How to make money serving old people

Feb 4, 2015

- By Bill Bonner

Bill Bonner
San Jose, Costa Rica

Dear Diary,

More ups. More downs. That was our forecast. So far, 'vol' looks like a winner. The volatility index has gained about 30% so far this year.

The US missed its growth target for the 4th quarter. America's oil states - the only part of the country where jobs and incomes had been going up - are now fading. World trade growth is slowing.

So the Dow rose 305 points yesterday. Gold fell $15.

    (Bloomberg) -- The economy in the U.S. expanded at a slower pace than forecast in the fourth quarter as cooling business investment, a slump in government outlays and a widening trade gap took some of the luster off the biggest gain in It's been consumer spending in almost nine years.

    Gross domestic product grew at a 2.6 percent annualized rate after a 5 percent gain in the third quarter that was the fastest since 2003, Commerce Department figures showed Friday in Washington. The median forecast of 85 economists surveyed by Bloomberg called for a 3 percent advance.

Nothing wrong with 2.6% growth. If it were real. We have a feeling that it will be discovered that the 'growth' was fueled by an increase in credit, rather than an increase in real output or productivity. And we also have a feeling that yesterday's big jump in stock prices will be revealed to be the work of speculators and mo-mo traders, rather than serious investors taking up serious positions. But we'll have to wait to find out.

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This is a very long movie we're watching. It began 44 years ago. And seems to have a few more years to run. So, let's take an intermission:

We spent much of January on the beach in Nicaragua. The longer we stayed the better we liked it.

It was warm and dry on the Nicaraguan Pacific coast, but we woke up to the sound of rain on the roof this morning.

"Lake Arenal has a very different climate," our scout, Ronan McMahon. explained. Ronan is a young Irishman with long dark hair.

"We are up high enough that it is naturally cooler. And clouds get caught in the mountains and drop their rain on us here."

By way of introduction to Ronan...we asked him where he had been.

"I've been traveling since the first of January," he replied. "I spent a few weeks on the Costa Maya in Mexico, near Tulum. That's an incredible place. It is beautiful and people love it. The growth has been spectacular. It began with Cancun. But now the whole coast is being developed. People who bought property there just a few years ago have made a lot of money.

"I went all down the coast, exploring and talking to developers. Then, I went over the west coast of Nicaragua, north of Managua. That area is undeveloped. I had been told that the coast was not very nice. But I found it is gorgeous. And you can still buy productive farms right on the ocean. You pay a little premium over the cost of farmland, for the ocean frontage, but not much. I think we're going to see some good projects in that area.

"Then, I came down to visit you at Rancho Santana....and to bring you up here to Costa Rica to show you this lake property. It's a completely different story. It is beautiful, like Lake Chapala in Mexico. But it's not crowded with a lot of North Americans - yet. I think it will be eventually, because it is so pretty. There are blooming plants everywhere. Stunning views down to the lake. And the climate is so healthy. In the 70s and 80s all year round. People come here and fall in love with it.

"From here I'm going to down to the South Coast of Costa Rica. There are some lovely properties there. Worth having a look. And then Ecuador. There are some great places there too."

"You mean, you spend months traveling from one holiday spot to another? And they pay you do this?"

"Yes, of course. "

The 'of course' part may not be as obvious to you as it is to Ronan. To him it is obvious that Americans, Canadians and Europeans are getting older and looking for nice places to spend at least some of their retirement years. Florida was once the destination of choice for those people. Now, they look to Costa Rica, Nicaragua and Ecuador. Ronan tries to get there before they do.

"I wasn't the one to discover this," he says, "but you make money in real estate by being in the 'path of progress.' What I look for is a place that is so charming...so nice...so appealing that developers can't screw it up. It is amazing how many failed developments there are. So, I have to be very careful about what I recommend. Developers cut up the land in a heavy handed way. Or they run out of money before they get the infrastructure working properly. Or they put in ugly buildings.

"Building a community is much more difficult than just selling lots. And if you get a lot in a failed community, it's a disaster because it is almost impossible to get out of it.

"The developers call me hoping I will help them rescue the situation by bringing in new buyers and homebuilders. But when the community has failed it is almost impossible to turn it around."

Ronan writes for International Living magazine, and for a small group of international real estate investors.

"I look for properties - some retail, some wholesale - that are especially cheap. And I recommend to my readers that they have a look."

We could see why the path of progress might take a real estate investor to Lake Arenal. There are few places like it. Rolling pastures and forests come right down to the lake. It looks like Switzerland, but with tropical plants and no winter. So great is the resemblance that at least one immigrant built a Swiss-style hotel, as if it were in the shadow of the Jungfrau.

Almost all the rest of the architecture, however, is boring and clunky.

We gave the local real estate agent some advice:

"You need a distinctive style...an Arenal vernacular that can serve as a model for local builders and architects. Otherwise, the houses don't embellish the landscape; they blemish it."

We doubt this advice was much appreciated. But at least he was polite about it.

Tomorrow: Sao Paulo, Brazil

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

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