Risky Business: Lobo Tiggre Says Investors Have Nowhere to Hide

In part 3 of INN’s series on risk, we spoke with independent speculator Lobo Tiggre, also known as Louis James.

So far, Rick Rule has said all jurisdictions are risky because of greedy politicians, and Jayant Bhandari has said that countries with more substantial legal and government systems in place are more predictable, and therefore inherently more stable to do business in.

In the last article of this series, Lobo Tiggre shares his thoughts on what makes jurisdictions risky and if there’s anywhere investors can shelter from the buffeting winds of political change.

What makes a jurisdiction safe?

In short: nothing.

Independent speculator Lobo Tiggre said that when it comes to safety in jurisdictions, “there’s no such thing.”

Tiggre threw the net wider in assessing whether or not a jurisdiction was risky, saying that pretty much everything had to be considered by investors—and he has plenty of experience, having traveled all over the world kicking rocks (and picking stocks).

“There are so many things that can go wrong in any given jurisdiction and hurt share prices of all companies working there,” said Tiggre.

“It’s much more than just the risk of an anti-business politician winning an election.”

Tiggre said that besides political risk, investors had to be ready for everything; a coup d’etat, floods, droughts, earthquakes, nationalization, trouble with indigenous peoples, economic collapse, trouble with non-government organizations operating locally, changes in tax and royalty laws as well as regulations, terrorism and even outbreaks of sickness and disease.

“Not all of these things are political, but all of them can affect every company working in the country, even companies with operations on the ground that remain completely unaffected.”

Political climate potent in all jurisdictions

With those hazards to watch out for, Tiggre said that there was “no such thing” as a safe jurisdiction to operate in, and that while some jurisdictions were “more prone to ebola outbreaks than others”, “safer” jurisdictions like the US and Canada were “always subject to change” that was an outcome of a cyclical political climate.

“Remember when Quebec decided to raise taxes on mining a few years ago, dropping it out of the top rankings in the Fraser Institute’s ranking of mining jurisdictions? Or in any Canadian province when the New Democratic Party wins, or in the US when the Democrats win?”

Tiggre said that some companies sidestepped trouble by simply avoiding jurisdictions outright, skipping negotiations and cutting out any uncertainty.

“I do know that many companies operate on a simple blacklist principle. They have a list of ‘no go’ countries and they just don’t go there, no matter how exciting the opportunities might seem.” He said that many investors used the same approach to save heartbreak as it was much safer than trying to predict risk based on models.

“I also know that some financial types try to model this stuff and predict it, but I’ve never heard of anyone (predicting risk) reliably.

“I think it’s foolish and dangerous to put too much weight on such models.”

Price always trumped risk though said Tiggre, and a project in a country that’s twice as dangerous as an alternative but a tenth the initial price will attract investment.

“Whatever the ‘correct’ political risk discount might be, if a company doing business in a risky place makes a big discovery, builds a profitable new mine, or adds a lot of easily grasped value, the stock is likely to respond.”

How to know risk?

All that said, he said there was no crystal ball on predicting risk—after all, circumstances change.

“There is never any way to really know what the risk is,” said Tiggre.

“You can sense that it’s more or less in certain places, but even the best places can take a turn for the worse and the worst places can take a turn for the better.

“That doesn’t mean you stay out of the market. It does mean you always remember that you are speculating, and never kid yourself into thinking that you’re investing. Not in natural resources, not even on the largest companies in the space.”

Tiggre said that the most sure-fire way of finding out about a project is to simply go to it and have a look around.

“What getting your boots on the ground does is give you a feel for whether the discount on a scary jurisdiction is overdone, or if the confidence in a safer jurisdiction might be ill-placed. That’s hard to tell without getting out there and speaking with the locals—preferably on your own, without management around, or official translators.”

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Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.

The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence