Bonner Private Research
Fatal Conceits Podcast
Federico Tessore - Lessons from the Fin del Mundo
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Federico Tessore - Lessons from the Fin del Mundo

Surviving and investing amid hyperinflation, political turmoil and economic chaos...
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And now for some more Fatal Conceits…

In today’s episode, we welcome serial entrepreneur, investor, author and founder and CEO of Inversor Global , Sr. Federico Tessore.

Over the past two decades, Fede has built his financial research business into one of the most successful in the Spanish speaking world (don’t worry… the conversation is in English), with hundreds of thousands of readers across multiple countries up and down Latin America and in Europe.

His massively popular #FedeTessoShow channel on Youtube has almost a quarter of a million subscribers, whom Fede guides through the ins and outs of investing in complex markets around the world.

We sat down in person with Fede at his office here in Buenos Aires to discuss investing during hyperinflation and political uncertainty, something he knows up close and personally, as well as his excellent book, Argentine Power: How to Return to being the Richest Country in the World (Spanish language).

You can find Fede’s writings here on Substack where he writes Pasaporte Inversor or follow him here on Twitter.

So please, pull up a chair and enjoy our conversation with Sr. Tessore today… and don’t forget to share our show with friends in both the English and Spanish speaking worlds.

Saludos!

Joel Bowman
Host, the Fatal Conceits Podcast

Thank you for reading Bonner Private Research. This post is public so feel free to share it.

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TRANSCRIPT:

Joel Bowman

Welcome back to another episode of The Fatal Conceits Podcast, dear listener, it's a show about money, markets, mobs and manias. Not necessarily and not always in that order. If you haven't already done so, please head over to our Substack page. You can find us at bonnerprivateresearch.substack.com, and there you'll find hundreds of articles on everything from high finance to lowly politics, plenty of research reports, and of course, more conversations like this under The Fatal Conceits Podcast tab at the top of the page. 

It's my pleasure today to welcome, in person actually, down here in Argentina's Capital of Buenos Aires, a good friend of mine, a serial entrepreneur, renowned investor, an author, a podcaster, a communicator, a man who wears many hats, Mr. Federico Tessore. Welcome to the show, mate. How are you doing?

Federico Tessore

Thank you. Thank you, Joel. Nice to be here.

Joel Bowman

I thought we might start out, just for listeners who maybe are unfamiliar with your work in the English-speaking world, how it was that you got started in investment research, in opening up these businesses in multiple jurisdictions, multiple countries, as we were just speaking about off camera, and how you got to know Bill Bonner in the first place.

Federico Tessore

Yeah, well, it's a long story but I will try to make it short and fun. When I was a kid, my father was a businessman here in Argentina and he was a very risky businessman and his businesses went up and down very, very quickly. So I grew up in a very financially unstable home. So sometimes we have two houses and we go on vacations to Punta del Este, that you know that's a very nice place here. And some other years we didn't have vacations and we only have one house and one car. So a lot of volatility in my early life. So from when I finished school, I decided to study economics and business and started to work in investments in a local brokerage firm. Then I used to work at Citibank, the local branch of Citibank, when the crisis of 2002 came here in Argentina. That was totally crazy.

People lost all their savings suddenly. People have money in their banks and suddenly that money was disappeared or didn't have value. So I was there working at the local bank and it was a terrible, terrible experience. But at the same time, I discovered that there were a lot of people here in Argentina that were very successful in their businesses and they knew how to make money but they didn't know anything about investments. And the banks in general with all the research that they produced it was very difficult, very technical. So a lawyer or a small businessman, it was impossible to understand. So in 2002, I decided to leave the bank because suddenly Citibank decided to close their sector that helped Argentinians to invest abroad. I think I was 25, 26 and there I rented an office in Plaza San Martin, that you know is in downtown Buenos Aires, used to be a very nice area and I decided to help my former customers of Citibank to invest their money abroad. In the US and Europe mainly.

And I launched in 2002 a newsletter by email. The email was very new at that stage, 2002. It was called Global Investor. Inversor Global, in Spanish, as a marketing tool to try to have more customers and give a better service. And in 2004, I decided to leave that business because I thought that I didn't have a very good competitive edge in comparison with banks that were returning to the country after the crisis. And I decided to create a magazine, like a print magazine, with real paper at that moment, that was sold in the Kioskos, I don't know how to say, in the streets.

Joel Bowman

Newsstands.

Federico Tessore

Yeah. So with that traditional model of advertising. That was 2004 that I launched the magazine. Always with the same mission, trying to help first Argentinians to manage their money in an efficient way. I think that to try to live in Argentina and be successful it is very important to know how to manage your money. Maybe if you live in the US or in Europe, maybe you can have a chance without being so good at managing your money, but here it is like life or death. So the magazine started to grow, we started to make education courses all over the country, but the business was average. It was not a good business. And in 2008 Will Bonner, Bill's son, started to live here in Buenos Aires for a couple of years I think, and he discovered my magazine in the newsstands. And he called me, “Hey, hello, how are you? I have a company in the US that makes more or less the same. What do you think if we talk?” And eventually we tried to do business.

I remember that Will told me that they have been trying to make business here in Argentina for a while and it was very difficult for them. So he thought that it was a good idea to think about a partnership between the two of us. It was before the crisis of 2008. So then the global crisis came and our plans to try to partner went away. But I remember that I visited Baltimore in 2009, I think, and Bill invited me and I started to discover what Agora was at the moment. I didn't understand very well the difference between a traditional publishing company and a publishing company as Agora is, and started to understand the model that Bill created. And I was totally surprised. At the moment there was nothing like Agora in Latin America. I was the only one that was trying to do something similar. So I learned a lot about the business with Bill and all the stuff and finally in 2012 we reached an agreement.

I had partners in the past, so it was like a mess to try to figure out all the ideas. But in 2012, we started to work together with Agora with Bill, and with the main goal of not only making the company grow in Argentina, but also in all the Spanish speaking world, which is huge. Spain and all Latin America. So then I moved to Miami to try to be near Delray Beach, where Agora had a big office at that moment and I started to learn the business and we started to grow. We used to have, before the pandemic, offices in Miami, in Madrid and in Chile. Now we have our main office in Buenos Aires, here and we have people working all over the continent, but we have more than 150,000 customers all over the Spanish speaking world. And the business is growing fast.

I think that Latin Americans are having the necessity more and more of understanding how to manage their money and all the internet and the globalization gave Latin Americans more tools to try to invest their money in a more professional way. So that's more or less a quick story of how we started and I knew Bill.

Joel Bowman

Yeah, it's very interesting too because, it's not like you began these businesses in say Singapore or Hong Kong or some jurisdiction in the United States that was very business friendly. Argentina, if it's known for anything, on the business front or the economic or the political front is, uncertainty, huge inflation. 

Before we get into all that, I want to just put your book up here. This is essentially how Argentina got to where we are right now.

Federico Tessore

Absolutely.

Joel Bowman

Facing political uncertainties, civil unrest potentially, maybe some opportunities, but you're explaining it to me just before, Argentine Power, how the 70 year journey basically took Argentina from one of the richest countries in the world to where we are now. Do you want to fill us in a little background there?

Federico Tessore

Yeah, What I tried to do in that book is to try to analyze why Argentina in 1950 was one of the most powerful countries in the world or one of the most economic powers in the world. There are different statistics, but there are some statistics that show that Argentina was even more, how do you say, richer than the US in I think it's 1947, 1948. There are some other statistics that say that it was number three or number four, but it was top five for a while and it was top 10 for more than 15 years. And what I tried to do is try to pick some countries that in 1950 were poorer than Argentina. I compare Argentina with Chile, a country that is here in the neighborhood, but also with Norway, Ireland and Germany that were in 1950, poorer than Argentina, and also China and South Korea.

And I started to analyze how those countries started to grow and how Argentina started to go down. So each country has their own rules or their own particular facts. But in general, I think that the main difference is whether the country is organized in a manner that they want to produce services and goods or not. In 1950, Argentina was rich and the main problem was that they say that only 20% of the people were rich and 80% of the people were poor. So they started to try to share all the wealth with all the people, but this automatically meant that it was impossible to have a company because taxes go up, regulations go up. It was like a socialist economy. Now we are in a socialist economy in Argentina. If you have money in the bank, you can't send that money to another country.

You can't do whatever, the level of freedom that we have in Argentina, if you are in the formal system, it's very low in comparison with the US or with our countries. So having a company in Argentina and trying to export, for example, if you sell soy in Argentina, that is one of our main products, you have to pay taxes because you export, only for the export. And it's crazy. So there are so many restrictions, so many taxes, and there are a lot of people that live very well without working and without producing anything that makes sense. I think that we have 6 million people that work in Argentina for a real job, but we have 14 million people that live without working, between handouts and...

Joel Bowman

It’s just welfare or...?

Federico Tessore

Welfare, yeah. Public labor. You go to a public office and it's full of people doing nothing. And there are some provinces, some states here in Argentina that 50% or 60% of the employment is from the government, from the local government. So the country and the economy is not willing to produce more and better. The only idea it's that this world is zero-sum game. 

Joel Bowman

If you have money, it’s because you took it from someine. Yeah.

Federico Tessore

It's the only possibility. So when that's the mindset, I think that's the main problem in Argentina and in many countries now, but we are the “best” ones I think, in that.

Joel Bowman

It's a dubious honor to be sure.

Federico Tessore

Yeah, yeah. So it's like a battle. Everything is a battle, I don't have money because you have money and I don't have money because you are going to Miami and when you go to Miami you go to expensive restaurants and you buy an iPhone. So that's why I can't send my kids to school or that's why I can't eat. So I think that's the main problem that we have in Argentina and we can't get out of. Peron, he was the founder of this system, was so good at persuading people that this was true, that until now, 70 years afterwards, we can't go out of that trap.

Joel Bowman

It seems very much like an ideological mentality.

Federico Tessore

100%.

Joel Bowman

How does it make you feel when you see, for example, usually around election times in the United States for example, where a good deal of our readers and listeners are from, people espousing some of the exact same ideas that have brought Argentina from up here down to here, this idea of that the world is a zero-sum game, rooted very much in Marxist ideology that there's a power hierarchy and the only way that you're getting things is because you've deprived me of them, hugely progressive tax rates, eat the rich, that whole kinds of thing. You must just be extremely frustrated when you see that it hasn't worked here and yet people espouse it there...

Federico Tessore

Absolutely. No, it's incredible. It's incredible that they don't see the experiences of countries like Argentina and many other countries in the world that tried the same path. And the problem is that you want to solve a problem and when you try to solve the problem, you destroy the things that are okay. So it doesn't make sense. On the other hand, I understand that through social media, there are a lot of people that are influenced by social media and by words, five words. So it's very easy to reach people with this idea of fighting, having enemies, of having very simple enemies. So I understand that with social media and all this globalization, having an easy enemy, it pays out because maybe you can win elections with this speech.

Joel Bowman

Political marketing slogans.

Federico Tessore

Yeah, so it's a big problem. I don't know how to solve it for me, the US has some protections that maybe it helps the US not to go through the same process like the country of Argentina. One of the big problems that I think Argentina has and Brazil does not, is that businessmen and people that know how the system works, at one stage they decided to close their mouths. And they didn't fight for these ideas and they didn't go to the TV or to the social media or whatever, and they didn't take the time to try to explain why those ideas generate poor people all over the country. In Brazil, it's different. For example, Brazil has a very powerful business environment where the business people, they are not afraid of speaking out and telling the people that if you go to a 60 or 70% tax rate, companies are not going to work and you are not going to have employment and salaries are going to go away.

So I think that, you are going to have the fight and we see that fight in the US and in many countries in Europe, but you need that some people, maybe in spite of being a small percentage, they need to speak out and they need to fight and to try to put a limit. So that's why I think that maybe countries like the US, where you have a lot of business people with an entrepreneurial mindset, maybe you can try to mitigate that problem, but you never know.

Joel Bowman

I guess one of the litmus tests will be the midterm elections this year in the US, which are obviously very contentious. But I'm wondering just as far as practical advice for people who are in the US or who are in the UK. I was just in London a couple of months ago and right there at the front of every tube station on the front page of every newspaper is 11, 12% inflation, which I know here would be a dream here. But I presume it was 7% inflation and 17% inflation here before it was 70% inflation. So if these people are now just maybe looking down the barrel of that sometime in the future, what advice do you have as far as investments, as far as starting companies, as far as being the kind of entrepreneurs that have a platform to speak out against the mission creep of socialism?

Federico Tessore

Yeah, I think that you have to, first, you don't have to trust the government and you don't have to trust the banks and you don't have to trust your local currency. I think that in Argentina we already know that we don't trust our banks, we don't trust our currency and we don't trust the government. But sometimes when I speak with people from developed countries, they don't even think about that. Say, oh, my money is in my bank so it's safe, I have dollars, I have Euros, or I have whatever and I'm safe. So the first thing that I would say is that, be careful because that which was safe for many decades, maybe in a couple of years is no longer safe. As a matter of fact, if you have dollars and you didn't invest in the last year, you lost 9, 10% of the purchasing power.

So the first thing I would say is that you have to be a little bit of a rebel to try to survive. That's why in Argentina and countries like Argentina, cryptocurrencies are so popular because we value a lot this decentralized future. The issue, the possibility of not trusting a centralized entity in order to have more safety. So I would say that, that's one of the main changes that maybe people in the US and Europe have to do. The other thing is to diversify. Since I created my business, I tried not to have all my customers in Argentina. We have customers all over Latin America and Spain. So that gives you an edge, because if Argentina and Chile, for example, are doing bad, maybe Spain or Mexico are doing better. So in my case, I have a more stable company that can balance the sales and revenues, that's the other thing.

And then real assets. I'm not inventing anything, but I think that real assets, even real estate in Argentina, well the last couple of years real estate went up, but the economy went up much, much more than real estate. So even real estate in countries like Argentina can protect you against inflation and against economic mess in there. So I think that's a good idea, a good set of tools that you can use to try to survive.

Joel Bowman

And I'm wondering, you mentioned working in the bank before in 2002, I'm wondering just as a real time experience as far as a warning for people who are perhaps listening to us sitting here, where there is huge inflation and where people don't trust the banks, they don't trust the government, they don't trust their politicians. I'm wondering if there are some signposts along the way, where people can say, when that happens, we're on the road to ruin. I'm wondering if you could talk us through, for example, what happened in 2002 just as a cautionary tale for people who think, “Well that happens in Argentina. It can't possibly happen in wherever I am... in Germany or the UK or the US.

Federico Tessore

Well, in the case of Argentina, during the nineties, Argentina, the local currency was backed to the dollar. So one Argentina peso represented one dollar. So there were a lot of people who deposited Argentinian pesos in the banks, and they thought those Argentinian pesos represented one dollar. So for example, they put in a savings account $10,000 pesos, and they thought they were $10,000. And at the same time, there were a lot of people that were buying houses with borrowing dollars. So they bought a house here in Buenos Aires and they were owing $100,000. Suddenly the economy collapsed. Why? Because the deficit was huge and suddenly nobody started to lend to Argentina, as a country. In the past, we used to pay that fiscal deficit with debt from abroad, the US and Europe. And suddenly the debtors from outside decided not to loan more money to Argentina. So they decided to destroy that pact, where “one peso, one dollar,” disappeared. And suddenly one peso was, I don't know, was three to one or four to one.

Joel Bowman

And this happened overnight? Or Did this happen...

Federico Tessore

Overnight.

Joel Bowman

Wow.

Federico Tessore

That's the problem.

Joel Bowman

So they woke up. So depositors woke up one night, they thought they had $10,000 equivalent, and then they discover that when they go to the ATM in the morning, if it's not a bank holiday, that although they still have 10,000 pesos, it's only worth $3,000 or $2,000.

Federico Tessore

And not only that, they couldn't take that money out of the bank because the problem was that Argentina didn't have dollars. The reserves went out, disappeared, from paying all these fiscal deficits that the government had. So you only could take the equivalent of $200 per week. So it was totally messed up. Many people were crying. I was in the bank, in the branch and on the streets, and people were hysterical. The streets were full of police. People thought that I was stealing the money. I was an employee of the bank, but people were angry against the banks and it was impossible to take the money. One of the alerts that the people had before this happened was huge government fiscal deficits, huge money printing, many things.

Joel Bowman

I was going to say, this is like a checklist of things that are happening in both Europe and in the United States right now, when you were talking about foreign creditors cutting Argentina off from the punch ball, the proverbial punch ball, so to speak. We see obviously what's happening around the world today on the geopolitical stage where countries that have witnessed the weaponization of the US dollar against the state of Russia, for example, are saying, well actually maybe our dollar reserves aren't so safe after all, maybe we don't want to show up at the next bond auction. Maybe we don't want to extend any more credit here. Then there are large and persistent fiscal deficits, money printing.

Federico Tessore

Huge. And the other part that was a big alert, I think that you don't have this situation in the US and Europe yet, is banks start to pay a lot of money to try to convince the people to lend the money in the bank. So suddenly the inflation was, I don't know, 5% at that moment, and they started to offer 15, 20% trying to convince people to leave the money in their banks. And suddenly people were convinced and they left the money in the banks, but suddenly they didn't have the money. And from one day to the other, they make this big announcement and the money disappeared. So I think that those are some of the factors that you need to take into account.

Joel Bowman

Yeah, it's interesting too that you mentioned before about financial literacy, or an investment literacy, and this obviously is something that had an impression on you when you were young, seeing these things. We see people on the street, for example, they may be 70 years old, they had saved for retirement and they would've been in their fifties when their retirement savings got cut by three quarters or what have you.

Federico Tessore

Let me add something, Joel, regarding the United States situation when the big crisis can explode. There's another item that happened in 2002 in Argentina that I think was very important: the political factor. I think that the economy can be a mess, but if people trust the economy, if people trust the currency, it can be a mess for many years, maybe decades, but suddenly when there a big political fight in Argentina, which normally happens when the President fights with the Vice President and the Vice President leaves the government and there's a coalition and then coalitions disappear...

That big political crisis combined with a big imbalance in all the other corners, with the fiscal deficit and all that mess, that provokes the inflation. I think that if you have big economic problems, but you don't have the political problems, maybe you can get along. But if you have the political problem with the economical problem, and when I see the US and the mess with Trump, and when Trump decided to fight when he lost the election a couple of years ago, I don't remember, one year and a half ago, I'm afraid about that because, trust can be lost very, very, very quickly. And it felt that when that happens, it's impossible to stop it.

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Joel Bowman

I think from both sides it seems too. Obviously you've spent a lot of time in the US and my wife has family in the US so we usually spend a month or two there every year. And I don't think, in my having visited the country for 20 odd years, this last visit, this summer, I said to my wife, I don't think I've seen the country as divided as it has been. So this is perhaps another warning sign along the road. 

Okay, Fede, we're bumping up against our half hour mark here for today's show, but for our readers, listeners and viewers who maybe want to get a bit more of your insight, they want to follow you. I know, I just checked you've up to almost a quarter of a million followers on your Fede Tesso show, so readers should check that out on YouTube. But where else can we find your work?

Federico Tessore

I have a newsletter in Substack also, by my name or Pasaporte Inversor, it’s like Investor Passport, where I speak about investments in Argentina and all over the world. And the social media, Twitter and Instagram, all the social media. (See Below…)

Joel Bowman

Excellent. All right. I'm going to put links to all this stuff down below and Fede, just before we say goodbye here, despite all of the, we've painted kind of a negative picture here, but you are a man who has opened businesses all around Latin America, over in Spain, as you were mentioning, any opportunities for American or European investors that are sifting through the markets down here in Latin America that have piqued your interest of late?

Federico Tessore

Yeah, well, I have been very negative about Argentina for many, many years, but now I'm changing. I think that it's a huge opportunity here in Argentina, regarding real estate and stocks. If you compare the value of the Argentina stocks, not with American or Arabian companies, but if you compare banks, the value of banks in Argentina with the value of banks in Chile or Brazil or Colombia, the price of Argentina’s banks it's like 25% of a similar bank in another Latin American country. Makes sense because actually the currency, sorry, the country is a mess. But I think that next year we have elections here in Argentina and it'll be very difficult not to have a very big change in the political landscape. And I think that a more market friendly government is going to come. I'm not saying that Argentina is going to transform suddenly into Switzerland.

But I think that we can be a more Latin American country. So if that happens, if the government changes, I think that stocks are going to go up very, very quickly. And also real estate, I think that real estate in Buenos Aires, for example, lost 30% of the value during the last few years. And at that moment, real estate in the US increased 100% or 150% in some. So the differential, I think that is big. So I think that you might have a good opportunity, it's not a short-term opportunity because I think that this increasing prices could happen at the end of next year or at the beginning of 2024, but I think that you have a period of time for the next six months, 10 months, that there are going to be a great opportunities in Argentina. And also living in Argentina well, it's very nice and now it's very cheap, so you can eat and drink very well for a very few dollars. So it's a good idea to have some time here in Buenos Aires.

Joel Bowman

All right, well we're going to track those opportunities down here with you, Fede for the next couple of months, couple years. The elections here, I think are next October, November?

Federico Tessore

In October of 2023. And the President starts the term in December, but it's October, yeah.

Joel Bowman

Okay, well let's follow that along. I'd love to have you back on the show. We'll keep up to date with how we're going here and tune in again please, and go and check out our Substack, bonnerprivateresearch.substack.com. We'll have Fede on again as soon as we can, and tune in again next week. Thanks very much.

Thank you for reading Bonner Private Research. This post is public so feel free to share it.

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Follow Federico Tessore Here:

Substack:

Twitter: https://twitter.com/fedetesso

YouTube: https://www.youtube.com/c/FedericoTessoreShow

Buy His Book, Argentina Power: https://www.amazon.com/-/es/Federico-Tessore-ebook/dp/B08YGM7VRT

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Bonner Private Research
Fatal Conceits Podcast
A podcast about mobs, markets and manias.
Each week, Joel Bowman sits down with a member of Bill Bonner's private research team to discuss the pressing issues of the day. From high finance to lowly politics, irrational markets and international real estate, great wine and classical books, nothing is off the table in these freewheeling discussions. New episodes every Sunday.
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