The Ayatollah never pictured this… An American investor bargain shopping in Tehran.
I (Kim) arrived in Tehran, Iran last night. In much of the Western world, almost no other country is viewed more darkly than Iran… It’s the enemy. From the 1979 hostage crisis… to President George W. Bush naming it a part of his “Axis of Evil”… to its dogged efforts to develop a nuclear program (and many say the bomb)… no country gets worse press than Iran.
At the S&A Global Contrarian, I’m interested in countries and markets detested and cast off by the rest of world… So, of course, I came to Iran.
The big picture of Iran is this… It has been a political pariah in much of the developed world since 1979 (when Iran’s revolution made it an Islamic republic). The country has for years suffered under the boot of economic sanctions – and these sanctions were ratcheted up a few notches several years ago when Iran didn’t succumb to global pressure to ease up on its alleged nuclear-development program.
My flight from Dubai to Tehran was packed. The flight had no alcoholic beverages of any kind available… Notable, but not surprising. (We’re in the Islamic Republic, after all.) Similarly, I saw very few women onboard. Upon landing, every woman – without fail – pulled out a headscarf and covered her hair.
Passport control was no big deal… although my friend Sam – an Australian who had not arranged a visa beforehand – was hassled a bit at the visa window, and had to pay more than the Iranian visa website specified. (Sam and I are former colleagues from our days in Moscow. He traded Russian stocks for one of Moscow’s big brokers.) Since the other option was for him to raise a fuss and take the next flight out of the country, he paid up.
Shortly after arriving at the hotel, Sam’s “man” in Tehran, a former senior energy industry executive whom I’ll call K, came to visit around 11 p.m. (There’s a certain sense of urgency here.) He and Sam have worked together a lot in the past, but I’m new to him. He had clearly done his research on me, though… “I receive DailyWealth in my inbox every day,” he told me, as way of introduction.
Two minutes later, after quizzing me about my nationality, what passports I hold, where I live and work, and where I flew in from, he smiled and said (as if to reassure me), “Everyone here thinks everyone else, both Iranian and non-Iranian, is a spy.” That’s the second time in a month, two continents apart, that someone has fingered me as a spy within the first five minutes of meeting me.
On another front… sometimes people ask me how I make contacts in a new country. I usually respond that it’s different every time. Before I visit a new market and country, I spend a lot of time back at home trying to set up meetings on the ground… you can learn a lot about an area by just being there. But of course, you can learn a whole lot more if you’re able to talk to people who have their fingers on the pulse of the place.
Finding people to talk to in Iran has been a particular challenge… after all, as I mentioned, it has been the sworn enemy of the West (with a particular hatred for the U.S.) for the past two generations. You can count the number of friends Iran has around the world on your hands. So making connections from afar has been a trickier assignment than usual.
That’s why I have had to be a bit more creative than usual here. An old journalist friend from Moscow – now the energy editor in London for his paper – introduced me to a local Tehranian reporter who works for a major international newspaper. I also scanned the list of alums of where I went to college for people who live in Iran… and found a guy who works for one of the big (and one of the few) investment houses in Tehran… So calling on him was easy.
On another front, the guy who heads up the contracting firm that fixed my basement in Virginia after a recent pipe burst is of Armenian-Iranian descent. My last name is Armenian… and we Armenians stick together… so he gave me the name of a few members of his family.
My friend Sam moved to Dubai a number of years ago to launch an oil-trading firm… And during that time, he made a lot of contacts in Tehran, in anticipation of being able to help Iran unload its oil on international markets. He and I tried to do some oil-transit deals while I was in Sri Lanka, and have kept in touch… Sam lives in Melbourne now, but we met up in Dubai to travel here to Tehran, where he’s refreshing his contacts, showing me around, and trying to figure out how to get well-positioned.
Last but not least, on my flight to Dubai, I happened to sit next to a woman from Iran… She saw me reading a book about Iran, and three minutes later gave me the name and contact details of her brother in Tehran. “Just tell him I gave you his number,” she told me.
I recently shared some thoughts on the Ukranian crisis. You can read that here.
And there were some major developments over the weekend…
Ukrainian president Viktor Yanukovych fled the country… Parliament voted him out of office after accepting a controversial economic-aid package from neighboring Russia. Now, there’s a warrant for his arrest for the 82 civilians who died over the past week. But he’s in hiding. Rumor has it that he flew to somewhere in the United Arab Emirates. Protestors have taken control of the country. Parliament speaker Oleksandr Turchynov will assume Yanukovych’s duties until the country’s election on May 25.
Folks think opposition leader and former Prime Minister Yulia Tymoshenko is the front-runner for the presidency. She lost to Yanukovych in the 2010 election. One year later, she was sentenced to seven years in prison over a natural gas deal she negotiated with Russia. She was released from prison Saturday and has already started rallying support. The trial was a political setup… Yanukovych wanted her out of the picture. The charges were absurd. He resisted massive international pressure to free her.
The new government said Ukraine needs $35 billion to avoid default… The U.S., U.K., European Union, and the International Monetary Fund have already pledged support for the new government. Meanwhile, Russia halted payments on its $15 billion bailout.
“The new government’s task is to stop the country’s slide, to stabilize the currency rate, to ensure timely salary and pension payments, to win back investors’ trust, and to create new jobs,” Turchynov said in an announcement on the Parliament’s website. “Another priority is to return to the European integration path.”
And according to Russian Prime Minister Dmitry Medvedev, Russia will honor the agreement it signed in December with Yanukovych to cut gas prices for Ukraine… though Russia is worried about the legitimacy of Ukraine’s new government.
Markets hate uncertainty… And the latest news from Ukraine put the markets more at ease… The yield on Ukrainian bonds maturing in 2023 fell to 9.16% – its lowest level since January 28.
Ukraine’s bellwether index – the UX Index of stocks – soared 12%, the biggest jump since May 2010.
Crux note: As the editor of the S&A Global Contrarian, Kim’s travels take him all over the world – sometimes to places no one wants to go (like Iran) – to find investment opportunities that offer incredible returns you can’t find anywhere else. To date, he has visited or lived in more than 70 countries, and has worked as a stock analyst, hedge-fund manager, consultant, and even a political analyst. To learn more about the S&A Global Contrarian – and to gain access to this month’s issue – click here.