Growing up, our family monopoly games were raucous affairs with a lot of shouting. My younger brother John was always in charge of the cash because no one else was deemed trustworthy.
In retrospect, most of my six siblings never really got the game at all. They carefully managed their cash and picked up random properties. This allowed them to stay in the game for a long time but made ultimate victory impossible.
As for me, it was either a great monopoly like Boardwalk and Park Place or I would crash and burn and then bolt to play basketball with the neighborhood gang. But the winner usually quietly accumulated a number of value monopolies and then as quickly as possible built hotels on them.
So you have to ask the question, just why is it that so many people are bad at the game of monopoly?
I think it is because we are taught at a tender age that tycoons adept at cornering markets are greedy and bad guys. This belief is compounded when we go to college and economics professors rant about evil monopolies and the need to “regulate” the free market.
Apparently, Carlos Slim, the wealthiest tycoon in the world according to Forbes, never studied economics.
Carlos Slim’s fortune was built on the back of Mexican telecom monopolies and, as a hobby, he bailed out the New York Times. Companies controlled by Slim have captured 80% of Mexico’s telephone lines, 70% of the cell phone market, and account for an incredible 34% of the value of the country’s entire stock market.
Maybe monopolies aren’t all that bad?
Lasting monopolies are tough to find in America but there are plenty of them in overseas markets.
Why? Well, the best way to convince government regulators to protect your markets is to be owned by the government itself.
One company I’m watching is Companhia de Saneamento Basico do Estado de Sao Paulo – SABESP (SBS), the largest water utility in Brazil. Majority owned by the state of Sao Paulo, SBS provides water and sewage services to over 25 million people in 365 of the 645 municipalities in the State of Sao Paulo.
The company has plenty of room to grow in Sao Paulo, other regions in Brazil, and even in neighboring countries. Sao Paulo has a population over 40 million and represents 30% of Brazil’s total economic output.
SBS is down sharply and I’m beginning to dig deeper into this Value Bounce candidate.
Opportunity awaits,
Carl Delfeld.
