The Global Search for Safe Havens

Photo: The Global Search for Safe Havens

Today, I am sharing two stories I uncovered while examining how various international markets weather the economic climate. Humans are ingenious, and to quote the Roman poet Ovid, “Difficulty is what wakes up the genius.”

If the world is cratering towards some coordinated global recession, the search for safe-haven assets will be global. If you can’t trust your local currency due to historic hyperinflation, can’t access US dollars from your local market, and precious metals are scarcely available or risky to store, you get creative.

Below are two of there creative markets I came across.

Heifer-inflation to combat Hyperinflation

From July 2020 to December 2021, inflation cooled from 838% to a mere 60.7% in Zimbabwe. Moderate, given the country's history. Zimbabweans with a short memory can still recall inflation rates as high as 231,000,000% in mid-2008.

These make for great headlines, but these numbers are irrelevant on the ground. The currency is worthless, and people know it.

Entrepreneur Kelvin Chamunorwa built an alternative banking vehicle to avoid exposure to the evaporating Zimbabwe dollars - or to US dollars, as they are inaccessible to the country's vast lower-income population.

His company, Nhaka Life Assurance, offers pension programs denominated in cows - an asset the population understands and whose value is resistant to runaway inflation.

Chamunorwa accepts contributions as low as $5/month, which he immediately converts into live cattle. For small accounts, value is accounted for in kilograms; for larger accounts, in heads of cattle.

He runs a breeding program to compound the value of the investment - any offspring generated by the individual's pension holdings are added to their portfolio.

Nhaka’s 70,000 clients are welcomed to the ranch for viewing days should they want to check in on the health of their portfolio.

“Savers have lost all confidence in conventional finance. The only way to rebuild trust is to offer people things they can touch and see”, Chamunorwa says.

Accelerating Returns

In Pakistan, street-smart investors trade in oddly appreciating assets - cars.

A protectionist market with heavily regulated international competition - coupled with a depreciating currency and rising inflation, creates a scarcity that compounds the value of cars.

A typical 4-door sedan purchased five years ago sells today for an average return of 60%. Adjusted for inflation (45% during the same period), cars have become a safe haven store of wealth.

Professional traders compete for “deal flow.” The ability to procure cars fresh off the assembly line offers an immediate 10-15% spread when the vehicles are provided to the public. They protect the spread aggressively. 90% of Pakistani car sales now move through these market makers.

Muneeb Gulzar, a used car dealer and owner of the owner Sam Automobiles, is in no hurry to get his product onto the street. “The longer these cars sit over here, the more valuable they get,” he explains.

Difficulty is what wakes up the genius.

Humans are ingenious.

Jay Martin
CEO, Cambridge House