Chris’ note: Today, we have an exclusive interview for you featuring Crisis Investing chief analyst Nick Giambruno and legendary investor Jim Rogers.
As you’ll see, significant changes are underway on the Korean peninsula… and they all point to one major trend: the unification of North and South Korea.
Nick says the world hasn’t seen a chance to profit from an event like this since Germany unified 30 years ago… which drove the overall German market up 456%.
According to Nick, “Korean unification would unleash an economic powerhouse and be a once-in-a-generation profit opportunity for those who invest ahead of the curve.”
There’s a lot to unpack here. That’s why Nick got in touch with Jim Rogers, a true investing legend who’s earned millions of dollars investing in crisis markets. As you’ll see, Jim thinks investing in Korean unification is a massive opportunity – and he’s putting his money where his mouth is.
Today’s Dispatch is longer than usual, but you won’t want to miss a word…
Nick Giambruno: North Korea is about the last place in the world most people would think about putting money into. To my way of thinking, that’s a clue there may be something interesting. It’s hard to think of a market more hated than North Korea. So, what is it about the place that piques your interest?
Jim Rogers: North Korea was richer than South Korea as recently as 1970. Unfortunately, communism can ruin anything. It destroyed North Korea, an unmitigated disaster.
Now the good news is there’s no debt. Nobody would lend money to North Korea. Secondly, it means that everything is extremely cheap. There’s a lot of cheap, disciplined, and educated labor in North Korea.
The communists did educate each other if nothing else. North Koreans did learn arithmetic and things like that.
So, you have cheap, disciplined, educated labor, and you have lots of raw materials. The reason North Korea was richer than South Korea was because it had a lot of natural resources – like coal – and it’s right on the Chinese border.
Now, you combine that, the possibility of the 38th parallel opening, with a gigantic capital, manufacturing, and marketing ability in South Korea, and you have the best of all worlds. Well, maybe not the best, but you have the right parts of all worlds on the Korean peninsula. It’s already happening.
They’ve taken the guns away from the guards at the 38th parallel, and they’re removing the mines, too. So, it’s already in process. Of course, you don’t know this if you’re only exposed to American propaganda, or Japanese, or South Korean propaganda.
The kid [North Korean leader Kim Jong Un] has said he wants to do for North Korea what Deng Xiaoping did for China. He’s starting to do it.
There are 15 free trade zones in North Korea. International bicycle races and international marathons are happening. The kid also opened an international ski resort.
You know, the kid is not North Korean. He grew up in Switzerland. But he can’t go back to Switzerland, so he’s got to change North Korea.
He’s trying to change North Korea into a new modern state. It’s going to be one of the most exciting places in the world for the next 10 or 20 years once it opens, and it’s starting to happen now.
Nick Giambruno: A big part of the story is the unification of Korea. Do you view that as a “when” not “if” situation?
Jim Rogers: Well, it’s certainly a “when” not “if” situation.
Once the border – the 38th parallel – is opened, who cares what the government is? Maybe America will buy the kid the Chicago Bulls. He can spend his days running the Chicago Bulls. But the important part is that it’s going to happen one way or the other.
You know in 1989, Willy Brandt, one of the most distinguished German politicians of the last decades, was on German TV and they said to him, “Will there ever be unification?” And Willy Brandt said in February of 1989, “Not in my lifetime.” You may know what then happened in November of 1989.
I certainly cannot give you the dates – and I don’t want to even attempt to – but I know that the 38th parallel is going to open. And that’s the important part as far as the peninsula, the society, the economy, and investors are concerned.
Nick Giambruno: It’s interesting you bring up the example of German unification. It’s incredible how fast the world can go through massive changes, and how even the most informed people don’t see it coming, even when it’s imminent.
A united Korea would be an economic powerhouse. What are the implications of that?
Jim Rogers: Well, Japan is against it because they know they won’t be able to compete with a united Korea. Japan has a population that has been declining for 10 years and a debt that has been skyrocketing. So the Japanese don’t like it at all. They’re doing everything they can to disrupt the Korean peninsula because they know what’s coming.
The Japanese have hated the Koreans for over 100 years. They’ve looked down on them. You know, the Japanese owned them for a while, too. But there’s nothing the Japanese can do now. There’s no way they can stop it.
The implications for Northeast Asia are enormous. Japan is declining, and Korea is rising.
Another dramatic change is there are railroads – they’re closed now – up the east and west coasts of Korea which connect to Chinese railroads and the Trans-Siberian Railroad. Those railroads are being rebuilt now.
Putin has rebuilt the Trans-Siberian Railroad down into North Korea.
The northernmost ice-free port in Asia is in a city in North Korea called Rason. The Chinese and the Russians have been building docks and ports there, so that they can connect back into the Trans-Siberian Railroad and the Chinese One Belt, One Road initiative.
So the whole transportation infrastructure is going to change in Northeast Asia as this happens.
And for what it’s worth, there is a movement to build a tunnel from Japan to South Korea.
Now I don’t know if it’ll work economically, but it would never work with the 38th parallel in place. But since the 38th parallel is going to open, this initiative is gathering steam. The economics are there. You’ll be able to get in your car in Tokyo and drive to Paris if you want to. Or send your semiconductors to Berlin.
So all sorts of things will change as the 38th parallel opens.
Nick Giambruno: Looking back at the unification of Germany, are there any historical parallels that make sense to you, or is this something unique?
Jim Rogers: History doesn’t repeat itself, but it rhymes.
One difference is that the neighbors of East Germany – the Poles, the Czechs – none of them had any money.
Everybody around Korea has money, the Chinese, the Russians, and the Japanese. So there’s a lot of money available to make unification work.
Also, both Koreas spend vast sums every year on defense. With unification, that will disappear, so they’ll have gigantic amounts of money that they can spend on building infrastructure and rebuilding the economy.
You know, we’re going to have a horrible economic scenario in the world in the next few years. The Korean peninsula will be affected, of course, but less than everybody else.
That’s because of the opening of the new economic frontier of North Korea. The economic situation in North Korea cannot get worse. It won’t get worse no matter what happens in the rest of the world. And that will give South Korea, a united Korea, a bit more of a reason for its economy not to be as bad as the rest of the world.
Nick Giambruno: Due to US government restrictions, investing in North Korea is mostly off-limits for Americans. What would you do to look to get exposure to North Korea today? And if that’s not possible, how would you look to position yourself to be first in line when the doors do open?
Jim Rogers: Well, that’s an excellent question. As Americans, you know, we are citizens of the so-called “land of the free,” so we’re not allowed to do things that other people can do. Other countries can invest in North Korea right now, but not citizens of the “land of the free.” So one thing you can do is be Chinese, or be Russian, and you can invest there.
There is no stock market there, but the North Koreans have been sending people to Singapore for the last few years to learn about stock markets and how they work. They’ve also been learning about real estate markets and insurance markets. They’ve been gearing up with this for a while.
Again, the kid has said he wants to do for North Korea what Deng Xiaoping did for China. So they’ve been learning and studying the procedures of how to open these various markets.
Now, if you want to go there, they will beg you to invest. The North Koreans will give you all sorts of incentives. The last time I was there, they kept telling me, “We’ll give you this, we’ll give you that,” referring to various incentives and guarantees.
I kept saying to them, “Guys, I want to invest, and I know you want it. It’s not your government that’s the problem. It’s my government. My government won’t let me come here and invest.”
They will do everything they can to help you as an entrepreneur, as a capitalist. If you speak Korean or Chinese, there are tremendous opportunities there.
So there are all sorts of opportunities, but you must be on the ground investing directly, and you cannot be an American.
There are going to be Chinese, Russian, and South Korean companies that are going to benefit. I own a few shares of Korean Air. It’s not a very good airline. But once the 38th parallel opens, there will be many other people flying around in that part of the world.
I’m also a director of a company, which in 2008, opened a resort in North Korea. I still don’t quite know how they got permission, but they opened a big resort. It’s been closed since 2008 when a North Korean soldier shot a South Korean tourist, but we still own it. And, once it opens again, we’re going to remodel and have swarms of people come because everybody is going to want to see North Korea.
This leads me to one of the significant growth areas. It’s going to be Korea and tourism.
Korea has not been on the world’s tourism map for many reasons. If you’re sitting in Germany and say, “Oh, I’m going to go to Asia,” Korea doesn’t come up. Maybe Bali comes up. Perhaps Japan comes up. Lots of things come up, but not Korea. That’s going to change because everybody will want to see it.
South Korea has plenty of tourist sites, beaches, mountains, and so forth. The whole Korean peninsula is going to be a tourist site for the first time.
Nick Giambruno: Do you think President Trump’s diplomatic efforts will bear fruit? If they don’t, what do you think of the prospects for the unification of Korea and the opening of the north?
Jim Rogers: Well, the Russians want it. The Chinese want it. The North Koreans want it, and the South Koreans want it. But the problem is the Americans.
Korea is the only place in the world where America can have troops on the Chinese and Russian borders. There are 30,000 American troops there. The Pentagon doesn’t want them to leave.
I know that South Korean President Moon is becoming more independent. In recent weeks, he was talking about how he needs a peaceful peninsula to save his economy, which is in decline right now. He has come to that realization.
Now, he’s not tough enough yet to say to the Americans, “We Koreans have been here for five or six thousand years on this peninsula. We’ve had some problems, but we’ve had some good successes. Now, after almost 70 years of a historical accident, it’s time for you to leave, so get out of here.”
Now if Moon gets tough enough – and he’s got plenty of friends who will help him – I don’t think America is going to go to war with South Korea to keep the 30,000 troops there. I can’t see it happening – America fighting South Korea, North Korea, China, and Russia to keep 30,000 troops in the South. I don’t think it’s going to happen that way.
So if Moon gets tough enough – and I noticed he is getting tougher and tougher – he might throw us out. Not this week, not this month, but it may happen.
And from my point of view, as an American citizen who’s paying a lot of taxes, and who certainly doesn’t want to get involved in some crazy war again, I hope he does. It’ll be good for America if we get thrown out of there despite what the Pentagon says.
Nick Giambruno: Thanks for your time, Jim.
Jim Rogers: You’re welcome.
Nick’s note: I think the most significant gains will come from companies with exposure to North Korea. But the fact that the North doesn’t have a stock market, and that crippling US sanctions are still in place, complicate investing there.
I have, however, found a completely legal “backdoor” way to do that.
As I discussed with Jim Rogers above, South Korean companies are first in line when the North opens for business. Many are exploring their options, examining opportunities, and getting positioned to make moves as soon as possible.
Remember, the overall German market went up around 456% in the years after reunification. I expect the post-unification boom in South Korean stocks to be at least as significant. Having leveraged exposure to a broad section of South Korean stocks is one path to big profits.
I shared one of the best ways to acquire that exposure with readers of my Crisis Investing advisory. (Subscribers can access that pick here.) If you’re not a subscriber, you can find out more about getting a subscription, and take a step toward profiting off these historic opportunities, by going here.