Stansberry & Eifrig interview Casey

[from The Daily Crux, forwarded to me by David Galland on 16 January 2011]

Our colleagues Porter Stansberry, founder of Stansberry & Associates Investment Research, and Dr. David Eifrig, editor of Retirement Millionaire, recently sat down to talk with legendary investment guru Doug Casey.

No conventional investments were discussed, however. Instead, it focused on the amazing development Doug and his partners are building in Salta Province, Argentina called La Estancia de Cafayate.

Porter Stansberry: Doug, we're here to discuss your project at Cafayate, and – if you don't mind indulging us a little bit – I would like to hear your point of view on where the origins for the idea of this type of community came from... the idea of having a community of like minds that would create a second home in one place. Where did that start for you?

Doug Casey: Well, believe it or not, the seed was sown many years ago when I read Ayn Rand's Atlas Shrugged for the first time. I had always thought it would be marvelous to have a place to live and engage with people that were like-minded and shared common values. In the book, she created Galt's Gulch, which is basically the archetype of that idea.

For a while I thought I'd found that in Aspen, where I've lived for many years. Aspen has many favorable traits, but I don't like the way the place has evolved. It used to be a wonderful place – characterized by soft snow, hard drugs, and casual sex – but now it draws entirely the wrong kind of people. The town has become very politically correct, and is an epicenter of class warfare. But I do like the infrastructure they have in Aspen.

So as early as my 40s I started thinking along the lines of "if you build it, they will come." I thought it would be nice to have a place where you can live like a renaissance man, where you can have absolutely everything you might want in the world, where it's civilized, but in a relatively rural area with easy access to major cities.

Stansberry: When you began planning this new type of community, how did Argentina come into play? When did you begin thinking about Argentina originally and then how did you make the final decision to select it as the location for your community?

Casey: Honestly, it would have been much easier to do it in the United States for a number of reasons. But I just didn't think the United States was suitable, because the U.S. is clearly and rapidly going in the wrong direction – and doing so at an accelerating rate. That's in addition to the fact most buyers would likely be Americans, and thoughtful Americans would want to diversify out of the US. So I reluctantly had to rule out the United States.

Over the years I've traveled to over 175 countries, and lived in 12, so I started considering other alternatives.

Europe wouldn't work. Europe is tired, socialist, highly regulated, highly taxed, and it has huge demographic and cultural problems with the growth of the Muslim and African populations. Europe didn't fit for many reasons.

I really like Asia, so I considered it. But the problem there is that for all its advantages, if you're not a native Thai or Chinese or Malaysian, you can be a welcome guest, but you're never going to truly fit in. You're always going to be what they call a gweilo – a foreign ghost. And frankly, most of Asia is pretty crowded.

Africa was ruled out for stability, security, infrastructure, and a host of other reasons.

So it basically came down to South America for me. I've been coming to South America for 30 years, so I'm quite familiar with the continent. Through the process of elimination, I was left with Argentina as the best choice.

It's a gigantic country with only 40 million people, most of whom are located around the city of Buenos Aires. Once you get out into the countryside – which is absolutely as pretty as anything you'll find in either the eastern or western U.S. – there are relatively few people. You can drive for hours at high speed and not see another human being, and I rather like that.

Of all the countries of the world – as I considered the pluses, the minuses, the weather, the cost of living, the culture, the geography – Argentina just seemed the best place to be.

Stansberry: That's a great rundown of the logical process that you went through to select Argentina... But Doug, I've known you for 15 years now, and I know that your brain – like every other man I've ever met – justifies what your heart demands.

So I wonder was there something else about Argentina that drew you to it? Didn't your father predict you would end up on the pampas?

Casey: It's a very strange thing, actually. I remember I was about a sophomore in college at the time, and I hadn't even been outside the United States.

My father was holding forth at a lunch that we were having at the house, and I said something you might expect me to say even now. He thought about it for a second and he said, "Yeah, you're probably going to wind up on some estancia down in Argentina."

He'd never been there either, oddly enough. But this is one of the things that perhaps subconsciously encouraged my solipsistic view of life that states that reality conforms to what your imagination wants. And that's pretty much what's happened. It's rather amazing to me, actually.

Stansberry: You spent a lot of time in Argentina over the years, and one of the things I've always been impressed with when I've visited with you is how well-connected you are locally.

You know a lot of people who are senior in the business community in Buenos Aires, and I'm sure you've met a lot more since you started developing Cafayate.

I wonder how your local business connections and the respect and esteem that you carry in Argentina has played a role in allowing Cafayate to succeed where many other developers from the United States have failed? And not just in Argentina, but many of second home developments in Central America and Costa Rica and other places haven't been as successful as Cafayate. How does your connection to the locals help you?

Casey: Well, I have to admit I'm reasonably well-connected in the country at this point. But I don't believe my political connections have really had much to do with our success with the development at Cafayate.

It's rather amazing to me that from a green fields project just four years ago – when it was nothing more than an excellent little town – it has stormed forward full speed with no political hurdles put up at all.

If we tried to do something like this in Colorado, I can promise you it would be another five years from now before we'd even finish negotiating with the county commissioners about how many employees we have to hire, how many welfare housing units have to be built, and all kinds of other constraints.

But we've had no problems at all. And although I'm pretty well-connected down here, I honestly haven't had to take advantage of those connections. I was surprised how smooth and trouble free it's been.

I think others are going to follow us in the town of Cafayate. Because as someone who has lived in Aspen for many years – like everyone that lives in Aspen – I'm always looking for the next Aspen. But I'm certain the next Aspen does not exist in the United States. That is, to me, beyond dispute.

Another "next Aspen" might be Queenstown in New Zealand, but one is unquestionably Cafayate in Salta Province, which is one of the most delightful, Aspen-like little towns that you can imagine. It's like Aspen 40 years ago, but with today's technology.

Stansberry: As you know, I've been there several times, and when I brought my wife, she said it was the most beautiful place she'd ever been to in the world. We've enjoyed every moment there. It's a great little town. The weather is perfect, the people are friendly, the food is excellent, the wine is great – all the things you need for good living are there.

When you and I traveled across Argentina together with Bill Bonner, the founder of Agora, and a couple other friends back in 2005 I believe, we were scouting locations for this community. Can you talk about why you chose Cafayate as opposed to Mendoza or as opposed to closer to the main city of Salta?

Casey: That's a good question. Well, we could have gone down to Patagonia. Patagonia is fashionable and has a number of cities that are very nice. But you know, the weather isn't right. They've got cold winters, and wet springs. And it's a new area – there are few elegant old buildings.

We picked Cafayate because it's got some of the best weather on the entire planet. It's located at about 6,000 feet in altitude and not so terribly far from the equator, so it gives you an eternal springtime type of climate. It's a huge, wide-open valley surrounded by mountains, but it's dry. But even though it's dry there's an immense aquifer underneath the entire valley. In fact, if you drill a well, crystal clear water will shoot 15 feet up into the air. So this is why it's such a great place for grapes. It's got cool nights, warm days, and sunshine 330 days out of the year. It's just about perfect.

It also is not too close to a big city. It's a two-hour drive from the city of Salta, which is a delightful old colonial city. But it also has its own jet airport where you can land a DC9 – even though it's only a town of 10,000. So you're only a couple hours by air from Buenos Aires, and in the near future, you'll only be a couple hours from Sao Paulo or Santiago. So it's a very nice location in the middle of nowhere, but in the middle of everything, if you would.

Stansberry: One of the things I remember when we were looking at the land was the water, like you mentioned. Someone had dug an irrigation well and it was shooting a column of water 20 feet in the air that was probably 10 feet in diameter. And I thought to myself, who's running the pumps? But of course, there were no pumps; it was just the natural water pressure of the aquifer, which is truly extraordinary.

I want to get into the amenities that you have planned for the development, but before we go there in this conversation, I want to point out that you began selling lots probably about three years ago, is that correct?

Casey: Yes.

Stansberry: How many lots have you sold?

Casey: So far 160 have been sold, out of a planned 370.

Stansberry: So you're not quite halfway there, but you guys have been able to sell a significant number of lots in a real estate environment that has been apocalyptical.

Truly, there has never been a worse time in the history of development to sell a second home community – to Americans in particular – and yet you guys have been very successful. And a part of that success, I know, is attributable to the charisma you have and the loyalty your readers have to your ideas.

Another part is that it's simply a good idea to have a second home in a place like Cafayate, that's completely gorgeous, a wonderful place to visit, and of course safe from all kinds of political threats.

But the third reason, I think, is that you guys did a very careful job in planning what amenities people would actually want and use. So I wanted to open up the floor to you to talk about why you planned the amenities you've planned, and how functional that makes the whole community.

Casey: To me, amenities are critical. A major amenity is the town of Cafayate itself, which is walking distance, and certainly riding distance. If you want to ride your horse into town, that's not only quite doable, but people do it frequently. In the town of Cafayate there are a dozen boutique hotels and 20 restaurants, and it's getting better all the time in quality. So that's number one in the way of amenities – there's a place right there that you can get all the things that you might want or need.

As far as Estancia itself is concerned, what we've tried to do is build the kind of place where a renaissance man would want to live. Now, I'm not a golfer – I'm not old enough to play golf – but we've got a fantastic 18-hole golf course there. I've been a polo player for the last 20 years... so we have two polo fields. We are in the process of building 40 kilometers of riding, biking, and jogging trails that meander throughout Estancia.

Also in the works are some fantastic athletic facilities, including a vita par course, which will run for several kilometers with all the standard stations. The ground has been broken on a 3,500-foot Gold's-class gymnasium, along with tennis courts, a squash court, and a basketball court. A yoga and aerobics room, an outdoor lap pool and an indoor resistance swimming pool, a Pilates room that's fully equipped and treatment rooms for massage; sauna and steam and cold plunges and all that. And of course, a skeet-shooting course is being put up. I think that covers most of the athletic facilities. When you're there, you can get into peak physical condition.

As far as the social facilities are concerned, we've already built the golf clubhouse. The social clubhouse is breaking ground shortly, and that is being built on the model of an Argentine farmhouse where a wealthy family might live. We have a billiards room, because I like to shoot a civilized game of pool. We have a cigar bar, because I do like a good cigar. We have a library – and I'm not talking about a couple Danielle Steel books laying around –I'm talking about a world-class library with a couple thousand books; well-selected, all the classics, the type of thing that when people look at it, they're going to say, "This is a proper library." We have a media room, which is going to have all of the world's best movies. If you've thought of it, if you've heard about it, the movie's going to be there, in addition to a very large number of instructional courses and so forth on DVD.

What else? Of course, a card room, suitable for bridge and poker. But in addition to that a nice chess table, a nice go table, and if you walk outside you'll be able to play bocce ball or croquet after a couple of glasses of wine. We also have a kids club where all the stuff youngsters like is going to be. Of course, the whole place is wired for high-speed Internet. I'm sure I'm leaving out a few things...

Stansberry: I remember when we were discussing all these amenities back in 2005, and we were plotting out all the things a renaissance man or a civilized man would need to live well. I'm very happy you've followed through on this idea... You've created this paradise for people like me and you who want to live well and understand the moral obligations of civilized people.

Casey: Exactly. If I'm going to live there myself, I want access to all the things I want. We even have a couple of lakes, one stocked with trout and one stocked with the good local eating fish. I'm not a fisherman, but you can certainly send the kids down to catch some fish for dinner if you get tired of great Argentine beef every night.

Stansberry: You mentioned the golf course, and I have to also say that it's truly world-class. I know Bob Cupp designed the course, and it's a delight to play. I've already played on it. It's not just a development golf course; it's a great golf course.

Casey: We'll get you on the polo field too, Porter. I think it's a sport everyone should learn.

Stansberry: Thanks Doug, but I like all my bones in the unbroken state they're currently in...

I also wanted to compliment you on the beautiful architecture and the materials in the golf clubhouse. Again, it's truly a world-class facility. It's not the promise of a world-class facility from a financially suspect developer. It's actually been built and it is absolutely first-class in every respect, as was the food and the service when I was last there.

I hosted a meal for probably 20 people in front of the asado spit on the back patio of the golf clubhouse, and it was one of the most pleasurable meals I've ever had. It was delightful. And we even drank wine made on Estancia itself.

Casey: Let me tell you some more about the food, because this is an important thing. We're insuring that organic milk and organic eggs and chicken are always available. We planted many hundreds of fruit trees ranging from olives to apples to pomegranates... you name the fruit tree, and we've probably got it. Everything grows there, so there's lots of fresh fruit and vegetables. I really prefer it to the industrial quality food we've become inured to in the U.S. So it's going to be a gourmet's delight.

And you don't know about this yet, Porter, but we just closed a deal with the Grace Hotel group, which is a new six-star hotel group run by some Greek billionaires. They're building a small, boutique hotel – only about 20 rooms – on part of our 1,500 acres, and they're going to take advantage of our facilities and make their facilities available to Estancia.

So they're going to have some special features of their own that we can take advantage of, including a fantastic treatment spa, to go with our athletic spa. So that's going to be an additional amenity that's available. They're starting construction on that next month.

Stansberry: That's incredible. A hotel on the property would really make it a lot more accessible and interesting for folks who want to go visit, and for homeowners who have guests more than they have bedrooms.

Casey: Exactly. And another important point is they're very big on cuisine. Their chef from London is going to spend several months in Cafayate making sure the kitchen in the hotel is in keeping with the rest of the facility.

Stansberry: That's great.

Casey: I should also mention that there are some existing hotels in Cafayate with very good service and very good food, as well.

Stansberry: Where would you recommend people spend the night if they want to take a trip down to Cafayate and check things out?

Casey: Well, there's a very nice hotel called Patios de Cafayate, one of Starwood's Luxury Collection. They have excellent rooms. But my favorite hotels are less expensive, just as good, and they're in the town itself right off the square. The Killa Hotel is my personal favorite.

Stansberry: What about other people that have been drawn to the Cafayate idea? When I was there with you in 2005, 2006, 2007, the place was overrun at the hotels with developers and other people from Italy, Germany, Canada, and the U.S. – people looking at buying up land and doing other developments. Have you seen any of those other projects moving forward?

Casey: I hear rumors but I haven't seen anything. But it's inevitable that it's going to happen, just the way it happened with Aspen. At Estancia, we've already got buyers from 30 countries, so it'll be very international.

Stansberry: What about the star appeal of some of the people who've bought? Obviously you don't want to use names, but I know that you've sold lots to several well-known business folks. Can you give us a flavor of who your neighbors are going to be at Estancia?

Casey: Well, this is one of the most interesting things about the place from my point of view... it really is true that birds of a feather tend to flock together.

There's a certain type of person that's drawn to live in Washington D.C. There's a another kind of person that goes to live in Las Vegas. A different type that lives in San Francisco. And a different type that'll live in Aspen, for that matter.

Generally speaking, what we've done is set a certain tone at Estancia. The people there tend to be successful, they range in age from their 30s up to their 60s, they're entrepreneurial, and they're free market-oriented. The ones that I've talked to have all done something interesting in their lives – so they make for good company.

The people I've met tend to read the things that we read, see things much the way we do – the kind of people you'd want to spend time with. It's not luck of the draw the way it is in most developments where you just don't know who your next-door neighbor is going to be and whether you'll like them. The chances are overwhelming that you'll like your neighbors and be interested in them.

Stansberry: I certainly agree with that. How about your house, Doug? Are you under construction now?

Casey: We're breaking ground as we speak. We offer nine standard plans that people can choose from and four different contractors that we supervise, but I've decided to build a home that we designed ourselves. I'm going to be spending significant time there, and there were just some additional things that I wanted.

Stansberry: Very good. How many homes have been built and how many are under construction or in the final stages of planning?

Casey: Altogether 30 houses are currently in the planning or building process. Six have been built, and 15 more are currently under construction. By this time next year, because of plans and architectural drawings, we figure there will be 50 houses built or under construction.

Also by this time next year the social clubhouse, which will be the last thing to be done, is going to be finished and the hotel will be just about finished. So we're in the final stages. Once complete – since the project is already an overwhelming financial success – we're going to raise prices significantly to keep the riffraff out. I actually didn't get in this for the money, I got into it because I wanted something that didn't exist. If it had already existed I would have just bought a lot there, and simplified my life. But anything worth doing should – by that very fact – be profitable.

Stansberry: Well, it's really an amazing accomplishment that you've built a successful second-home development two hours from Salta in the Andes Mountains, in the middle of the biggest real estate depression since the 1930's depression. So, congratulations on your success.

Casey: Thank you... But I think the reason it's been so successful is because, in my opinion, this is the best development on the face of the planet... It has everything you could possibly want in a development. It is unique.

Dr. David Eifrig: Doug, I wanted to touch on my experience down there and how impressed I was with the setup. To me, an interesting aspect of the area is its great wine. Can you comment a little bit about the grapes and vineyards in that area of the world and how you've integrated them into Estancia?

Casey: Certainly, although I'm not a wine connoisseur, as you both know.

One of the interesting things about the area is that it is where the highest altitude wine in the world is grown – not in Cafayate itself, although that is high altitude as well – but very close to Cafayate. The two main grape varieties are Malbec, which is a very rich, hearty red wine, and Torrontes, which is a really delightful white wine. So most of our grapes are those two, but we also have Cabernet Sauvignon and a couple other varieties.

There are a couple reasons we built Estancia right among the vineyards. Number one is because it's very aesthetic; it's nice to live among vineyards.

But the second reason is that it's economic. We want to keep the running costs of owning a home there as low as humanly possible. Right now, the monthly fees for homeowners are only about $350 a month, and as more of our grapes grow to maturity, the revenue generated will only help keep costs down.

Also, because our local partners are expert vintners, we're making it possible for any owner to blend his own wine with his own label. I can imagine the wine-tasting parties in the next few years...

Eifrig: I really enjoyed the Malbec when I was there. It's almost like a French table wine, but not watered down. You could almost have it at any meal. It was just spectacular.

As you know, we're going to take a group down to Estancia this spring during the grape harvest season. We have about 30 spots that we're offering to readers to come down and join us. Can you talk a little bit about what's planned during that time? What kind of things can people expect?

Casey: In addition to the harvest activities, we'll have a whole host of things to do.

One thing we always do is some horseback riding. My personal preference in riding is thoroughbreds, but the local horse down there is called the Paso Peruana. It's a very unusual horse. It has an extremely smooth gait and is extremely reliable. They can walk for many, many hours at high speed. So we always have a bunch of the Paso Peruanas that people can ride around if they wish.

We'll have stargazing on the dunes, because part of Estancia is sand dunes actually. We'll go out at night and look at the southern sky. It's just breathtaking. People who live near cities in North America have never seen anything like it.

Obviously, our fantastic golf course will be available. We'll also have asados, which for those who aren't familiar are the most fantastic barbeques you can imagine – with just about every type of grass-fed, free-range meat you could want.

Eifrig: For me, one of the most impressive experiences I had there was eating the beef. I truly had never experienced the flavor. And at each restaurant, the beef seemed to get better and better.

Casey: There really is a reason why Argentine beef is famous, and it's because it's all grass-fed, and only a small amount of it is finished in feedlots, as it is in the U.S. And even the beef in Argentina that is finished in feedlots isn't finished the way it is in America – where the cattle are there for months chock-a-block next to each other, and pumped full of steroids and antibiotics. That's just not done down here. It all adds up to why the beef is as good as it is.

Eifrig: I couldn't agree more... Changing gears a bit – what's your take on the country politically? What can you tell us about safety and security for individuals who may be interested in going down there to buy a second home or retire?

Casey: Well, like I said, I've been coming to Argentina for 30 years now. I have an apartment in Buenos Aires, and ranches in both Patagonia and Salta. Having lived in B.A., I can tell you it's like New York except safer. That doesn't mean you can't have something stolen or be pickpocketed – that can and does happen, like it happens in any big city. But as far as physical safety is concerned, it's an extraordinary city. It has an extraordinarily low murder rate and violent crime is quite unusual.

But the important thing to remember about Argentina is that once you get out of Buenos Aires and into the countryside, you're really going into a different world. It's almost like you're stepping back in time.

Crime in Cafayate is literally unheard of. It just doesn't happen. First of all, there's nothing around Cafayate. It's the middle of nowhere. But the people that live there are all employed in the vineyard and winery business or dealing with the tourist trade, because tourists have loved it for many years. So crime is not an element and safety just isn't an issue.

As far as the political situation in Argentina, it's irrelevant to the quality of life. Like all governments they are capable of doing dumb things, but they don't affect you. It's quite unlike the U.S., where they enforce the laws in an increasingly draconian manner. The country is laid back. It's more European than Europe – in a good way.

One of the things I like most about this place is a certain down at the heels elegance. It was a fantastically rich place a hundred years ago, and then they started going through all these stupid political experiments – not unlike what we're seeing in the U.S. right now. So the people have already learned to be suspicious of the government, and the police, and the army.

My experience is that most governments leave you alone if you're not their personal property, which is to say, a citizen.

People read these ridiculous things about Argentina and the economic problems which they have – which are mostly true, incidentally – but they don't affect you at all. In fact, they affect you favorably as an outsider coming down here. The government leaves you alone. It's not a police state. They don't monitor you. They don't track you. They don't care if you come down here on a tourist visa and stay for 10 years. When you finally leave you pay a $50 fine and you can come back in on the next flight and there are no hard feelings. Try that in the U.S. and see what happens.

So, no, Argentina is a fantastic place to live and you don't have to worry about the Frito Bandito or any of this type of thing. People who continue to believe these things are people that are really so unsophisticated they should probably stay living in Podunk, Iowa.

Stansberry: Alright, Doug. Thanks so much for talking with us.

Casey: It was my pleasure. It was great talking with you, and I encourage anyone who may be interested in learning more about Estancia to check out our website.