If you know what you’re doing, Puerto Rico may represent a big opportunity. From Simon Black at sovereignman.com:
In the spring of 1871 after a miserable defeat in the Franco-Prussian War, Paris plunged into a major crisis as local citizens revolted against the government.
Financial markets went berserk as a result, and the prices of French government bonds plummeted.
There’s an old story that an heir to a large fortune came calling to the offices of the Rothschild banking family looking for investment advice.
According to accounts republished several years later by the Wall Street Journal and Chicago’s Daily Tribune, Rothschild advised the man to buy French government bonds.
“But the streets of Paris are running with blood,” exclaimed the investor.
Rothschild is reported to have replied, “My young friend, that is the very reason that today you can buy securities for 50 percent of their face value.”
This story gave rise to a common saying in finance: ‘buy when there’s blood in the streets’.
This is easy to understand intellectually… harder to do in practice.
When there’s blood in the streets, i.e. markets are collapsing, our human emotions kick in. We tend to panic.
Rather than think that the worst is probably over, we often think that the worst is still to come… and that good times will never return.
Buying at a time when everyone else is selling takes courage. People tell you that you’re crazy.
Looking out my window of the lovely Vanderbilt Hotel here in San Juan, Puerto Rico, I can’t see any blood. Not yet.
But there is zero doubt that this island is in dire financial straits.
Puerto Rico is flat out 100% bankrupt. There is no other way to state the case.
The island’s government is in default. The development bank is in default. Even the local utility company has filed for bankruptcy.
The fallout has been so severe that it borders on ridiculous.
To continue reading: Where there’s [almost] “blood in the streets” in America today…
