"Much of the world is going through a downswing of the credit cycle. Argentina doesn't have and didn't have much credit. So it will be spared the big problems. But it sells farm produce to the rest of the world. It has to expect a period of sluggish sales and soft prices.

"I don't know if I would advise foreigners to bring their money to Argentina. But I would advise everyone to diversify beyond their home country - especially if they are American or British. Generally speaking, it appears that the go-go finance-based economies of the Anglo-Saxon world have peaked out. They lived on credit. Now, they die on credit. And they will find it very hard to shift their economies from credit-fueled consumption to investment-driven production and export. The competition is too stiff. America is a high cost producer. It can't compete easily with the developing and emerging economies. So, it will just have to get used to a lower standard of living. That means lower asset prices too. Which is why an investor - broadly speaking - can anticipate a higher rate of return from his investments in India, Brazil and even Argentina, over the next 20 years, than he can from the US."

But isn't Argentina full of crooks, booty-shaking tango dancers, escaped Nazis and Norteamericanos on the lam?

A friend of ours thought so. She was having lunch at a nice restaurant in La Recoleta, one of the nicest parts of town, when someone stole her purse. Poor thing, we were afraid her trip was ruined. But then, she got this email:

"Hi good afternoon, my name is Emiliano, is that i work doing maintenance of parks and squares in the area of palermo, and in one of the trash bins encontre a series of documentation to its name and among other things i could detect this mail.

"That is why i warn that i have the papers mentioned, licenses, passports, credit cards, etc. without more and in anticipation of any response on their side and wishing you are with their belongings, i leave my mobile Phone in order to combine a meeting so that you can restore their belongings, but more, i dismissal of you carefully."

She writes: "This 'Santo Emiliano' is now and always will be the patron saint of Buenos Aires. He has restored my faith in humanity by going beyond his job tidying up the beautiful local parks and helping a total stranger to once again see the real beauty of his city. He explained that he enlisted the help of many friends to compose the email above. I get teary-eyed thinking about it. I can't wait to meet him and try to explain to him in my broken 'castellano' that he is working in the wrong municipal department and should be promoted to the head of the department of tourism!

"Ah, the world is once again a nice place to live."

And lastly...

"I must say," Elizabeth began, after hanging up the phone. "Being married into your family is an enriching experience."

Elizabeth comes from a good New York family. Her ancestors were ambassadors, officers in Washington's army, heiresses and socialites. She went to private schools and then to an Ivy League university. Poor thing. She had never had much contact with Irish riff-raff, tobacco road farmers, and lowlife financial publishers. She can thank your editor for introducing her.

She had just been talking with one of our cousins. Well, the wife of a cousin who died suddenly last week. He was only in his 50s and seemed like a nice enough fellow. But he was no Harvard-trained go-getter.

"I felt so sorry for her [the widow]," Elizabeth continued. "Your cousin hadn't worked in years. He was on disability. I'm not sure what that is. Some sort of welfare, I guess. He didn't look disabled when we met him two years ago. He was such a big, strong man.

"But when he died, he left his wife with no source of income at all. She's applying for disability too. She has no income at all. I don't think they have any savings either. And her disability status hasn't been approved yet. It hasn't come through. I wanted to tell her that we'd help her but I felt a little awkward. I've only met them a few times. You should do something...

"There is a whole world out there that I didn't know anything about...that lives and thinks in a much different way than we did. They're very nice. I like all your family. But they have very different attitudes and habits than what I'm used to. I wonder what caused it. Maybe they probably worked hard when the steel mills were operating. But then, when the mills shut down, maybe they got in the habit of getting paid not to work. I don't know...but it's very strange."

"What do you mean," was our reply. "Your family didn't work for generations. They inherited wealth and spent it. They spent money they didn't earn. My family did the same thing. They just spent wealth from other families...and didn't get as much of it."

Until next time,

Bill Bonner
for The Daily Reckoning Australia

• Kirchners Lose Election in Argentina
• We Don’t Serve Hamburgers
• A Chilly Trip to Argentina
• Cattle Prices Have Risen Only 1% This Year
• Our Cattle in Argentina

"Well, there are three types of cattle," we explained. "There are feed lot cattle...which are fattened up on grain. And there are grass fed cattle - which Argentina is famous for. But I've got sand-fed beef."

"Sand fed?"

"Yeah, it's pretty dry up there. Every time I go up I wonder what they eat. It hasn't really rained in two years. I see almost no grass. I figure they must eat sand. We've got a lot of that..."

"What do they look like?"

"They're brown and very skinny."

"They don't sound very appetizing..."

"They're not...almost too tough to eat. But they have one big advantage.

"What's that?"

"Very low cholesterol.

"Yes, it's a selling point. Sand-fed beef is very low in cholesterol. And fat. And everything else. Calories too. It's low-cal beef. We were thinking of calling it 'zero beef.' But we decided on 'sand-fed' instead."

"Is it good...? Do people come back for more?"

"Not very often. They can usually only eat one steak. It wears their teeth down so much."

Until tomorrow,

Bill Bonner
for The Daily Reckoning Australia

• Cattle Prices Have Risen Only 1% This Year
• A Chilly Trip to Argentina
• Kirchners Lose Election in Argentina
• The Return of the Cattle Market
• Most Likely No Housing Recovery to Bubble-Era Levels in Our Lifetimes

As we remarked above, we're suckers for underdogs, die hards and scalawags. That is probably one of the reasons we like Argentina; it is all those things and more. It is a measure of the lost cause status of the pampas that news of the election was hard to find. We looked through the TIMES and found no mention of it. The International Herald Tribune did pass along the news - on page 4.

Something went wrong in Argentina. The country was once a rival of the United States of America - with nearly the same income per capita...and about the same prospects. Now, it has less income per person than Chile and exports less beef than its tiny neighbor, Uruguay.

What went wrong?

Well, life is not exactly under our control. We doubt that a group of Argentines ever got together and decided to become a second rate country. Things happen.

And here at The Daily Reckoning we watch...and wonder what will happen next.

Until tomorrow,

Bill Bonner
for The Daily Reckoning Australia

• Should Foreigners Invest in Argentina?
• Pension System: A Conversation With Chile’s Former Labor Minister
• Our Cattle in Argentina
• Latin America Has Suddenly Become Very Interesting
• U.S. Presidential Election

We caught up with Doug in Buenos Aires. But, like your editor, Doug is looking forward to spending time away from the city...up in the wine area in the northwest of the country.

"This place we're developing - Estancia - is turning into one of the most enjoyable places in the world to live, even if you can only spend a couple months a year there to recharge. It's got one of the best climates in the world, and I speak as someone who's been to 180 countries. It's a short horse-ride away from Cafayate, a town like Aspen. You wouldn't dare ride a horse into Aspen, trust me. Cafayate has a score of good restaurants and sidewalk cafes.

"The key is that Estancia has everything a civilized person could want, right there. I wanted a mellow place to hang out, but couldn't find anything - anywhere - that suited. I've lived in Aspen for many years, but it's become, frankly, unacceptable. Way too expensive, too snooty. Incredibly over-regulated. Rife with class warfare. And, frankly, the United States is just not the place it used to be. But Aspen has elements worth retaining, like the restaurants, gyms, the intellectual activities. So I figured the only way to do it right was to build it myself. I'm a huge fan of spas in the Orient, for instance, so we're doing a fantastic health center, spa, and gym - including a parcours, and a lap pool. Yoga, pilates. I don't believe we've missed a trick, anywhere."

We went to look at Doug's place the last time we were in Argentina. It's only about 2 hours from our ranch...and worth the drive. He's building what will probably be the finest place to live in South America. To disclose an interest, and admit a weakness for property...we were so impressed; we invested in the project...and even bought a lot.

"I know people sometimes worry about the political and economic situation in Argentina. But it's actually a plus. Since the Falklands War the army, and the police have been held in low regard - a very good thing in Latin America. Most Argentines are of Italian extraction - the country is, at this point, perhaps the most demographically European in the world - and have a natural aversion to paying taxes. The place definitely has a gently anarchic flavor. The fiscal problems of the government don't affect foreigners, unless you lend them money - which I don't advise.

"The Argentine government has been incredibly stupid for well over 60 years. The good part of that is the average person has learned to live with it, and work around it. The Argentines are much more able to adapt to the things the world is going into now - Americans are going to have an unpleasant learning experience."

Doug is planning to live through what he calls 'the Greater Depression' in comfort and style:

"We've got a Bob Cupp golf course, which we expect will be perhaps the best in Latin America. I've taken lessons, but don't consider myself a golfer. I've played polo for years, so we've got a couple of polo fields, for friendly farm-type games, rather than the type of thing they do near Buenos Aires. Salta is also an epicenter for Paso Fino and Peruana horses, which have the smoothest gates in the world; you can ride them for hours on our trails. Or days in any direction out of town, probably without seeing another person. Estancia answers the question of what you do after a golf, polo, or tennis. Some people (I'm among them) will shoot skeet. Others, including me, will relax at the library, or the cigar bar. Have a game of billiards, or croquet, or bocce. Or perhaps play bridge, chess, or poker. I like all of these things. We've got 200 acres of grapes, partially because they're economic, to keep the fees as close to zero as possible but, also because they're quite aesthetic. In addition we're putting in every description of fruit tree, berry bush, and veggy we can think of. Plus fresh dairy, Argentine beef - which is not processed in feedlots, and actually is the best in the world - and fresh fish from our own lakes; it's a chef's delight. Our concierge is a great Belgian chef who, coincidentally looks like a carbon copy of Jean-Claude Van Damme.

"Best of all, so far we have buyers from 12 different countries. I've met many of them, and can tell you they're all the kind of people you want to hang around with - smart, successful, and libertarian oriented. It's a pace where a Renaissance man can feel at home.

"If your readers want to find out more they can go to estanciadecafayate.com. Sign up to come on down this October."

Until tomorrow,

Bill Bonner
for The Daily Reckoning Australia

• Cattle Prices Have Risen Only 1% This Year
• Kirchners Lose Election in Argentina
• Investors lose $10 trillion worldwide
• Should Foreigners Invest in Argentina?
• The World of Money Seems a Million Miles Away

On Friday, the U.S. stock market lost another 127 points. Almost all the news is bad. Consumers are slowing down their spending - retail stocks are down about 40% from their high. Even Wal-Mart - where people go when they don't want to spend much money - is down about 20%.

U.S. factories - those that are left - are going quiet too. Word came out last week that factory output slipped 6% in the third quarter; it's biggest drop in 17 years.

On Sunday, we went to church here in Buenos Aires to the sound of bagpipes. A church around the corner from our apartment has services in English. Out front was a bagpiper in full dress uniform of the Scottish Highlanders. What was he doing there? We don't know. We continued on down the street to another church.

"Render unto Caesar that which is Caesar's," was the key line in yesterday's service. Our Spanish is poor. But we'd heard the story before, so we knew the plot. The feds of the Roman Era in the Levant tried to lay a trap for Jesus. They figured he was a rebel...a malcontent...a troublemaker. If they could get him to say that a man shouldn't pay his taxes, they would be able to put the cuffs on him and make him to do the perp walk. But Jesus was too smart for them. Instead of falling into the trap, he gave them a sly comeback: Tossing them a coin with the emperor's mug on it, he said the famous line. What did it mean? No one quite knew.

But Caesar's money was what the Caesars made of it. They clipped the gold and silver coins...then debased them with other metals. And when people tried to give them back to Caesar in payment of taxes - at face value - at least at one point, the imperial tax collectors refused to take them! They wanted better money.

"Empires built on debt start to crumble," is another weekend headline from the New York Times. The Roman Empire over-reached...and over-spent...and began to crumble shortly after Jesus died. Now, another empire seems to have over-done it...

*** The U.S. Empire is built on debt too. And now, with a $1 trillion deficit, the debt is mounting up fast. How long can this go on? We'll find out...but we wouldn't want to have too much of Caesar's money when the world figures out that Caesar is broke.

Argentina is full of surprises. One big surprise is that the land of the pampas has mostly resisted the worldwide financial crisis. On the weekend, the Financial Times gave out the news that:

"US faces worst recession in 26 years."

Europe has a major slowdown in front of it too. And Asia - well, if stock prices are predictive of economic trouble, Asia is going to see the biggest slump of all.

"What a week!" quips Dan Amoss. "Of course, you could say this about each of the past four weeks. The credit markets are flashing early signs of calming down, so hopefully the stock market can get back to the business of valuing companies, rather than remaining a source of cash to stuff under the mattress."

But Argentina? The country seems to have been spared. It is blessed by its own mismanagement...saved by its own incompetence.

Incompetence...sloth...and mediocrity are greatly underrated, in our opinion. "For the race is not always to the swift, nor the battle to the strong," it says in the Bible. Right. Sometimes the race goeth to the guy with the sprained ankle...and the battle is won by the pacifists!

Of course, when the going is good, the good get going fast.

But now the going isn't so good and the folks went so fast wish they hadn't gone at all. If Lehman hadn't been so quick to take advantage of the credit bubble in other words, it might still be in business.

What brought this thought to mind was airplane reading. We picked up a book in the Madrid airport - a biography of Heinz Guderian. Does the name ring a bell, dear reader? It should. Because if Heinz Guderian's tanks had not raced so fast across Poland in the spring of 1939, Adolph Hitler might not have been encouraged to invade France. And then, if Guderian's new invention - the Blitzkrieg - had not been such a success in France, Hitler might have put his map of Russia back in the drawer, made peace with England and WWII as we know it wouldn't have happened.

But in the early days of WWII the battle went to the swift! And Heinz Guderian was one of a handful of military men - a group that included Charles de Gaulle and George F. Patton - who were beginning to understand that the world had changed. In Lincoln's war against the southern states, Stonewall Jackson first announced the key insight: the attacker always lost. A soldier had little chance of getting across open ground when determined defenders stood on the other side. The invention of the machine gun seemed to make that insight obvious to everyone - though generals in WWI forgot the lesson with astonishing regularity...and at an appalling cost.

Tanks changed everything. Suddenly, the advantage shifted to the attacker. Heinz Guderian, with his tank divisions, could sweep through northern France so fast that the French commanders didn't know what was happening. They couldn't organize a defense; by the time they set up a defensive line, Guderian was already on the other side of it. Even though the French had more tanks than the Germans, they had no plans for a defense against Blitzkrieg; it was the first time they had seen it.

If Guderian had been a bumbler or a fool, the whole thing might have turned out better. Instead, the Germans were cursed by their own success.

When the Nazi regime fell, the Perons gave out passports to allow many top officials to escape to the pampas. But by the look of things down here, the Nazi fugitives must have neglected to pack their organizational genius. Argentina bumbles along. Even in the midst of the biggest boom in farm prices in 30 years, Argentina still couldn't seem to make a profit. The country is rich in farmland. It is rich in minerals. It has one of the world's largest underground lakes. But by the time the Argentines got ready to take advantage of high prices - the boom was over.

"Yes, I like it down here," said Doug. "This is about the only place in the world where prices haven't come down. Because they never went up. Argentina is mostly unaffected by the credit crisis, because it never had any credit. Even the government. You'd have to be crazy to lend money to Argentina."

*** 'You're looking surprisingly jolly for someone with so much money invested in the mining business,' we teased Doug over dinner.

"Well, like I told you, thank God for Argentina. I invested a lot of money down here. And so far those investments look pretty good. Some of them look very good. I'm enjoying it down here. And I'm even getting in the cattle business. And it looks very profitable. Of course, this is not like your operation up in the mountains. My cattle actually have something to eat..."

"Besides, I don't think we've seen the last of the mining boom," Doug continued. "The Asian economies are probably going to continue to grow. And they're going to need more resources. I think this may turn out to be like the period in the early '70s - when mining was hit hard. A few years later, of course, it was booming again.

"In fact, this could turn out to be one of the greatest opportunities of our lifetimes. Because the industry has been hit so hard, you can get some astonishing deals. You can buy a mining business for less than the cash in the bank. I know of one that is selling for half the cash in the bank. And another that is paying a 23% dividend. These kinds of opportunities only come along once in a lifetime. Or maybe twice."

Our friend Ed Bugos, over at Gold and Options Trader whole-heartedly agrees. In fact, he has an arsenal of tiny metal mining and exploration companies, called "Leapers" by Ed, which are frequently located in Vancouver, British Columbia.

"And by the nature of these companies," explains Ed, "they're very small worth as little as $25 - $50 million. The stock shares are cheap, too... often trading for just pennies. In fact, they're so cheap, you can buy 1,000 shares or more for just a few hundred dollars.

"But just one piece of good news can send the shares soaring hundreds, even thousands of percent. The most common way for a Leaper to do that is to reach the next milestone in a mining company's life cycle."

Bill Bonner
for The Daily Reckoning Australia

• The Major Difference Between Rome and the U.S. – Electronic Transfers
• Investors lose $10 trillion worldwide
• Kirchners Lose Election in Argentina
• Cattle Prices Have Risen Only 1% This Year
• Our Cattle in Argentina

Friends had just come back from our ranch in Argentina. They brought hundreds of photos and many happy memories. But they brought us some disappointment too. We spent – how much was it, we’ve forgotten already – some $75,000 on a state-of-the-art solar heating plant, we find that it doesn’t work. It is winter in Argentina now. Up in the mountains, temperatures drop down into the teens (in Fahrenheit) every night. Without heat, it can be rough.

Our friends had a professional as well as a leisure interest in the ranch. Patrick is a cattle breeder in France. His animals regularly win top prizes at farm fests. We had asked him to take a look at the herd down in Argentina.

His report:

“It’s a different world down there. We were very impressed. Everyone was so nice. They treated us like family wherever we went.

“And the scenery is spectacular. We drove over the mountains to get to your place. It was unbelievable. There’s nothing like it in France. So wild. So empty. And the sky is so blue. It was always blue. Without a cloud. They told me that the sun shines every day. Even when it rains, the sun comes out soon after, so there is never a day without sun. Very different from here in France. In the winter here, you can go for weeks without seeing the sun.”

There, you can’t go a single day.

“We were impressed too by the way the mountains change color as the sun makes it way from dawn to dusk. It was so beautiful, we just wanted to stop, sit down and look at it...

“Even at night, it was spectacular. We had a full moon. And sometimes we would be out on the trail late, after the sun went down. But the moonlight was so bright, we didn’t need the sun. I have never seen anything like it.

“I have to tell you though, that your ranch is so rugged...we were surprised you had any cows at all. The first thing I asked when I got there was: ‘What do they eat?’ There’s no grass. It’s so dry. I know you have plans to build more water storage areas...but, you might need more than that.

“Naturally, the cows are very thin. They’re not the kind of cattle you’d find in Europe. You have a local brand – practically your own breed of creole cattle mixed with various trains of Brahmin, Bradford, even some Limousines. But the operation is so different...and the terrain is so different...I realized that everything I knew about cattle was nearly worthless out there.

“I heard from Jorge that your place is so remote even the cattle buyers don’t want to come out. Besides, the beef is too tough – which I guess is not surprising.

“You know, here we move cattle from one field to another. It takes about 10 minutes. But I asked Jorge how long it took to move them from that huge valley in back of the house to the pasture just in front, where you treat them for diseases and sell them. He told me it took 12 hours...if the cattle are in good shape.

“And they have to move them over a stone path barely a meter wide with a drop-off down the canyon of about 100 meters. It looked like a death trap to me. We wanted to see them, but we were afraid to ride over on horses...it just looked too dangerous and uncomfortable, so we decided to go on foot. Jorge told us it was just a ‘couple hours.’ So we set off. But after two hours, I could barely breathe...it’s just so high. And we looked over at a snow-capped mountain...and Jorge said, ‘it’s just over there...’ But I knew it was at least another couple hours hike. And it was getting dark. So we had to go back.

“It’s an amazing place...and we had a great time...with memories that we will keep for our entire lives. But, seriously, you need to get the heating system fixed.”

Bill Bonner
for The Daily Reckoning Australia

• Our Cattle in Argentina
• Cattle Prices Have Risen Only 1% This Year
• “Macho”: Not the Right Thing to Be During Roundup Season
• Compuel
• Rounding Up Cattle in Compuel