He searched for oil in the badlands of Somalia and fuelled a stock market boom in Mongolia. He sued the world’s smallest republic, far out in the Pacific, for a chunk of what it is worth. Now, he is betting on North Korea. James Passin, a hedge fund manager at Firebird Management, believes the nuclear-armed country sits on as much as 1 billion barrels of crude — enough to make it as big a producer as Oklahoma. If the oil exists, he wants to help unlock it. “You have a country with 25 million people — young, highly disciplined, literate — and a strong military-industrial complex,” he said in an interview. “It’s possible that the early investors will be rewarded with potential for massive appreciation.”
The risks of sinking cash — even just $7 million or so of Firebird’s $700 million in assets — into a neo-Stalinist state with labour camps and virtually no private property are obvious. The geopolitical volatility was on full display last week, as North Korea claimed that it had tested a hydrogen bomb. And Mr. Passin is treading on murky investment territory, given the U.S.’s sanctions against the country.
His investors have experienced the wild rides that come with such frontier markets. Two of his funds are being liquidated after deep losses, including on banking in Iraq, gold in Armenia and oil and gas in Kenya. But Mr. Passin isn’t deterred. “I see opportunities when other people are afraid,” he said.
Mr. Passin, 44, studied philosophy at St. John’s College in Maryland. He was inspired to enter finance, he said, in part by the story of Thales, a philosopher in ancient Greece who got rich by monopolising olive presses before a bumper harvest he had foreseen in the stars. After graduating, Mr. Passin began his career as an editor at Taipan, a financial newsletter in Baltimore, recommending obscure foreign stocks.
Peter Schiff, the chief of Euro Pacific Capital in Connecticut, met Mr. Passin in his newsletter days and later invested, on his advice, in Hurricane Hydrocarbons, an oil company in Kazakhstan, buying shares for as little as 25 cents apiece. Eventually, the company was sold at $55 a share, Mr. Schiff recalled. “I’ve bought some stocks from him that have gone to zero,” Mr. Schiff said. “But this was such a big winner.” Mr. Passin dismisses concerns that any oil exploitation would fortify Kim and others in the country’s ruling elite. He said business with North Korea would both benefit ordinary people and encourage the totalitarian state apparatus to become “more open and less harsh.”