsoons arrive this year, and
following that a sustained 2% climb by the time Santa comes. No one argues
that the Sri Lanka market is a dormant volcano waiting to erupt, so hook up your
seismograph to broker comments, to my LI‟‟s and stay tuned to the weather
reports. This firm earns 5-stars for preparation, knowledge, detail, honor and
polish, and is a top choice.
Every itinerary has a fizzle and Somerstill Brokers is it. I‟m met at the door by
our contact and am forbid entry beyond the public guest room. They have no
business cards. Do they have foreign investors? “No. Well, maybe one.” I
shake hands and leave. It‟s the only curdled meeting to date.
Bartleet Mallory Ltd. Is in the financial district near the city center. A rule of
thumb is that the top, older, respected firms are found here in the center,
whereas the local and newcomers often shack up in the residential area where
rent‟s cheaper, per the last broker. This applies to various businesses and many
The firm occupies the second floor of what appears to have been a huge
warehouse, now tastefully decorated with new computers and a workforce of 45,
nearly all male. They lack the sophistication of other houses, but drive hard and
speak good English. This is the country‟s #5 broker, with a strong base in local
investors. They have only a couple foreign clients but seek to expand and prize
Niedco. “We will give you enormous personal attention.”
Where am I? Solely in working for Niedco do I find myself handing out business
cards at a national badminton tournament. One of the Bartleet traders is the
national coach and that‟s how latter in the day I find myself in the front row of the
tournament. Another trader next to me wants to teach Niederhoffer (former
world squash champ) about the Sri Lankan market and squash. He‟s the
reigning and 5-time national squash champ. Niederhoffer remarked two decades
ago when I started, “You can train a national champ to become a strong trader,
but not the opposite. The discipline, drive, organization, strategy and follow
through that make a champ prepare you to trade.” Hence the athlete:employee
ratio, and weigh heavily the number of elite athletes within a selected house.
Niedco‟s has included reps from squash, paddleball, racketball, basketball and
Hong Kong Bank, located n the same building as the exchange, is the largest
custodian, first choice of foreigners, and the only one I visit. A custodian is
required and the account is at the bank rather than broker. It‟s easily opened in
dollars with an average interest of 6.5%, and upon a trade money is converted to
local currency at the normal rate. The fee is outlined in the literature, with our
contact‟s card. He, sober and overworked, exclaims at my mirror-image notes
and demands a writing lesson. The transfer is by Swift.
You have the option of hiring Walldock Mackenzi as an investment advisor, and
Keels says it‟s a matter of personal taste though the Mackenzi office location
within the Keel fenced compound is suggestive. The representative says that
when the country gets its feet again, there will be venture capital opportunities
and the government welcomes them with little restriction. He confirms what I‟ve
heard from others about the economy, and this country currently ranks #1 for
people deserting the island to find new lives elsewhere.
Streets working hard with traffic and citizens provide impromptu meetings. A
voice booms on my evening indicator walk, “Mister, don‟t go down that street
because it dead ends at the bombed corner.” Surprised to hear English, I wheel
and behold a slender, excited man with sincere facial lines and a limp who has
just risen from sleeping on the steps of a federal building. He points to the corner
and smiles, “The rubble and glass is up to my knees. Beware of the „tiger‟ in the
city!” I‟ve found my guide for tonight‟s LI‟s. “The Tiger rebel group,” he states, “is
taking the fight to the government on it‟s own ground.” The moon rises as we
walk and he explains, “The poor and normal people in this country are unhappy
with the government because so many, like me, are out of work and thrown out
into the streets because there‟s no money for rent. I can‟t even buy rice for my
family, unless I beg,” and he spits into the gutter. “The government funds the
troops at a cost to the country welfare. Watch where you step!” and I slalom
debris from an explosion.
Two hours later, I tip him for the educational tour, and we separate. We‟ve
passed a bombed building every twenty minutes – Bank of Ceylon, various
shops, the fish market. Who does one believe: The brokers who say the quality
of life is good, or the man on the street? Who does one support with his heart:
The government crushing the “Tiger” people, or those rebels? I turn a couple
corners until satisfied the man hasn‟t followed, then enter the Grand Oriental
Hotel. After calculating the chances of my bed blowing up are 1 in 10,000, I
Over a breakfast plate and through the window is a panorama of Colombo‟s port,
where dock cranes for cargo ship hang idle. When they start lifting, start
investing. I walk new parts of the city before the morning meetings. Many of the
buildings are 150 years old rendering a British colonial ambience. The people
are friendly as if the next passerby couldn‟t be dressed in explosives, and
fortunately the prevailing body type is thin, so I give others wide berth and avoid
crowds which are targeted. Their body type predisposes them also to work, to be
driven to keep busy and thinking; they become antsy when unoccupied, like last
night‟s escort. This shows in a high literacy rate, and they read in free time on
the corners or buses, though the national print appears to me as spaghetti
thrown against a sheet. English is widely spoken and I suspect a solid
educational system of ready students. I like this place, and one day may bicycle
the island perimeter to learn more of it. I propose this is an opportune spot for
seeding capitalism as we‟ve tried elsewhere, for the reasons given and because
the people are goal oriented, more so to a full pocket after a full day‟s work.
I explore the hotel health club in the line of duty. “Massage here?” and though
the receptionist doesn‟t follow English there are female giggles from an interior
room. I enter and review the gaggle of pretty ladies to pick one with a winning
smile and large hands. She leads me to an isolated room where the day‟s work
is rubbed away and the handshake index is gotten though it‟s hard strained to
apply as an indicator without more figures. Find enclosed the expense account
receipt, also for the next night and the next.
Columbo, at less than a million population, is the administrative capital on the
west coast with one of the largest artificial harbors in the world. Seaports are
pleasant diversion due to constant change and all that goes with a seashore
stroll. I tramped the same city beaches five years ago as tourist about to make a
frightful mistake. The boardwalk was crammed with vendors and sideshows
when I stepped up to the weaving head of a 10-foot black cobra, coiled and
reaching high out of a basket. I was tired and the charmer‟s flute seemed to
mesmerize the snake and I, nose to nose. I recall as if in a trance a circle of drop
–jawed bystanders and the snake head big as a black saucer. I reached out and
patted it gently on the head, feeling the scales, and it nudged back as tenderly
against my hand. Then I snapped to my senses, stepped back and left. A few
women turned white and fanned their faces. In retrospect, the highest erratum of
my life, one step forward, and I vowed to never get so run down as to error in
Today, walking from the exchange to my hotel, a fellow approaches to pawn
trivial wares and chat. A friendless person with a weight on his shoulder finds
solace in a stranger he‟ll never see again who tells him disagreeable truths, and
thus I learn lower indicators though some hit hard. I‟m dressed well enough to be
called „mister‟ and prey. The man‟s quickly followed by a scarecrow, then
another, and all now wanting to lead me to the British Army-Navy store. They
shepherd me into a narrow alley of seedy shots that dead ends. I recall the
guide‟s nearly prescient warning the previous night, “Beware of petty thieves who
gang to mug tourists, in particular when one after another join up until you‟re
outnumbered. The second man has a knife and they‟ll rob you.” I cling to the
briefcase containing this report with one hand and use the other to feel my jacket
pocket for the wad of small bills I regularly secret there to toss into the air and
dash off while they stay to fight over the fallout. Too soon they edge me toward a
wall near a shop entrance wherein I race in as they perch outside. The owner
says the British store closed years ago. The three eventually dissolve into the
cracks and I return to the hotel.
The street signs protest a Niedco approach. This major city is war-torn with
rubble and hungry people. On the last night in Colombo, the slight fellow who
warned me of the next-day robbery limps up scolding, “I told you not to go near
the Hilton Hotel! Why didn‟t you listen? That‟s where the muggers pick-off the
rich tourists and that‟s where you…” and he accurately describes yesterday‟s
heist attempt. “ They were very bad boys,” he consoles. The street grapevine is
fast. We walk together until again the moon rises above the skyline. Nearby, a
middle-aged man with a toy, plastic rifle slung over his shoulder sings sorrowfully
to a poster that‟s the country version of “Uncle Sam wants You!” My limping
benefactor whispers that a year ago his family was killed by the Tigers, and now
the poor, crazy fellow sings for hours.
Never in a childhood dream induced by strikingly exotic stamps from Ceylon
(now Sri Lanka) did I think I would come here. I fly into Colombo, the capital of
this Indian Ocean island the size of West Virginia, when the tropical monsoons
for the first time in 52 years have failed. The land, people and market are dry,
far from my colorful childhood memory, but an instructive stop ensues. I attend
five brokers, one custodian bank, an investment advisor, and scores of streets in
three days. In addition, I suggest the Grand Oriental Hotel with a harbor view,
walnut-and-honey milkshake, health club, business center where this 20-page
report is typed, and that it didn‟t blow up.
It‟s an honor to sit with surviving traders in a long wind down because they‟re
most fit in the marketplace history. In ‟93 all were pups in tall oats as the
economy soared; in ‟94-6 only the big houses with foreign clientele broke even
as others fell like ten-pins; now, in ‟97 the veteran traders as other professionals
flee the island stay and say, “We‟re optimistic”.
What bungs the economy? We‟ve learned the June rains failed causing power
and crop failure on the teeny island. I offer that hungry, thirsty people plagued
with blackouts become sympathetic to rebel promises. Had government officials
stood on speaking platforms as gaunt as the listeners, perhaps they would have
rallied round them. The quality of life during a drought is better in nearby jungles
where survival skills can get fresh food and water from vines, so the Tiger cause
grew. The lesson dawns of how primitively simple life is in a small, closed
system like this island, and how vulnerable a little market is to a single factor like
withheld water. That‟s the boom and bust of Sri Lanka, and I suggest
commissioning a meteorologist and cloud seeder to predict and manipulate the
market to better times.
The broker selection is: First, the biggest Keels, for their foreign client expertise,
candor, English, personal attention, gusto, hinted extras, and low commission. A
close second is the much westernized CDIC, and third the slightly stodgy C.T.
Smith. In sum, it‟s a pleasure to work among people of integrity who appreciate
a working light bulb and glass of water. I also enjoy their custom of not smiling
when talking business. I characterize the marketplace as resting in a
modernization juncture of equipment and habits, nowhere as developed as
Southeast Asian and Mid-east countries, but worth following.
Timing? The economy is dumped from war and weather. When these are
resolved the new exchange scoreboard will light up. Watch the March election,
the April mandate, and the June weather predictions. Since there may be no
other chance, I thank Niedco for sending me into a place where the present
specialty is suicide bombing. The clean-up after last week‟s explosion at the fish
market is ongoing, and as a vegetarian that bothers me.
Preface: A thin young man in a white business suit rushes into my hotel. “Doctor
Keeley, I deeply apologize. The monsoon struck this morning and my $100,000
Mercedes washed into an unseen crack in the road. It‟s starting out to be one of
those mornings, but I think the sun‟s coming out.” This is Visha, my guide, whom
I come to esteem through the week of meetings.
The exchange is apparent bedlam. I catch a glimpse of papers flying amid
shouted orders before being hustled to the SEBE office, covered below. The
Bombay exchange is by far India‟s biggest, and the other sizeable one here is
the NSE (National Exchange). There are lesser ones in Calcutta, Delhi and
Madras. The limit to short term trading now in India is it‟s not done electronically;
however, “In nine months the electronic trafficker is slated to begin. Then, a year
after that, the electronic transfer should be complete.” This turtle‟s pace may
guide Niedco‟s decision to enter the market. The exchanges days are Mon.–Fri.
and the Bombay hours are 0930–1430 , and the NSE 1030–1530 local time.
SEBE is the India regulatory agency for the exchange, their version of our SEC.
and is located in the Bombay Exchange building. They grant the key “Foreign
Investment Item” (FII) required of foreign traders. Processing the license takes
4-6 weeks for a “one-time, no-worry fee” meaning the $10,000 is paid after the
license is assured. Then trading may commence. Henri, our contact here, politely
pages through selected articles on Niedco, brushes them aside and smiles, “All
we are concerned with is the one-page FII form, that your company has a 3-year
track record, and the $10,000 fee.
The Indian etiquette of business cards is to lay your own on the table before each
of the attendees, and each in turn places his before you. They remain
untouched, unlike poker where one has the option drawing to the hand, then are
gathered at the meeting‟s end.
This section begins with a preview composite of all the brokers‟ impressions and
answers to my questions.
Broker business matters are done instantly, not later, here. Calls are made
forthwith, meetings are set up now and attended in an hour, information is gained
at once, all by habit. Then it stops. Outside the inner circles of these top houses,
things turn to mud. This is entertainingly contrasted to America where, in
general, the individuals procrastinate within a system that moves like lightning.
The net result is the same in both countries – consummation of affairs in
tolerable time. Fortunately for us in India, there‟s a lubricant in the slower, lower
systems I call “grease”, or tips and what some term bribes. All executives know
and use it, indeed the entire country from street vendors to cops to politicians up
to the market is run on grease. The import cannot be overstated; know the right
hands to grease, or someone like our contacts who do. With that, should you
decide to invest in India, it takes about a month to get properly installed as a
foreign entity before trading begins. “There should be no unexpected surprises
Non-local traders must obtain a Foreign Investment Item license (FII) from SEBE
at a one-time fee of $10,000. The trading account is kept with a custodian bank
rather than the brokers, and the best we‟ve found is Deutsbank. Virtually all
sizeable foreign investors choose to have an offshore account at Mauritius
usually set up through Arthur Anderson. There are some 150 stocks of suitable
volume and liquidity for Niedco-style trading. All the brokers contacted can
handle transactions in the $2-3M range on 1-2 day swings. The normal
commission is 1% on the in and out, but slides down on larger trades, negotiable
within each house. There‟s no margin trading nor shorting of stocks. By going
the legitimate Mauritius route taxes are reduced from the usual 55% to about
15%. There‟s no problem on conversion of any amount of rupees to dollars even
on closing the account, and no maximum on dollars removed from the country.
Foreigners anxious to get into India take these steps: Process the FII with the
aid of a broker; obtain the Mauritius company via Arthur Anderson, and get a
custodian bank with the aid of a broker. These procedures run concurrently and
take 1-1.5 months.
The brokers I visit are ANZ, Motilal Brokerage, JSB Brokers, SSKI Brokers,
Crosby Security, Prime Brokers, DSP Brokers.
Motilal is an old house in the top ten Indian brokers and traded $200M last year.
Visha, who sets up and accompanies me to all the broker meetings, says it‟s
important that Niedco gets the local flavor of the Indian stocks and this is one of
the best houses for that. “They are good with esoteric data.” I explain our need,
the standard opener, “We are looking for $2-3M single trades with a capacity for
5M and quick in-and-out, perhaps within a day.” The answer is, “We can, and it‟s
important you choose a broker that handles not necessarily a large number of
FII‟s, but FII‟s that use similar short-term strategy. We do.” They trade in 60
companies from 15 industries while relying heavily on research from which I‟ve
sampled and am lugging back one kilo. They see the overall market on a
continuing climb for the next months.
JSB Brokers specializes in local flavor and institutional trading. They are
Bombay‟s third largest by volume and offer an impressive office and aggressive
staff. “If Niedco chooses liquid stocks, we have no problem handling the
volume,” they say. Examples include but are not limited to State Bank of India,
Disco, OBC, and Reliance. They do an average daily volume of $1.5M, typically
60% from institutions, and handle about 35 FII‟s. They agree with other brokers
that Deutsbank does the best job as custodian. Their market impression is a
moderate rise in the coming three months, then down a bit until the budget is
completed on 19 July, after which expect a big move up.
SSKI Brokers plucks us from the hotel lobby, drives to their building, and throws
out the red carpet. This is the city‟s oldest house, begun in the late1800‟s, and
now ranks #3 by volume. They‟re proud of being the first domestic broker and
one of the few originals to sustain. They trade 120 stocks for an average daily
volume of $3-4M. Their contacts run deep and throughout the market. Specialty
is institutions. It‟s prudent on accelerated trades of 2-days of less to tell the
operation desk at any broker at the time of buy to instruct the custodian to hold
rather than move the certificate. Again on close, Niedco tells the broker desk to
inform the custodian that the house holds the certificate, so the transaction is
done and legitimate. Curiously, they bring up cigarettes and the idea of studying
discarded stubs in a certain city area. “Go look for butts there,” they say without
flinching, so I assume a prior Niedco contact. The commission is standard
throughout the houses at .5 – 1%. They like auto stocks and ITC for us, and
expect the market to stay fairly quiet for a few months before running active
toward the end of the year. This and the last broker are two of the most
aggressive for our account.
Crosby Security is one of the big international firms and quickly points out the
ease of relationship via their NYC branch. The meetings last an hour, and our
contacts are straight-speaking and informed. They can handle our wants and
suggest staying with the top 50-100 stocks. The rest of the information matches
the other firms.
Prime Brokers graciously accepts us an hour late because it‟s the first early
morning meeting after the brief storm which flooded the streets that hid the holes
that caused Visha‟s chauffeur to drive the Mercedes into a “crack” of the
pavement. This house is young but motivated and Visha speaks well of them.
Their space is a labyrinth of connecting rooms with a hustling staff of 30. The
present rule against margin trading should be lifted next year, and for now
leverage is limited to trading one stock against another.
DSP Brokers is one of the biggest in the country and 40% owned by Merrill
Lynch. The physical facility is ample, modernly equipped and busily staffed.
They do business with 90% of the FII‟s and have a general large capacity. Their
network of contacts after twenty years in business is extensive. They say SEBE
is a chain of links which must be greased one by one before pulling to
advantage, and they know the links. A quick call to SEBE arranges my
exchange go round this afternoon. The people are brainy and affable, and
pursue us with a zest soon explained. The glory days were three years ago, and
brokers all around became rich. That‟s when American hedge funds like George
Soros‟s flocked to the country, and the better hotels spilled over. The rupee has
depreciated about 8% each of the last three years. The current market should
rise quickly over the next three months. I resist informing that the five previous
brokers shared a conservative short prediction, and wonder if anyone graphs
individual broker predictions vs. an accumulated one vs. the eventual market.
This sum broker index could aid choosing one.
A custodian bank is required by Indian law of foreign investors. Deutschbank of
India is reputed the best and handle FII‟s of many global big boys. Opening is
simple at any branch in the world, and one bank handles as many brokers as
desired. The fee schedule is attached. Our contact, Paul, talks skillfully for an
hour and shows me the impressive physical facilities including the vault where
securities are stored. He is familiar with our fast trading pattern and remarks it‟s
curious that England and Switzerland parallel our style but not other Americans.
Their computer software is designed for FII‟s wanting trade speed. As taken as I
am with Paul, he is as much with Niedco, and offers his services and contacts
anywhere he‟s worked including Japan, Singapore, Europe and India.
ANZ is the second bank appointment. It‟s also a gigantic modern operation with
large vaults for the millions of certificates that are stacked within cabinets that
slide on rails. Consider this as a model for the voluminous Niederhoffer libraries.
I reject this otherwise capable custodian because our contact worked for SEBE
for years and, Visha explains, “He could have a drinking circle of old buddies
from the rules department and one day at the table information of a private
nature might accidentally slip out.”
Arthur Anderson is the preferred consultant for setting up the Mauritius off-
shore account. Our contact is close-mouthed and Vishs whispers it‟s because a
consulting agency normally charges a fee for dispensing information. On the
other hand, I figure he should provide us a fee as a prospective huge client. I
hate these meetings like officers clanging sabers against the chairs in bluff, and
nearly stand to walk out. Instead, I present the Niederhoffer articles on shoeless
trading, voodoo and the Yankee hobo, and our contact suddenly becomes
animated and spouts answers. FII‟s trading over $20M a year use an off-shore
account to reduce taxes from 55% to 15%. It takes 4-6 weeks to set up, but is
done concurrently with opening the custodian and securing the FII license from
SEBE. He sumarizes the purpose of AA in India, “We are the best in smoothing
moves through the various levels of the business network, without which things
move dreadfully, painfully slow.” The fee to AA for the whole offshore setup
including grease-jobs is $25,000 up front, and Visha says after the fee‟s paid,
“there are no worries.” There is, however, an ongoing annual fee directly to
Mauritius of $15,000 for their services.
Bombay’s streets are lush with lower indicators. Stock bulletins blow in a fiery
breeze on man city corners with overseers shouting to suited passersby “Get em
while they‟re hot!” Similar ads posted on street signs advise drivers to buy
companies going public. “There‟s a difference between India now and last time
you came through ten years ago,” Visha tells me. “Now there is opportunity for
the Indian talent. This, in turn, is a strong indication for foreign investment.”
.Bombay remains India's chief financial, commercial, educational and cultural
center, plus is the land‟s Hollywood. Cinemas, in my opinion, have been the
main inroad of global Americanization. Youngsters pick up English phrases,
heroes, actions and mannerisms taking a part of American home. India films are
a surprising second in worldwide popularity in my informal poll, with Hong Kong
next – one in which I once had a crowd part. In Bombay, throughout India and
many countries of the world, there‟s a regular “black” or alternate market for cash
and travelers checks to a 6% advantage vs. the bank rate. Transactions are safe
as my local contact takes the dollars and reappears minutes later with rupees, or
vice versa. The common citizen integrity is refreshing. Taxi drivers charge the
meter fare and street venders return proper change, though I wonder about the
street walkers. I take a nature walk in the interest of the company to the vicinity
to ask and discover them heavily engaged. Prostitution is popular as
hamburgers and I illustrate this with an anecdote from a similar foray in Dehli in
my younger years. There was a four-square block area where hundreds plied
their wares, and more in the tenement buildings. A most peculiar condom index
became obvious after visits to a half-dozen bordellos where outside the entrance
to each was a pile of condoms. There were never less than a few hundred and
often measuring two feet high. I figured it advertising, like McDonald‟s arches
with X-number sold. Certainly the higher the stack the more seductive the
business, and the more of that the better the times. I‟m told that the Indian man
will buy such fun before bread for the table, but can‟t say this is limited to this
country. As for condoms, I buy American when it really matters and carry them
with me wherever I go. In any event, I pay each madam for the information and
The country is renown for poverty, and in Bombay I walk through poorer sections
past hundreds sleeping in alcoves, abandoned buildings and on the sidewalks. I
feel comfortable having cruised countless skid rows while hoboing boxcars
across USA. These Indians have a dry, shady, safe place, a meager source of
income when awake in errands and begging, appear fed enough, bathe at fire
hydrants, and enjoy the company of many in similar holey clothes the better to
admit a breeze. I don‟t wish the lifestyle on anyone, but there are many worse
places in the world and this one unjustly gets most the credit. Begging here is
interesting and annoying at once. I‟ve covered it extensively in “The Indicators”,
and won‟t try your patience except to say Indians are champ beggars and today I
meet one of better. “Monsieur,” a little voice begins and rattles on in French. I
shake my head to which follows, “Senior,” and the little girl takes my hand while
continuing in Spanish. Not releasing, she tries English. “Sir, my mother is a
great woman now without milk for my little sister. I am the working child of the
family, so ask you to buy some canned milk. I want no money, nothing for
myself, only for the baby.” I sigh, for it‟s about the hundredth plea of the day and
I normally keep a simple rule: Give to the first deserving three askers each day,
then ignore the rest. Having a short background in begging myself, it‟s easy to
pick candidates, “Where‟s the store,” I question the 7-year old wrenching my
hand and she points ahead. The canned milk costs ten-times the normal beggar
take and the shopkeeper bags it to offer dryly, “She speaks six languages and
this is the forth milk of the day.” Begging given competition requires ingenuity. I
acquiesce and am in Nirvana the remainder of the day. Some don‟t need to
overtly beg, are naturals. I ride a train first class in a seat next to the lavatory for
the backward trots and observe an old lady sitting outside the door. I must
explain India toilets are a flat, hole-in-floor concern with much slipping and
sliding. She ignores the filthy tracks and stench and placidly eats chow directly
from the floor with a piece of cardboard. I look at her complexion and into her
eyes to see the picture of health for someone half her age. She finishes the little
meal and another man comes by and drops a new glob, and she scrapes it
gratefully. Truly, western has much to learn from eastern medicine about germ
theory of disease..
Few realize the oddities bookshelf in the celebrated Niederhoffer library where I
go for evidence of human extremes along the lines of the first editions of
Guinness‟s Book of Records. Many of the most remarkable claims come from
India: The man who stood on one leg looking east for 30 sunrises, another who
buried his head in the sand for a month praying, and the array of cave dwellers
for years. I haven‟t discovered my first levitator or spontaneous human
combustible in fact, but continue looking. Sometimes what‟s most remarkable
about the fakirs and feats of India is what‟s fake. Tremendous, old walled forts
are ubiquitous across the land where one may enter thick gates to inspect the
insides and climb the rampart. On a trip I was high atop a fort wall with flock of
tourists when suddenly came up a shout from as if from an invasion. We peered
over and down the wall onto a spectacle of a dozen natives standing on a
gigantic material quilted together from a dozen light blankets. “One shouted fair
English, “Throw us your coins if you are willing and the gods good we will
disappear!” Wait a second, I mused. If we throw they can run off… even as the
tourists pelted coins onto the material. Yet the actors remained as statues in the
rain waiting for more. Satisfied, the main voice raised his hands to beseech, then
the others grabbed the great cloth‟s edges and turned it upside down, quickly
crawling under. There was short moment underneath then it went flat and still. A
minute passed, and on the wall above the group began to mumble. Suddenly an
associate of the disappeared party ran out below and pulled the blanket away to
rush off. There was nothing under but bare ground. To this day, it‟s
unexplained, though I suspect trap doors in the earth to underground
passageways that lead to riches.
I remember my first landing as a wet-behind-the-ear globetrotter in Delhi, and
right off the plane I was hounded by ruffians who tugged my clothes to follow
them to this or that while pick pocketing me. Suddenly and quietly, “Come to the
celebration,” and I looked over the ring of scamps to a young man, not so
different from the rest by appearance, waving me toward him. I followed. ”I am
just in veterinary school,” he announced at once and adjusted my gait because I
had just graduated in same. “Where are we going?” I asked. “To a party…wait.”
We walked an hour to enter a stockade style building where smoke poured from
many chimneys. “The party is inside.” It was a crematorium! I got to tour the
facility managed by the escort‟s father. Hooking tourists and dipping from the
donation pot at the exit probably paid for his textbooks, and who can question the
choice of major after being around so many people like this. “Did I not tell you it
was a celebration?” he clarified as I left, and of course it is a release to leave this
life for some. Affordable cremation is uncommon in India, and many acquire a
friend, probably put him in the will to keep his clothes. On the same trip, I found
myself led to a wide river where a reek nearly drove me away but I pursued the
shores edge where a few wood rafts floated, gradually burning and disappearing
amid the crackling fired fat. The wind shifted over the big soup and I forced a
retreat. When the normal crematorium smokestacks burn fuller at the same time
the raft pyres dwindle, good times are in India.
Why do I prowl the city streets? These are the fringes between ordinary people‟s
lives and high finance. Biological boundaries fascinated me even before I
understood scientists had named them this. As a kid, I flanked woodlot edges,
skirted lakes, followed pole lines cuts, walked seashores, and railroad tracks, all
because there‟s the line where two world‟s collide producing greater variety of
plant and animal species, and exciting hybrids. Similarly, the streets hold many
and strange lower indicators, plus the idea of quantifying and ordering them to
give an edge in speculation. Adventure comes to play, and an answer to
Niederhoffer‟s boast that I get scammed, skinned and swindled more than any
businessman he knows: A cowboy gets bucked off more often than a worker
slides from the desk chair, and I calculate this is why I get hired for this job.
A medical anecdote from a previous Bombay visit illustrates the Good Samaritan
attitude and inherent fair play involving a wart, mine. Having tried over-the-
counter medications, physician‟s electrocautery burning and liquid nitrogen
freezing, and waiting unsuccessfully for years for spontaneous disappearance, I
was led by yet another guide to the city dockyard of this major port. I had
conquered warts down to this proverbial last one that hanged so long atop my
right index finger knuckle it became a sort of pet to be rid of. His promise was a
wart specialist of mystical standing for work on sailors who suffer them. The
weaving waterfront cobblestone streets were crammed with shanties until we
reached one no different from the rest. “This is the doctor,” the guide assured
reverently, and a door opened at his knock. A teenager in soiled rags emerged
toting a black leather medical case that he unlatched with a flourish to reveal a
neat arrangement of suction cups, hoses and medicine vials. He was so
professional and the case so worn I began to think him experienced. Inquisitive
neighbors circled us on the street and a sacred cow peeked out the living room
window of a home to watch. “This is what the wart roots look like”, and the
doctor shook a vial holding gray slivers that resembled half-inch worms. The
crowd gasped, and I didn‟t suggest warts have no roots but let him have his way.
He pulled a scalpel, demonstrated its edge on his shirttail, and took my finger in a
steady hand. He lopped off the wart and blood spurted until the crowd backed a
step. “Now for the roots!” And with quick hand movements he produced a
suction thimble and placed it on the wound. There was the slosh of liquid suction
and he thrust high the cup as the ring of people closed in. With a roll of his wrist,
he poured a thimbleful of blood and roots onto a cobble. “Roots!” shouted the
watchers. “Count them!” yelled the doctor. ”One, two, three, four, and five,” and
the doc extended his palm at a buck a root. I bargained to three and he happily
accepted. “Jungle powder,” he declared to everyone and sprinkled black powder
from a vial onto the cut, pressing it in. “Go in peace, the wart is gone.” The
crowd dissipated, the cow pulled in its head, the doctor shut the door, and to this
day the wart has never returned.
The heat and noise of this concrete jungle is inescapable to many, until .the
monsoons soon hit in full force, and I‟m told it rains four days straight harder than
a sainted cow peeing on a flat sidewalk. Traffic comes to a standstill and
meeting-goers are allowed an automatic hour grace. For now, the bovines
wander the dry, hot streets as indicators themselves. My extraordinary guide
throughout, Visha, talks of a cow‟s life as not “Having a care in the world,
belonging to no one and revered by all.” He says that when times are good, the
cows tell you by showing fat for being fed as homage. Skinny cows mean lean
The week here consists of fifteen major meetings and scouting the streets for
lower-indicators. All objectives are met and the net result is very positive. My
notion from this week‟s cross-section of Indian businessmen is he‟s savvy,
efficient and enormously hard working. Most the rest of the country, especially in
the larger cities, is wretched in dirty streets squabbling for morsels because
they‟ve known no better. But, given a chance at business, the Indian is superb.
He drives relentlessly and honestly. The people I‟ve met in the marketplace take
your dollar only after the thought that they can return it or better. There‟s
everything in the workforce to persuade Niedco to come to India.
Visha the guide gives Niedco unmeasured value directly through his contacts,
diplomacy and insights. After this tough week, he‟s already off on a camel safari
for two weeks, then won a youth executive trip to Brazil for placing in the top 15
of his graduating class at NY University. He‟s a chip off the old block, as his
father started the Indian family empire by placing fourth in India on his SAT‟s to
gain a birth and scholarship to college. “My only problem,” confides Visha, “Is
trying to look older than I am.” He‟s gifted, toils, polished and, despite it being a
broker hunt, I suggest this man also if there‟s a slot. He carries a cell phone on
Brokers at the finish line show a photo finish. Visha says if Niedco chooses to
keep all investments under one umbrella, DPS is it. They‟re big with penetrating
contacts throughout the market and country, and have interests in 90% of the
FII‟s. Each of the other local houses is large enough to handle our wants and no
doubt they share inside info with the former broker. JSB is a tiny notch above the
rest for aggressiveness. They‟re capable and unswerving, and I cheerfully break
a personal rule by accepting a dinner invitation. Motilal is efficient and handles
other quick-trade FII‟s which is important. SSKI is the largest and oldest
domestic broker. They claim contacts throughout the market and fit the mold of
the others in honesty and amenability. Crosby Securities has the edge of
internationalism with NYC affiliates. Their Bombay house is professional and fits
our requirements. Prime Brokers has the respect of their peers, which says
much. They‟re data oriented and though the smallest of those interviewed,
indicate ability and willingness to do the job. Consult Visha for the final picture
on the brokers.
India is attractive now according to international reports because of cheapness
and strong fundaments. My advice for Niedco and India, wait. You‟re a short-
term trader in a long-term place. I don‟t like rigmarole and grease anywhere, but
I‟ve tried to guide you through to optimal advantage. In filling out the FII form,
use the word investor, never trader, and disclose interest only in medium to long
term investment. After the FII is granted, short term trading begins without
penalty. Other foreign investors here trade mainly long-term, I suspect because
it‟s the long country habit. The mentality has been deliberate, there‟s time, move
slowly, and be pulled by others. Short term trading in India will commence in
nine months when the electronic hookups to the exchange begin, plus another
year to throw the switch. I suspect the Indian mindset will succeed this
technology, and anticipate the removal of the $10,000 FII ticket to play ball,
destruction of taxes to undermine the off-shore company, and drying up of the all
around grease. The greening of India may start with the emerging short-term
market in 1.75 years and may you contribute greatly to substantial reward. In the
interim, it‟s a hedge for long-term wart removal.
Preface: One day the Sahara desert will be pushed back by the spread of
greenery. This will be heralded by a widening band of peoples freed from the
narrow Nile valley and their ancient thoughts, and that will be indicated by a
powerful economy thanks to the success of the emerging market.
The major brokers encase the exchange in a tall downtown building. The floors
are stuffed with people elbowing, like a bullfight, to get near the main arena. A
Groucho Marks look-alike appointed as guide by the exchange chairman, whom I
met earlier, pulls me through the mob to the trading floor entrance. Fists pound
vainly at the door like men clawing to get out of debtors jail, but Groucho gives a
polite single rap and it cracks. We alone are admitted.
Two years ago the inner exchange was entirely non-computerized and trading
was conducted by outcry. I‟m told the din was incredible. Now, in stark contrast
to the outer commotion, I witness a quiet, professional system. Three
concentric circles of computers are manned one-each by a floor trader – 110 in
total. They‟re hooked to a central server in an adjacent wing and that‟s where
the interaction occurs. Calls from brokers such as the ones I visit come to the
floor traders, who key them in and a trade is found, then confirming calls are
relayed out. The computers are a few years old but being updated. “Until
“technological inserts” are complete there are infrequent rocky moments, but
usually the process is smooth.” The sum daily volume averages $17M and
increases steadily each week. The exchange hours are 1130–1630 Egypt time.
I call on EFG Brokers, Delta Brokerage and Nassef. A sore point, and then
forward. My main contact wears the lather of a racehorse in explaining he isn‟t
cheered at setting up multiple meetings in little time on short notice. The Niedco
team was to have organized this entry far in advance. There‟s a country network
of regarded individuals he intended to plug me into, but it‟s got to be a fast go all
EFG is the biggest broker in the country with a daily average volume totaling a
sixth to a third of the entire market. The company owns two large downtown
Cairo buildings with the brokerage at one and corporate offices at the other. The
furnishings are modern enough but the computers a tad outdated. Their
literature is slick with emphasis on research, and the securities staff of 70 is
youthful and professional. The pace is brisk with business at hand, and moderate
trading in progress. Ala, a bit older, is our main contact who started the firm from
scratch, though he handpicks trader Elwa as my capable younger shadow. I
meet and chat with all division heads, apt and ablaze. It‟s relief after some other
countries that English is a second language among the educated and higher
Since this is the first broker, I‟ll dwell on the responses. They handle many
foreign accounts, and can field the $1-3M trades required by Niedco. A trade this
size melts into the market, and waves begin at $5M. Virtually all foreigners use a
custodian bank. No forms to open an account; just fax the first order and, presto,
business. No requirements nor license. Commission is 1% each way, but
“adjusts slightly in rare large trades which Niedco is capable of.” Margins and
swaps don‟t exist. Terms are T+4 buy, and T+2 sell. No tax of any type. T-bills
are sold without leverage on discount basis at a Monday auction for the 6-mo.
and Wednesday for the 3-mo., with next day results. There are 5-yr. and 7-yr.
government bonds yielding 11-12%. All this information comes from Ala while
gliding room to room as he efficiently trades via a mobile phone.
The steps for a trade are: Niedco calls in an order with follow-up fax. Ala phones
the custodian bank (on sells) to confirm the stock name, then calls his exchange
floor trader to execute the trade. There‟s no computer hookup with the exchange
at present. Ala confirms to Niedco, although the “official” confirmation comes
with the 1830 hr. printout and fax of all the day‟s trades.
The state of the economy is steady progress. The GPD per capita has doubled
in the last five years and they expect it to catch another 15% next year. The
economic growth is about 5.4%. The currency should appreciate against the
dollar in coming months. There is a forceful privatization program by the
government that relates directly to the overall economic strength, and it should
continue. There are many American companies here. There are 100 brokers in
Egypt, all faring well with the past two months showing a flood of foreign hedge
funds. “The big shift in the people is mental,” he asserts. “In this economic boom
fundamentalism is diving because the people are finding something tangible to
The Delta firm is next, full of surprises. The exterior appears to be a quaint
apartment building under construction on a quiet residential street. I grab my hat
at the door thinking it‟s the wrong place, but darkened stairs climb into a lighted
level where a heavy door swings open to a community scurry. Our contact is an
attractive, thirtyish lady pinned in her office by appointments, so I must wait.
Below are the responses of Neva the managing director, acute as they come.
This is a medium-size outfit, seventh by daily volume ($2-3M) among the top ten
brokers. The staff of thirty is competent albeit Neva has the best English. “There
is too much business to hang curtains, sorry”, she sighs as paint dries on the
walls around us. Workers and clients are in and out the door during the 30-
minute interview. They‟ve been in business for two years as one of the first
“new” brokerages to open with the ‟95 national exchange law change. Delta
started as a family business and then merged with Egypt Bank. The smaller firm
enjoys a good reputation. (There‟s a gap as she gets tough with a meddler; in
Egypt it‟s called “chewing the head”.) “My personal code is to tell a client to wait
for a better trade if I think one‟s coming rather than grab the instant commission,
and I‟ve never broken it.” Commission is 1% both ways, but slides to .5% on
jumbos. They have a handful of foreign clients and the capacity to deal our large
trades. A $1M trade makes ripples, contrary to other input. The trades in this
country are in physical shares. “Settlement is sometimes bumpy, as in any
emerging market. I don‟t hide this delay.” I like a business busy as a ticking
clock, and businesswomen who keep the beat.
Nassef broker is singularly exceptional. The owner, my contact, is present
chairman of the Cairo exchange. The company that bears his name is one of the
oldest (began in the early 70‟s) and so highly respected, he says, they don‟t print
brochures. Like a Niederhoffer play, he hands me two cards. He sits in a small
mansion within the exchange building that appears to last have been decorated
when the Sphinx went up. The mind‟s the matter, and his is not idle the thirty
minutes we‟re together. He studies the monitor, phone trades, and talks with me
at once. “I don‟t advertise any more either,” he adds.
I SNAP my suspenders to get attention. “You and I are alike,” I say. “We both
wear suspenders and value efficiency. I see you‟re busy so will ask just ten
questions, each of which requires a one-sentence answer”. As he nods, I figure
what they‟ll be. The replies are the next paragraph.
The firm is among the country‟s top ten by volume. His normal commission is
only .3%, undercutting the others. He can field Niedco sizeable orders. If duties
as coexistent broker and exchange chairman prevent personal handling of our
trade, ask for his brother Sela, a trader.
A lady cuts in, so pretty I wince and, recalling Niederhoffian advice that shills
could be used as distraction, refuse to look at her again. “She‟s brilliant too,”
smiles the chairman, “And a broker!” I complete the ten questions and rise. “Too
bad you have to leave Egypt so soon,” she chimes. I march out into the bubbling
sea that fills the broker floors that insulate the quiet exchange.
I visit the three top choices: CitiBank, Amex Bank and Egypt Bank. Note all the
brokers counsel use of a custodian, and a fee is saved by having the broker use
his affiliate bank. One custodian can serve more than one broker. An account is
easily opened in dollars or local currency and this is used to pay for trades.
Conversion to local currency is at the local rate of exchange with no fees. The
transfer of funds is by Swift system. There‟s never a problem, I‟m told, in getting
funds back in dollars within two days after closing the account. Bank interest is
about 5.2%. Elwa says of the top three, Citibank gets the nod, Amex Bank
second, and Egypt Bank not so far below.
Citibank occupies floor after floor of a towering building busy with a class staff.
The bank name speaks for itself. I was not allowed to visit the vault because of
corporate rummaging within at the time. Forms, fees and other information is in
the literature. Amex is also highly touted, and modernly equipped. The vault is a
sturdy room the size of the cell Jesse James broke out of, but here it‟s in a
barred and guarded basement. English is spoken, and you have the cards. I
don‟t tour Egypt Bank but speak briefly with a representative. He aggressively
seeks our account by mailing information.
CMU regulatory agency is the Egyptian equivalent of our SEC. I enter a concrete
government edifice and traipse dim cement hallways to the deputy chairman‟s
door, knock, and enter a bright office to shake hands with a fellow who stands
like a college professor with critical eyes. “Welcome. My name‟s Garthie.” He
steers the conversation to the advantages for foreign investors in the emerging
market: Rules are strictly adhered, steady growth forecast, and then he launches
into technicalities that riddle until I raise a palm. “In truth, I‟m unfamiliar with the
topic details though you explain them well. Did you used to teach, like me?”True,
and education is our escape hatch for the rest of the meeting. He hands me a
copy of exchange regulations that you‟ll receive, and note the “floors and
ceilings” of a stock: On a given day, if a stock price rises or falls 5% then it must
trade the rest of the day within that extreme. I chose not to explore the low-life
indicators with the deputy chair, but exit as his words echo along the hard hall,
“Opportunity and protection…Opportunity and protection…”
Pub-Ent is the privatizing office I enter with relished memories of my early
entrepreneurial days as a Cool-Aid sales kid on hot Idaho streets, through
California swap meets as mogul of fishing poles, soft porn and decorated cow
skull,; and finally a stint as peanut salesman for Niedco‟s “Nutcracker sweets” on
Manhattan‟s 42nd street. The lesson learned is I don‟t much like interference. My
awareness heightens at shaking hands with an apparent Clark Kent keeper of
the Pub-Ent light. I step back for him to duck under the desk to emerge in a
Superman uniform. “This is not an agency of pig-headed bureaucrats! Our staff
is skilled and things get done. Privatization in Egypt is gung-ho and won‟t stop.”
He passes me a list of the main companies being privatized this year.
Tark, whose card you find with the list, went to Harvard and then got a
“privatizing degree” in Washington DC. He looks late-thirties and is vigorous
from squash and judo at which he‟s a black belt. His discourse on individualism
and free enterprise is eloquent and he‟s a fitting speaker at your Junto or Doug
Casey‟s Eris. Foreign investors are invited to participate with money and/or
personnel in Egyptian companies and he hopes to hear from you personally.
Pub-Ent is strangely, but justifiably, a government agency albeit he claims it
doesn‟t operate like one. “We function as a small enterprise”.
Our pleasing thirty minutes includes a short history of privatizing in Egypt. It
started in ‟89 and the government responded by creating the Pub-Ent (Public
Enterprise) agency that same year. The original intent was to educate people to
throw off their veils, but it was a hard sell in the early days. By ‟94 citizens began
to modify their thoughts, so by ‟96 the ball began to roll with companies for the
first time offered for privatizing. They were taken up for the most part, and so it
goes through the years to the company list in your hand. In addition, he
suggests you send him directly a company profile you seek, and he‟ll customize
a list. Most foreign input is in the range of a $100K or more, but I get the feeling
they‟re open for smaller inserts too.
A supper discussion with Ala, the founder of EFG Brokers, reveals more on
commissions. For huge trades it‟s “nearly negotiable” to the lowest percent. In a
few months, commissions will decrease greatly across the board reflecting a
change in exchange regulations. Within the coming year, if we take in with them,
there will be a “linking of trading desks” between Niedco and EFG, meaning there
is no need for orders to go through a trader. I find the man smart, decisive,
American educated, capable of fooling me, and hungry for your business. “Victor
Niederhoffer is a renaissance man”, he says. I excepted this invitation because
it‟s one thing to understand business matters and another to appreciate a person,
and this one I sense is valuable. The amount of drinking at dinner with
businessmen is, I believe, indirectly proportional to their future success as
business partners, so here‟s to you.
Lower indicators flourish in the streets of Cairo. One walks city blocks before
finding a butt longer than the filter, and that means tough times at a street level.
The twist is the butts are much longer at the firms. Draw your own conclusions.
The derrick index is non-existent here where 20 huffing laborers and sets of
ladders are the stand-in, however there are many of these. I read this year that
Mcdonald‟s again dominates the international fast food market with about 42% of
total sales, however their share is dwindling by about 1% per year as the next in
line, Burger King and Wendy‟s capture more appetites. In Egypt things shape up
differently. Kentucky Fried Chicken recently took the lead from McDonalds in the
fast food race, but McDonalds is combating with home delivery, the first and only
n the world. The new:old car ratio is dismal. When things pick up – I expect
another year as families use realized excess cash for essentials - then late model
cars should run the lanes. For the moment, everyne drives rickety crates, taxis
are banged up, and trucks roll lopsidedly on bent axils and mismatched tires.
There‟s a fantastic parking system in Cairo. Everyone double-parks – miles of
them. Not one driver locks the door but leaves the car in neutral, removes the
keys and walks away. When someone who has a car blocked in wants to drive
off, he hires “car rollers” who for an Egyptian pound push this car, then one
behind it, sometimes a rank of cars until the one to be freed has room to pull out.
Someone should build a parking garage with the market prices projected on the
walls, and use the profit to invest in automobile manufacturers a year after the
Can I count the ways street affairs sicken one? In small business there‟s enough
wheedling to choke a camel. The classic scene is two bargainers over the
simple price of a head of lettuce, each unyielding until the other starves. A
purchase is as unbending as ancient chess when opponents out-waited rather
than out-witted the other to keel over. Negotiation to hear one‟s own voice is the
most valued piece. The common starting point in a sale is the most extreme
prices offered by both parties, and it proceeds. I walk into a rug factory to view
the workings and am greeted by a salesman, “What would you like?” “Nothing”, I
reply. “Yes, we sell that. Step this way.” The rule of transaction seems to be
never say no when a client asks for something, even if it‟s a striped camel.
Refreshingly, he will try to locate one and have time to sketch an explanation of
the impossibility, then offer to sell a spotted one in its place. The next ticklish
point is bribery, as it is here preferred over honor. Small shop owners, cart
salesmen, taxi drivers, hotel clerks and whole systems of people are greased up
and down the ladder before advancement is had. Greased transactions,
something I dislike, are the custom. Tips based on merit I like, but not bribes on
refusal to work. I don‟t single out this country as even of a minority operating by
the “bite”, but if one established a bribe index for a nation and waited for a sharp
decline, it would be a strong signal to input. On the other hand, apparently, and
fortunately for us, the higher business echelons such as brokers among the
marketplace are westernized in method.
The illiteracy rate in this country is 50%, yet the children are smart and among
the more trainable in the world, like so many puppies trying to escape the back
yard. It will be interesting to see exactly where the money goes once it starts
pouring in like sand, but if the country‟s smart they‟ll invest in educational stock.
At present, Egyptians have much time on their hands. I know the feeling from
having tried and been driven back from the streets not by lack of funds, nor by
hunger, but by flat boredom. Kindly, the citizens are neurotic as should be
among a keen populace having nothing but to stuff their pipes. They are Olympic
smokers. Graph the puffing pipes in coffeehouses, bars and homes vs. the
economy and you‟ll fall from the smoke with an advancing economy. As for
electricity, as early warning, recall I‟ve circled the globe by plane for two decades
quantifying runway and city lights. I‟ve watched Mexico and other countries from
above change illumination over time from the dull orange of sluggish current to
the brighter white glow with updated wiring and power plants within expanding
cities. As an economic signal, a bigger glow in good times, like educational
stock, means a continued up trend. Now, gloomily in Cairo, the reverse -
blackouts. They used to occur here frequently, but have dwindled to a couple a
week. I would hesitate to trade in a city until blackouts are cleared up.
Cairo, from an earlier trip, is now cleaner and friendlier. Progress is in the
streets on every footstep and lip, and on the skyline with sweaty laborers
balanced on ladders knocking together new constructions. If I had a hand in
Pub-Ent to attract foreign investment, I‟d hire a fleet of camels to sweep visitors
through the city to point at these things. It‟s the largest city of the Middle East
and one of the world‟s oldest civilizations, a blend of old and new, East and
West. It takes only a block‟s stroll to conclude it‟s okay for male politicians or
military brass to walk holding hands nonsexual but affectionately. The Pyramids
of Giza sit at the southwest edge of the city where a few years ago I was
physically knocked back with as much awe as at India‟s Taj Mahal. The taxi ride
braving city traffic to get there was another matter, and I suspect the driver kept
the most circuitous route to up the meter. He landed me near Giza where self-
appointed guides swarmed the cab. “Careful, Mister, They‟ll hit you over the
head and rob you.” So I exited and one of the urchin guides whispered in my
ear, “Hurry, the taxi driver will cut your throat and take your wallet.” As it was, I
hired two camels and an escort who took me beyond the pyramids into the
desert, then suddenly pulled reins and asked, “Do you have a gun?” “No, I
replied, “I don‟t need one.” He left me lone.
“Look along the streets at night for hundreds of lovers hand-in-hand,” Ala told
me, and I did to find it true, “This is always a sign that economic times are good,”
he continued. “The historical relationship here is religious fundamentalism which
discourages public displays of love. I‟ve noticed when the country‟s economy is
on the upswing, more people turn from religion. They have incentive, something
to do, new goals and show it via affection. Big changes are coming to Egypt with
privatization and the emerging market. Just look on the streets.” Another
unprompted indicator was unveiled. “Count the number of veils on the females to
rate the rise and fall of the economy. When times are tough and fundamental
sentiments high, there are many covered girls. They don‟t have money to fix
their hair, or their husbands want them to hide as religion demands. However, as
things improve, the fundamentalism drops aside and so do the veils.”
The Cairo swing is a colorful triumph with ten meetings over the course of two
days. The whirlwind go-round is propelled by the drive, intellect, contacts and
English of Ala and Elfe of EFG. I sit with top men in all meetings. Most recall,
“The American who writes forward, like us" per mirror image from right to left.
The only blight is ours, that Elfe the organizer was notified just before my arrival,
causing last-minute scrambling among prominent parties. Remember, efficiency
is a high virtue anywhere. This country's report comes typed at the last broker
before departure, and is sent overnight mail. The dual purposes in Egypt were to
make market contacts at the exchange and houses, and to investigate
privatization with investment intent, and I'm satisfied with the results. I'll make
the weekly phone call to Niedco tonight.
It is seen among the Egyptian top brokers that the best have charismatic
ramrods. It‟s all so very attractive, as I told the dogs in veterinary school, “But
don‟t pick up the first big bone because the next may taste better.” My top broker
pick is EFG for reasons given, but the others have such distinct flavors why not
pick two? Second choice is Nassef, the dual chairman at his brokerage and the
exchange. Rarely, but that day much went into the first handshake, and I‟m
reminded of prizefighters taking in what‟s possible at the touch, withholding
much, and imparting one‟s code of ethics. In his fifties, he was the Egyptian
gymnastic rings champ. “There is no conflict in running a brokerage as well as
the exchange. How could there be?” Delta as oddball broker with a dynamic
lady leder can be trusted in a questionable market. Most desert flowers bloom
and perish, but this new one I think will survive. The choice is yours.
The lower indicators show a dull green light growing brighter. I don‟t advise
jumping into a place where there‟s grease and blckouts. While the dress and
manners of the teaming masses in the noisy streets resemble skid rows, the
business sector is westernized. I like the integrity and pride fostered in big
businessmen by the burgeoning market. I think as the market expands and the
economy climbs, a plateau will be gained where the hardworking populace below
will trot into place like herds, furthering the country‟s advancement. That will be
the boom. Egypt could become westernized overnight. In short, wait one year.
Watch the veils.
I stop at Dubai, a constituent of the United Arab Emirates, to invest my curiosity only. One could walk
border to border in two days and finish for a dip in the Persian Gulf, but I spend the time afoot in the
fascinating Dubai City. An original fishing settlement having expanded along both banks of a creek plied by
paddlers and small boats, the present international business district is connected by a tunnel and two
bridges. Knee-length Kurta shirts with matching baggy Shalwear pants replace suits and males glide in
these long white robes between old mosques and posh malls. They are a sturdy, intelligent people from
what I see, but over-fed by the rich oil spoon here in the city. I‟m told imported contract labor –apparent
wherever a broom or shovel is lifted - includes housing and no option to marry or immigrate. My glance
around the city reveals a planned, modern face of concrete and glass built on the 1966 discovery of oil;
however, the minds under those sheets suggest a culture deeply rooted in Islamic tradition. People are
strange when you‟re a stranger, odder still as I‟m ignored in the city. Never on balance but content, I exit
back onto the emerging market tour.
Yankee Hobo continues the trail in Part II in the Philippines, Korea, Indonesia,
Thailand and Turkey, plus an Impact.
YANKEE HOBO IN THE WORLD EMERGING MARKETS
Bo Keeley „02
The emerging market trail was salted with surprises in part one. This second part picks up wiith
five countries to the end, and then some.
Preface: Hold these three things before investing here: Schools are the best
kept and attended of anywhere on tour, the people are honest, and they love to
gamble – from cockfights to market pits. Gauge the countrymen‟s pleasure and
learn his misery.
The exchange resembles a basketball stadium with “a Hong Kong scoreboard” –
electronic, 4-sided, and suspended from the high ceiling - so prices are read from
all angles. 80 little dealer cubicles cover the floor. Everything is modern, and
minds fly fast.
Across Manila lays the other market exchange with a hundred traders. I didn‟t
tour this, but am told it resembles the main event described above. The bigger
firms are computer-linked to the exchanges. The hours for each are Mon.–Fri.
I meet Hagedorn Securities, Albacus, Peregrine, and Angping Capital spread
over three days because of congested streets. I‟m informed store and bank
robberies, common in years past, now hardly exit for there‟s no chance of car
Hagedorn Securities was born in the early ‟40‟s and remains one of the oldest.
Spacious offices reflect earlier times and price movements are still scratched on
chalkboards. “We want to put in a modern electronic board,” a trader states, “But
the clients insist on the chalk on board.” There‟s a large seating area for patrons
to watch these. The securities staff is 50 with more in sundry divisions on other
floors. “We first brought Bloomberg to the Philippines and used it to research
Niederhoffer. Remarkable!” Adrenaline runs through the house today with
traders and clerks scurrying, and the chalk flies. The most memorable comment
of the hour is, “The investor must remember the oriental mind is ruled by
emotion, not logic”. The trader shakes his head as if in indigestion. “That‟s just
the way it is.”
Our contact is the most fantastic yet. Robert steps out of a James Clavell story
of the business Orient. He‟s hulking, bald as Kojack, in his early thirties, behind-
the-scenes guy, entrepreneur moonlighter, plays rugby, has a lightning mind and
maverick tendencies, and is the only licensed non-Filipino trader in the country.
As head of international investment, he dances through the office with all at his
fingertips. He also resembles a Pirate or double-agent, shadowy and a step
ahead of everyone, and I offer this man can help or hurt you very much.
He defers politely to a single man in the firm, the owner, who is purely oriental.
Jaba, wears many hats in various industries, sits on this-n-that boards, and is in
motion always. Different families appear to oversee the various country‟s
industries, and Jaba is the father of one of these. We get on well, but most of my
time is with the Robert the maverick. He‟s the answer man, personally knows the
other firms‟ presidents, has at request anyone on the phone using a thick wad of
business cards stored in a sports coat pocket, and anticipates me like radar.
The answers to your questions are here in some detail since it‟s the first broker
stop. The top ten brokerages in the country owe thanks to foreign investors.
This firm‟s share of the market is 7% where the average daily market volume is
$100M. A $1M trade of a large stock doesn‟t rock the market, and $2-3M single
trades are frequent, however a bigger one causes ripples. The top ten stocks
account for the majority of the index. A custodian is urged, and Hong Kong bank
is good. Margin is possible and normally 10-days that can swing to 30-days. Off-
shore stock borrowing is easy and takes the place of shorting. Settlement is T+
4. There‟s no index swap trading, but T-bills (in weekly auctions) and longer term
issues are handled. The only taxes are on dividends.
The steps in a trade are straightforward: Niedco phones Robert with the order,
he passes it on-line to the floor trader at the exchange who executes it with
forthwith confirmation. The scenario can be followed on Bloomberg. The
standing commission is .5% in and again out, with no other fees. “For larger
trades it slides down to .35% or lower. We accommodate.“
Looking to the upcoming year‟s economy, he predicts a general slow growth of
9% in the outlying island provinces, while in Manila 4%. Inflation is stable at 5%
now and 7% last year. The government is urging the people to go back to the
provinces where there‟s more opportunity and the response has been moderate.
Rice, the staple, influences the marketplace. In the May ‟98 elections, Romas,
who‟s been a “wonderful wizard” for the country, will step down. Closely observe
the outcome. Robert provides the names of young strong IPO candidates, and
the leader is Smart Co. The stock to look at now is Solid Group that has
exclusive rights on specific Sony parts for USA. The maverick passes the acid
test to brokers, “Do you invest in the stock yourself?”, with “Yes”.
“Education is the only way up and out for a national of this country, and special
attention is paid to it.” Also, the code of ethics is powerful. The family unit is
strong. There‟s poverty but no starvation; poverty here means discomfort in life.
I accompany Robert this afternoon to a rugby match where his bulk steamrolls
the field, though he‟s not the athletic match of some who grace the Niedco office.
I‟m surprised at the international overlap of rugby players into finance, as dozens
of players/businessmen from assorted countries compete in a schedule of
financial capitals. In a week he travels to Hong Kong for a six-country spectacle.
Robert was born in New Zealand, worked in England, lived and worked through
Asia including Japan, and has been in the Philippines since ‟92.
The next broker is Abacus Securties, established inn ‟90 and now ranked third
among the top 10. The facilities are modern, and this was the first brokerage to
have an electronic board. They have 3% of the total market share, and half their
business is institutional including a “few” foreign clients. Our contacts are Henra
and Lora, head and VP of institutional sales. I also meet the usual array of
researchers, traders and the firm president, all whose cards are enclosed. The
staff is fresh, informed, eager, no negative traits, and I rate them highly.
The answers on trading, commission, settlement and custodian run parallel to the
earlier broker. The general feeling here is that the present Philippine economy is
sound. Investments are a major driving force. The market is up 20% from last
year and should show sustained growth. The top ten brokers control a lion‟s
share of the market and are doing well as of three years ago, and much of the
reason for their viability is foreign investment.
The next is Perigrine Securities, and I shorten the report here by saying the
house and staff plus responses are similar to the previous brokers. Find a full
deck of business cards from VP‟s down to department heads, including literature.
Our main contact is Joel, the international trader. The consensus for the coming
year is profits are to be made in selected issues such as Mondergo (casino
resorts) or Lotadanin (gin and rum) despite overall dry news. Alhough I endorse
this firm, the other two are quicker and surer with answers. My input is to dig at
the underlying reasons for the top stock choices being casinos and liquor.
The next, Angping Capitol, is a top candidate. They match the others tit-for-tat
except are traditional Oriental, mostly Chinese. I meet owner Mr. Angping whom
someone whispers, “Mr. Angping is being shy because it is our way. He is the
number one man in the Philippine cement industry.” Industries simplified, I figure
one family runs each, and these network to influence politics; just an educated
guess. I imagine there are intermarriages for power jockey, as in royalty.
There‟s a delicate moment when Mr. Ping comes to me red-faced, “Should I call
you Bo or Keeley?” “Either or both”, I reply. “Should I call you Ping or Pong?” A
man‟s character is revealed in the way he fields a jest. Disarming laughs are had
all around and– at risk of chagrin – we may be remembered as daring traders,
and I better weigh this house.
The meeting is at a round table with dignified Chinese trying to contain zest so
not to lose face, yet they‟re nearly out of their skins to get our account. It‟s
classic: The noble president, whippersnapper right-hand man, the exotic female
international sales lead, and steaming tea. English is a poor second language,
so smiles and nuances carry the communication. I feel like a dog trying to read
cat body language. Note the better English speakers are quantified 1-5 on the
business cards, with the best here pulling a 3.
The securities division of this corporation has grown strong and fast since
inception three years ago. They‟re #1 broker for local investors, and #3 overall
with 70% of their entire trade done by foreigners. They own 2% of the market
share by volume. The fashionable offices spill over two floors where the staff
numbers 80 including four dealers and four traders.
Miscellaneous comments: “The Philippine psychology is „short-term minded‟.
Short-term minded mean today, long-term tomorrow, too-late is yesterday.” I get
the feeling these Chinese share not the Philippine penchant for gambling. The
overall economy is stable with the only weak link that exports are down. “Don‟t
miss „Midnight Madness‟ tonight at the Mega Mall!” Today is payday in city.
People spend money before it falls out of pocket.” The lines circle blocks, and
the spending spree begins at midnight when the doors open.
A personal incident nearly lost face for our company. In the custom at the round
table of exchanging business cards and bows, I fumbled for the dwindling stack
in my pocket and, like pulling a card off the bottom of the deck, produced a
condom to the beautiful head of international sales. Luckily only she noticed,
giggled, and I stuffed the accident back before it rose the circle. I apologize to
Niedco for this.
I rate this company high with the misgiving that their custom to clam up or smile
benignly replaces the awkward “We are the best,” or “We don‟t know that.” I
prefer all cards on the table and let faces fall as they may. Also, it may be hard to
find a good English speaker for a quick trade.
The Hong Kong Bank is experienced and highly recommended. The staff of 150
sits on an enormous bank of securities and money in a skyscraper in the clouds.
Our contact speaks good English. Opening the account in dollars or pesos is
easy, a basic custodian agreement, and there‟s not a problem to recoup closing
dollars. The best transfer method is swift. The system will be script-less within
months. Our contact states, “The market itself is high risk, and very volatile.”
The lanes of Manila, population 9M, announce the din of advancement, slow
and sure. Earlier, at Hagedorn Securities it was rousing when Robert motioned
out a large window, “There are eight malls either new or under construction
within a mile radius. These are signs of the city growth.” They also contribute to
a mall index I‟ve tracked casually for years. “Let‟s count the construction
cranes,” he said, and there are eight within the same area. We hadn‟t spoken of
my own crane count either, but evidently he‟s read of the lower indicators fed
Niederhoffer by a hobo living in his basement. The malls are jammed and the
cranes are moving. One of the new malls is said to be the largest in Southeast
Asia, and 9 of the top 10 stocks at the market have interests in malls. Note
among Hispanics and many third world countries the mall occupies a more
prominent place in the people‟s intent than you might think. Families plan
picnics, pleasant views and buying sprees under one huge roof because of the
air conditioning with escape from street noise and pollution. Think of a Manila
mall as a combination of NYC‟s Central Park and a bank. People in the
shopping centers and streets say the government is stable, and after a slow
growth they expect a big spurt in the homeland.
The red districts fall under scrutiny and are busy as monkeys at a flea
convention, a good sign. Equal time to all, and what of prostitutes as lower
indicators? She, like the secretary or janitor, is another Filipino worker. She
goes to the job, punches the clock, and goes home. The force is female, young,
pretty, savvy, hungry for money, cheekier this year, and competitive. I favor one
in orange who has my tongue, “Wanna date, sailor? She has hopped off a park
bench to stand out from the bevy. The ensuing interview reveals the price of fruit
has increased with a burgeoning local women‟s liberation movement. This also
explains the swollen assertiveness of the ladies at men who don‟t make prompt
advances and quickly find the tables turned. My normal position is to sit in a red
light area for an hour and quantify workers, Johns, offer frequency, etc. Most
women now ask for a business card or hotel phone before leaving the company
of their friends. One shares this for security, to roust a prolonged session, for her
girlfriend to come in minutes for an emergency, and to repeat business the next
night. The best time to frequent red light areas for such an parlay is after prime
time around midnight. Anyone left then charges less – easier on the slim
expense account – and is eagerly taken off the cold street to talk. She starts the
clock beating with the first words and research often carries into the next morning
for she has no other business so late. The gal who was in orange reports upright
times with elevated prices and fierce rivalry. I work many nights running on this
Repeated blackouts are an early indicator of down times and continue to plague
major cities here, but not so badly as in the past. Once I sat during a two-day
blackout in a candle-lit circle of Filipinos at a wake of the father of a lady I‟d met.
Instantly the chair under me shattered into pieces and I sat on the floor. At that
moment the city lights burst on and jaws dropped around except the old man‟s
whom witnesses looked to for more, but I fled the scene before finding out.
This island nation is 7000 land dots separated by sea that requires a boat or
plane to link. I‟ve visited many previously except the southernmost group that
currently is off limits because of Moslem friction. The more populated islands are
so many progressing modern states contrasted to the thousands of tiny, fairly
uninhabited islands that lay as sleepy escapees. I want to call on them all! I land
on a distant one after the week of broker meetings. Palawan is what happens to
Gilligan‟s Island after capitalism moves in, and may be a model for emerging
economics in other islands, or in little far-flung nations. You decide whether or
not it‟s advancement. The capital Puerta Princessa speaks of evolution within its
own generation. The fresh look of unused education on the children‟s scrubbed
faces, more electrical current pumps through enlarged lines, and construction
projects scratch the streets everywhere along with assorted flea markets and a
new dock with boatloads of new merchandise unloading daily. Listen, a newly
busy port town like this often leads a greater wave of economic growth
throughout the country. (I‟ve seen it in one country after another in my travels)
Recall also, the Philippine government presently encourages Manila and larger
island residents to relocate on smaller ones like this.
The young:old headshake ratio is useful here and elsewhere. The young lean
into their strides with forward-thrust chins and dollar signs in their eyes, while
their grandparents shake their heads side-to-side in disgust and resignation. So
much to have changed so quickly! And what of the parents - between the youth
and aged? The parents struggle between two tides and don‟t figure into the
indicator, but likely after the modern economy is in place they‟ll swing to the
younger generation, the grandparents will die and the ratio falls to the wayside.
Today, however, I‟ve never seen such a high headshake quotient anywhere,
indicating great change. There‟s an attractive side effect: It should take two
generations for capitalism to root here. The reasoning is from ground zero the
first generation denies capitalism even as seeds grow in the cracks; the second
is confused by it, and the third is gung-ho and contributes so free enterprise
takes off. Apply these principals also to the brokerage houses where Chinese
conservatives due to footholds in industry have dominated until recently, but now
westernization, particularly Americanization, supplants them in full force. That‟s
a lot of head wagging. I believe old oriental ways at the firms will drop after the
grandfathers pass, for better or worse. On an even larger scale, as the world is
swept clean by the little brooms of emerging markets, a global paradigm shift
may follow with the old shaking their heads reactively to a new world market
On another island, I hurriedly exit the port city and am engulfed by the thick
tropics with a parade of picture postcard scenes of coconut trees, sandy
beaches, and hut villages on stilts hidden in the jungle. Remember, in scouting
for indicators in these small towns, general custom replaces individual feeling. I
travel rough for days in/on “jeepneys”, hybrid bus-trucks where passengers ride
seated, in the aisles, on top the roof or hood, or hanging from the sides and
bumpers. The superior spot is bucking along the top, ducking branches for more
views. The ride‟s akin to “decking” the roof of a freight train with the same
advantages and hazards. A vine nearly decapitates me while distracted by a
monitor lizard 5-foot long crossing the road, to get to the other side I imagine.
Another moment I get stung in the eye once as the truck pitches in a rutted track
and I claw the roof edge until pulled being back aboard. One ancient jeepney
drinks in the radiator a gallon of strem water every thirty minutes all day. At
wider rivers, I become the bellwether for kids riding atop who follow my jump to
the bank when the ford looks deep enough to make the bus go submarine. The
trucks crawl only to stop every fifteen minutes for passengers, cargo or water.
One brightly colored jeepney has three flat tires in as many hours, but the fifty
aboard remain cheerful until the bus kicks into a rough spot and sends a crate
flying from the top, crashing and spilling wine bottles across the road. The owner
hops madly around the broken bottles but after the cleanup, cheers and passes
around free samples.
I tour a penal colony on the far size of one isle where convicts with very long or
accumulated sentences are put out to pasture. Bank robbers, murderers and
others with lesser crimes work small industries like wash, or tend administration
gardens and clear jungle roads. I discover the colony while riding a “tuk -tuk” or
3-wheeled motorcycle taxi on a country road that suddenly comes upon a work
gang of 60 convicts restrained by shotgun-wielding guards. We dead stop as the
group of heavily-muscled men with machetes cut, chop and drag a fallen tree
from the road ahead. A whoop goes up, and without warning the gang turns and
begins running at us. They close to five yards and I await shogun blasts that
never come; instead the men split like a river at the tuk-tuk bumper and flow by
either side until the last passes and the guards follow. Simply, the work day had
On the next island, I catch a ride along a rural road that opens to a clearing
where dozens of cars and bicycles stand outside a tented stadium. It‟s a cock-
fight! This is to the Philippines as bull fighting is to Mexico and horse racing is to
Hong Kong. Inside, circled bleachers around a central 10-yard ring are tiered up
the tent sides to seat about 400, and the crowd is riotous among flying feathers.
Instantly the ruckus abates as the assemblage spots me, the only gringo. I peer
deliberately about the stands, thrust up my hands like Richard Nixon and throw
both thumbs. The noise swells instantly as if the volume is turned on and all
eyes go back on the roosters. Blood flies, booze flows and bets soar. The rabid
gambling is a metaphor of the marketplace floor.
On a different island, I stumble into a scenario that conjures the “Dumbo
Speculator” who reads line lengths at Orlando‟s Disney World. Upon drawing
near, I see a man tossed far above tree level tethered by an elastic rope. He
drops below the coconuts and I trace a roar of approval to an open area where
stands a four-story derrick. It‟s an inspired bunji jump! When it‟s his turn, one
person steps from a line to climb a single-story tower and is strapped into a
harness. The thick cord hanging from the crane is stretched by winch downward
to clip to the harness. Another rope that has been securing the man to the
platform is snapped free and he rockets. He sails above the crane by 20 yards
then plummets earthward to the elastic‟s maximum just above the crowd‟s heads,
and bobs up and down like a yo-yo until coming to rest in midair. The ride‟s
applauded passionately, and the next steps up. The line of people is a block or
45 minutes long and heavily weighted by Filipinos compared to whites like me
who gawk on the sidelines. That's why I offer this corollary of the bunji index that
the more in line for them the higher volatility of the market. One of the largest
bond traders in America lives near Orlando, Fl. and frequently takes his kids to
Disney World. The Dumbo ride is the most advertised and popular ride among
families, he says, and there‟s always a line with a sign out front informing the wait
time before the last person in line gets on. He jots the number of minutes and
graphs it vs. the bond movement throughout the year, and claims the Dumbo
index is as reliable as any for trading bonds.
Back in Manila, my fondest bizarre memory is the Hobbit House. In your mind‟s
eye enter a bar from R.R. Tolkein‟s The Hobbit. Everyone is a dwarf two feet
shorter than I, and a rock-and-roll band of short-people slams out a Chuck Berry
tune. I eye an attractive lady half my height and ask to dance but am rejected. I
withdraw not knowing if I would have picked her up during a slow dance or gone
to my knees. Perhaps the most enjoyable peoples of the world – from a roving
misanthrope – are Filipinos. They still call me “Joe “ or “Hey, GI” even wearing a
business suit, leftover from when it was occupied and badly damaged by the
battle for American recapture in WWII. They‟re by and large scrupulous,
industrious and prone to speculation. They take profits with lumps, grinning, as if
playing a bigger game in life, which must be factored.
The literature on and mailed by Niedco preceded me and paved the way to
productive talks; thanks and please ensure they arrive to boost other country
wins. The exchange, five brokers and custodian reported above all lay within the
capital, Manila. This bustling metropolis shows a plethora of LI‟s particularly in
the clogged streets. I see one traffic cop in a cowboy hat, unmistakable for his
unhinged dance in busy intersections, whom I encountered seven years ago.
He‟s the symbol of freedom, of speculation. Hard work is fashionable here,
reminding me of „50‟s America. The people and land are fertile for the seeds of
capitalization. Filipinos are gifted with their hands but not prone to piggy banks.
“Working hard to get paid and gambling it off are in our blood,” I‟m told,
suggesting a mindset of American subcultures like cowboys and hobos. Bet on
everyone to take an honest paycheck to games, to lose, to have to work again.
The cycle‟s ideal for speculation, or for self-perpetuating capitalism, like jumping
into a skip rope.
Robert of Hagedorn Securities has been my astonishing guide, and I suggest he
knows what we want and will cater it. His contacts are of enormous value, he
does things directly with a knack for at once grasping detail and general concept,
he‟s non-Filipino and well-traveled, is an original thinker with strong backgrounds
in business and sports, his age allows him many years before dropping from a
heart attack at the pace, he‟s fascinated by the Niedco peculiarities, and he‟s the
first to study us before we study him. In baiting a mouse trap and leaving room
for the mouse is a way of saying in business to offer latitude with options, and
Robert figures I‟m able to take one, or leave all. Ensure a backup if he‟s off at
rugby. As for his firm, it‟s old, established, large and the only poor mark is the
chalkboard. Most the other houses get high marks as well. For a truer oriental
flavor consider Mr. Angping‟s outfit, and that malls are much made of cement.
Keep in mind the Chinese oversee the majority of Philippine industries which turn
the market. Why not try both houses?
The Philippines is acclaimed as among the best emerging markets in Southeast
Asia. It‟s my job to evaluate the brokers and if you believe, as I do, that they‟re
as capable as any on the world trail so far, it falls then on my second duty, to
estimate the potential for investment. Watch this country more closely than
others since it‟s riper. The May, ‟98 election may be our pivot. Many feel the
market, driven by foreigners, will shoot up after it. There are also great
opportunities in IPO‟s and seed capital projects – common here – in a style after
our own. There‟s another personal reason to Niederhoffer for the Philippines
allure: The market‟s a gigantic poker game because of the gambling habit of the
natives. If one can read their hands, one can predict his winnings. Temper this
with the fact that foreign investment plays heavily into the game, so stall for trade
times when the more foreseeable local element enters strongly…then push your
Singapore is inserted into the report because it must fall somewhere in the scope but, of course, it‟s a
different island nation and apart from my emerging tour. Many of my flights within Southeast Asia countries
land here to shuffle passengers before continuing to my destination. I stopover one day in the capital with
which I‟m familiar from earlier travels. Upon stepping from the plane the dissimilarity to other Asian cities is
immediate. Everyone is educated and the streets sweepers look like professors. I ride the subway and walk
a mile before finding a single piece of litter, with no butts the whole day. The eyes of the locals are clear,
smart and the penalty for drugs is hanging. I have a personal theory developed from years of globetrotting
that the world‟s going to hell in a hand basket floating on drugs, but here is reverse support from the
immigration form visitors must sign, “DEATH TO DRUG TRAFFICERS”.
For other indicators, the new car index is astronomical at about 95% with nearly every auto in city lanes
being shiny new. It costs about $50,000 just to get a permit before the price of the car. In like, everything
about the city is modern. Utopia, a planned dream community comes to mind, and someone explains
(English widely spoken as a second language) the existence of an autocracy that takes care of all. “The
ruling party is a brilliant mind group”, I‟m told by a citizen on a bus. People are content with automatic
smiles and have no conscious want, but… Did you ever read Watership Down about the hutch of rabbits,
perfectly tended so having no needs, until a group of breakaway rebel rabbits re-educates them? Did you
ever see the end of Stepford Wives where the perfect citizens are revealed as androids. The Singaporeans
are not these, but they risk becoming automations in a real-life sequel “Stepford Island”. Singapore has a
strong emerging market but since no appointments were set, I choose not to adjust my itinerary to stay.
On the flight from Singapore, I sit in an aisle seat and read with shoes kicked off and sox in the laundry (and
they call YOU the “shoeless trader”) when a middle-age man walks by and collapses on the floor to my left.
Oh no, I‟m going to have to work on this heart attack barefoot, I think. Everyone on the plane is oriental and
prim, and the guy in the aisle is white as chalk. I suspect he‟s just made his worst business mistake, but
because of the colorless complexion and blank stare can‟t tell if he‟s under arrest or just fainted. Many of
the Orientals face value this look while their minds work inscrutably behind closed doors. His breathing is
slight and there must be resuscitation within 15 minutes or his chances are nil. The passengers shriek and I
begin to rise when the attendant rushes up and kneels over him. There‟s a Chinese shout and an oxygen
tank is wheeled out of nowhere. Slowly the man slowly regains consciousness and is helped to his seat
where he‟s okay for the rest of the flight.
Preface: I knock on brokers‟ doors cold. Small men peer through the glass and
scurry for an English speaker. “What you want?” I press a business card to the
window and yell, “From Niederhoffer Company in America.” “How much you
worth?” “125 million dollars.” The doors open.
The key to locating the exchange is the Korean phrase for „financial distinct‟
which I gain from a doctor in the form of a prescription and jump in a taxi. I
discover the exchange in a futuristic high-rise centered on an island within Seoul
curiously called Manhattan. I enter a swarm of round, brown faces and find
myself tailed by a secretary who taps my shoulder, “I wanta practice English.
You speak?” She leads me to a visitor‟s gallery undergoing construction so
precluding a personal view. The tail says the floor trades 25M shares daily for a
total $400M Korean. There‟s direct computer linkup to the broker houses. The
hours are 0930-1130 and 1300-1500. The atmosphere is electric, as is my
escort. She just returned from vacation in America, so I ask for the fondest
memory. “There so much room. And you get to jaywalk!”
Having pinpointed the exchange amid myriad skyscrapers on Manhattan, I drop
the idea of getting help stateside and pound doors and windows along adjacent
streets. Most signs are in Korean and few greeters speak any English, but I visit
two neighborhood brokers, KDB Securities, and LG Securities.
KDB securities yelled, “Come up, come up”, when I announced the Niedco fund
size, and I did. Our contacts are Sang and Kang, both managers in the
“Gentlemen, there are two things you should know about the American company
Around me, the Korean eyes narrow.
“The Niederhoffer Fund is known for its unorthodoxy, and its success.”
The splash of our literature is an exclamation point. Headlines: "Victor
Niederhoffer – Renaissance Man of Wall Street" (Opportunity, 11-19-96), "I owe
my success to the Enquirer says Wall Street Wizard," (The Enquirer, '96),
"Whatever Voodoo he Uses, it Works" (Business Week, 2-10-97). They read
slowly, grunting in rumination. I twiddle my thumbs for ten minutes until they look
up and beam.
This huge conglomerate has a total staff of 700. The securities section opened
six years ago and is tenth ranked of the country‟s 40. Note only 15 of these,
including this one, handle foreign clients. Sang and Kang are among four
international traders, and their English is the best, though sketchy. A license
from the exchange is required and they‟ll facilitate it, then the account is easily
opened with a custodian bank recommended. Liberalization of broker and
foreign trade regulations should take effect in six months. The commission is
.5% on buy and sell, and though “fixed” it‟s lowered slightly for large trades.
There‟s direct computer hookup to the exchange floor, where it‟s automated
without floor dealers. No taxes on ttrades. The firm deals in T-bills but
foreigners aren‟t allowed to participate.
“Economy poor. Korea no tiger. Maybe soon.” International competition has
brought the nation to its economic knees. The steel industry is down to the tune
of decreased worldwide demand. Land prices have risen dramatically in this
country whose length can be traveled by train in a day. The cost of labor is sky
high, so anything requiring such as construction is dear. Optimistically, there are
two theories on the economic turnaround and market comeback: The first states
the market will bottom this year, the second that it will bottom next year.
LG securities is just down the road and ranks #2 among all brokers. They own
15% of the market share and trade for many foreign investors. They claim there
are four major international brokers in Korea of which theirs is tops with a staff of
four traders specializing in foreign clients. You have the contact cards. The
responses to the usual questions parrot the previous house, and their English is
This particular firm does well in these tough times since it‟s large and
successfully shorts the market. True, the economy is down but it won‟t reach the
lowest until either the second half of this year or the first half of next year. Then
comes the turnaround, and the market will shoot up. The deal on the steel
industry is interesting with the economy needing much its export. Giant Humbo
Co. went belly up recently precipitating a political scramble that caused
government takeover. With the government at the reins of the giant, the Korean
steel industry isn‟t as lame as some think.
With little to go on and less for comparison, I recommend these two brokers
because they‟re big and seem honest. A trading room without orders is like a
house with closed windows, but the traders I view overcome torpid times with
hope and reading material.
Three items fall under this heading: The Insightful, nightly chats with my
doctor/landlord, the city of Seoul from its streets, and searching for Victoria.
The doctor mentioned earlier in this report is a panacea. Candid, traveled,
informed of Korea‟s situation, and inquiring of USA, we talk evenings. “Korea is
working through its worst economic times ever. Big companies are going
bankrupt while a general depression sweeps the land.” The economy is
dominated by corporate conglomerates that make charitable contributions to a
government that is making bad decisions, perhaps based on personal interests.
His take on the steel industry is the 3-D factor, soon explained. The labor fee is
so high as to be prohibitive; for example, maids make as much as the technically
skilled. “It‟s crazy! People avoid what I call the 3-D jobs – dangerous, difficult or
dirty.” So great is demand that a street cleaner makes as much as a dental
hygienist. “The government is a mockery. It‟s common knowledge that it‟s
holding the country back. Better times to come after the national election, then
recovery will be slow but sure.” His specialty is internal medicine.
Seoul is the capital with about 10M population and was the site of the ‟88
Summer Olympics. Drunks litter the streets in which there is no other garbage.
Good people staggering and dropping everywhere without worry of getting soiled.
Singapore has spotless lanes because of penalty, whereas here I think
cleanliness is due to Korean honor. So why do they drink? That‟s the potential
indicator I‟ve tried to survey elsewhere – Yugoslavia in the 70‟s, and China in the
80‟s - a spin in history when a fairly virtuous populace is driven to drink by an
oppressive government. They are escape artists, not drunkards, drinking to
remain stable. A few drinking tents are erected along the streets, in lesser
numbers now since the government outlawed them. I strain outside to catch
tones through the material. More often, a well-dressed man or woman buys a
single bottle from a store and walks the town alone until he can hold no more,
then falls on the spot. I slalom dozens nightly. They don‟t otherwise litter, and I
watch transfixed today in a subway as a schoolgirl erases a quarter-page of
writing, ostensibly to save paper, then carefully brushes the particles into her
I walk into the university area, today infiltrated by police squads in full riot gear –
helmet, shield and club. It‟s a blast from the American past when anti-war
protestors battled police lines in tear gas clouds around campuses including mine
at Michigan State. Hundreds of cops bus from one corner to the next, perhaps to
inflate their show. The milling students scowl at the buses and an English-
speaking pupil tells me, “Student riots are „seasonal sport‟ with the riot squads.
We‟re mad because idiotic government cheats the nation by skimming profits.”
Ten thousand mice nibble at each policy passed down.
I journey the 500-mile length of the country by train while waiting to hear from
Niedco. The northern portion of S. Korea is mountains and uplands, but soon the
hills flatten into rice fields with primitive little greenhouses of clear plastic
stretched over sticks to give private gardens a jump on spring. It‟s agricultural
scene after scene rolling by, dotted by infrequent primitive highway construction
or minor building in hamlets. Whenever I see the moon on two consecutive
nights to know the wax or wane, I reflect on my first off-beat indicator letter to
Niederhoffer on “Full moons and the marketplace.” Guidelines for gardening are
unchanged and straightforward as to the moon. Generally, farming activities for
growth and production increase, especially for plants that produce above the dirt,
during waxing. So, fruits and vegetables to be eaten soon are gathered at the
waxing moon. Planting crops that yield below ground, and harvesting for food to
be conserved or preserved, occurs best during the wane. On the whole,
speculators are thought to become more volatile under a full moon. I must
remember to ask the yield, if any, of that early informal marketer‟s almanac. The
Korean train network is adequate, more easily more maintained by the country‟s
diminished size, and puts to shame USA where even many hobos won‟t ride
Amtrack because the double-deckers speed dangerously fast and the schedule‟s
spotty. Two of the five Amtracks I‟ve taken had accidents, but only one of the
250 freight trains. On this Korean rail trip, I take in the land as one of Asia‟s
“Little Tigers” because while rice fills the stomachs, the breath of the nation is
from competing tenaciously in the international trade of manufactured industries.
This is at once the most pleasant and challenging of countries to get around.
Everything is unfamiliar, getting lost is easy, and no one understands the word
“help” though they want to. Once back in Seoul where one-quarter of the country
lives, everything seems so raw and fresh.
My thought is the economic situation is a veterinary predicament: The country is
a tigress caught in a physical depression. It has such strength by nature that it‟ll
outlast the condition, and knowing this one should buy it now from the pet store
while the price is cheapest. On the other hand, who wants a sick tiger when you
can wait till it recovers. (I‟ll continue this line in the summary.) The strong stock
of the S. Koreans, nearly entirely ethnically Korean, is supported by their isolation
on this distant land claw. Conceivably, you can judge the country‟s prognosis by
the peoples‟ makeup, and the people are big-handed, strong-hipped, wide-
cheeked, tall and defiant, with intelligent eyes, deep morals and working minds.
It‟s all in their steps, the short bitter butts they toss, and the drunks who fall
before getting home. They won‟t be kept down.
On return to the capital city there‟s still no word from my company. Where are
the financials? Why have there been no answers to my faxes in the past two
weeks? Where are my contacts? I'm wandering the city like a lost soul after a
milk-run air flight and train run down the peninsula, and am haggard. I assume
by your long record of achievement that an emergency has popped up, yet is it
so great as to abandon the Yankee hobo? As last resort, I'm faxing the boss‟s
I‟m stranded in a far-off country called South Korea with no English speakers or contacts, and no
one met me at the airport as was supposed. My support staff in your dad‟s trading room has
apparently disappeared. Your mission, should you decide to accept it, is to bail me out. I located
the exchange only by going to the finest hotel in Seoul, the capital, and asking where the stock
exchange is. The best English speaker pulled a thick dictionary, looked up “stock”, and said, “You
want go where pigs live?” I shook my head. “You want go where horses live?”…He went down the
animal list and ordered me out to the street, despite my coat and tie.
They let me send this fax from the hotel before kicking me out. Victoria, I‟m not kidding. Imagine
my plight. Right now, go upstairs to the trading room and ask someone to contact me. Tell them I
need the names of the guide or brokers that were to have been sent a week ago. Use the return
number on this fax, and maybe they‟ll let me back in to pick it up. Fulfill the mission and make
money for your father to pay for this.
The fax reply never arrives, so I wander afoot refusing to return to the airport
before gathering intelligence. Having located no proper English speakers at the
best hotels, the next thought is the tourist board, but of the bevy of ladies only
one has a small, scattered vocabulary. I learn the word “doctor” and am raced to
one who speaks English and runs a convenient bed and breakfast out of his
home. This is my salvation. With a prescription that says in Korean, “Take this
man to the financial district”, the Seoul stopover evolves into a choice opportunity
to knock on brokers‟ doors cold. Without advance notice, they can‟t and fluff the
cushions and call the shills. It becomes an adventure, and you‟ve read the
That said, I‟ve learned South Korea is not the freewheeling capitalist society
some hope, but at present a nation strangled by government bureaucracy.
“Everything is regulated down to the flavor of ice cream”, someone told me. I‟m
also informed the restrictions on brokers are relaxing over the coming year, and
perhaps the market will become the vanguard of advancement. Watch but
hesitate before jumping on the wagon at that bend. Korea is so geographically
isolated and clothed in its old ways that it may take about one generation after
the freeing and return of the market for the true effect of nationwide freedom to
ring in the safety of your investment. I‟m hinting at a one-generation lag from
economic turnaround to point of entry. There are similar examples in Mexico
along the border where “wetbacks” enter, work hard in America, but a gap of one
family generation is necessary before the children break loose from the old and
are captured by the new – language and ways – with ultimate progress. It‟s a
case of the father working not for his son who‟ll stagnate in the transition, but for
his grandson who‟ll prosper.
The natural house choice from the limited field is LG Broker. If you plan to enter
this country in a big way and require more than one, remember there are now
only four in the country with international desks. Ensure the contact speaks
English, plus a backup person. The brokers are eager for business but
honorably point to the future as a better enter point. Pre-arrange a return trip
with a local house before placing any money. Keep glasses on the steel
industry, elections and market liberalization. Wait until broker regulations and
commissions relax in a year, or when there are “absolutely no limits on the
brokers by the year 2000”. Also, look for the people to straighten, then come into
the country. I bet they define the world resiliency, and when the economy in
which they live reaches rock bottom, their mettle will show.
A side trip to Taiwan is included on the Korea ticket, and though not part of the emerging market trail, this is
where twenty-five years ago I initially learned the vacationer and businessman can be one. I was fresh out
of veterinary school, just moved from cold Michigan to the sunny California, and took a left turn that‟s proven
vital. While waiting six months for the multiple-choice California vet boards result, I started hitting the
racquetball around San Diego, mecca of the new-sprung sport, and got sponsored to play the pro tour.
Leach Industries was the leading racket manufacturer in the mid-70‟s, and invited me to join a three-man
team to go to Taiwan to combine forces with the world‟s leading all-rackets manufacturer, Kuhnan
Industries. The brain was the head of Leach, the brawn was the chief engineer, and I was the pro on
display. My part, once there, was to impress the Kuhnan people, many athletes themselves, with racket
prowess. This I did, and posed often holding an oversized 4-foot racquet for photos. I learned nuances of
business in another culture: if one bows, do it low; the practicality of gifts, a Chinese given; provided “dates”
and the snare of mixing work with pleasure; and if you‟re the best the appointment knows, it‟s good enough.
Incidentally, we flew away with the contract, the companies subsequently merged, and – much due to this
outing – racketball swept America as bowling had twenty years prior, and made many including myself
money and small fame, before dropping to the wayside in popularity.
Now on the Yankbo tour, the streets of capital city Taipei are like an anthill aflame with citizens. The fire is
in the people is free enterprise, plus throwing off the traditional ways. Though this country isn‟t considered
within this tour and there are no prospect appointments, there could be next time around.
Preface: Rising out of the surrounding miles of stench and garbage is the
business skyline of Jakarta. This oasis has grown in diameter and height since
my previous visits, so now it‟s a moderate taxi ride from hotel to appointments.
The architecture is magnificent, comparable to Hong Kong. Remember,
however, the base sits on acres of trash and open sewage, hovels and litter
blowing in the wind.
This is the Jakarta exchange, located on the ground floor of the reflective
skyscraper that houses the larger brokers. It‟s up-to-the-minute including a
public gallery and electronic signs that flicker prices. The most fascinating angle
is looking down at the floor which is set like a carpeted Roman amphitheater. It‟s
stepped and sprawling and on the tiers lay some 500 computers manned by floor
traders. What a contrast to the screams on the floors of public outcry trading!
There‟s no shouting when things reach a fever, though I‟m told the 500
computers hum and buzz. There‟s direct computer link between the house
dealer to whom you‟ll call trades and his man or men on the trading floor. The
exchange is squeaky new and so tight, I‟m told, it‟s hanky-pank proof throughout
the trade. The average daily volume is $240M and single trades of $1-3M are
“medium sized” and frequent, but a single transaction of $10M causes a shock
across the market. The hours are Mon.-Thur. 0930-1200 and 1330-1600 their
LIPPO Securities is the only listed public security company, 2 nd by volume
among the country‟s 230, and handles foreign accounts with regularity, including
George Soros. The firm occupies a floor of one of the sundry skyscrapers rising
from the city streets. The equipment is ultra-modern and the personnel sharp.
Our contact is institutional sales head, Huri, who went to school in San Diego and
is direct, efficient and reliable.
My opening comment must be on Ramadan, the ninth month of the year in the
Islamic calendar. This comes no doubt as a weird indicator to your trading room
in Connecticut, but I accent it here. Ramadan is 30-days of ceremonial rigor
including fasting among the Moslems that compose 80% of the country
population. Business slows dramatically for one month akin to a blackout in
America, to continue with renewed vigor at its end. My reasoning as an indicator
is most the traders here, judging by their life stories, are recently successful as
this is a freshly emerging market, yet they staunchly maintain their religion. The
men in these offices don‟t have to suffer through it, but choose (it appears to be
from piety rather than peer pressure) and it shows in their character strength,
something we wish to deal with. It‟s more difficult for the newly rich to fast than
the long poor, and my opinion base is personal. We‟ll see how Ramadan comes
to play throughout the report.
LIPPO has been in business since ‟89 and presently holds 7% of the market
volume. Of this, 64% is from foreign clients, and of the markets‟ total foreign
investment 67% is via this broker. They‟re hungry for more. Huri will make an
exception and begin trading immediately without any forms being signed. No
licensee or permission required, and no capital gains tax. A custodian bank is
needed and he recommends Standard Charter or Hong Kong Bank. The
literature suggests a fixed commission of about 6% on the buy and sell, but our
contact assures its dramatic lowering due to our large volume. Settlement is T+3
buy and T+6 sell. There‟s no swap index trading, and T-bill trades begins in
The general economic picture has a double standard. The standard of living in
Jakarta is high, while low in the rest of Indonesian. The villagers cannot afford
the city. Huri offers, “The country economy is better than the world thinks.” The
growth of 8% has been steady each of the last 15 years. The inflation rate is low,
last year 5.6% and this year 1.2%. The currency is stable with trade increasing
each of the past three years. The state of the securities houses is the top fifteen
are holding well because of foreign sales, with the others struggle. There are lots
of IPO‟s and companies to put money into, and you‟ll receive a list prepared by
the research staff. He confirms there‟s much ongoing construction in the city,
and the government estimates it would take one billion dollars to modernize the
present open sewage. Till then, as long as there are periodic rains, the city
smells like roses.
The LIPPO traders and workers are gaunt after a month of fasting from sunrise to
sunset, but joyous in liberation from it. They‟re disciplined Moslems and don‟t
celebrate with drink or sex, but put their refreshment back into business. They‟re
a hard driving lot, something I don‟t need to tell you about. The interesting angle
is that during Ramadan, ending a week ago, inflation rises as the economy
slows, then predictably recovers. This happens almost every year. It reminds
me of dry spells in the low Sierras when growth‟s put on hold, and one must
watch for wildfires that probably won‟t spring up. I believe the firm, like Huri, is
capable and worth working with.
I‟m sitting in the next broker Barings, Johnny-on-the-spot typing this report
across from the international sales room. Public computers are hard to come by
in these far-flung countries, and after interviews I often ask to use one to write
and express their report in a timely manner. Silva, the main contact with whom I
spent the past hour, now sits through the glass at the international desk. Next to
her is Darwin, the boss, with whom I spoke for ten minutes and wanted more to
plumb his formidable market knowledge. The total staff of 60 includes 4 in
international sales. Sexes are split half-and-half, and are fairly independent of
position. The exception is all males in the settlement room “Because their arms
are stronger for stamping the certificates.”
These offices occupy a dozen rooms of one floor half-way up the glass-sided
skyscraper that houses the exchange. Furnishings include state-of-art
computers and a lavish meeting room with a 20-foot table, built-in telephones at
each chair, and a lazy-Susan microphone. Barrings was born into securities in
‟90 when the market opened, and boasts of being one of the originals while
thanking foreign investment for the market‟s dawn. They‟re still grateful, hence
the red carpet wherever I walk. They rank among the country‟s top five, capture
4% of the market volume, and are a leader in foreign funds. There are offices in
London, San Francisco., Singapore Hong Kong, and NY, and Niedco has the
option of trading via the latter.
A trade works like this: Niedco calls NY or the international desk here, the trade
is keyed in and transmits by computer to the floor trader located a few floors
below the exchange. the floor trader executes the trade via the central exchange
computer on the floor, and the info returns by computer to Silva at the brokerage.
She confirms by phone to us, and the official printed confirmation is sent in the
The economic forecast is for continued growth at the same 8% rate of recent
years. The market dances very much to the tune of politics, but the upcoming
national election won‟t affect the market because “The winner‟s predetermined”.
The government maintains a successful program to keep devaluation at 3-5%
per year, and with currency stability there‟s been a huge influx of foreign money.
The head analyst adds that in the near future Indonesia will be the leader among
the Asian emerging markets. Everyone here is emphatic that though non-Asian
eyes are focused on Thailand, Indonesia is the better speculation. For this,
Silva and two team members recently turned down job offers in USA following
graduation there. Foreign interest In Indonesian IPO‟s and value companies are
“a really big show”, as Ed Sullivan the analyst say. Barings is a primary liaison
and shall contact us as these crop up. Also, find a clipping of IPO‟s for sale that I
pulled from the full last page of the Indonesian Observor newspaper.
Their responses to my prepared list of broker questions are unhesitant and vary
little from the previous brokers. There‟s a clarification that big houses use a
sliding commission based on trade size, going down to 1% on the in and out,
though it may drop to .7% on gigantic deals and lower as the broker-client
relationship grows. Their best stock picks are Indonesian Int‟l Bank, which I‟ll
back as the manufacturer of the thousands of little motorcycles and mini-vans I
see crawling below on the city lanes; and the colossal Toll Co. that makes sense
given the on-going construction of „flyways‟ or elevated traffic shunts over busy
city intersections for which a toll is levied. I like the working, qualified, friendly lot
in this big firm and issue many gold stars with no black marks.
Carr Brokers, the third and last on the schedule (though I may do some
independent probing later) is an enigma. Where the others dusted the rug to
their executives‟ offices, this firm chose the back door route along a shabby
carpet to a second-level man. He, our contact, is Irswin whose English is fine
and sharp eyes are distrustful. They‟ve been around since ‟89 and have a staff
of 60. I get the feeling they think I‟ve dropped by unexpectedly into their global
poker game where they think I‟m bluffing despite our have our advance package.
His answers are dodgy and he doesn‟t show enough cards to earn a
recommendation, particularly in light of the two other class brokers.
There are signs of the times across Jakarta. The incoming flight reveals a
marked brighter glow of city lights since my last visit five years ago. The voltage
is upgraded, with probably fewer blackouts. I‟ve commented on like progress in
Central and South American over the years where on night flight approaches and
takeoffs I‟ve watched major cities extend electrically into the landscape. The
streets shine with new autos by approximately 15% increase. There‟s frenzied
construction in the business sector, with numerous „flyways” or elevated
highways along congested areas. The alley cat index holds high and steady
since my last stay here, bearing out constant filth, hence rats about the city.
Curiously, the white dog indicator is down. Recall the more white dogs the fewer
poorer roads, brakes and lighting; thus the less advanced the city. The darker
ones get run over. I feel comfortable in calling this an official sign having
monitored it around the planet for years. One also studied the walking males
under streetlights in the touristy spots and every twenty minutes a young lovely
would take him by the hand to a nook. Now it takes about three times as long for
the approach, ergo the standard lay index has dropped. Commission sales in
assorted shops and businesses are on the up, a signal of economic headway,
reflecting better service. Businesses emerge from many slants when employees
are rewarded in part by sharing profit. Finally, general wages are up to ten bucks
a day for Jack and Jill Indonesia for secretaries and day laborers. The net result
of this plethora of indicators, nonetheless the mysterious disappearance of white
dogs, point to advancing times.
My observations include the usual count of fast food joints and when they went
in. The golden arch index (McDonald‟s) is climbing and, significantly, the inner
arch index (congestion within the joint) is high with much congestion to get a
meal. There are about 15 in downtown Jakarta and I sampled four on a
milkshake project to determine cow feed and found nothing unordinary. The
crowds are middle-class or higher, educated and many university students who,
different from America, come in from the oppressive heat for a relatively costly
meal. Coat-and-ties are common under Big Mac smiles, while the poor stay
home with their rice. In parallel, the Kentucky Fried Chicken index is up, with 40
locations in the city. Kentucky took root earlier in the suburbs, hence the higher
number with some newer sites within the metro. There are also numbers of
Baskin Robbins, Wendy‟s and others that make me think if Niedco got hold of the
data of proposed fast food sites and overlapped them onto a single global index,
the countries to invest in would appear like stains. I‟d be out a job. A lfurther ook
around Jakarta shows numerous shopping malls recently completed or under
construction in the financial district, an auspicious sign. They‟re jammed,
another, with people buying. You‟ll receive a copy of the Indonesian Observer
and a newspaper subscription may be in order since it hosts business news
throughout Southeast Asia. The classifieds, of course, are a meter for the
country‟s‟ percolation. It takes money to place the ads, literacy to read them, and
phones to respond to them. An easy, quirky, possibly useful study would be to
count the number of ads columns vs. the market movement over time. I expect
classified rise sharply with a beginning boom, sustain through steady times, and
imply steering from investing in a place where the number is low.
My reading stock running low in Jakarta, I join a throng holding texts as they
enter a building for what I figure is a book sale, but turns out to be a rare
Christian church service. The success of such in nations near the equator rests
not initially in the “word” but in the air conditioning and soothing music. Compare
to Hong Kong where I encountered alcohol fumes in the ventilation of oriental
businesses, and in the L.A. county jail ether vapor from the ducts during a three-
day stint for refusing to sign a jaywalking ticket. Now you realize a success
formula in air conditioning at fast-food and religious chains. Back at the church
service of hand-waving and speaking in tongues (I think), I find the door before
the healings, nevertheless refreshed after thirty minutes.
A lesson from this world tour is the businessman and vacationer should be
friends, a step out from Rodgers & Hammerstein‟s Oklahoma, “The farmer and
the cowman should be friends.” One man likes to push a buck, the other likes to
push his luck, but the businessman and vacationer should be one. I have some
personal remedies on the condition know as Traveler‟s Fatigue, and the first is
joining vacation to business to mutual benefit. I know the fatigue as an insidious,
lackluster performance, to wit, in Sri Lanka petting a cobra; in Rwanda locking
stares with a male silverback gorilla with a harem who fancied my group of
otherwise female tourists; and recently in Philippines producing the condom as a
business card. The treatments you hear about are to be fit and rested before a
trip, drink liquids, and tranquilizers. My other ideas after having crossed
thousands of time zones are: Arrive hours early at the airport and spend time
kicking back. Fly business or first class if affordable. Land for an important
meeting a day early and prepare by relaxing. Find a quiet island or resort every
two weeks during a long tour such as this one, and spend a few days to get
sharp. Physical fitness is indirectly proportional to symptoms, so pack a pair of
jogging shoes for sightseeing, plus walk to appointments. Keep body plumbing
in motion with lots of liquid. Add an hour of sleep to the first night in a new land,
and consider ear plugs and nightshades. Finally, take a “redeye” flight if you can
sleep on it to awaken as fresh as if never having moved. One day I‟ll publish
Keeley‟s Kures, an informal set of alternative treatments gleaned from vet med,
old medical tombs, and adventure self-treatments.
Still, there‟s nothing quite like getting out. Indonesia is an archipelago country of
14,000 islands strung far into the Ocean, though about half are occupied. I
harbor fond memories of a ship cruise many years ago, unlike what you may
expect. I slept on deck by choice with the improvements of jumping porpoises
and sailfish, fresh air and sunshine, and perfect moons over calm waters. The
requirements for a week aboard are a tarp, books and food. There‟s the option
of going below deck anytime with the teaming hundreds swinging in hammocks
above children vomiting through diesel fumes, and then waiting in line for an hour
for a plate of unidentified goop. In port for a few hours once a day, I walked the
town and watched the unloading and loading of passengers and cargo. The cost
for this less-than-luxurious but highly enjoyable cruise was $20/day all inclusive.
Jakarta is the capital and largest city located on the island Java. It‟s the main
trade, industrial, educational and financial center. There‟s progress in every
direction one looks from the business section, especially construction, albeit with
a hundred sweating teenagers replacing each building crane. Infrastructure
construction such as telephone and communications proceeds even swifter here.
Perhaps a better-scrubbed future environment will conduct higher individual
adequacy. Jakarta, the major city, signals outside investment, but remember, it‟s
one city on one island of 14,000.
If you choose to invest, here‟s some help. My broker pick is Barings with its
“largest emerging market desk in NYC” located on Madison Ave. near the old –
sigh – Niedco office. Only a hair behind is the LIPPO broker.
A personal warning: Despite the skyscrapers and high song of Indonesia the
leader, I‟m reluctant to put into the hurrah because of the low-life indicators. It
doesn‟t total correctly. The greatest indicator, of course, is incompetence, and
for locals on the streets it‟s a way of life. It‟s expected and desired since in its
absence an individual could be held responsible. The regular guy fills his body
with alcohol and nicotine, curses at perceived spirits of the mind, and spits at
every crack in the sidewalk. An investment here would be hair-tearing, to wit I
steamed often and yelled twice on the streets during the stay. It‟s conceded, on
whole, events iron out. One is overcharged at a shop then undercharged at the
next; items turn up missing in the laundry but with new ones to replace them. Is
this something you want to risk with your funds?
Yet the Ramadan factor discussed above among the brokers must be factored..
Ramadan includes lessons of athletic training including suffering, discipline and
goal orientation that preclude success. Don‟t underestimate the collected
strength of character among the emerging market executives to tug a country
from an economic muck. The everyday citizens are basically good people
beaten down by generations of poor habits that capitalism could help. Put the
carrot before one donkey, the rest follow, and almost miraculously other carrots
appear. This is true anywhere, despite shortcomings leveled at capitalism.
In a thought, hang back a bit until the Indonesia market emerges more, then
enter for greater profits without greater risk. Praise to the Niedco three-person
team that prearranged contacts, mailed our literature, and faxed me with
adjusted itineraries. Their exactitude penetrated this dense country chaos. The
visit is relatively smooth on rough waters. This report comes to you typed at the
airport business class waiting room a few hours for departure.
Preface: The situation in Thailand resembles that of next Turkey with the capital
city advancing stupendously above the countryside of plodding ancient ways.
The moment is pivotal: Will the city envelope the country before it swallows the
city? Which direction will the people move? As a backpack traveler I enjoy the
old countryside, and at once I hope that if Niedco comes to Thailand the city
spreads. Meanwhile, I‟m in for the ride of my life.
I‟m forewarned there‟s little to see at the exchange except screens. Indeed, it‟s
computerized to the hilt with direct linkage from the outside brokers to the floor.
There are no workers on the floor, only computers and armed guards. A vacant
viewing gallery hangs above, and still higher the big electronic scoreboard. A
lady at a mike in a broadcast booth provides live coverage via satellite, and you
know, somehow I miss the hubbub of public outcry at Karachi and Bombay.
Modernization is better for Niedco though, and the average daily volume is
$200M. The hours are 1000-1230 and 1430-1630. It‟s slow between sessions
now, and I select books from the exchange library on history and rules before
The brokers visited are Security One, CMIC Brokers, Thimex Finance, Asia
Securities, and Tisco
By the Buddha, I must be in the wrong building! This is my notion at peering up
the insides of the Security One skyscraper that rises like a Hyatt Regency. This
firm offers the most elegant structure to date on trail. I‟m met with a cool
handshake by our contact, Val, a nervous young man who‟s reviewed our
advance packet. The elevator climbs many floors in ominous silence until the
doors open on the trading operation.
Dozens of heads remain buried before humming computers for an
announcement that may ring all phones off hooks and make the market go mad.
I‟m shunted swiftly to the international manager‟s office where Gram rises to
shake hands with his eyes glued on the screen. Little is accomplished in 15
minutes for my not wishing to break his absorption and him unwilling to tear
away, except the assorted quotes you‟ll soon find. After, there‟s a meaningful
hour tour with Val of eight office floors holding 200 employees, including 25 in
international trading and 50 in research. They‟re young and professional, albeit
still gathered at the terminals in frenzied knots with intermittent exclamations
Securities One started trading twelve years ago and quickly stampeded to the
top. They hold 8% of the market share for a #3 spot among brokers, and capture
12% of all foreign investors making them that #2 choice. Commission is .5% in
and out, and there‟s no margin trading, .Since the broker has direct computer link
with the exchange, a trade goes: Niedco calls the order to Val, it‟s keyed into the
computer, goes to the exchange for the trade, relayed back to Val, all the while
you‟re on the phone. Formal confirmation comes at day‟s end. Settlement is T
+3 on the buy and sell. Trades of $3M are common and don‟t affect the market,
but ones of $10M can cause ripples. Opening the account is easy with the
forms, as is closing. There‟s no T-bill trading, and government bonds are done
in a very small way.
Gram says of the future, “The extreme negative public opinion should reverse in
1.5 years, and this will be led by the market reversing in a year from now, so the
economy will pick up in two years.”
Meanwhile, I start to grasp the screen agitation. Recently, Financial One, the
country‟s largest institution, was unable to meet debt obligations, and the
government allowed an historic first in admitting the central Cank to back the
failing goliath. The public is stunned and has formed various factions. An
approaching announcement may rock the nation, but I must leave before it so
miss the tumult.
In a sentence, Gram and Securities One wish our business in a big way but I
don‟t trust the devious wrinkles around the honcho‟s face. “So soon?‟ he
remarks as I rise to leave his office, then adds, “We want to be your broker. I
think I can provide you with the cleaner communication and the commission
savings which have been holding you back from trading more in Thailand through
your present American middlemen.” The English spoken in the house is fine,
they‟re a leader among foreign investors, and I can think of nothing to discredit
them except that their sheer size could mean less personal attention.
CMIC Brokers rolls out the red carpet from step one. Tony, buoyant and
informed, is our guide who ushers me through the department heads including
Anne the leggy, pretty head of trading who jumped fields from chemistry; Tom, a
bulging and capable leader of research, and the president with whom I chat for
ten minutes. Find their cards with various ratings for English, honesty and
knowledge on scales of 1-5 with five being tops. This is a big operation, a
combination of financial and securities services. The latter is our focus where the
staff numbers 300, with 35 in trading and 20 in research.
It‟s all housed on ten floors of yet another ultra-modern, high-tech downtown
edifice. The public viewing room has seating for 200 - filled in former boom years
but ghostly now – with a colorful readout screen the size of a small cinema and a
broadcast booth that reaches 29 branch offices around Thailand. It‟s tall and
polished, surely, but don‟t sway yet.
It‟s far and away the most Asian company to date here. The dress and manners
are conservative with stiffness in the air. People pass and bow, and the
hierarchy is easily determined by the depth of the bend. The gal who serves the
president and me tea practically defers to the floor. I don‟t cotton to formalities
during time otherwise better utilized, but find middle ground with nods, dips and
sips. The firm seems rooted in the past with no other white heads present.
Office banter is in Thai, and their best English is more broken than any other
house. Intriguingly, this may be a superior house because of the traditional
values. You decide from the facts.
I‟ve painted the picture of a gigantic, slick Asian company where one walks in
and feels he‟s in heaven. It‟s a heady place, but the stumbling block is
communication. I must repeat two-syllable words to our contacts and hardly
follow his replies, so I‟m afraid heaven would have a price tag of mistakes. At the
elevator, I shake hands with Tony, and he pumps mine refusing to release until
the door nearly closes, dragging us both down. That's the report.
Thimex Finance has a lower volume ranking than other houses, but don‟t be
mislead. This is a sizeable and fancy institution. It occupies six floors of a
contemporary skyscraper with a securities staff of 200, including six institutional
salesmen and eight traders. The outstanding thing is this staff hails from a dozen
countries the world over. I‟ve never seen the likes of the collection, and this is
the only firm where English rather than Thai is the office language. The ten
leaders I meet closely have a mint quality, like the “shell” and “mineral” rooms at
your Connecticut home where each specimen singularly represents the special
environment of a distant place. A thick carpet leads to a public viewing area that
seats a hundred with a Times Square electronic sign above for tracking stocks.
Scant seats are filled, “A sign of the depressed times,” they admit.
Our main contacts are absorbing, well-traveled and I‟ve invited them to stop by
your States trading room. Our #1 link, Jay, is Thai but lived in NY and knows the
Niedco trading operation. #2 Papon was born Thai, educated in USA, and has
done business in many countries. His thesaurus vocabulary from extensive
reading and top tennis and squash rankings put me in mind of Niederhoffer. He‟s
a fountain of dry business facts too. Third, Niwit graduated from Penn State in
engineering and was heir to a gem business that he turned from because he
likes action and “rocks don‟t move as fast as stocks”. His mind is like a boxer‟s
jab but controlled in the oriental way. I was fairly struck dumb by what the three
had to say and accept an uncustomary invitation to dinner.
Total company assets are $64M. They have .6% total volume market share, with
a goal of 2% by year‟s end. The commission is .5% in and out as fixed by the
exchange, but the large customer is “accommodated” to half that. A custodian
bank is suggested. There are no restrictions, licenses nor capital gains taxes
required of foreign traders.
On the house: “Bluntly, we are struggling. The search for the correct survival
strategy is ongoing. One route we‟ve chosen is taking foreign investment.” One
gets the idea of a Houdini house under the ice looking for pockets of air, then
suddenly I come skipping from America with a big balloon of oxygen. On the
market: “It won‟t turn around for at least nine months, and even after that it may
not. It depends mostly on foreign funds.”
Niederhoffer specified, “Investigate the state of the negative psychology of the
country, with its course of expected reversal.” The firm recently hired a full-time
psychiatrist and you may want to consult him.
Many like to wine and dine, but these gents don‟t drink and dribble away life‟s
inconsequentialities. I discover at the meal that to take Niedco aboard would
boost this outfit into the big-time. They‟re frank, “You would be our primary
concern as our largest customer.” Later, “Don‟t let the fellows at the exchange
convince you of a rosy economy. The country‟s in poor shape, but we‟re
emerging.” At desert, my veterinary background‟s examined and I table
diagnose the twelve pets among the three. The dogs are mostly St. Bernard‟s,
odd for this city, but I deem it a display of strong individuality. It won‟t due to
argue for I‟ve diagnosed the owner from the patient for a long time.
I find not a single fault with this company other than smaller size and recent ease
into foreign cliental. The “three musketeers” joined two years ago and turned to
foreign investors with immediate effect as the house climbed from 48 to 42
among the top 50 brokers by dollar volume, and they expect to be #30 next year.
Have you ever heard of the little engine that could… and did? Thimex could.
Asia Securities is another door into another high-rise of the financial district, and
then it's Disneyland. The center escalator rises between two water curtains into
the public trading area. Twenty persons occupy the cinema-like setting that can
hold a hundred. In every direction one sees the grace of high technology.
However, they lay the ragged carpet for me. They received the advance Niedco
parcel that other businesses choose to memorize in advance, but here it hasn't
been touched. Our contact, forbid you should be entrapped, is a female version
of Kelly's Heroes sergeant, tank-size and barking orders at everyone including
the Yankee Hobo. The irritating thing is she turns instantly assuming the
commands are followed. When she orders, "Sit down!" I feel like marching past
the waterfalls and out, but there's my superior Niedco to consider. Find Oga's
card and one for second contact, Ran, a willowy meek fellow who trembles at her
bellows. He went to college in Wisconsin but claims he's forgotten English, so I
must talk directly to Oga, who remembers hers from before the marriage divorce
of a German. I cut the interview short.
The house has brokered since '74 and ranks seventh by volume with 3.5% of the
market. A recent campaign for foreign funds is successful and they hold 30% of
the sum foreign investors. Money and math are levelers, one socially and the
other intellectually, and when she can‟t or won‟t convert Thai bot to dollars I set
my jaw rather than descend to the level of her upturned nose. Getting forms is
like pulling teeth, and she finally hands them over chiding, "They're in English,
but hard to fill out." Now she drops a tied wad of brochures and huffs, "Lucky
you. We just did a road show in Europe and these are left over."
I get a walk-through by Ran of the numerous floors. Two are magnificent, open
soccer field-size and divided by cubicles with up-to-date computers manned by
professionals. The staff is 320 of mixed gender with 120 traders, 6 foreign
traders including Oga the biggest head, and 30 females in the man-less
settlement area. "The girls are more dexterous and pay better attention to detail
to detail than men," I'm told.
The only good counsel I get from hoodoo Oga is, "Thai people like to gamble.
It's an itch they have trouble controlling." So much the better for her. I suggest
our follow-up man turn back at the water walls. Shoeless trading ain't their style.
Further, I propose word circulates quickly around the financial block that fresh
meat has landed in Bangkok and the bigger brokers have already divvied up
Niedco, leaving Oga out in left field.
Tisco Brokers is a westernized, ride hell-or-high-water outfit. Our three top
contacts are the international sales manager, head of research, and an
appointed trader. They are mid-thirties, English good, strong character, to the
point, and pursue us doggedly.
The company originated 25 years ago with the inception of the stock exchange.
The grand year for foreign trading was '84 when they were the champs, but after
slid downward with the increased vigor of competing houses. Now, they're 20th in
the top 50 by volume and own 2% of the market share while managing 8% of the
foreign contribution. There are three floors, one for trading and international
sales, one for the public viewing, and the last for institutional sales. Everything is
class, on a par with any of the earlier places. The staff of 200 in securities breaks
down by department in parallel with earlier houses. Here they comprise a happy,
working machine and, importantly, committed. I give this firm high marks
The present state of the economy is the pits, worsened by the recent clobbering
of Financial One right when the market was expected to turn around. Many small
businesses have fallen in the past 4-5 years of depression, and many more will
welcome Niedco “rescuing” them at a better time for all in the future. The
consensus is the economy should comeback after the new year. .
Thai brokers all are capable of guile, but only about half choose it and the others
remain sparingly honest. High in skyscraper air-conditioned rooms, they shake
heads at the chaos below on the streets and remark that public confidence in
the economy is down, and this is a driving force in the market. I hedge that the
most these street scamps care about is their next meal and hardly look up at the
general economy. Construction cranes dominate the Bangkok horizons like an
eerie late scene in War of the Worlds. I'm told at present there are 90 major
construction projects including three in major transportation: a subway, new train
station and myriad flyways (elevated highway bypasses). These speak to the
capital city, and I wonder why the prevalent opinion abroad is this is a badly
depressed country. Perhaps the capital will show advancement to outlying
areas, or the reverse may occur. This old question of is the universe expanding
or contracting begins for the speculator in Bangkok.
Other signs of progress greet me across the city. One used to rely mostly on
traditional 3-wheeled tuk-tuks (motorcycles with canopied sidecars) for
transportation, but now great fleets of new taxis scoot the ways. The meters
work, they‟re much utilized and that‟s great development in a third-world nation.
The new:old car ratio has climbed from about 10% three years ago to 50%.
There are new tires all around too, even on bang-up vehicles. My own stories on
flat tires in remote countries are countless. In Trinidad I rolled on two rims in a
taxi with a 400-pound woman, and in the Nepal mountains once walked out in
thongs after all the spares had gone. Hence, observe the new tires in Bangkok.
I take in the touristy Buddhist temples and monasteries I‟ve seen before but now
with a new eye for indicators. The tourist factor is steady, suggested by lines to
see the famous, giant reclining Buddha whom one mustn‟t point toes at. The
shared amiability among Thais at street level is at a height as extreme as the
depth of the common ignorance, without relationship, and I‟m often caught
between handshakes and fists. The street businessmen are usually above
cunning compared to other countries on tour, so a shop owner like Abe Lincoln
chases you with forgotten change. They‟ll tell you it‟s the Thai way. I‟m gratified
at the recently elevated minimum wage to $10/day. The secret of my shoestring
travel for two decades has been to live and work in a first-world country, and
travel in third-world ones. An optimal ratio of one work day at home per four
travel days abroad has allowed me to journey 75% of the year. I learned around
the globe to count tourists at key spots and this expanded into identifying the
circuits they used like ants under backpacks. Ants follow scents, but travelers
follow predecessors‟ routes as laid out in the most popular guidebooks. Africa
has eight major loops, South America six, Southeast Asia five, Australia five, and
so on. Knowing these, I devised with a friend Full Circle, a guide to world travel
circuits actualized after James Michener‟s novel The Drifters.
Television set numbers have climbed astronomically since my last tally three
years ago. Then, I drifted along dozens of alleys after supper to count the
antennas per city block. Downtown families live in rows of concrete or wood
shacks up-and-down the alleys, while the street sides are occupied by
businesses. I recall there being one television per alley mounted high on a
basketball hoop with an audience of every kid on the block. A poor man‟s
cinema, I was often the viewers‟ choice for an instant, a shadowy figure striding
by while counting on fingers and disappearing. This isn‟t the case tonight on this
tour where a dozen or more personalized antennas shoot from rooftops and
everyone‟s watching inside. The cockroach index is at an all-time low, and must
relate to modernized garbage collection (trucks), and maybe a swing toward
cleanliness, or a shift in appetite toward the insects as food in these low times.
Roasted grasshoppers are sold like peanuts on the street and I leap at the
opportunity to eat them. They taste like roaches, and that‟s from the streets.
Bangkok is the nation‟s political, cultural, financial, and educational capital, and
the major port. The streets are a perplexity of long angles and short honks
where it‟s a great relief to escape by boat taxi along hundreds of miles of intra-
city rivers and canals, frequently used for longer city crossings just as one gets
on the NYC subway. I decide this method to visit prison. Prison side trips in
foreign countries have been a hobby since the early „80‟s when I refused to sign
a jaywalking ticket and spent three harrowing days in the Los Angeles county jail
catacombs searching for Bobby Fischer. One year in Bangkok I taxied to the
outer wall of a large prison, well presented with passport in hand as well as
paperbacks for an inmate and chocolates for the gate guard. "Books for
prisoner, chocolates for you,” I gestured, and signed a Thai form allowing the
visit. The thick wooden gate opened to a courtyard with a few dozen milling Thai
prisoners. They stared blankly, skeletal with holey t-shirts. The guard motioned
to sit on a concrete slab and returned minutes later with a thirties man with a
bristly beard and as emaciated as the rest. I rose and smiled, "No trouble. I'm a
traveler with some extra books and candy." He brightened. I learned there were
three white inmates in the otherwise exclusively Thai prison: This American was
in for drug smuggling, me for chocolates; A Canadian for an unnamed crime,
and an Englishman for showing his feet at the stone Buddha, a disrespect
warned in guidebooks. "How is it?" I asked. He glanced down and teared, "Get
me out of here, please.” He acquired Thai in the initial six months of a two-year
sentence but chums with the Caucasians for protection. He alleges cell vermin,
beatings and execution by machine gun. Many prisoners turn to heroin for
release for which smuggling got them there. The guard suddenly approached
the Caucasian prisoner, who related, "The river‟s coming! It‟s bath time, and the
screw says you got to go.” They diverted a river through the prison twice a week
for hygiene. “Thanks,” and we separated. Others interested in prison visits find it
not uncommon in third-world countries and the Lonely Planet or other
guidebooks provide details.
You as athletes understand the pluses of ankle weights, though they play hell
with the airport metal detectors, and in Thailand mine cause a stir. People
approach hourly to inquire, and can you guess why? Thai boxing! The sport
started in medieval times when battles were fought in close contact with knives
and swords, where also the arms, knees, elbows and legs were used. Now it‟s
the same as the old days but without the steel weapons, small gloves are worn,
and the loser‟s allowed to say “Uncle” before dying. The thick brutality is
everything American big-time wrestling struggles to be. I walk to my favorite
stadium that resembles the Philippines rooster fights except on a larger scale
where already screaming hundreds in a tiered amphitheater rising above the
center ring hoist fistfuls of money for action. The pandemonium and betting
approaches the Karachi, Bombay and Cairo exchanges. This match ends when
the victor performs a back flip next to the bloody loser, then the next match
begins. The chisel faced, olive-eyed hard-bodies weave a warm-up to live
ringside music like the Sri Lanka cobras. After a short prayer in distant corners,
the fighting starts and the music increases tempo to whip them and the audience
into a fever. If the fighters slow down, the music picks up, and it heightens in
measure each round like a Gioachino Rossini masterpiece. The style differs
from international boxing for not only the fists, but knees, feet, and elbows are
thrown. Also, no woman is ever allowed to step into the ring for fear her
presence will destroy the strength and skill of the boxers; and there‟s not a
female in the stands, reminiscent of the Niedco early trading rooms. It‟s too ear-
splitting, so I exit after four fights to the darkened streets.
The next day, “You wanuh sell ankles?”, and I wheel to face a sturdy brown man
with a fixed grin at my feet. Another solicitor. I shake my head “No”, but indicate
a desire to visit a fight club, and we hop in a taxi. Soon, “Ya!” he shouts, louder
with each of my feeble kicks into a heavy sawdust bag swinging on a chain. A
minute later, exhausted, I give him the weights and he hammers the bag
measurably farther. Grinning still, he returns them and I stammer an apology, “I
would give them but they‟re my only pair and I walk so much.”
A worrisome matter for us as an indicator is the patrons at the equally famous
massage parlors have dropped dramatically. However, none of the girls speak
English to explain, only say, “You god, want massage?” The parlors are
legitimate, usually nonsexual and often posh, with hundreds of individual rooms
within a high rise. On the other hand, at a separate location is the notorious
Patpong, Bangkok‟s bawdy red light district. I don‟t make it there tonight, but
there‟s a strong memory of last time. I escorted two Canadian female tourists to
a class Patpong strip joint where naked Thai girls wrestled and after a pin I got
the tab. We‟d drunk only sodas and after factoring in a show fee, the bill was still
three-times what was proper. There could be no complaining since no one in
charge would admit English, so I left more than fair pay on the table, and we
stood for the door. The waitress stalked, and the bouncer stepped in
gesticulating madly, and I danced around him to find the exit door had no handle!
A secret tap was required to have it opened from the outside. The bouncer came
at me and before either of us knew what happened I used a wrestling “slip”
maneuver to slither behind him, and rode his back like a bucking bronco until he
began to tire and slow. I let him go, and reached for my pocket, pulled the
required amount and we were let exit. You see, they were lining up the rest of the
bouncers outside the circle of spectators, and probably the band was staged to
raise the tempo.
I long for places outside the city where may lie clues to the puzzle of the
market‟s set of negative high indicators and my set of positive lower ones. A
day‟s train ride north from Bangkok brings one to a beautiful, jungled hill region. I
book a 3-day combo-trek by elephant, boat and foot. My idea of a working
vacation is from between an elephant‟s ears. The secret is to grasp the tops as
reins and trust the flat feet parading through the jungle. The boat trip is spiced by
animal sightings, but coming ashore the next morning is better. We take native
trails connecting villages of barefoot, grinning Thais and sleep the night on a dirt
floor hut next to old ladies smoking opium. Villagers tucked back amidst rice
paddies seem immune to the depression elsewhere in the country, and the river
still has fish and the gardens grow.
For brokers, I like the fresh, cosmopolitan cast at Thimex. Their English is best,
commission lowest, and they‟ll spit the truth in your face rather than lose your
money while saving your face. Though small, they‟ll climb with Niedco‟s support,
perhaps. Consider picking too a big house like the class TISCO where they look
you in the eye while relaxing and explaining things. Both these firms guarantee
personal attention to our account. Avoid rude Oga, smoking Gram, or outfits
where English isn‟t a password. Forget the waterwall shows and think of how we
dress. The more involved the speculation, the less trust to appearances.
When to invest? It‟s moot, apparently because someone from Niedco‟s on the
way to make sure the hand‟s dealt right. They‟ll be met cordially and hopefully
with this report – going out tomorrow – in hand. I think your decision to send an
advance scout, myself or anyone, prior to one of our own traders has been a
The lower indicators here are in sharp contrast to the economy. They suggest
fair to good times, but the country‟s depressed. I‟m a bit bewildered but can
theorize. Perhaps the city surges while the rest of the country stagnates to mix
the indicators; or, the upbeat LI‟s may be a carryover from better times before the
Financial One fiasco; or, maybe the strong indicators such as the crane index are
being seen now within a lag period – something we‟ve talked about as critical to
know when to invest. That is, are certain indicators I‟ve listed predecessors or
followers to economic moves, and by how much time? This would take more
data over time that we don‟t have, so all that‟s possible now is seat-of-pants
I think Thailand‟s cities cry for money while the countryside carries on with
backyard gardens and fishing that feed the family as well as never. So, the
nation‟s overall economy is bottomed albeit not in the sense that America would
be under similar circumstances. The fall of Financial One, the country‟s largest
financial institution, and odd bailing out by the Central Bank confuses the nation.
The consensus of specialists I‟ve talked to is there‟s a base of truth to the
citizens losing faith in the economy, but it‟s a partial loss since each person looks
at the next while waiting for his own confidence to be restored. “We‟re
guaranteed now of getting our money …. aren‟t we?” is my phrase for describing
the circular faith on every city street corner. There‟s little wonder at the existence
of in-house shrinks, and it‟s plain as an elephant‟s track that the fate of the
country hinges on foreign investors like you.
In sum, the conflict of positive lower and negative higher signals create wide
possibilities that become a poker game of players making best guesses along
strongest lines of probability. You already figured that; nonetheless, it‟s the best I
can do from the exchange, brokers, streets and hill country.
Preface: This report begins on a low note and rockets upward. Each country
success hinges on my bilingual guide - his character and the timely manner in
which he's alerted of my arrival by the Niedco team. The Turkish guide is
superb, but I‟m announced so late that the meetings are fewer, of poorer quality,
and with less eminent contacts. That said, it's still a triumph.
The Istanbul exchange is spacious with stock and bond systems totally
computerized. There are three separate markets here: Stocks, government
bills and bonds, and repo transactions. The stocks floor has an electronic board
to track trades. The T-bill area, which especially interests you, is 40‟ x 40‟
hugging a ring of twelve computers. My escort and I are taken aback, “How can
a small arena handle the enormous T-bill market, she wonders. However, a lady
who works a trade screens illuminates, and we‟re satisfied.
The way it works is this: A brokerage or a bank – someone authorized to trade
T-bills – calls the exchange to place an order. One of the workers such as the
screen lady answers and executes it. This is called the “combination system”
because the remote broker or bank have duplicated on screen most of what‟s on-
screen here. The trade is simultaneously verbal by phone, and on-line.
Asked for recommendations, our insider says the prevailing deal is short-term
government bonds that mature in 3-6 months. Much of this and another twenty-
minute interview with a stocks person is in Turkish, so I refer you to the
appropriate business cards and a booklet entitled Turkish Bond Market in
English. The average daily volume for all three markets is $1billion, which
breaks down to $150M for stocks, $100M for T-bills and bonds, and $750M for
repos. The hours are Mon.–Fri. 1000-1400 for same-day T-bills, and 1400-1600
for next-day ones.
I present here the banks before brokers since they popularly trade Turkish T-bills,
a Niedco target. I attend four: SurBank (Editor‟s note: Only this name has been
altered for soon apparent reasons.), Guaranti Bank, AkBank, Yapi Bank. Their
functions are to trade T-bills, handle their physical storage, plus do the back
office work, though on rapid trades there‟s no certificate to transfer. Every broker
suggests the use of a custodian banks and the top picks are SurBank and Chase
Manhattan. Both have NYC branches where the account can open with ensuing
quicker dealing. One bank may utilize many brokers including the bank‟s own
The first stop is SurBank. I meet with the female higher-ups whose cards are
with the literature. The vast facility embraces many floors of a skyscraper with
new computers everywhere. Four screens look at the bond market. The
hundred-odd staff includes thirty in stocks and ten in bonds bustling like lizards in
warm sand. The bonds manager is female, and international sales are handled
strictly by women.
I notice everywhere in Istanbul‟s financial sector that the bosses are as often as
not females. I except the reason may be their innately superior verbal skills
including language (English) acquisition. Their explanation, “Women are smarter
in Turkey,” doesn‟t compel yet. They‟re aggressive, honest, direct and proficient.
Not one of the hundreds identified at banks, brokerages and the exchange is
over thirty, 10% have gone to school in America, and at least half speak
passable English. The males fall dismally to the streets by comparison.
A personal informal survey reveals that half the women who fit the above profile
are men haters, giving rise to the indicator. The greater the hatred for man, the
more man should invest. I hasten to add that, psychologically, the gender has
been pinned here so long and now suddenly rises by merit to dominate… so, let
them and make money. By point, at SurBank half the women executives are
solid men haters in the same sense than some females call men chauvinist pigs.
I don‟t ask them, they don‟t specify as I carry the Niedco high-price tag, but I
judge it in their dress, eyes and off-color comments such as “Men, such dumb
beasts yet they can be trained”. Among that half, the majority are lesbians or
bisexual. This doesn‟t bother me, but next time for the company good send a
female should you ever decide to hire one.
Ergo I sit across from three executives throwing daggers with their eyes for one
minute before anyone speaks, “Who is Niederhoffer? Why don‟t you have an
appointment?” The news clips on you with the wacky headlines about using
“Voodoo” and “Music” and a “Hobo” soften them to grant the following
This bank is a custodian and trader of T-bills for numerous foreign clients. One
can also use brokers for trades. There are two types of trading in T-bills:
“Repos” (repurchasing agreements) where the shortest term is intra-day and the
longest 90 days; and hold-to-maturity bills. All are volatile with 5-10% daily
moves. This bank‟s daily average volume in T-bills is $1.3M and in repos $3M.
It‟s simpler to open the account at a NY branch.
Flickering lights and air conditioning crash due to poor city power mars the
interview with the three witches constantly complaining, “Hotter than Hell” and
fanning themselves with our literature. Then more questions are answered.
Treasury auctions are announced Tuesdays and conducted the following day.
Prepayment for the auction is 1% and you‟ll find the steps for trading in another
bank report. The minimum trade is $1M and maximum $5M, the limits set by
exchange rules. The fee schedule is enclosed. The present yield for T-bills is
very high at present, about 122 basis points. It‟s important, they say, to declare
all income to the government, and they drop the tax schedule in my lap. I
suggest SurBank as custodian but not as trader because cocky chicks who
conservatively tie themselves to rules can prick the relationship.
Guaranti Bank shows a sizeable T-bill area, called the “treasury room”, slightly
larger than at the other banks. Here ten modern computers are manned by
efficient workers. I meet managers of the treasury room and other departments,
and all are men with barely comprehensible English. Sadok, older and
distinguished, of the T-bill room is said to be the local, sought “guru”. The tour
covers other floors of the bank building including equities, and then I spend an
hour at the elbow of Sadok. At the other elbow sits Katy the translator, a young
American financial enthusiast who‟s been in international investment for two
years and already speaking Turkish. Her translations as well as personal
answers come crisply and ring true. Here are the tidbits from our triangle.
The advantage to using a bank as trader is it has a generally superior team,
better info, and can form synergies with outside groups. Some of the biggest
brokers, as opposed to banks, do a fair job of trading T-bills, but stay away from
the smaller ones. A criticism leveled at banks is they trade less speedily than
brokers, but this is said not to be the case with Guaranti which matches the pace
of dealing in the States.
An order works this way: Niedco phones Sadok (via an interpreter, I suggest)
who instantly picks up a line to the treasury room a floor below his office. There
the trade is made and confirmed on the spot to us. There are shared screens,
even as we speak, in front of Sadat, the treasury room and the Istanbul
exchange. The dollar T-bill volume of this bank is astronomical and confidential,
so I must pass it myself. He is open to fee reduction on big trades. Reclaiming
funds in dollars after an account‟s closed is simple, nippy, with no ceiling. Even
physical funds above $1M may be taken from the bank with a couple days notice.
The literature on taxes is “in theory, not practice”, which is fortunate since it‟s in
Turkish. Take Sadok‟s word, he says, the government never pursues capital
gains and specifically doesn‟t track foreign investors. Guaranti has a NY affiliate,
the Bank of NY.
The saying in the countryside outlying the city is, “The streets of Istanbul are
paved with gold!” There is enough opportunity to make the head swim. One
departs on vacation and returns a week later to find another building constructed.
Women, says Katy, operate in international investments because they‟re better at
it. “The men are unable to think of the future.” The government is poor but
unable to hold back the ongoing boom. “It is hard to train the Turkish men to
plan beyond their noses,” she grumbles. “There is huge opportunity for the
entrepreneur but it must come from outside this country because the existing
Turkish mind simply doesn‟t grasp building a business for a better tomorrow.”
Her Canadian boyfriend, for example, recently started a coffee business and is
doing well. Her father has begun an import business under her direction and is
Guaranti is the #1 Turkish bank in terms of equity, and in the top ten for fixed
income. Many foreign institutions choose them for trading but few as custody
bank, a quirk speaking in their favor, I expect. I tour some half-dozen floors
including one entirely for the “sessions rooms” where 2-6 traders knot around
each of dozens of screens watching equities turn, yelling at them. It‟s like a
horse race, and Sadot dryly comments the bank is very big into domestic stocks.
“The traders are criticized for being volatile but like their jobs and the feeling it
The massive, new skyscraper with big red letters AKBank certainly touts it‟s
status as the largest private bank in Turkey. Our contact, Kair, answers key
questions in broken English. The only new information is that bank interest is
about 100% annually, and T-bill/bond interest is around 125%. Yes, these are
the correct figures, but recall the high inflation. This is a mammoth operation, yet
as all cards and literature are in Turkish, I suspect they deal mainly nationally. I
have nothing negative to say about them, only that the others banks are at least
as good, plus speak English.
Here I sit encircled by managers in the towering Yayi Bank, ranked #1-2 for
trading in Turkey depending on definition. They do heavy T-bills for foreign
clients. Our chief contact is Uka, the exacting chief of international investment,
alas the only person I talk to because, I surmise, he‟s the one who speaks
English and even at that it‟s hard to follow. There are dirt road school children the
world over – I‟ve been beleaguered by them begging to practice simple English –
and yet these institutions haven‟t decided to learn English or hire a translator to
attract clients. For this reason only, I place this and AkBank low on the list of
Eczacibasi Securities is an equities broker that also handles T-bills. If physical
layout reflects competence this place makes the grade with two floors within two
buildings for trading. Furnishings are up-to-date including electronic boards that
provide a Merrill Lynch look. I show early to see the 100 staff arrive on time,
mostly under thirty, scrubbed and stepping lively. Much can be told from the first
and last point of a rackets match, or the first and last minute on the job. Our
main contact is Sima, a young female with strong English, quick mind and
integrity. She introduces me to the firm heads. The Niedco literature, articles
and financials prove the icebreaker for after viewing them for minutes everyone
opens up. In truth, most house presidents are more interested in the shoeless
picture of Niederhoffer trading than in the financials.
Last year this house traded $8 billion in fixed income. They were #2 in foreign
trading, and #1 for fixed income trading among all the brokers, but #8 overall
(including banks). Their practical advice is banks generally dwarf single
brokerages in dollar volumes, but banks have other tasks, so stick with a trading
specialist. This one services many foreign clients. Their information on trading,
accounts, lack of requirements and restrictions, commissions, taxes, and
recovering dollars runs common with other meetings so isn‟t repeated here. The
oft given phrase around the table is, “You come and go as please.” They
emphasize our stateside house must maintain a 24-hour office because of the
time difference, and little do they know of the filled minutes of the 24 hours in a
Niedco trading day. You‟ll receive a stack of literature including research, their
cards, and opening forms.
I pointedly ask each interviewee for an opinion of the present and future
economy, and for specific investment prospects. The inflation is 65% (wpi) and
80% (cpi), and they expect the coming year figures to rise to 90% and 75%
respectively. There are many outlay opportunities spread over sundry areas, and
Sima is preparing a current list as well as continual updates. This firm utilizes
intra-day research on trades and gladly shares it with us. Many exclaim on the
explosiveness of the T-bill market including their top economist, “T-bills have
been profitable for some time and will get a little better in the coming months.”
This corporation is big, informed, frank, hungry, and earns nothing less than high
ATA Securities is also sizeable and modern. The talk table includes our main
contact Gutz, who heads international investing, the senior VP, and others, most
who speak passable English. A fluent answer is provided to each question
posed. This house deals heavily in repos, where a single trade of $1M is easy,
but $5M may take an hour to complete. They handle numerous foreign clients
but most via London.
Global Securities offers two floors of young ladies in mini-skirts and young men
in short haircuts and ties within but another Istanbul skyscraper. Our two
English-speaking contacts are Alto, a hairy man who chain-smokes and
anticipates my every question with remarkable radar-answers, and Asha who
conjures Miss Turkey. We sit in the male‟s office amid smoke and butts on the
floor – puffed to various lengths depending on his volatility – and though he‟s
loquacious, her polish also shows through. Both attended university in America.
The girl and I escape after twenty minutes to tour the facility.
This is the largest equity broker in the country at just six years old. Their equity
base is $80M making it one of the best capitalized. They specialize in short and
medium-term issues of high volatility. The staff of 400 occupies as many
computers, with 30 in a research department that ranks first in Turkey. “We
excel in market acceleration,” says the head, “and in pattern research.” The
steps for trade and other information runs the same course as our other sources.
“Many of our investors are eccentrics,” winks Alto, and escorts Asha back to the
office, the only smoking area on the floor. I place this firm high on the list for the
remarkable Mr. Alto.
I enter the vast Grand Bazaar and am quickly lost among everyone else,
reminding me of California swap meets only this one‟s under a city-block tent and
the clamor along a hundred aisles is outrageous. Mobile hawkers are
pestiferous, but now occur to me to use to yoke customers at the swap meets I
sporadically work. One follows me like a spy at a distance for ten minutes, sizing
my interests, then zooms in to guide me to the top places for things I‟ve been
admiring. I exit and over the course of hours each day visit enough mosques
and palaces to last a lifetime; some dwarf even Camp Niederhoffer. A full day‟s
given to sauntering the gentler old city where lies my hotel. Note I walk daily
across a bridge 45 minutes to the Asian city side for business appointments
rather than taxi equal time through traffic knots.
Istanbul is situated on a peninsula at the entrance to the Black Sea and is the
country‟s largest city at 9M population. It straddles a strait and thus lies in both
Europe and Asia, hence the bridge. The streets are alive with the sight and
sound of progress per the spirit of the reports. Sidewalks and roads are being
poured even as I walk around them, and new factories and houses steamroll out
from the center into surrounding hills. It‟s an attractive sight for countrymen and
I‟m told half the population is under 25. Many are female, multicultural,
multilingual and want to become managers, lawyers, accountants, economists
and traders. Everyone‟s wound-up with enthusiasm and it‟s an honor to be here
at this pivotal point. The economy seems to be tearing away from state control
by threads as thousands of family industries break open with sales. It‟s said that
if these little businesses continue to fly, Turkey will take off.
Turkish bathhouses are as popular as American health clubs, and I step into one
on a walk. There‟s a warm mist everywhere, in a large locker room and along
the main corridor to the central steam room that is as large as a small house with
a fountain in the center. Steam and men flow out numerous smaller branch via
concrete paths to littler rooms where benches and warmed by nearby rocks on
which to poor cold fountain water. Hisses everywhere, and if you peer closely
into alcoves there are 2-3 businessmen discussing, I infer by their gestures and
tones - deals. One finds nothing less in the American athletic clubs, of which I
once was introduced as having attended more than anyone (as a pro
racketballer). No one says you have to shed your sheet in the central steam
room to lie naked on heated stones as a furry man lathered with suds applies
soap to your body and massages. I retire to a room with a cold fountain, remove
my sheet now drenched with sweat and steam, and alternate sitting under hot
and cold water spigots squirting out the wall. The Turkish bath is an off-spring of
the Roman baths popularly used for hygiene, therapy, relaxation and business.
It‟s a princely wind down to a day‟s meetings.
Quite by chance, I stumble into the entrance of the University of Istanbul,
Turkey‟s oldest (founded 1453) university. Students pass briskly through and I
feel seeped in riches until suddenly one stops and smiles. I‟m momentarily
smitten as she offers a hand and Turkish greeting. “American,” I explain, and
she becomes wide-eyed. “Come meet Papa,” she declares, grasps my hand to
pull me along city lanes. Via extremely limited English, I discover she‟s a last-
year attorney student at the top of her class. We halt at a female dormitory
where she gently shoves me onto a bench and disappears inside to emerge with
a translator. “She want to know all about you…” it begins, and five minutes later,
it ends… “She say she love you.” I blush and their eyes avert. The permutation
unwinds in my mind, and I excuse myself lamely, never to meet the father.
Going alone to the train station for a change of scenery, I ponder the platform
arrows. A voice booms, “You are Jewish, yes?”, and I turn to grin at a bushy-
bearded Turk who‟s viewed me with a guidebook upside down, my quirk and the
normal direction of text flow here. “No,‟ I‟m just me,” I reply. “It‟s okay to be
Jewish, even here,” he insists. “What do you look for?” He routes a city train
tour, and I zip the town for two hours. This, or bus, is the proven best overview,
and once checking an almanac found I‟d explored 60 of the 100 major cities of
the world in this way.
Niederhoffer recalls the inspirational dinner with Jim Rogers a few years following
his 1990 round-world motorcycle investment tour aptly chronicled in Investment
Biker. His girl friend Tabatha, “Jim‟s my bimbo”, rode her own bike and supper
chair, and they held a strong bond. She became a shade tree mechanic for the
tour‟s breakdowns while he had the good nose for speculation. Rogers founded
legendary Quantum Fund with George Soros but had a motorcycle vision. His
expert indicators keyed countries where the driving bureaucrats push fiscal
reform, advocate free trade, and keep currency strong. The four of us over good
food agreed that business meshes with vacation and one should see a place
before investing. “Thanks for eating with us motorcycle trash,” Rogers quipped
on backing from the table, “May your travels be fair.” I liked Rogers‟ rebel
wanderlust, lassie-faire goggles on the world, and applauded his decision before
40 to trade a millionaire‟s Wall Street desk for a BMW. Much of worth occurred
on his 20-month, 51-country, 57,000 mile trip that passed through Istanbul, and I
reflect often on his business and travel acumen during the quite minor Yank Bo
From Istanbul, the portrait is an advancing nation but I hear of a gloomier interior.
I spend an hour devising a probe by train and plane and present the agenda to a
broker, who sighs. Tourism is deflated, even impossible in areas of fighting.
Travel east from the city and the scene deteriorates. Roads become rougher,
people poorer and if you go further still the cities look like refugee camps full of
people fleeing poverty or terrorism, then near the eastern border it‟s civil war.
This explains the stream of youth and enthusiasm into Istanbul. I‟ve traveled the
country on a previous excursion, but back off today at the advice of the broker. I
learn Turkey‟s history is peppered with neighbor skirmishes that has produced
the strong citizen manner and fitness I‟ve been studying. They remind me of the
desert dwellers‟ constant vigilance for intruders and snakes. The country holds
past roots from many directions with resulting branches seeking their own light
irregardless of the others. The roots cannot be changed, each branch realizes its
own direction, but the whole tree does not. This is still considered a strong buy
among the emerging markets given the risks of political crisis and fighting.
Given the slow start, with meetings squashed into a short few days, and that
business English is laborious, the thrust to investigate and make contacts in the
T-bills and emerging markets is won. High points of the sum eight meetings
occur at two brokers and two banks where English is best and I‟m able to use it
to climb the organization ladder to find the pilots. The scout‟s mirror writing
draws attention where individuality is prized and the normal pen goes right-to-left.
Choice? It‟s hard to argue with the giant SurBank – trader and custodian of T-
bills – however I personally wouldn‟t do business with a bevy of stuffy,
conservative broads with male chips on their shoulders. Up to you. I like
Guaranti Bank with the vast offices and hyper staff, where the #1 guru speaks
little English, but Katy‟s the key to make things good. But, what if in mid-trade
the solo interrupter isn‟t available? It makes sense to hire Katy or someone like
her - on location – to handle Niedco‟s investments, or put someone in Istanbul
from your own office. An international swap here, or in any country, seems ideal.
Eczacibasi is the most impressive non-bank broker, a slight nod ahead of Global
with the ciggie-smoking genius at helm, but remember the banks trade larger and
apparently as rapidly as the brokers. So, you pick the grapes.
One day, women may rule the financial sector including Turkish investment, thus
one studies the emerging world of females. If money rules the government and
government rules the citizens, then women will rule the country. The visit gives
birth to the lady executive hypothesis, where the larger the female:male exeutive
ratio, the more desirous the input into the business. I‟m agog at meeting so
many ladies in charge, think it‟s healthy and, moreover, feel it should carry to
politics in this and other countries.
No wonder one sees such amazing things going on in the countryside and city.
The outlying areas are traditional and Islamic, and the city is vibrant and
westernized. What would you do if living in the country after generations and
abruptly the sirens of opportunity called from the city? Half hole up in their robes
in the bush and the other half flock to the city. Today, old meets new, sluggish
currents meet accelerated, in a great experiment I expect to be repeated
throughout the world. The moderns, I think here, will win the experiment that will
serve as the template. Keep eyes on Turkey, and remember the mechanism is
fueled by money generated by capitalism and the emerging market. If one
guesses rapidly and rightly, much is to be gained as the country sheds its
“I once complained to my father that I didn‟t seem to be able to do things the
same way other people did. Dad‟s advice? „Margo, don‟t be a sheep. People
hate sheep. They eat sheep.‟”
Trails end. After the return, I enter a Niedco trading room full of whispers. “Shall
we go with Bo?” A week later, there‟s backslaps. “The firm put millions into
Turkey, in one week doubled!” The next week, “It‟s doubled again!” Some lower
indicators hit the public eye. “Wall Street gambler Niederhoffer Intuits Millions
with Hobo‟s Help” headlines The New York Observer (3-21-97).
Soon after, Niederhoffer sends friend Rip Mackenzie and me to review the
Broadway musical Titanic. Victor‟s the ultimate ship buff, with paraphernalia
displayed through the house and a major painting hung in the trading room.
“Never think you‟re unsinkable,” he reminds. The production is well-done but,
sadly a few months later, Niederhoffer does it better.
The bottom rips in his fund as Thailand collapses, and later in a combo -
statistical freak his SP hedge fails in the October „97 crash. The trading staff is
dismissed and doors shut. Millions are lost all around, and the former lifestyle
diminishes as Victor takes his first hours off in decades to watch an electric train
in the basement circle a track. Deep down no one hears the screams.
On Oct 27, ‟97, most people would recall that Niederhoffer lost his fund in a
single rotation, and would put out of mind its top performance in the preceeding
fifteen years (including 44% gain in ‟96). One man wouldn‟t have missed the
impression, and that anecdote begins one warm afternoon twenty years before
the black day in Grenich Village. “Let‟s duck in here,” Victor says at the entrance
to a basement cafe. “There‟s someone in games I‟m dying to meet.” The room‟s
vacant save a white-haired gent over a checkerboard. “May I buy a checker
lesson?” Eyes shoot up, “Why not?” A game commences that blossoms into a
lifelong match. “The experts make the most of their wins and draws, and the
masters make the most of their wins, draws and losses.” – Tom Wiswell,
undefeated world checkers champion from 1956-1981.
I realize none of it until a year later, because the emerging market trip leaves me
gripped in travel and I depart immediately after the Titanica play to walk the
lengths of Vermont, Colorado, Death Valley and Baja California, followed by
travels in South America. I am dumb of Niedco until Mackenzie shocks me in
Nov. ‟98, after the company has regained modest success:
I dropped by the Niederhoffer house about three months after the collapse to complete a goal I‟d
set for myself a year earlier. Essentially, he was making the best of a bad situation. The office was
empty and he was playing with a train set in the basement. Upstairs, he was turning an office into
a lab of electric circuitry toys and kits. He was in a Howard Hughes-esque bathrobe beyond
redemption. I handed him what I had come to deliver, a piece of the actual Titanic, a quarter-inch
of rusticle taken off the door that was left open, adding to the decline of the ship. He was grateful
and courteous, but mentioned he‟d been abandoned by clients, bankers, friends, the works. I said
to him, “This doesn‟t make sense. Given your thirty-year track record of success, the collapse was
no more than a blip. Everyone who„d invested with you knew you and the risks, and they were
more than happy to be aboard during the peaks. Certainly there must be someone who sees
there‟s more likelihood of another stretch of unmatched returns.” "Unfortunately,” responded
Niederhoffer, “others don't appear to share your brand of reasoning."
“What collapse?” I write Niederhoffer. He answers, “The Thailand massacre
brought me to a low level. I couldn‟t adequately defend my SP positions because
of it. Eventually, it became a matter as to whether my clearing firms wished to
work with me or not. I can‟t discuss the rest because under the terms of
settlement I reached with them I‟m prohibited. Suffice it to say I sued the Merc
because of the bad marks and we settled under mutually satisfactory terms.”
…“Your fair weather scenario in part on Thailand contributed to my bankruptcy
and the loss of hundreds of millions for others. We should have paid more
attention to the unfinished skyscrapers and real estate excess.”…“Bo, this is very
deep and can‟t be told in detail except to say I did right for the customers and it
will always be one of the darkest days of my life that I lost for them and their
families, and lost my business and so many of my friends. It will take many years
of grief to recover and will always live as among the darkest handful of things in
He finishes a cordial letter of 29 Oct. „97 to customers, "We took risks. We were
successful for a long time. This time we did not succeed, and I regret to say that
all of us have suffered some very large losses.” I‟m outraged to learn a single
client carps much less of the mass abandonment. Niederhoffer‟s style and codes
are known, laid open in the fish story prompting this report: Go deeper and
farther to make gains, take somewhat greater risk for far greater reward, and risk
humiliation outside the familiar to earn big. An early signal was in the mid-„70‟s
when he gave up a squash racquet as world champ to cross-over and grasp a
bigger game of racketball. That approach is how we met. He entered his first St.
Louis national tournament, even as I pedaled a bicycle from San Diego to play as
the reigning paddleball champ. We witnessed each other for the first time
wearing mutually different colored tennis shoes. He sported them, “For
individuality”, while I was as much one but had a blown sneaker. Everyone
knows the risk. The Niedco patron reaction points fingers back at self-training to
react emotionally instead of rationally. Logically, one can dig deeper.
The Niedco method is about organizing statistics using the scientific method.
Perhaps Victor‟s greatest gift to the marketplace is his system of trading as
tested and verified by continued victories. Where Aristotle created a system of
knowledge that pierced most disciplines including astronomy, physics, biology,
psychology, politics, ethics, plus everyday thought and conversation,
Niederhoffer crafted a system of logically thinking about the market based on
statistical quantification and comparison of individual commodity movements. If
this pattern can‟t be found in a trade, he rejects it and waits until another meets
the criteria to give an investment edge. It‟s as though, at certain times, some
trades jump through a window of logic, hence predictability, and in that span the
decision to invest is made. Hours may pass between windows. The Niedco
trading room is piled floor to ceiling with books from the branches of learning
wherein Aristotle planted the logic seeds. If nothing‟s jumping, a book comes off
the floor into his hands, so the day, and the years go.
“The speculator is a hero, and has been throughout history, Niederhoffer wrote
for Freedom Daily in January, ‟93. “Some speculators are discoverers like
Christopher Columbus, creators like Henry Ford, or inventors like Thomas
Edison. Their job is easy to place on a high plane. My role in the grander order is
indirect, relatively invisible and unplanned. The only discoveries I make are the
routes that prices will travel. Like hundreds of thousands of other traders, I try to
predict the prices of common goods a day or two in the future. If I think the price
of an item will go up, I buy today and sell later. If I think that the price is going
down, I'll sell at today's higher price. The miracle is that in taking care of
ourselves, we speculators somehow ensure that producers all over the world will
provide the right quantity and quality of goods at the proper time, without undue
waste, and that this meshes with what people want and the money they have
available.” Our humble addition since the Yankbo tour is the customer is also a
Niederhoffer yearly offers fresh grads from top universities the opportunity to
work his trading room, while housed under the same roof as his family. Each
understands the labor and reward, and no one needs to keep pace with the chief
but most try out of pride. Early smiles tip as class scholars and athletes figure to
equal the “the old man”, but I tell you none have. By small example, two have
been carted by ambulance after a personal choice of overwork. I had more
sense early on and after a long week of matching Victor‟s routine of trade,
exercise and read, I got awfully dizzy and eased back. Everyone can‟t measure
up, but each owes to himself to pull up from personal grief to brighter stature.
The train circled the track and his mind the objective. He recovered using the
original tenets of quantitative analysis and scientific method developed before
starting to trade his own account in ‟79.
Niederhoffer‟s allure for the Titanic spins a mysterious web that starts before he
himself sinks and comes full circle after he‟s resurfaced. This is the untold
anecdote. Rip Mackenzie happened to be in the Ct. home about a month before
the Thailand butchering when Victor sent us to review the new Broadway musical
Titanic while he was rooted in the trading room in a position. That evening after
the play, Rip began to notice “Titanicana” around the large house – paintings,
models, even a picture on the cover of Education of a Speculator. A few hours
later, we entered the kitchen and observed the youngest Niederhoffer daughters,
Kira and Artie, had just begun drawing on some papers that looked like
documents of some sort. I calmly replaced them with tablets and handed them to
Rip, “Here, you may be interested.” They were the original telegrams from White
Star Line regarding the Titanic. “Ask Victor if his Titanic is unsinkable,” I jested.
Rip left the next morning, telling me, “I understand the Titanic mystique a little
better – it‟s a reminder that in the ocean of life or trading even the biggest can
sink. In appreciation for the royal hospitality, I‟m setting out to find something
about the ship Victor couldn‟t possibly know. It‟s no small challenge, since he
knows practically everything there is.” I was to discover the rest of the story a
year after the Niederhoffer ship did sink. Mackenzie wrote then informing me of
the collapse, and after an eerie follow-up:
Once I realized its magnitude, I gave up the challenge and, as usual, everything fell into place after
it. Within weeks, I‟d met virtually every primary scientist and publicist studying the ship. What had
been a symbol for arrogance and disaster in the 20 century was now in scientific circles being
considered a symbol of learning and hope for the 21 … It‟s like the phoenix rising from the ashes,
and the Niederhoffer story too. Interesting. I heard Niederhoffer sold the Titanic telegrams for a
huge amount at the height of the movie frenzy. I told the whole story to Charles Pellegrino (author
of Her Name, Titanic and the ship paleontologist at the discovery of Titanic‟s location.), including
the telegrams on the kitchen table, and suddenly he went silent – an unusual thing. Pell had been
viewing the telegrams only months earlier with Titanic guru Walter Lord (author of A Night to
Remember) and they and many others puzzled one thing. “So THAT‟S how that black crayon got
on the telegram!‟ shouted Pell. To this day, I credit you for saving the Titanic telegrams from a
worse fate…. Good. And now, with my thanks, Victor has a piece of the real titanic.
His mind sharp, heart in the right place and account replenished, Niederhoffer
takes up life in Practical Speculation (with Laurel Kenner), the upcoming follow-
up to the autobiography. Risk and survival are strong currents and the story
compels as usual. He discovers a periodic table of the elements for trading, and
the endless quantification requirements. Expect to be surprised. Mackenzie
adds, ”Now he‟s up and above. He honors the story of Icarus, and brings in daily
returns that would stagger most of his previous clients‟ minds.”
Deeper perhaps than the emerging markets as they lead to westernization of the
business sectors and country traditions fall to the wayside, is where you choose
to invest can rock the world. Now is one of the most historic times in business as
nations struggle within – old vs. new. Ponder linking the search for profit with the
globe‟s well-being. That, and be humble of what one doesn‟t know because
we‟re all latent Titanics. As more markets emerge, so do you and I.
50 THINGS I LEARNED ON THE EMERGING MARKET TRAIL
“It would look stupid if your story doesn‟t say anything about how I stumbled and
went under in Thailand using some of the same indicators that made millions
elsewhere,” he told me in permitting this story. “What we forgot was the
homeless man indicator – the unfinished building one, where you go into a city
and find abandoned derricks in the sky with the owners gone into oblivion in the
cages playing with the dogs. et al.”
Victor Niederhoffer (to the Yankee Hobo)
1. As the businessman and vacationer should be one, so add the
adventurer. When in 1897 the steamship Portland docked at Seattle bringing
hard proof and initial news of the Klondike gold strike, the world was shaken, and
thousands uprooted to boom or bust on gold speculation. Take a chance, I‟ve
learned, or take nothing at all.
2. Arrive early for appointment to see an unrehearsed stage being set.
Much is told from the first and last point of a rackets match, so the first and last
minute on the job.
3. Become excited, but remember money is as neutral as the jungle.
4. Fly business class or better for flight change priority due to inevitable
goofs. The airport business lounge offers computers and other communications,
sometimes a health club. You get to board and exit first, everything is less,
letting you drive your business upon landing rather than vice versa.
5. The degree of sophistication of some nations‟ business sectors is
greater than grasped from their streets or television. Often there‟s a higher tier of
businessmen who are the nation‟s champions as in Egypt and India. Less often
the contrary applies, the more virtuous are in the streets, and where it‟s so better
to judge the long term market by the common good man.
6. The most significant question to put a person you interview or may work
beside is, “What do you do in your spare time.” If he replies, “There is no spare
time,” or “My work is my play,” give him the nod.
7. If you‟re an executive with a big plan that requires help, keep your
friends close, your enemies closer, but have one reliable scout. He should think
as you do, spend your money as if his, and answer your questions as if talking to
himself. I was this to Niedco but ignorant of emerging markets; so the hanged
8. Niederhoffer counsels, draw on my forehead and look in the mirror often.
Keep the big picture in mind and don‟t get sidetracked by the entertainment of an
occasion. Can the country, can the executives earn a profit. Will that profit
suffice to cover the risks, the uncertainties, the costs of collecting, the chances of
fraud… Keep thinking.
9. The second step after the first in the door is find the business pilot.
Keep asking for the bosses‟ boss until someone says the guy under him is the
boss, then you have the pilot. Information flows from the top of the mountain like
10. Money talks, everything else walks. If there‟s one message from this
trip, it‟s that it doesn‟t matter if one wears different colored gloves, or none at all,
so long as there‟s money in it everyone will shake your hand.
11. Nearly all my interview techniques are from veterinary medicine, sport
contests, bar observations without drinking, and two books, How to Read a
Person like a Book, and The Art of Negotiation by Gerald Nierenberg – all
12. The successful business explorer must be a masterful negotiator, and
above all this means speeding initially into a pattern of cooperation, and falling
back there when a meeting‟s strained. Failing this, revert to honesty and silence.
13. Don‟t bluff, not ever. Though it probably won‟t work today, it‟ll ruin
tomorrow‟s deal because high-level business delivery is read in body language.
Always be shore your story is wider than its tail.
14. After the pyramid of needs is met, money and sex drive the world.
Beware of offices where sexuality‟s overt.
15. Trust implicitly an all-male or all-female house whatever your gender,
because there likely sex is eliminated from the equation of success with higher
results. I‟ll be hung for this. Be wary where females occupy positions in sales
but no others; they‟re calling cards. If there‟s one pretty girl in the office, gain a
rapport to get at the honcho, her mate. If a girl up front has better looks than
information, suspect a shill. Females trust females more in business than men
trust men, or any other combination.
16. Never sleep in the other camp until after the treaty's signed. Turn away
even when sensitive as the yen market. Walk between appointments, carry your
own water, and sleep well.
17. My rule is nearly never accept a dinner invitation with a prospective
business partner, despite etiquette. It rarely helps - if all can't be accomplished
at the office, something's wrong - and often hurts.
18. The older and less attractive the secretaries, the better the business favor.
19. Don‟t use a broker whose office plants have died.
20. Confirm foreign contacts by email, fax or phone with your sponsor
company just before arrival, or plan to suffer greatly. Carry a guide book in case
the contact no-shows at the airport.
21. Pave the way to meetings with literature and a cover letter to the
department chiefs. Take extra copies for sudden visits. It‟s the business version
of sending flowers to a date to relax, provide legitimacy and give a starting point
22. Success is all in the prime foreign contact. He must speak English, be
knowledgeable, connected, honest, discrete, on hand, and able to outperform
you. I had these men and women on tour and the returns leaped dramatically
23. Traders the world over converge in physiotype and mentality, and it‟s
hard to tell which came first, the egg or chicken, or circular. The model I find is
ectomorph, not tall, quick facial features, surprising streak of introversion,
sincere, nervous, smoker, formerly athletic, and family oriented. That‟s not to say
these are the best traders, just the prevalent; the better are exceptions, and the
best is a one-of-a-kind that breaks the mold. Besides, if you lose money with a
non-conventionalist the chances are greater that you‟ll learn something.
24. When entering unknown terrain such as a foreign meeting, treat it like
survival by starting with short, slow steps, gradually expanding with confidence.
25. Jokes distract unless it‟s an artful in a dull crowd that directs a genius
barb to deflate egos to get swiftly down to business. Recall I played pong with
Mr. Ping, one of the most close-faced influential men in Philippines, to make a
gain for the company.
26. Extensive note taking during a meeting is unprofessional, but jotting
important figures is welcomed. After leaving a meeting, I “writerstorm” before the
next. At days end, I type the reports. At country finish, I mail them to the home
office. Retain a backup copy plus set of business cards.
27. Take a knapsack in lieu of briefcase, or carry the brief in it. It‟s more
secure and expands to hold literature throughout the day. Figure on 1-3 pounds
28. To know the economy learn the people and the best place is among
them. Much truth comes from direct questions to barbers, waitresses and during
pauses on public transportation, especially when there‟s something to conceal or
boast. Cinemas are the inroad via America to the world‟s minds, and the
audiences are fertile with signs.
29. There are more indicators, lower and non-traditional, than one can
imagine. They should be catalogued, quantified and a sum index posed to
assess a given market. The right signal, grown familiar with over time, gives the
edge for slow riches.
30. The smaller and less diverse the market, the more valuable the single
indicator, as with dry tea leaves in Sri Lanka where monsoons missed for the first
time in a half-century. The corollary is use an index combination of indicators to
evaluate a large, diverse market, though it‟s less accurate.
31 Pay most attention to what‟s underfoot, real estate, that's always a
leading indicator. If you see buildings that haven‟t been occupied, worse
buildings where cranes wave in the wind building has ceased. Why you know
that banks are in trouble, and that the infrastructure is not well. Real estate is a
foundation for your feet and your money.
32. The true grit of a country is measured when the economy bottoms out.
Look first to the people for turnaround, next to the natural resources. These run
shallow or deep depending on the location. Examples in this report of the
peoples model are Philippines and Korea where it‟s predicted the tough
community will effect a reversal; and a model for natural resources is Indonesia
which falls back on its land.
33. Character comes out of the cracks when a nation is crushed
economically. Study the genealogy and customs beforehand to determine
resiliency, hence opportunity. Look for tells when it‟s hardest to keep poker
faced. Invest in the businessman who doesn‟t beg when his chips are gone. If
you can convince yourself a broker will treat you the same in bad times and
good, hire him.
34. Payola? The horse does the work and the coachman still gets the tip in
some countries, and avoid contributing from a sensible and moral stance.
35. Ask at every meeting: What is the recent past, present and future
economy, and why? Then query for specific investments. Is later better than
now to put in? End with, “How much have you invested in this item?” Never use
an autographed baseball mitt until you see the star wearing it.
36. Much is told in, “Can you reveal the secret for the lowest commission
37. Be aware of personal ignorance, warned the Niedco team. If you ask a
direct question, don‟t expect to get a truthful response. Don‟t leap to conclusions.
Often I ask people what the lowest rate they can pay is and they reply they can
do something off the books. But it turns out that was the spider saying come into
38. In places where computers are sparse, ask after the day‟s last meeting
to use theirs to get the reports out early. The evening begins with clearer
evaluation of the lower indicators.
39. The business card is key, and impressive titles open foreign doors. One
day of twenty meetings can go through 100 cards. Don‟t carry condoms in the
same pocket as I did in Philippines.
40. Be prepared for the worst of scenarios to relax during meetings. The
Inner Game of Tennis isn‟t a personal favorite, but the maxim is: Imagine the
worst thing that can happen in an event. Rehearse it mentally. Now breathe
41. Anyone with a business card of his own making can get a corporate
discount at the better hotels. Explain you‟re doing business locally for a 15-30%
break. An employer letter or fax from the company being courted seals the deal.
Word memos to imply you‟re meeting companies rather than doing business,
otherwise immigration could press for a business visa instead of tourist.
42. Protracted business swings must be broken by day outings to guarantee
sharp thinking throughout. Blitzkrieg trips should have a big vacation
exclamation point. Try to schedule morning interviews, afternoon loose ends,
and be a tourist the rest of the day. The businessman and vacationer can be
43. After the final selection for speculation, send one of your staff to oversee
the first couple weeks of trading or business. Envision having an employee
continually rotate through a number of countries during the first few months of a
launch into emerging markets.
44. If your trading style is intra-day with fast calls, a mutual language is vital.
It the best country pick offers poor English contacts, retain on priority basis a
translator at the foreign brokerage, or put someone there from your own office.
An international swap of personnel seems ideal, using the model of the university
student exchange program.
45. Invest in the foibles of people if you‟re broke morally. Right now it‟s
make-up in Egypt and gin in Philippines. Prepare to trade blows in money and
blood games. Foreigners know they can‟t be sued so don‟t meet their
obligations, and see you as ripe to pluck.
46. Free enterprise is not for all races at this time. There‟s argument, but I‟m
firm. Capitalism doesn‟t work in areas where people prefer to be shepherded
and fathered. One day scientists will claim to discover a laissez-faire gene to
abet capitalism seeding ventures. Moreover, some other isolated cultures prefer
to be left alone entirely, to not accomplish nor be herded, and we must respect
that if we respect our own values.
47. The vacationer can look for business opportunities during travel, and the
businessman should take advantage of side trips. Combine business with
pleasure for greatest treasure. Alternate but don‟t blend, and, as always,
business before pleasure.
48. Emerging markets offer sky-high potential but weighty risks including
exchange modification, drastic economic transition, standard of living change,
population shift and altering of attitude, city reconstruction, political instability,
and thieving foreigners protected by unfamiliar laws. Some of this is forced
change to many, so money as well as intrigue fly on the trail. This suggests an
advance scout armed with an assessment plan to quantify the reward to risk
ratio. Also, maybe one day there‟ll be a world emerging market index where one
invests in the aggregate markets, hence its destiny.
49. Everywhere people cry for freedom. It comes first from the educated,
usually the young. Freedom for the people often precedes the emergent market,
and here the indicators are smiles.
50. Life is good in whatever nation you travel if your company is in demand.
QUESTIONS FOR BROKERS
“What‟s money? A man‟s a success if he gets up in the morning and goes to
bed at night and in between does what he wants to.”
This is the verbal questionnaire for each firm. I ask brokers early if I may jot
figures, then pull this sheet with spaces below the questions for answers. The
scheme works flawlessly.
1. Inspect the physical layout including computers and software.
2. Staff size, and breakdown in research, international sales and traders?
3. Get business cards of contacts.
4. Rate the best English speakers.
4. Present broker ranking among all houses.
5. Does this firm have capability for $2-3M single trades?
6. Can the house handle intra-day trading with ease?
7. Explain the trading process, step by step.
8. What‟s the house‟s daily volume, yearly volume; the market‟s?
9. Does a $2-3M trade cause a ripple, and what size rocks the market?
10. When did they being trading, and general track record?
11. Give and get company literature, financials and sample research.
12. How is an account opened, and get the forms?
13. Requirements or licenses required of foreigners?
14. T-bills trading possible? List steps and timing.
15. Margin or leverage allowed?
16. Commissions and how to get lowest?
17. Reveal the secret of the cheapest way in-and-out on a trade?
18. How are trades paid for and in what currency?
19. Taxes and other fees?
20. Closing the account, how are dollars recovered, and to what limit?
21. Are custodian banks required or advised?
22. IPO list for input.
24. Other investment opportunities.
22. Provide high-volume, high-liquidity stock choices.
23. Evaluate the recent past, present and future economy.
24. Currency stability and expectation.
25. State of the brokerage houses.
26. Arrange tour of exchange. Days and hours? Copy of rules in English.