As expected, the economic reality in Puerto Rico continues to improve. Recovery funds have stimulated growth in a similar manner that we have seen from other natural disaster-stricken areas. That doesn’t mean that Puerto Rico has become the new Hong Kong and is now a thriving economy, just like Rome was not built in one day.
Puerto Rico is ridden with a corrupt and incompetent government. In addition, the Federal Oversight Board has enabled the government to continue with its fiscally irresponsible policies. One of the simplest examples is that Puerto Rico has still not put out audited financial results for the last several years. How can any court determine appropriate recoveries when you don’t even have an audited baseline? Similarly, the Oversight Board has not made Puerto Rico delineate between essential and non-essential services as is mandated by Promesa.
Despite all of this adversity, these investments and Puerto Rico continue to improve. Our investments revolving around the commonwealth have been very successful and we continue to be optimistic into the future. While the overall market continues to seem expensive, I’m continuously pleased about finding enough opportunities that make me optimistic about our future investment returns. Most of our large positions continue to trade at discounts to any conservative estimate of liquidation value and have reasonable growth prospects. That generally leads to good long-term investment returns. I will say that there is a lot of froth and speculation in certain areas. Cannabis stocks are one obvious example, just like Crypto was at the end of last year. While some may speculate and do incredibly well, speculation doesn’t meet the criteria that defines an investment.
An investment is an operation where based on a careful examination of the fundamental facts, one should expect good investment returns. That is what we do with every one of our investments at TTCM and we continuously try to improve our odds of success.
Below is a Bloomberg article updating the Puerto Rico situation. Even these potential budget increases continue to understate the economic reality in my estimation, so I’d continue to expect further changes moving forward. Thank you very much and please don’t hesitate to contact us if we can help you with anything at all!