Robert P. Smith, Founder and Managing Director of the Boston-based Turan Corporation, was kind enough to take the time to answer some interview questions about his entertaining and insightful book Riches Among The Ruins: Adventures In The Dark Corners Of The Global Economy.
Thanks to Robert P. Smith for his time and for his intriguing answers about his adventures as global bond and debt trader in the early days of globalization. He was often been called the "Indiana Jones" of international debt trading. His exciting globe trotting life has lived up to, and even exceeded. that billing.
What was the background to writing this fascinating book Riches Among The Ruins: Adventures In The Dark Corners Of The Global Economy?
Robert P. Smith: As we grow older it’s natural to try and put our lives into some larger perspective; to make sense of the times through which we lived. In the late 1970s and 1980s when I started trading emerging market debt, I was just trying to make a living. Looking back, I see that I was surfing the early waves of globalization and, in the process, helped create what is now a $5 billion dollar a day market.
You were at the forefront of the international debt market. How did that market work when your career was at its peak?
Robert P. Smith: When I started, the trade in emerging market debt was less than $300 million per year. I was the quintessential middleman, finding buyers and sellers and making my money on the spread. It was a primitive business back then. I made cold calls, advertised in foreign newspapers that I was buying or selling certain types of bonds and physically ferried actual bonds around the globe in my suitcase. Today, of course, all this debt is traded electronically by traders sitting at desks in New York, London, or Paris. In my heyday I had to walk the streets of San Salvador, Lagos, and Guatemala City.
How does the international debt market operate now that was different from your days on the frontier?
Robert P. Smith: The advent of the digital age was transformative. I operated in markets that were completely non-transparent. No one knew, for example, what an El Salvador bond was worth. I sold it for whatever a buyer would pay. Today, anytime such a bond trades hands every trader in the world knows the price paid within seconds. I made money when the market was primitive because I often had information no one else had. Today, everyone has instant access to all the same information. That’s why the spreads in the old days could be huge. Today, they are as thin as a piece of paper.
How was your business career different from the activities of the Wall Street bond and debt traders?
Robert P. Smith: It was far more adventurous than sitting at a trading desk in New York or London. I traveled incessantly, often to countries where there was real physical danger. One morning I was thrown out of bed by a bomb blast near my hotel in San Salvador during the bloody civil war there. Lagos was a violent city where it was impossible for a white man from Brookline to blend in. You can’t get that kind of adventure on the 6:15 from Larchmont.
How important are bonds and debt to fueling the global business economy?
Robert P. Smith: Countries, like companies, need credit to function. Goodness knows the United States of America runs on debt, and at frightening levels. Countries run their armies, infrastructure and services on debt. When debt freezes – people stop lending – the economy shuts down. For emerging market countries, debt, carefully managed, can offer way to a more prosperous future.
Robert P. Smith (photo left)
Many people believe that markets behave rationally. You state in your book that markets operate on emotion. Could you please explain what that means?
Robert P. Smith: The notion of rational markets exists side-by-side with the fear and greed side of the equation. Decisions that are rational for any given individual – wanting to get money out of a bank believed to be failing, for example – can, if widespread fear sets in, lead to the very result one hopes to avoid. Just as it’s rational for any individual to want to be the first out a burning building, if everyone acts rationally, tragedy ensues. And, of course, people don’t always act rationally. I was in a swoon over Russia’s economic potential after the collapse of Communism and in my exuberance bought millions in Russian bonds that lost most of their value overnight. I held on and recovered, but I wasn’t a happy camper. Markets, in a gross sense, operate rationally even as millions of people playing in those markets make emotional decisions.
Would you say, like some other observers, that American foreign policy is now foreign economic policy?
Robert P. Smith: There’s no doubt that economic issues have gained importance in international relations as the economy becomes globalized. The enormous U.S. debt owed to China, free trade, energy supplies, even climate change – they all have profound economic implications. But many foreign policy issues are not primarily economic, such as nuclear proliferation and human rights.
Do you ever feel that your international debt business was unethical or was feeding off the misery of others, or were you helping financially strapped nations to clear their debts?
Robert P. Smith: The bonds I was buying and selling were issued by nations that needed capital to run their governments and provide services. Creating a market for these bonds made them more appealing and thus offered a way to improve the national economy. Now, not every country has a virtuous government, but I wasn’t playing games with other people’s money here – I often had my entire net worth invested in a transaction.
Were you ever at personal risk of physical injury or even death?
Robert P. Smith: I’ve already mentioned the bomb blast in San Salvador. In 2004 I went to Iraq to investigate the opportunities in Iraqi debt. We had a heavily armed security detail and wore flak jackets the entire time. To get to the Green Zone we had to drive at high speeds in armored SUVs down a road fondly nicknamed “The Highway of Death.”
Would you do it all over again, or have international bond markets changed too much for a repeat of your life's adventures today?
Robert P. Smith: I loved my work. I loved the travel, the adventure, the allure of exotic places, the sound of foreign languages. I loved the risk, physical and financial. However, but times have changed. I am a dinosaur in the industry today. You can find great adventure in the world today, but it probably wouldn’t be in trading bonds.
What is next for Robert Smith?
Robert P. Smith: My 70th birthday is around the corner. I still travel on business, most recently to Syria and Turkey. I still look for opportunities around the world, but now, I take joy in watching my grandchildren grow up and serving on the boards of various non-profits.
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My book review of Riches Among The Ruins: Adventures In The Dark Corners Of The Global Economy by Robert P. Smith (with Peter Zheutlin).
My Blog Business Success Radio interview with Robert P. Smith.
Robert P. Smith (photo left) is the Founder and Managing Director of the Boston-based Turan Corporation, which specializes in trading emerging market sovereign debt and evaluating creditor claims against foreign governments.
A graduate of Bowdoin College and Boston University School of Law, Robert P. Smith served as a loan officer and economic liaison for the United States Agency for International Development (USAID) in Vietnam, El Salvador, the Dominican Republic and Brazil. He later joined Deltec Bank of Sao Paulo, Brazil, before returning to the United States in the mid-1970s where he established a law practice specializing in international debt collections.
Turan Corporation was founded as Turam (“Turkish-American”) Corporation in 1978, and soon became one the largest privately held sovereign debt trading firms in the world. The company’s many achievements include purchasing $7 million of Turkish Non-Guaranteed Trade Arrears (NGTAs) in 1980, making it the first company to develop its own debt/equity investment in Turkey. The company forged similar archetype deals in places such as El Salvador, Nigeria and Guatemala.
Bob Smith is a noted authority on developing world debt and has been cited or quoted in numerous publications including the Wall Street Journal, Africa Economic Digest, The Financial Times, International Business, and various journals of Euromoney Publications of London. From 1986 to ’88 he wrote the monthly column “Blocked Currency” for Euromoney Treasury Report. Robert Smith is a sought-after speaker and has addressed numerous professional groups on matters relating to emerging markets.
