Issue #28 - Most important email I'll ever write: Venezuelan Election this Sunday

Read time: 3 minutes

Ok, made it back from Venezuela after 50 hours in transit. Serious milk run, pero vale la pena! 

Thankfully, I maintained a Journal during my trip. It has already inspired many ideas and I will share the fully typed up diary when it's ready for those interested, for it may inspire you, too.

Some of you may be aware, but if not, the most critical election in Venezuela's history - and South America for that matter - is happening there this Sunday.

Current President Nicolas Maduro, the handpicked successor of socialist-turned-communist-dictator Hugo Chavez (who ruled from 1999 to 2013), is gunning for re-election. 

The last 11 years has seen phony elections and continuation of the dictatorial ruling that has kept Venezuelan society at a standstill...although the winds seem to be changing.

After the food riots and economic destruction sent 7 million refugees out of the country and destroyed the middle class in Venezuela, the world seems to be watching. For the oil resources in Venezuela (they have the most oil deposits in the world) are so valuable and Western society would love better access to it, but can't do business with communist regimes, ergo, sanctions.

It would be a great pleasure for the US to see a regime change and lift the sanctions and allow oil to flow out of the country more freely. This would benefit Western democracies and help curb inflation but also be a MAJOR boon to the Venezuelan economy and attract much needed foreign investment that would instantly change the country's economic trajectory for the betterment of all citizens (currently 95% poverty).

We met a random guy on a hike who said there are 11 million voters in Venezuela and 7 of them are voting against Maduro - I was surprised by this as most people I talk to say there’s no way Maduro won't win.

He elaborated to say that the problem is that Maduro, even though he’s only got 4 million voters, publicly said on TV that the only way he leaves is if he’s killed and he’ll take to the streets with arms. And the thing is, he controls the Army since most of the generals have made all this money and garnered so much power. Ditto for those "Enchufados" (those “plugged in” crony politicians, businessmen and said army generals) and the problem is that these people will all be torn down if Maduro gets outed and so he might seriously use military force to stay in the seat. He has done this before. 

My brother in law - 31 years old and a great entrepreneur with two car dealerships - is worried about the election. He has $4,000,000 in cars on his lots and they aren’t insured - can’t get it here - so you can understand his concern.

Last time there were riots on Avenida Bolivar where one of his dealerships is located and people with sub machine guns were firing bullets everywhere through every store window and car in sight wreaking havoc.

Back when Chavez was in power, he called people in the 5%, like those we socialize with, Oligarchs, so as to give them a bad name. But in actual fact it is the Enchufados that are the equivalent of nefarious Russian Oligarchs.

Also back in the day he was so narcissistic he used to commonly speak for 5-8 hours straight on TV every day, spewing his propaganda nonsense about communism and distributing money and land from rich to poor.

He would say to the TV and the public - if you don’t have a house or any land, just go take some for yourself because the "Oligarchs" don’t need all of it. This is how my father in law got his 5,000 hectare farm stolen from him.

Invaders everywhere took over private property because Chavez said you could.

This happened to the entire middle class. There are virtually no 60-90 year olds with any net worth as it was all stripped away from them. It is now the young generation, like my sister and brother in law that are providing for their families. 

Horribly sad. This is what socialist propaganda turns into when the economic music stops: decrepit industrial parks where Ford and GM used to manufacture cars that now look like a scene from the Walking Dead, 1,000,000% inflation, extreme poverty, electricity outages, gas station line ups around the block (even though they have the most oil in the world, they can't get it out) and a dictator that presents himself as Superman to the ignorant poor as their savior (seriously, large cartoon images of Maduro are found on the side of buildings).

Anyway, the election is on Sunday and so we shall see what the hell happens. 

At least this time, it seems like the Western World is paying more attention. 

And give your very best to the wonderful people of Venezuela who desperately need our support. 

PS. My good friend shared a great piece from Rystad Energy discussing the election and economic impact most related to oil production. 

PPS. I know the above sounds alarming, and it is. But, I want everyone to know that the people in Venezuela are some of the best people I've ever met. The culture, the nature, the food, it is all beautiful and I look forward to spending a lot of time there. I just hope the economic and political situation changes that might liberate the poverty into a functioning capitalistic economy.

1. Personal Finance

Simple one today: diversify.

After hearing countless stories from people in Venezuela, hearing how their parents lost everything, property stolen, and businesses confiscated (including my father in law), it is ever so apparent that no matter how good you have it, how good or resilient your business is or how amazing your property is, sometimes, it just might not be yours. 

Talking with my brother in law - he knows he can make a lot of money through his car oil products business and through his car dealership business.  

But he also looks at me with big eyes and a look of fear and says, but Eddie I know I really need to diversify. Because today I have something, and tomorrow I might not.  

So we worked together to set up an investment account in the US (interactive brokers) so that he and his family can start contributing to diversified ETFs, so that if something happens in the country, which has happened before, they will have a safe guard to fall back on.  

A reminder, ETFs are the easiest way to instantly invest in the worlds best companies, automatically diversified, and low cost.

Remember. Don't put all your eggs in one basket. 

2. Stock Markets

Markets have been volatile lately. S&P500 is down 3% in 5 days.

With big tech earnings falling short of expectations and an assassination attempt on the likely next president of the United States, there is no shortage of bad news fueling the fear.

But just a friendly reminder, ignore the media headlines, because stocks always drop.

Remember, investing in the stock market is not a get rich scheme.

There will always be highs and lows, but with a long time horizon, stocks do go up. 

Indeed, since last year the S&P500 is up 20% and it's 10 year annualized return is 13%.

3. Real Estate

Need to get a new heat pump for a small retail strip I own with a friend of mine. 

Who knew that a replacement unit would be quoted at $33,000!?

Indeed, prices have skyrocketed in this industry. Over the last five years, Air Conditioning suppliers Watsco, Blue Star, and Modine Manufacturing stocks are up 234%, 375%, 643% respectively.

Another reason that not all real estate investing is "easy" and "care free" (despite what tik tok real estate folks tell you).

Sometimes the ETF and chill route is the best method. No capex required by you :)

1 Quote

"Good things happen when you just show up"

- uncle Sam

A Question

What inspires you lately?

My inspiration comes from the people of Venezuela. So resilient and wonderful they are and despite all the challenges, they find ways to make things happen. 

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Thank you

Eddie Gudewill, CFA
 

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