Musings on Investing

The Deceptive Low-Costs of the Third World

Novo Resources (NVO)

Prices of smartphones and laptops tend to be similar around the world. But prices of what are called untradable goods tend to differ, sometimes drastically. According to the Economist, the price of a burger in India is ~50% cheaper than that in the USA. This to many people (including well-known economists) means that Indian currency is undervalued by 50%. I completely disagree.

If you knew the content of fecal matter in the burger sold in India (where 50% of people go out to poop in the open), I guarantee that you would without a hesitation pay 100% more to get US quality. I have spent years explaining to people why the so-called emerging markets are not cheap. They are often expensive and subsidized by the West.

I explain my views on this price differential in the linked article.

On investments…

I have written several times about Novo Resources (NVO; C$3.28). Today, Dr Quinton Hennigh gave a fabulous speech (which was live-streamed) at the Denver Gold Forum in Colorado Springs. I was in the audience. By the time his speech was over, NVO had fallen 20%. Why?

I read a lot of emotional chatter on blogs. It seems to me that “investors” in the blogs saw yesterday’s price of NVO as a given. They then marked NVO negatively, for it had not released any news today as a part of Dr Hennigh’s speech. It seems that some people simply dumped what they owned. It would have served them better had they invested not for news-flow. They would have been on a firmer ground had they some valuation of their own on NVO.

In a short span of time, Dr Hennigh has created an organization that employs >70 people. He has been the geological and business mind behind developing NVO. His independent-thinking and huge creativity has attracted massive money towards NVO. While a lot can go wrong, as someone who has started companies in the past, I have huge admiration for Dr Hennigh.

For me, today was an opportunity to add to my position of NVO.

Warm regards,

Jayant Bhandari


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