Bo Keeley     6-02

                                                                Part 1



“Gentlemen, there are two things you should know about the American company I represent.”


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 Niederhoffer note:         


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 challenge.


“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.



                                                     Karachi Exchange


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 Brokerage.
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 on Niederhoffer.
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 international status.  
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.



                                                          Custodian banks


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. 



 Other meetings   


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 squirming. 


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.  


                                                             SIRA LANKA



Preface:  I survey every bulky person.  A suicide pedestrian strapped with bombs blew up the fish market.  What am I doing here?   



                                                        Colombo Exchange


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 floor.


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 nature.


“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 countries. 


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 wrestling. 



                                                        Custodian banks


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.



   Other meetings


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 sleep well.


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 survival again.


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.


Bombay Exchange


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 en route.”


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.



         Custodian banks


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.”



                                                        Other meetings


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 hurry on.


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 times.





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 the camel.


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.



 Cairo Exchange


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 around. 


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 business levels. 


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 grasp.”


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. 



                                    Custodian banks


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.



                                                            Other meetings         


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 boom comes.


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.












                                                        Bo Keeley     ‘02

                                                                   Part 2


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.



                                                         Manila Exchange


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. 0930–1200.



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 getaway.


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.



Custodian banks


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.”



Other meetings


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 company project.


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 ushered in.


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 ended.


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 chips.        





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.




                                                               Seoul Exchange


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 international department. 


“Gentlemen, there are two things you should know about the American company I represent.”


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 similar.


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.



 Other meetings


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 purse. 


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 11-year-old daughter:


       To Victoria

From Bo

       Re: Urgent


       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 reports.


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.


Jakarta Exchange

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 time.





LIPPO Securities is the only listed public security company, 2nd 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 three months. 


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 evening. 


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.



                                                         Other meetings


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.



Bangkok Exchange


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 leaving.





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 “Ola!”


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.  . 



                                                       Other meetings


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 good move.


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 deductions. 


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.



                                                  Istanbul Exchange


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.



                 Custodian banks


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 traders. 


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 information.


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 advancing.   


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 gives them.”


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 preferences. 





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 marks.


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.



                                                                Other meetings


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 tour. 


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 inhibitions.










 “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.’”

                                                                       Margo Kaufman



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 my life.”


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 hero.


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 20th century was now in scientific circles being considered a symbol of learning and hope for the 21st… 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. 







“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 results.


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 water.


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 recommended.


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 to conversation.


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 before investment.


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 per broker.


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 and fee?”


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 my parlor.


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 easier.


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 one. 


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.  Thanks, Niedco.





 “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.”

                                                                        Bob Dylan



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.