I voted!

No, not politics but Otto’s survey. Just go to IKN and look for the “WHICH WILL BE WORTH MORE AT END 2015?” poll on top of the page.

Before you vote, here’s my thoughts on each option:

1) AAPL: Not sure how much upside there is left after the past few years or what the margins are on mobile devices now that they are ubiquitous. Any monkey could have told you that but did you know that the proliferation of mobile devices gave birth to something called big data? Put simply: everything you do is recorded and analyzed. Your mood, location, places you’ve shopped at, relationships, etc. Feeling stressed out? Don’t be surprised to see a coupon for your local day spa on your smartphone. Walk into a bar? Expect an ad for a “get you home safely” taxi service on your trusty device. Ended a relationship on a social network? Book a comfort-sex trip to Kenya with any of our preferred travel partner sites. AAPL doesn’t really use “big data” in their business plan but their devices make it possible for others to do so. Did you know there are private, for-profit companies who will sell your current and recent location to anyone based on GPS data embedded in publicly available social-media posts? George Orwell was wrong about one thing only: the date was off by 30 years.

2) Bitcoin: I don’t understand it being used as a currency but you may be surprised to know that Bitcoin has serious implications for online security. Bitcoin is based on “mining” computer hashes, similar what is used in cryptography. As a result, cryptography that was considered secure only a few years ago is now trivial to break because Bitcoin miners have learned how to exponentially increase the speed of hashing (particularly by applying graphic processors or GPUs instead of CPUs). It used to be if a company like Target, Home Depot or JP Morgan got hacked, encrypted data on their servers such as passwords was relatively safe. Now this data is exposed and sold in no time. This combined with the existence of a shadowy industry where you can sell computer vulnerabilities to the highest bidder (ie. governments and businesses) means there is a tremendous incentive for hacking.

3) Gold: It’s shiny. For more wisdom, ask Otto because I don’t know.

Merry Christmas

Brianna: “I want Santa Claus to bring me everything I like (in the commercials) on Disney Junior.”
Me: “Isn’t that a lot?”
Brianna: “Santa Claus can borrow my suitcase if he needs one, so he can bring everything I like from the North Pole.”


A Merry Christmas to all, from cold and rainy Cusco.

The difference between men and women – baby food edition

Mamacita linda feeds the baby:

  1. Get out your handy “baby nutrition needs” chart provided free of charge by your friendly local pediatrician, courtesy of Nestle and Abbott Labs.
  2. Run to grocery store and buy the recommended baby cereal. Interesting! This cereal is made by Nestle.
  3. Stop at the pharmacy on way back from grocery store, buy recommended baby powder milk. Hey, look at that, powder milk is manufactured and sold by Abbott Labs!
  4. Boil water, get out the blender, read the instructions, throw it all together and listo! Yummie baby cereal is ready.
  5. Put bib on baby, wipe her hands with Huggies no-alcohol wet wipes because you never know when the dog might have licked her or drooled on her. Es capaz!
  6. Feed baby.

Papucho feeds the baby:

  1. Get whatever food is on the table.
  2. Mash it, add a twist of lime. Nah, just kidding about the twist of lime.
  3. Feed baby.

Now it isn’t that I don’t care about proper nutrition for my baby, only that I don’t believe some big multi-nationals know better what my baby needs than the Pachamama. We eat fresh and heathy foods, so if baby craves it, I figure it must be good for her.

Here in Peru multi-nationals and their slick marketing campaigns are still fairly new, people tend to put a kind of innocent faith in what they see in commercials on TV. It must be good for your baby because the trustworthy pediatrician (tall and white, of course) in the TV commercial said so. I think people in the industrialized countries have become so accustomed to the consumption society that they take for granted but also with a grain of salt the constant marketing thrown at them. Some commercials are cute, most are just good bathroom breaks. You understand it affects your buying habits yet you don’t take the commercials very seriously. By contrast, here in Peru I’ve had more conversations with people where they were trying to convince me of some point of view very similar to one being made in a current advertising campaign on TV.

Not saying multi-nationals are all bad, I’ve worked for one and it’s true that you can do great things by combining the talents of many people. I happen to believe that human beings should put their intelligence and creativity to use, I don’t believe in the noble savage of old. Having said that, big business answers to their shareholders first and in countries like Peru that is not something the average consumer is always aware of.

baby eats

Many moons ago, when Brianna Nayaraq was just a baby.

IKN Chart of the Day

I caught a glimpse of Otto’s chart of the day over at IKN and shamelessly swiped the same:


Remember when gold was $1,200 and going up? The gold nuts said it was never ever gonna end? Of course neither was the real estate bubble, the internet bubble, RCA in the 1920s and 30s or tulip mania long before that.

Gold is a fickle thingy and I have no earthly idea where it’s going next. Maybe all the retail investors are dumping gold to jump in the big DOW / S&P500 comeback? If that’s the case surely we should call a top in the DOW / S&P500 in the next 24 months or so?

Hey Otto: special request, how about an S&P500 chart expressed in ounces of gold? See if that tells us anything.

I’m sure far more intelligent commentary could be scribbled here but a double shot of Jamaican rum and some fine music will do:

PS: On a serious note, I haven’t seen main street Peru react to the lower gold prices, there is still this “party will never end” attitude and that could be trouble: with the good macro numbers that Peru had been posting on the back of rising mining revenue also came an increase in consumer credit, imported consumer goods, declining trade balance, etc. Not saying end of the world is coming but I doubt Peru’s internal economy is as strong as many have come to believe.

PPS: Even I had something to say about gold going up at $12 something.

They knocked down the palais in Cuzco

Alternate title 1: Invest in Cuzco real estate.
Alternate title 2: Please tell the friggin’ bankers in your part of the world to raise interest rates already!

They knocked down the palais. I didn’t cry, just took a picture:


A new office building is going up where the palais used to stand 😦

This building used to be restaurant / dance hall that catered to events like birthdays and quince años parties. We had Brianna’s first birthday party there. The place was always busy, at least 3 or 4 parties per week, we reserved something like a month in advance for Brianna’s party.

Real estate in Peru has been going gangbusters for years now and the building was on the corner of the Plaza Tupac Amaru, a prime location in Cuzco. I imagine the land where the building sat is worth between $500 to $1,000 per square meter. The building just recently got knocked down and a new office tower is going up where the local palais used to stand. Hundreds of Quinceañeras will cry 😦

Real estate in many areas of Peru is very expensive. Here in Cuzco a nice 100 square meter (~1,000 sq. feet) apartment costs around $100,000 nowadays. I know a man who bought an apartment in Lima some years ago and after owning it for only a few years he sold his apartment at a profit that allowed him to pay off the mortgage and buy a nearly-new Cessna 182 with the money left over.

Cuzco isn’t Shanghai but everywhere you look new apartment or office buildings are going up. It’s hard to say if we’re in a bubble yet (and how close we are to the end of it). As much as real estate prices have gone up in Peru you would think it is a bubble, but the demographics disagree. Mortgage interest rates are high (9-11% last I checked) and banks require 10-20% downpayments for a mortgage in Peru. My guess is that the price appreciation will likely slow down in the future but I don’t see a big deflation like in real estate in the US. The prices here have been rising mostly due to high demand (demographics), limited availability of land (geography) and high interest rates.

This dumbass kept interest rates in the US so low for so long that investing in the industrialized countries made no sense any more. Hence there have been large capital inflows in so-called developing economies like Peru where returns on investment were higher (think large sovereign wealth funds and the like looking for fixed income investments or countries like China looking for hard assets like minerals). To prevent “overheating” of the economies the central banks in countries like Peru raise interest rates, which might help slow the domestic growth but only exacerbates the inflows of foreign capital.

Bottom line tell the friggin’ bankers to stop worrying about Greece (look at Argentina now) and raise interest rates instead. Of course the bankers are afraid to slow down so-called economic growth at home or hurt real estate values in the US/Europe in the near term but all that will sort itself out. The bigger problem is that by keeping interest rates effectively at zero the big bankers are destroying the entire concept of future value (meaning, a dollar today is supposed to be worth more than a dollar tomorrow, but now it isn’t, it’s the same). No one has a real clue where all this is going but by keeping interest rates so low the bankers may be causing the one problem that they are desperate to avoid: deflation. I’m not saying you can’t have a society where interest rates don’t exist (look at banks in the Muslim world) only that our society and our financial system is based on the idea of future value and you work with what you have.

Rant over. Here are the Kinks:

The day they knocked down the Palais
My sister stood and cried
The day they knocked down the Palais
Part of my childhood died, just died
birthday party at the palais

Brianna’s first birthday party was at the palais on Plaza Tupac Amaru, which is now no longer there

come dancing...

Come dancing…

You’ll never see this on the FB pages of expat Peruvians – part 7863

The widely reported news about wages in the US. From the Washington Post, the newspaper which was always said to be in bed with the US Army:

New report shows more workers falling behind average wage level

Fifty percent of U.S. workers earned less than $26,364 last year, reflecting a growing income gap between the nation’s rich and poor, the government reported Thursday. There were fewer jobs, and overall pay was trending down — except for the nation’s wealthiest. The number of people making $1 million or more soared by over 18 percent from 2009…

Read the complete article here.

Now I’m not talking about skies are falling here, and I’m sure a lot of the low income earners are college students working part-time jobs and the like, but the fact remains that fully half of working people in the US earn about the same or less than what Patricia earns here in Peru.

I guarantee you’ll never see that on the FB pages of expat Peruvians in the US. If you read any of those you’ll come away with delusions of grandeur, false notions that every Peruvian who ever moved to the US has 5 cars and runs 3 popular money-making Peruvian restaurants.

BTW – Patricia works for a cellphone company and her job is considered good-paying but it is a front-line job, she’s not in management or executive pay – yet 😉

I have to work 10% harder this year

The man who destroyed my previous employer (or at least he spearheaded the destruction) invented this illusion of 10% earnings growth every year. That kind of corporate BS is NOT what I’m talking about here. In my case, it’s a plain and simple truth: if I want to have about equal income every year that I’m in Peru, I have to work a good bit harder every year.

The reason is that most of my work as a contract pilot or consultant is paid in US dollars, but my groceries are paid in Peruvian Nuevos Soles.

And here’s how the US dollar has been fairing against the Nuevo Sol this year:

US$ vs Peruvian Nuevo Sol - 1 year chart

US$ vs Peruvian Nuevo Sol - 1 year chart

And 5 years:

US$ vs Peruvian Nuevo Sol - 5 year chart

US$ vs Peruvian Nuevo Sol - 5 year chart

View charts at XE.com.

Here’s an article about Peru’s central bank as well as the central banks of other so-called developing economies taking measures to prevent their currencies from rising too much:

And here are Peru’s foreign currency reserves over the past 10 years, standing at around $40 billion at this moment. Chart shamelessly robbed from IKN:

Peru foreign currency reserves

Peru foreign currency reserves

Now foreign currency rate swings are nothing new and I am not predicting the demise of the US dollar or the end of the world here. But it should come as no surprise that consistent near-zero interest rates and monetary easing (printing money) in the US will erode its currency’s value.

When I was a young boy in the early 1980s and Belgium developed large budget deficits and high unemployment, I could not understand why the government just didn’t put all the unemployed people to work printing more money, kill 2 birds with 1 stone.

No matter what the guys in stuffed suits tell you, how they saved the world and you owe them eternal gratitude all that, the fact remains that some future generation in the US (mostly) will have to deliver $40 billion of goods and services to future generations of Peruvians.

LAN Peru to invest $1 billion in Peru

The airline industry in Peru is doing well. Here’s the link from Andina: LAN Peru to invest $1 billion, and a quick excerpt:

Lima, jun. 30 (ANDINA). La empresa Lan Perú invertirá 1,000 millones de dólares en el país hasta 2011, para incrementar la flota de naves y en una mayor tecnología de la aerolínea, manifestó su gerente general, Jorge Vilches.
“Invertimos muy fuerte en una nueva flota porque el crecimiento del sector en Perú así lo justifica. Traemos cuatro aviones pequeños y dos grandes Boeing 767, que son para la operación internacional”, indicó a la agencia Andina.

Read the full article at Andina.

I’ve been trying to get a flying job here in Peru, here’s to hoping for a good opportunity in the near future 🙂

To stay current as a pilot I’ve been doing some airplane deliveries and ferry flights, mostly to Europe. Here’s a picture I took approaching Greenland on a recent Trans-Atlantic ferry flight to Europe:

Approaching Greenland on a trans-Atlantic airplane delivery flight

Approaching Greenland on a trans-Atlantic airplane delivery flight

More flying pictures on my contract pilot blog.

Aah those reliable and ever so ethical multinationals…

Just some thoughts about big companies and nice promises. Here’s some excerpts from an AP article today on BP’s oil spill response:

“Due to the distance to shore (48 miles) and the response capabilities that would be implemented, no significant adverse impacts are expected,” the site plan says.
“Said BP spokesman Daren Beaudo from Robert, La.: “We expect that a complete review of the regional response plans and planning process will take place as part of the overall incident investigation so that we can determine what worked well and what needs improvement. Thus far we have implemented the largest spill response in history and many, many elements of it have worked well. However, we are greatly disappointed that oil has made landfall and impacted shorelines and marshes. The situation we are dealing with is clearly complex, unprecedented and will offer us much to learn from.”

Here you go, Mr. Beaudo, enjoy:

Now I positively have to stop buying BP gas. For years I have tried not to buy Exxon gas because Exxon fought 20 years not to pay the punitive damages from that case. At least the captain of the ship has apologized.

What’s relevant here in Peru, let’s just say when a multinational and rich old guys in Lima make promises about things like extracting resources from the Amazon jungle in Peru without spilling a drop, you can count me sceptical.