Markets Media Must Read

By Riley McDermid, Deputy Editor

Markets Media Must-Read

Online Editor Riley McDermid goes around the world in 235-pages in Riches Among the Ruins: Adventures in the Dark Corners of the Global Economy.

There is much one can say about famed international debt expert Robert P. Smith's recent biography, “RICHES AMONG THE RUINS: Adventures in the Dark Corners of the Global Economy,” but perhaps the best jumping off point is summarized in the inaugural line of the book, in which Smith says, “On a single day in 1998, I lost $15 million in the ruins of the Russian economy.”

It is a telling confession, because it serves to illustrate that although Smith may have made millions betting on shaky and often mercurial international debt markets, he has also had his moments of sheer instinct and “market fever,” during which he not only lost millions of dollars, but also managed to teach himself, once again, the singularly most important lesson any investor must learn: To get emotional about money is to lose money – no matter how much you may have made in the past. Having long lived under the moniker “King of the Jungle Bonds” – and a rather shameless self-promoter of any comparisons between himself and Indiana Jones – Smith is inarguably one of the world's most fearless financial adventurers.

He has also made a killing off of coining some virtually bulletproof maxims, including, “Show me a country with strict currency exchange controls or with an arbitrarily fixed exchange rate and will show you a thriving currency black market.” As such, “Riches Among the Ruins” does not disappoint in the action department. John le Carre – or at the very least Tintin – would be jealous of some of the hijinks Smith seems to have gotten himself into, including racing through the streets of Baghdad after the fall of Saddam, wheeling and dealing in the back rooms of local “financiers” in Vietnam, and running for his life from unsavory characters in a largely lawless Nigeria.

How he managed to do all this without being murdered, kidnapped or at least seriously maimed is nothing short of a miracle, and one which the reader follows with avid interest. With chapters with names like “Turkey: Selling the Letter ‘M' for a Cool Half Million” and “Nigeria: Promises, Promises,” the book is a dedicated narrative of his “precarious, treacherous, and exhilarating world of the debt trader” as he “negotiates with unseemly businessmen on the streets of Istanbul” and alternately charms and infuriates corporate big shots in Guatemala.

Billed by his publisher as a major page turner, the biography is at once adrenaline-fueled and utterly compelling, as we watch Smith scamper from one end of the globe to the other in search of not only fortune, but glory. And he found both, in spades – the fortune from being in the right place at the right time with the right people and the glory from being savvy enough to work disjointed and archaic financial markets to his advantage.

Writes Smith: “The word globalization wasn't part of the lexicon in the mid-1980s, though one could argue that the process of globalization had been going on at least since the days that Spanish ships carried spices back from the Orient. But the globalization as we know it today – integrated, global markets linked electronically and operating 24 hours a day, seven days a week – was still around the bend in 1984, at the height of my El Salvador business.”

But how did he wind up in El Salvador in the first place? The son of a collections lawyer from a solidly middle class Jewish family growing up in post World War II Boston, Smith had given no indication well into his early 20s that he had any intention of doing anything but follow in his father's footsteps. His parents, then, were of course shocked to learn the not only was Smith hellbent on getting out of that sleepy backroom collections office, but had also enlisted for a tour of duty with USAID during the height of the Vietnam War. It was a decision that immediately catapulted him from the staid safety of Brookline, Mass., to the streets of Saigon and, as Smith delicately puts it, “the infamous Rue Catinat” and Vietnamese pleasure girls who found his paycheck – and perhaps his enthusiasm for collecting stamps – little to be desired.

But it was also a beeline that set him on a life course that left Smith starved for further adventure, adventure which eventually sent him to the very furthest corners of the world in search of the next big deal in international debt markets, as well as the simple thrill of the chase. After his stint in USAID, Smith gamely tried to toe the family line and come back into the fold of his father's collections agency, but it ultimately paid off: one fateful, frigid morning in 1976, Smith was commissioned to collect a debt from a Turkish firm, setting off a chain of events that led him to become one of the world's foremost experts on international debt markets. There is no doubt that the international debt markets have changed remarkably over the last three decades, going from virtual backwaters in some places to a globally linked network that is now monitored around the clock by virtually all sectors of the global capital markets. However, it is the days before the 24-hour, all seeing electronic eyes that makes Riches Among the Ruins such a fascinating read.

Writes Smith: “In El Salvador in the 1980s, I also learned an important lesson about capital – financial capital and human capital. Money, and people, will find ways around any barriers erected to keep them at home when the financial incentives are sufficiently high. Developing or poor countries often impose strict limits on the amount of local currency its citizens can convert into dollars from the Central Bank in order to maintain a certain level of foreign exchange required to buy desperately needed imports.”

It was that deeper understanding of the psychology that leads market movements that pushed Smith into deeper, more dangerous, and more lucrative waters. Often appearing to be going on no more than sheer instinct and chutzpah, he eventually found himself smack in the middle of some of the major international debt events of the last 30 years, perhaps by using lines like this:

“When I received the call from Baxter asking if I dealt in Guatemalan stabilization bonds (GSBs), I did what I usually do when confronted with a new opportunity: I faked it. I had never even heard of GSBs, but that was no deterrent. A few years earlier I had finessed half a million dollars from the most successful business mogul in Turkey and then made a small fortune trading Turkish trade debt. I wasn't such a schlemiel, after all. I had wandered into unfamiliar territory and come out ahead, way ahead. I had a bright future in the world of high international finance.”

Today, Smith leads a far more staid – or at least domestically situated – life these days, as the founder of Turan Corporation, a Boston-based firm that specializes in trading emerging markets' sovereign debt and evaluating creditor claims against foreign governments. However, he is not quite out of the thrills game yet – a recent press release sent out by his publicists touts Smith as an expert on the various topics of the “Mexican Bolsa and Peso in light of the H1N1 virus; Ecuador's strange new default on government debt; his thoughts on Brazil and Peru in an inflationary economy; and why Panama is a ‘mini' banking country.”

How interesting these topics are to the reader are of course debatable, but there is one thing that can be in no doubt – “Riches Among the Ruins” is a must-read for any trader, banker, freelance financier or even global traveler who one day dreams that they, too, will someday be in the right place, at the right time, with the right people – and make a million at it