One of the most important principles on Wall Street is Baron Nathan Rothschild’s famous piece of advice: buy when the blood is in the streets. There is one place more than any other that meets that criterion; Darfur. My advice is to rail against all those well-intentioned but foolish folks at places such as the Sudan Divestment Task Force and Genocide Intervention Network, begging us to sell just about any assets or any stocks of any companies that do business in Darfur.
Last April, I wrote a column for the FT called “Technology sheds light on the heart of darkness”. In it I outlined how the greatest way to combat violence and corruption is to open up communication channels to the victims and how the best way to open up communications channels is through capitalistic investment. Assuming profit-driven investment is the only way to create self-sustaining economic virtues, why on earth would we believe the best way to help the people and to stop genocide in Darfur is to completely isolate them? That is what will happen if the developed world’s investment community succumbs to the pressure from groups such as Fidelity Out of Darfur and sells its assets in any company doing business in Darfur. Its people will be further isolated.
Last week, the FT reported that Rolls-Royce, the British engine maker, was joining Siemens, the German technology group, and other big conglomerates and investment companies in pulling out of Darfur. Rolls-Royce said it would “immediately cease” to pursue new business in Sudan and “progressively withdraw” from supporting existing contracts. That is one more company that will never care what happens to the people in Darfur.
Virtuous cycles are created when we invest, when we build interests when we and create connections in an economy. Vicious cycles replace virtuous ones when we disinvest, remove interests and close connections.
These wrong-headed activist groups are now attempting to put pressure on the great Warren Buffett to divest any investments his companies have related to Darfur, specifically citing his (and Fidelity’s growing) investment in PetroChina. You see, PetroChina is a subsidiary of CNPC, which itself is a “subsidiary” of the Chinese government. And since CPNC does business in Sudan, which means CNPC does business with the government in Sudan, these people want Buffett to sell his PetroChina stake.
I guess these activists think that if PetroChina would just leave Darfur, all the violence and bloodshed would cease. What do these well-intentioned activists expect to happen when the government and people and few businesses in Sudan are completely isolated and without access to any capital? Do they expect the government gently to capitulate? Are the 2m uprooted citizens of Sudan suddenly going to be better off? What is the endgame of total isolation in the midst of genocide?
Go and watch Hotel Rwanda and tell me what Don Cheadle’s character, Paul Rusesabagina, would want. He would want more help and interaction and investment and connections to the developed world.
And from an investment perspective, there is even more reason to start putting money to work in the companies willing to do business in Darfur. All these forced liquidations in Sudan get done at far below even their minuscule market values. You always want to be on the buying side of a forced liquidation. And if there is no profit-driven corporation on the buying side of these forced sells, it is going to be politically driven governments, such as the Sudanese government itself, that will be the buyers. That is not going to help.
Although it seems counterintuitive at first, the advice is rather straightforward really, as the best time to buy is always when things cannot get any worse. The best time to sell? When the bulls are celebrating victory. I stepped into the figurative blood on Wall Street and in Silicon Valley when I launched my tech-centric fund in October of 2002, just 10 days before the Nasdaq hit its lowest point since the peak in March 2000. After being aggressively long tech for four years, I am approaching the US tech market with caution now that the Nasdaq has more than doubled from those October 2002 lows.
I would rather be a buyer in Sudan than in the US.
Cody Willard is a hedge fund manager at CL Willard Capital. www.codywillard.com