Volume V Issue I
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Welcome Letter

Welcome back. Lets get the ugly part out of the way first. I am still way behind on the publishing schedule. The continued delay and total lack of communication was a result of several converging events including an irresistible adventure. Some I previously mentioned while others developed in close sequence. They ranged from pure regulatory compliance and corporate gymnastics to an extraordinary adventure that would have been, at best, frowned upon by the issuer of my passport. No attempt at succinct explanation would avoid appearing cryptic, melodramatic and just plain ridiculous. I will endeavor to reveal some of the causes of my most recent absence over time as prudence and the statute of limitations permit.

I do, however, believe in the sanctity of contracts and doing what one says one will do. This is a core principal not to be quibbled over. Therefore any of you who wish to cancel your subscription would be entirely within your rights and we will process your request immediately. If you choose to cancel just email admin@withoutborders.com and you will still receive the next four issues of Without Borders free of charge. You can re-subscribe at any time at the going rate.

While I freely apologize for my disappearance without proper notice, I am very glad I did it. I am personally much better for the experience and I feel more alive and energized than I have in a very long time. There is nothing like a spate of revolutions and civil war to get the blood going. As much as I love the investment business, I didn´t realize how much I miss being in the throws of upheaval as they unfold. This realization will likely materialize in future additions of this publication. Perhaps it is my midlife crisis? For some a younger woman with big tits or a sports car. For others a personal trainer. For me a civil war.

I have a stack of notes from my less controversial travels that I am working through before I am off again in search of pleasure and profit. That sounds rather provocative doesn´t it? But why shouldn´t it be fun? I´m turning over a new leaf and leaving the grumpy cynic behind. As I have written before, I was bothered that I had let the current state of political and economic affairs (the politiconomy) get to me. I have been drifting for the last year or more from my normal optimist and opportunist bon vivant towards being a down right curmudgeon. If truth be told, this gloom and doom period found me smoking the same cigars and sipping the same Scotch but I somehow lost perspective. Friends call me a rabid Libertarian with hedonist and anarchist tendencies. It is a description I encourage and once did my best to live up to. As last year came to a close I realized that I had failed in this whimsical yet noble endeavor. I started to care about things that were headlines but not really important. I was sucked into the trap of information overload where everything is both urgent and sensational. This may work for those who live and die in the cyber blogosphere but it is not for me. Not that there is anything wrong with cyber blogosphere. It worked out well for Ariana Huffington. But it does not suit my personality and it was a mistake for me to try to accommodate the present trends. So this year my resolution is to keep everything in perspective. I will write about what I think is important and only write when I have something to say. I hope you stick around but I understand if you don´t. I will be happier for the change regardless of how current events unfold.

The world may come apart at the seams but will it effect mine and yours? The answer is yes. But it need not be painful. In fact it can be profitable. While acknowledging the unavoidable tinge of schadenfreude, we can profit from the limited tensile strength of thread as the systems stops unraveling and starts tearing. In fact, if we position ourselves correctly while going on with our daily lives, we will come out of this in great shape. Perhaps we will be able to create wonderful opportunities as society rises from the rubble.

I have had some long and often dark conversations with close friends in different corners of the globe. During these deep dialogues my friends almost universally came to the same conclusion; I was taking the global geopolitical situation personally. How silly. Ridiculous. Foolhardy even. And sadly, absolutely correct. Like a research biologist at the Scope´s trial, I have been outraged at the reaction to the global crisis. I was angry at governments for doing all the wrong things. Couldn´t they just see how they contributed and continue to contribute to the collapse? I was almost offended by the so called intelegencia´s reaction to the crisis and their predictable condemnation of Capitalism even though Capitalism hasn´t been practiced in years. I fumed for months over the legal and moral precedent set by the Chrysler bail out. I accosted my friends with diatribes about the difference between correlation and causation in economics. And more than anything else, I was devastated by the loss of America. Not America the place or the nation state.

I mourn America the idea. An idea that there would always be a place where the individual was tantamount. America the system. A system where individual liberty was protected above all else. A system created with the central purpose of limiting the powers of government and restricting the will of the popular masses from being forced on the minority. America the culture. The culture where individual responsibility went hand in hand with the opportunity to dare to fail greatly. To fail and expect nothing more than the opportunity to try again. Rugged individualism comes with responsibility yet, alas, neither qualities are valued today. America is gone. Only the United States remain and the United States is a nation state like all others.

The New Me?

While Frau Fitz would prefer my New Year´s resolution included a gym membership, fewer cigars and less red meat, I have decided to do all I can to make the new me the old me. The optimistic opportunist rather than the doom and gloom laden curmudgeon. The misanthrope shall be replaced by the seeker of prosperity pockets. While, I will never be a cheerleader and there will always be a smiling cynic and critic just below the surface, I will redouble my efforts to find actionable ways in which our community of roving capitalists can capitalize on catastrophe. The analysis of the economic and political situation will likely remain dark and stormy but it will not impact my belief in the ascent of man or the opportunities that abound. I will not allow myself to be sucked into the pit of gloom and despair. The situation may be dire but it need not be dreary. Therefore, the first official act of the new me is to replace our inflation/ deflation slingshot photo. Gone is the menacing Indian soldier full of foreboding. He has been replaced by the optimistic Venezuelan freedom fighter in tight jeans. What better way to turn over a new leaf? I feel better already!

The Sovereignty Project: 2011

I am also redoubling my efforts to find and found Fitzroymcleanstan and I will continue to work on the sovereignty project. It has been a long time since I wrote about this idea. Many other freedom lovers believe it is necessary to create a new shining city on the hill that welcomes the productive and self sufficient. Since my time at Oxford, I have studied the concept of newly found sovereignty and I believe it is an absolute necessity in this day and age of self destructive and oppressive nation states. This is by no means my idea alone. Many people, far more accomplished than I, are quietly working behind the scenes. While most people in the western world dismiss the idea of a new nation out of hand because the western style mega-nation state has been their central cultural institution for the last century, nations come and go all the time. It may be more difficult than in the past, but the idea of a new nation state based on individual liberty and freedom of action is not as far fetched as it may initially seem. I have personally witnessed the birth of six nations since 1991. Many more came about without me to bear witness. In the last two years I have gone to visit seven regions which have the potential to become sovereign states either through armed struggle, secession or treaty. The problem with most of these would be break away regions is that the people advocating the independence are just as oppressive as those they want to be freed from. It is not a freedom movement but rather a fight over who gets to be the oppressor. Fights between tyrants and would be tyrants are the norm. Therefore I suspect we shall have to work towards the creation of a new sovereign entity. In each of the next twelve issues of Without Borders, I will be writing about this concept and examining the opportunity and outlining how we could go about it. I firmly believe it comes down to timing and preparation. The timing needs to be such that the ¨great powers¨ are too busy with their own internal situation to be bothered. That implies that the new state must be neither strategically important or politically sensitive. Secondly, to be successful we must have plans in the works and achieve critical mass before the geographic opportunity arises. Think this is madness? Is the Scotch typing? Actually no. We are at a critical juncture where the combination of technology, finance, freedom and action could allow the next frontier to appear without having to leave the planet. Seasteading is an interesting concept and may yet prove viable but we should not rule out a land based option just yet. More to follow. Much more.

In this Issue

This issue we focus on the Falkland Islands and the opportunities that lie on the islands and beneath the ocean floor. Not only will we discuss the entrepreneurial and lifestyle aspects of the FI, but we also bring you what we believe is the best risk adjusted way to play the potential oil boom without having to take the big risks associated with hydrocarbon exploration. And the best part is you can buy these shares without having to visit anyplace with penguins. They are traded on the London Stock Exchange and can be purchased through many mainstream brokers.

This welcome letter has gone on longer than necessary. It reminds me of the counterintuitive yet accurate phrase, ¨ I am sorry to have written such a long letter, I simply lacked the time to write a short one.¨

Until next time, thank you for your continued support and patience. I look forward to meeting more of you on my travels. Even though I am a pathetic correspondent, I do enjoy hearing from you even if it takes a while to hear back from me.

Yours in exploration,

Fitzroy McLean
Chief Bon Vivant and Speculator

Dispatch: The Falkland Islands (Las Malvinas)

Background

Like most people, I first heard about the Falkland Islands when Margaret Thatcher sent the British military to liberate them after the Argentines invaded in 1982. Located in the South Atlantic, off of the coast of Argentina, the Falklands had been a rather dreary outpost of Empire populated by less than six hundred full time residents and hundreds of times more sheep. Until the conflict, most of the Falklands were owned by non resident land owners. A dozen or so families, resident in the UK, owned tens of thousands of hectares of grazing land, called stations, where they raised primarily sheep for their wool.

After the conflict, the UK government and the local Falklands government understood that in order to strengthen their claim to the islands they should try to develop a self sustaining internal economy and encourage further settlement. It was as if the invasion by Argentina reminded the Brits that they had the Falklands the way a leaky roof leads to discovering old treasures in the attic. After they drove out the Argentines, the Government set up a forty five million pound development and reconstruction fund. Not that there was much there to begin with in need of reconstruction. The government laid out a Stalinistic five year plan which included ceding the local fishing waters and the offshore oil fields to the Islanders. The problem was there was no known economically recoverable oil and for years the area had been over fished so the boom had to rely on sheep and tourists at first.

Believe it or not this worked and the island has attracted a significant number of immigrants in the last decade. At first they dribbled in as land was sold off to would be homesteaders. Not surprisingly the first batch were landless Kiwis who had been priced out of the sheep stations back home. Then came UK born homesteaders attracted by tax benefits and generous subsidies. After that came a really surprising mix of nationalities. Chileans. Saints. Saints? Yes Saints. In the local parlance a Saint is a native of the island of St. Helena known mostly for being Napolean´s prison but today another UK island dependancy. Saints are almost all of African decent so you can imagine prospects must have been limited at home if they picked up stakes on their tropical island to head for the wind swept treeless islands known for its penguin population. But none the less, they came and the Saint population is now just behind the native Kelpers, as those born on the islands are called, UK immigrants and before Chileans, Russians and Kiwis.

The New Boom

The population of the islands are now estimated at about 3,500 thanks mostly to the increase in tourism since several cruise lines have now made the Falklands a must- stop destination for those going round the horn and oil which we will address separately below. But it is not just cruise ships and hydrocarbons. The internal economy is indeed booming. They are moving up the value chain in several areas. They have fish processing plants that allow for higher value exports and an EU approved slaughter house which allows them to export beef and lamb at much higher prices than they would otherwise. It also reduces the dependency on wool prices for the sheep farmers. And yes sheep farming is the correct term. Cattle ranching. Sheep farming. You run cattle. You grow sheep. It is just the way it is.

The Feel of the Place

Many of the recent immigrants we spoke to on our recent trip were UK born immigrants who were fed up with Britain no longer feeling British. They were fed up with the politically correct multi cultural cool Britannia experiment and wanted to go to a place that still respected Margaret Thatcher and a place where being proudly British was encouraged. The Falklands fits that bill entirely. When you arrive you feel like you have stepped into a thirty year old back issue of Country Life but with newer Land-Rovers. Barbour wax jackets and Wellies are the most common apparel items but there are plenty of wool caps and sweaters to be found as well. Port Stanley, the capital and largest town by far, feels like a costal Scottish village circa 1950. The kids are all polite and rosy cheeked, the women are stout and sturdy and the men have the skin of those who spend their days in the sun and their evenings in the Pub. It takes a bit of doing to figure out if the universally red noses are from the fields or the pints. Even the dark skinned Saints and Chileans took on the air of the British countryside. The only person we met who seemed not to have adopted Queen and country was an Indonesian bank manager who was obviously there for the expat package and counting the days until his contract expired. This brings up an interesting analogy. On more than one occasion I thought this must be how Dubai or Abu Dhabi was circa 1977.

The islands are a village and privacy is almost unheard of. You can take this as a neighborly benefit or a major negative. Rest assured half the islands will know what you eat, what you drink, how you tip, and if you like dogs. And that is if you are a tourist who doesn´t get back on the cruise ship the same day. If you actually want to live there or stay more than a couple of nights then you can expect to be the topic of conversation and the subject of aggressive scrutiny for the rest of you days in residence and perhaps beyond. It is not a place where you can blend. Perhaps this will change a bit if the boom continues but that would depend on the big question that underscores every conversation in the Falklands not about the wind or football; how much oil is out there?

The Oil Question?

The British Geological Survey estimates that there are about 60 billion barrels of oil in and around Falklands territory. The hydrocarbons were discovered by Shell and Amanda Hess in 1998 but at $12- $15 a barrel it wasn’t worth the effort to explore further. Naturally technological improvements and much higher oil prices make these deposits worthy of significant exploration expense.

The Hunt

I have traveled around the world and I always enjoy the energy of a boom town. One of the things I like even better is the energy of a would-be or will-be boom town. So much energy combined with the skullduggery implicit in jockeying for position and the wild eyed plans of buccaneering entrepreneurs. I love it. The Falklands feel this way right now albeit in a much more staid way than say Luanda Angola just after the cease fire. Nonetheless, you can feel the energy. Locals will publicly fret about the possibility of losing their bucolic way of life if the oil estimates are correct yet that doesn´t keep them from speculating how much their house will be worth in three years. Pubs are filled with locals and and newcomers alike who are already spending their fortunes in their head.

The Players

Six companies hold licenses to explore in the region. Two of them are private companies; One of them,Arcadia, is private so we don´t have much information on them and they are not open to investment. However, the public companies are worth exploring…

Desire Petroleum Plc (LSE:AIM:DES)

Desire has a large area license in the north basin. It has been drilling aggressively and so far it has come up with mud. Its shares have been on a wild ride even by junior exploration company standards. At the beginning of 2010 they were trading at about 100 pence. Then they dropped as low as 38 pence before they spiked to 150 pence after back to back disappointing drill results they are now trading at 39.75 pence. Yet all is not lost for Desire. They now have to give their rig up to a competitor before they can drill again but they still have enough cash to drill two more targets. At this price it may be worth a wild speculation because if either of their other wells hit the shares will spike back beyond 150 pence. This is a speculation and a wild one at that. It is certainly not an investment recommendation but sometimes the shares in companies that are universally hated turn out to be the ultimate winners.

Falklands Oil and Gas (LSE:AIM:FOGL)

Falklands Oil and Gas has been listed on the AIM since 2004 before the major move in oil prices but it wasn´t until 2007 that they started exploration in earnest. They raised nearly 100 million US dollars just before the financial crisis. FOGL has a joint venture with BHP Billiton to explore in the east and southern basin. FOGL has a 49% interest in the licenses but BHP has to spend two thirds of the costs of exploration. It also owns 100% of another license in the southern basin. The JV drilled one well with disappointing results and BHP Billiton pulled out of the follow on exploration and paid a hefty penalty for walking away. Although the FOGL shares have been pummeled having lost half their value since the first well and BHP´s departure, they still have 80 million US dollars in the bank. They are soon to drill the Loligo well and any success there will almost certainly cause a spike in the share price. Junior exploration shares are the most volatile and big spikes up and down are the norm.

Argos Resources (LSE:AIM:ARG)

I am tempted to buy a big position in this company just because the ticker symbol has made my Argentine friends go berserk. Even those that don´t really care about the Falklands get worked up over the ticker symbol. In their minds it would be the equivalent of a Cuban company operating in Key West with the ticker symbol USA. It is actually worse because Argentines see the letters ARG and think of their national football (soccer) team. But beyond the symbol, Argos has as an exploration area of over 1000 square kilometers adjacent to Desire´s exploration block. They are the most recent company exploring in the Falklands to go public. They listed their shares on the London Stock Exchange´s AIM market this past July. They are now in the process of conducting seismic interpretation in order to determine how to prioritize their drilling campaign. Of all the Falklands explorers they are the least far along. This is not necessarily a bad thing but a stake in this company is a lottery ticket. Lots of exploration risk and potential upside. If I wanted a Falklands lotto ticket I would go with Desire of FOGL only because they have more drilling to do and the shares have been beaten down. But I am not in the market for a Falklands lotto ticket.

Borders & Southern (LSE:AIM:BOR)

B&S is another UK listed company with a large portfolio around the Falklands. They have been struggling to acquire a drilling rig to move their projects forward. I haven´t taken a close look at the company because there hasn´t been much to look at beyond the seismic data they acquired. I must admit I have a bias against the company because their headquarters is located on St. James’ Sq in London, just down from where Eisenhower planned the D Day invasion. While St. James is one of my favorite places in the world and I spend too much time and money in Clubland, it really bothers me that a struggling microcap oil and gas company with properties in the Falkland Islands has office space in an uber posh (Uber Posh….that is a clashing culture metaphor and the back of a D Day reference eh?) and ultra expensive location bothers me. We looked at participating in the private placement they conducted in November but I never got past the HQ address. It may ultimately be the company that hits the big basin.

Rockhopper (LSE:AIM:RKH)

Rockhopper is the company in the region that has garnered the most media coverage. They are the most advanced operation and they have all the cash they need to complete their present exploration program. With a market capitalization of nearly a half a billion Sterling, it is considered the prime Falklands play. It is also the only company to thus far actually find what they believe is economic oil but it has had to reduce its original estimate of the size of the field.

Nobody knows for sure if there is indeed economic oil in Falkland waters. Repsoil the Spanish firm may prove that all the geopolitical and geophysical wrangling has been for not as they are drilling in Argentine waters between the Falklands and the Patagonian coast. Their geologists seem to think that the FI waters are a red penguin. We will wait and see but after our time on the ground in the FI and in London talking with the companies we think there is a better than 50/50 chance someone will strike it rich. Which company? Your guess is as good as ours. We are not buying a position directly in any of the above companies.

What happens if there is oil?

If anyone hits economic oil then the benefit to the Falklands economy will be enormous. The FI government will see revenues rush in because there is a 9% royalty on production and a 26% corporate tax rate. But the big money will be in the international trade, services and other activities from housing workers to supplying them with their evening libation. The sleepy FI will become a boom town for entrepreneurs.

Entrepreneurial Opportunities

Would I move to the FI? Probably not. Island fever and the village like atmosphere are not for me. I would really struggle with the lack of privacy. But don´t let that deter you. You could make a fortune if there is oil by providing services to the influx of oil workers. There is a shortage of able bodied workers and an even greater shortage of entrepreneurial thinkers in the FI today. You would need to get on the ground and set up quickly. As we wandered around we thought someone with energy but no capital would do well by starting a recruitment agency that specialized in filling FI jobs and a short term housing agency that handled rentals. If you have a bit of scratch to get started then I would put an ad in the paper for helicopter mechanics. There are lots of these guys back from reserve duty in Iraq and Afghanistan. I would start collecting resumes and start the registration process for a company that provide aircraft parts and maintenance in the FI. As soon as someone hits oil there will be a need for rotary wing aircraft maintenance as oil companies will need to constantly resupply the rigs and shuttle people to and from the oil fields. There will be many more opportunities but you will have to visit to spot the one that best suits you.

Getting There

Because of the continued and now heightened by hydrocarbons dispute between the UK and the Argentines, it is expensive and or inconvenient to travel to the Falklands. All logical routes would lead through Argentina but you are not permitted to depart Argentina for the Falklands. Therefore you must either fly directly from the UK on a military transport flight that sells tickets to passengers. Notice I did not say ¨sells seats to passengers¨. The flight leaves weekly from the Royal Air Force base Brize Norton just outside of Oxford. The more comfortable if more expensive way to fly is via LAN Chile. LAN is a fantastic airline. It is the best airline in the Americas by far. I would fly LAN before flying any of the US carriers. The service is polite and the seats are as good as any save Emirates or Singapore airlines. However, the flights are expensive and mostly inconvenient. If you are coming from Europe or North America the chances are you will have to spend a night or two in a hotel between your arrival flight into Santiago and the departure flight to the Falklands. Cruise ships are convenient for those not wanting to spend more than a day in town but it is expressly forbidden to get off of the ship and stay on unless there is a medical emergency. I know I tried. So how did I get there?

I hoped a fishing vessel out of Uruguay. The captain was a Rocha based commercial fisherman who regularly stopped in the Falklands. It took some coordination but this allowed a long enough visit and a learning experience. The lesson; study hard. I´m not cut out to be a commercial fisherman. There are other vessels that ply the Uruguay to Chile route that regularly stop in the Falklands and many of them have cabin space available. In fact, traveling the world by commercial vessel is more possible today because the ships almost all have excess space below decks as the technology has obviated the need for most of the crew. I´ve been researching this for some time now and hope to make another longer journey this way sometime in the next year. Its really disturbing the lengths to which I will go to avoid the indignity of airport security.

A Second Falklands War?

Regarding the heightened geopolitical situation and the saber rattling by the Argentines, my take on the issue is that it is much to do about nothing. The Argentines are in no position to do anything more than whine and whinge. The Argentines are armed with harsh language and little else.

Given the fact that a military option is not entirely feasible, I have requested an audience with the Minister of Defense and the President of Argentina to discuss my fool proof plan to regain the Malvinas without a fight. In fact the conquerors would be welcomed with open arms. You see, I live in a place that is invaded by Argentina every year between the 15th of December and the end of February and the locals not only welcome the invasion but plan nightly feasts to welcome the invaders. Here in Punta del Este the Argentines have figured out how to invade with style and the best part is they do it without the government.

Pictured to the left are three Argentine invaders just after establishing a beach head. Their operation suffered very little casualties beyond a couple of cases of whiplash and a saw jaw. Nobody died in this invasion. Each year thousands of these warriors take full control of the land and more than a few choose to stay year round an repopulate and prepare for the next wave of invaders. In our trip to the Falkland Islands we saw only one really attractive woman during our stay and she turned out to be the social director on a visiting cruise ship. The Islands were totally devoid of pretty women. They were also pretty low on good looking young men without gnarled fingers and or bulbous noses. The wind swept landscape and harsh winters probably have something to do with that. Regardless, if Argentina really wants to reclaim territorial control of the islands it would be simple enough to mount a clandestine operation of copulation. All they would need to do is send over wave after wave of attractive people, of which there is no shortage in Argentina, to mate with the locals. I would mount a Le Femme Nikita type operation where every good looking criminal of child bearing or marrying age for that matter was offered a stiff jail sentence or entry into the Malvinas project. Within no time at all, a referendum vote for separation from the UK would pass by an overwhelming majority. This tactic would be much more attractive than what was tried in the 80s. The picture on the left does not seem nearly as attractive as the one on the previous page. Despite my desire to experience a good civil war close up, the hippie capitalist in me still believes, make love not war.

Conclusion

The Falkland Islands could well be an enormous boom town. An enterprising entrepreneur who does not want the excitement and turmoil of the Ivory Coast or Burma. It would be good for a family man who wants a nice, as in friendly not sunny, stable place to raise their children with the added upside of a potential boom. Regarding the oil and gas plays in the area, most of the shares are just too pricey for me given the speculative nature of the prospects. While long time subscribers know I like and encourage speculation, I prefer to do it in very early stage ventures where I know the management or the price is right. Buying a lotto ticket in the open market is not for me even though odds are that one of the Falkland Island plays will hit it big.

Actionable Intelligence Falklands Islands Holdings (LSE:AIM:FLK)

Because we like the future prospects of the Falklands and we cannot get comfortable with any of the oil and gas companies focused on the region, we have decided to play the Falklands with less, albeit significant, upside and very limited downside.

Overview

Falkland Islands Holdings is a micro conglomerate that offers us exposure to the potential boom in the Falklands in several ways. The company owns 8.2% of Falklands Island Oil and Gas (LSE:AIM:FOGL) so if they wind up being the lottery winner then FLK share price will react accordingly. They also own The Falkland Islands Company which is the primary provider of services in the FI. They sell insurance. They own development land and rent housing. FIC provides logistics services and port operations. They own Falkland Islands Shipping which is the primary provider of freight forwarding and ocean transport to and from the islands. And if you have ever heard of ¨The company store¨ you will be interested to know that FIC owns a large percentage of the retail outlets in the capital. In short, the company will benefit from the influx of people and material if and when the oil boom materializes.

In addition to the assets in the Falklands, the company also owns and operates the Portsmouth Ferry service in the UK and owns Momart which is a weird and wonderful specialty transport company that specializes in moving rare works of art.

Recent Performance

Falklands Islands Holdings is a profitable little company. In 2010 the company reported a pre tax profit of 5.7 million pounds which was a 17% increase over 2009. Part of those earnings were derived from the sale of a small portion of their shares in FOGL but operating profits were still up more than 15%.

The three operating subsidiaries all did will in 2010. The Falklands Islands Company increased operating profits by 9.5% to 1.38 million pounds. The Portsmouth Harbour Ferry Company increased its operating profit to .79 million pounds despite reduced ferry traffic in the UK. Momart moved enough Monets and Whorhols to bring in nearly a million in profits in a year where art sales and museum budgets were at record lows.

Finally, their stake in FOGL is worth about ten million pounds sterling at today´s prices.

Valuation

Presently trading at 282.5 pence, FLK has a market capitalization of just over 26 million pounds. It has roughly 1.5 million pounds of debt and over 4 million pounds of cash in the bank. It is presently trading at just over five times 2010 earnings. It also pays a dividend of just over 2.5%. Best of all the company remained resilient at the height of the financial crisis and even managed to pay down debt with cash from operations.

Price	2.282.5 pence
Market Cap	26.04
Net Debt	1.5 M pounds
Cash on Hand	circa 4 million
Price / Earnings	5.09
Dividend Yield	2.54

BUY Falklands Islands Holdings (LSE:AIM:FKL) at or below 283 pence

This is a value play that pays you to hold the shares while we wait to see if the oil boom develops. If it does then this could be a double or better for us. If no boom develops the shares will likely stay where they are or fall slightly. The shares trade very thinly so be patient. We suspect that you can pick up shares slowly unless there are good results from a driller in the region. No results are expected in the next month so be patient.

End Quote

The past month has reconfirmed that favor revolution in principal. It is good for society in general and it is the ultimate check on government. Naturally, less government means less cause for revolution. In my recent travels I have spoken widely about the ideas of revolution, freedoms and democracy. The more people I speak with the more I remain in favor of the first two and circumspect of the latter. So here are two quotes on revolution. Both I believe are accurate and relevant.

¨ Every generation needs a new revolution. ¨

Thomas Jefferson

“Those who make peaceful revolution impossible, make violent revolution inevitable.”

John F. Kennedy

But before we get too carried away feeling good about revolution. Let us not forget that the aftermath is the difficult part. A revolution ¨for democracy¨ is like having a revolution ¨for pasteurization¨ . Democracy is a process by which a society picks those who can impart their will on others. It is a means not an end. Freedom is an end but unlikely in any of the places presently toying with revolution. Let us then part with words of warning,

“In a revolution, as in a novel, the most difficult part to invent is the end. “

Alexis de Toqueville

As I wrote about in the welcome letter this month, most revolutions are not about freedom. They are about who gains control of the institution which possesses the legal authority to oppress the populace. I fear that in the grand scheme very little will change in Libya or Egypt other than the names on the doors and who receives the largess from the ruling powers. The oppressor is dead. Long live the oppressor.