Personal liberty is deteriorating, the economy is on life support and can flat line any day now, governments around the world are getting crushed by debt, and it’s all getting worse at an exponential rate. Out of these circumstances Sovereign Man was born, and since 2009 we’ve scoured the globe for information, solutions and contacts that help individuals and companies rise above the problematic politics of bankrupt nation states and the fraudulent and fragile financial system by diversifying elements of their lives across national borders. The Sovereign Man podcast covers everything from offshore banking and second passports to finance, frontier investing and international living.
I thought in this age of insanity that we are living in, nothing would surprise me anymore. But sure enough, there was a headline in the Financial Times the other day, “Central banks should consider giving people money.”
It seems almost impossible that someone could believe in something so ridiculous. And yet this is the world we are living in. The path to prosperity is now based on unelected central bankers conjuring millions of dollars out of thin air.
Bankrupt governments are issuing bonds with negative yields, meaning they are being paid to go deeper into debt. And there are more than $13 trillion of these negative yielding bonds in the world.
If anything this makes a compelling case for why people should consider owning gold.
It’s a store of value with a 5,000 year track record of withstanding inflation, political crisis, and monetary stupidity.
I’ve been suggesting people consider buying gold for quite some time, especially over the last year. I argue that the supply of gold, is actually declining, yet the demand will increase in large part due to all of this central bank lunacy.
And that has absolutely been happening. The price of gold is up more than 25% over the last year, and just surpassed $1,500 per ounce. But unlike most other assets like real estate, stocks, bonds, etc, gold is still far from it's all time high.
There could still be plenty of gains ahead.
And silver would have to triple before it reaches it’s all time high.
Every summer for the past eight years, I’ve enjoyed a week or two in the italian countryside at a 400 plus year old villa. Here I relax with friends, family, business colleagues, and some of our Total Access members who fly in from around the world, to break bread and enjoy really stimulating and entertaining conversations.
This year Peter Schiff has been one of my guests. He’s an old friend who shares many of the same beliefs. And when our conversation this morning turned to gold, I thought it appropriate to record it, and make a Podcast out of it.
In our conversation we talk about why gold and silver have plenty of room to rise, and a number of different ways to invest.
Each year, I invite an incredible mix of young people from more than a dozen countries to join me in Lithuania for an intense week of business, investing and entrepreneurship classes taught by the smartest people I know (it’s also entirely free for the students who attend. I pay out of my own pocket for everything).
I do it because I feel strongly about self-education. It’s how I got to be where I am today. So I thought it would be an opportune time to give you my latest thoughts on how to get an education that really makes a difference in your life.
Education has no age limit (for example, attendees at our camp range from 17 to 47 years of age). But today, I want to specifically address those young people either starting their university studies, or just about to graduate.
Getting a university degree is one of the most important and impactful decisions you’ll ever make.
And we’re expected to make this decision when we’re still teenagers, too often without afterthought as to what a decision like this really means for our future.
In this podcast, I talk about how to approach the decision, whether or not to go to university, how to pick a major and how to manage debt. I also discuss compelling steps that you can take either instead of a university education, or to complement it.
Listen here to find out how to make the most empowering choices you can about your education.
(And if you’re 57 years old and considering doing something new with your life, this podcast will definitely be worth your time. It’s never too late to change your trajectory and make excellent choices.)
Last week in its annual report, the US government reported that Social Security’s long-term, unfunded liability now exceeds $50 TRILLION.
Moreover, they state that the Social Security and Medicare trust funds will run out of money in 2034.
This is the government’s own calculation.
Bottom line: The younger you are, the less you should count on Social Security in your retirement plans. You must take matters into your own hands and save independently for retirement.
But that’s easier said than done, right? The traditional concept of ‘saving for retirement’ is to set aside some money from your monthly paycheck, and put it in something like an IRA.
That works fine for some people. But what if you simply don’t have any more money from your paycheck to save?
Or what if you’ve already hit the maximum amount you’re allowed to contribute to a conventional IRA?
Fortunately, there are great solutions. We’ve written about SEP IRAs in the past. But there’s another structure I’d like to discuss called a Solo 401(k).
A Solo 401(k) is an incredibly flexible, robust retirement structure that allows you to set aside potentially tens of thousands of dollars of income from a ‘side-business’ each year.
This could be just about anything-- selling products on Amazon, generating advertising revenue from YouTube videos, Airbnb rentals, freelance consulting, anything.
And almost anyone can do this. You could literally be a 15 year old teenager walking dogs on the weekends for extra cash, and stash that money into a Solo 401(k).
If you’re currently an employee at a US-based company, you might already have a regular 401(k); it allows you to make pre-tax contributions to your retirement, and sometimes the employer even matches what you put in.
The plan probably doesn’t offer much leeway in terms of where you can invest that money, though. At best, they probably give you a list of mutual funds from which to choose.
But a Solo 401(k) – a.k.a. an Individual 401(k), Self-Directed 401(k) or Self-Employed 401(k) – lets you control where your funds are invested.
And unlike a conventional IRA – another common retirement structure – it lets you contribute MUCH more money to your retirement before it’s taxed.
It just has to be done with income from self-employment, or from a side job.
With all of the money-making options available today, it’s not difficult to stash a lot more money into a tax-advantaged retirement account.
There are lots of details to consider when opening a Solo(k), but here’s the general idea:
First, since we’re talking about self-employment income, you have to think of yourself as both an employer and an employee.
As an employee of your own business, you can make a total of $19,000 in retirement contributions this year if you have a 401(k), plus another $6,000 on top of that if you’re over the age of 50.
But you can contribute even more than that since you’re also the employer in your business.
For this tax year, the maximum total contribution to a 401(k) between an employer and employee is $56,000 (for those under the age of 50) and $62,000 (for those 50 and over)… so that’s potentially tens of thousands of dollars in extra contributions you can make.
More importantly, these contributions can be deducted from your taxes.
So when the Bolsheviks come to power and ratchet up tax rates to 70%, you’ll be able to take a LOT of money off the table to set aside for your retirement that they can’t touch.
Plus, Solo 401(k)’s are incredibly flexible.
Today’s podcast is with Marin Katusa.
Marin is a world-class resource investor and lead analyst for Katusa Research – his publishing company, where he shares the details of many of the private investments he makes.
Marin’s been investing in resource stocks for twenty years. And he’s gained a reputation as a guy who can get things done (and get the best terms) when raising capital to invest in companies – over the years, he’s put hundreds of millions of dollars to work in the sector.
In our discussion with Marin, he explains his boom/bust/echo theory of investing in natural resource stocks and where we are today in that cycle (it happens to be the part of the cycle where you can find the greatest value).
We asked Marin to walk you through some actual examples of private investments he’s made so you can learn when you should be looking to invest (and also understand the massive, upside potential when buying resource stocks near the bottom of a cycle).
I’d encourage you to listen to the end, when Marin shares the names and tickers of his two favorite gold stocks today (like the rest of the gold sector, they’ve been pretty beaten up).
He also shares a few details of his most recent investment – the largest personal bet he’s ever made.
So if you want to hear about where we are in the gold market, which types of gold companies you should be investing in today and hear Marin’s outlook for the gold sector going forward, you can tune in right here.
Today’s episode of the Sovereign Man Podcast features non other than Sovereign Man’s Chief Investment Strategist, Tim Staermose, talking about not one but two highly successful, targeted investment strategies with proven track records.
If you are a regular SMC or 4th Pillar reader, then you’re familiar with Tim’s wit, his financial probity, and his impressive stock picking skills. Today, he’ll tell you how he goes about looking at the markets at a time when nearly everything is overpriced.
Also, if you’re curious about Tim’s top recommendation today, you can get more details here…
A quick general summary of what’s discussed:
* Intro - A bit about the markets… what Howard Marks and Warren Buffett think…
* 2:30 - A bit about Sovereign Man’s Chief Investment Strategist, Tim Staermose, and his track record
* 3:30 - Why Tim is finding great deals in this “pre-frontier market”
* 6:30 - What investors can do in today’s market, the mistakes most investors make, and the difference between the macro and the micro investor
* 9:30 - Tim’s take on “deep value” investing
* 12:00 - The other strategy Tim has been employing lately
* 13:00 - The analysis Tim does when deciding how to invest in takeover arbitrage
* 14:30 - The advantage of investing in markets based on British Common Law
* 16:00 - Why today is a good time for M&A investing
* 16:30 - Tim’s take on gold acquisitions - the majors…
* 18:30 - … and the juniors
* 19:20 - Where gold prices might go
* 19:45 — Tim talks about one of his most exciting recent picks
We hope you enjoy and learn from today’s podcast.
Today we bring you a fresh episode of the Sovereign Man Podcast, where Simon Black unpacks why the people in charge have no idea what they’re talking about… and how you can protect yourself from their policies.
Freshman politicians want to nationalize entire industries. They want to increase the marginal tax rate to 70% or more. They want to ban corporations from buying back their own stocks unless those companies meet stringent requirements. They want to raise capital gains taxes.
In short, they want your money.
In this episode, Simon gives you a roundup of bad policies, why they don’t/won’t work… and the one big thing you should do if you don’t want the Socialist train to run you over.
A quick general summary of what’s discussed:
Intro - It’s here, and… they have “NO IDEA!!!!” (Jim Cramer was right.)
* 2:00 - Why stock buybacks are stupid… but why the government should drop the idea of regulating them
* 7:20 - What all this is REALLY about
* 9:15 — Equality vs. Freedom and why you can’t have 100% of both
* 16:50 — The rise of Socialism in the US and what’s behind it
* 22:00 — Taxes: Why raising them never solves income inequality (and what does)
* 28:00 — How NOT to become wealthy
* 31:00 — Bernie Sanders and Donald Trump said the same thing
* 32:30 — Solutions for you, including what to focus on now
* 34:00 — Simon’s warning — and his big Obama quote of the day
* 36:45 — One place that is getting it right
* 37:45 — Proof that they don’t REALLY want free education
* 39:00 — The best entitlement ‘demands’ you’ll hear all day
* 44:00 - The ONE thing you need to do if you want to protect your money in an age of Socialism
We hope you enjoy and learn from today’s podcast.
Welcome to another edition of the Sovereign Man podcast.
As we enter 2019, you’ll start to see more podcasts from us. And you also might notice a few changes. We’ve upped the production value of our chats with Simon. And we’ll continue to improve both the production and the content of our podcasts.
And we’d love to hear your feedback on our efforts.
In today’s podcast, Simon gives us an update from on the ground in Puerto Rico… and explains why you should absolutely consider moving to Puerto Rico if you have a business, earn investment income or want to freelance and significantly lower your tax bill.
Plus, Simon shares some specifics on how to get started taking advantage of Puerto Rico’s tax incentives (and who can benefit from Act 20 and Act 22).
It’s an outrageous deal to be able to live in paradise and pay essentially zero tax. So if you have any interest in Puerto Rico… and you could potentially benefit from moving yourself or your business there, please do not miss this discussion.
And make sure to subscribe to our podcast on iTunes or Google Play.
Here’s what you’ll hear about in today’s episode:
Intro - Simon talks about how amazing life is in Puerto Rico, something which surprised him. (He’s not a beach guy.)
About 3:00 in — Why moving to Puerto Rico is like moving to Florida… with major financial benefits
5:45 — What Simon gave up to move to Puerto Rico, and why it reminds him of South Park
8 minutes — Why Simon sees voting with your wallet as much more powerful than voting at the booth
10:00 — The big difference between living in a high-tax state like California and living in PR, and how the tax incentives work
18:15 — details about Act 22, including whether it works for crypto people, investments in US companies, etc.
27:27 — details about Act 20, what constitutes a “qualifying” business
31 — Can an employee on salary do this?
32:54 — Are you still paying self-employment, FICA, etc.? How do the taxes work?
36 — How does the IRS consider you a resident of PR? What do you need to do?
36:30 — Do you create an LLC or a corporation?
38:30 — How is the rise of socialism going to affect programs like these? Will these incentives last?
47:50 — Do you need to be wealthy to reap these advantages? What is the income threshold or net worth threshold to make moving to PR a good idea? (Plus, Simon’s decision not to use “rule of thumb” ever again.)
50 — The power of compound-compound (double compound) interest, and whether Einstein said that thing about it.
54: Why Simon is no longer skeptical about the PR tax incentives
57: Why the requirements for Act 20 are better than they’ve ever been (and why you should lock them in… now)
1:09: How expensive is it to live in PR? Are there “middle class” options? Plus, what life is like there
1:11: Drawbacks to living in PR
1:12 Opportunities in PR
1:20: Summing it all up — and Simon’s advice on first steps
We hope you enjoy today’s podcast and learn a lot about expanding your freedom and opportunities.
And make sure to subscribe to our podcast on iTunes
Between the year 1054 and 1224, there were 83 civil wars in Russia. That’s about one civil war every two years.
Through the middle ages, feudal lords were periodically murdered in peasant revolts. When people sense too much unfairness in the system, the pitchforks come out.
Wealth and inequality have been with us for all of recorded human history, and probably before that.
Things get rocky when that gap grows large enough, or is even just perceived as large.
Invariably, this inequality gets “corrected” either by a government or an armed revolution.
Wealth is either taken by the state and redistributed, or taken by pitchfork, machete, or gun wielding mob.
We’re kind of at the point now where wealth and income inequality has once again gotten pretty pronounced.
Just a small sign of the times we discuss in today’s podcast involves a school in Great Britain that has banned expensive jackets.
The idea is to protect the feelings of kids whose families cannot afford the jackets. So in order to avoid “poverty shaming,” parents won’t be allowed to send their kids back to school after Christmas break with top brands like Canada Goose and Moncler.
So if all the students can’t afford a $900 jacket… then nobody is allowed to wear one.
Invariably, the “solutions” don’t lift the disadvantaged up, but simply drag the privileged down.
And wealth isn’t the only type of inequality. What’s next? Forcing the best athletes to carry weights, or bringing down the smart kids’ test scores?
It’s nothing new. Back in 2008, the Occupy Wall Street movement gave voice to the same feeling. Someone at the top is screwing the little guy.
Inequality is part of human nature. We are not all going to be born with the same skills, intelligence, desires, and preferences.
In today’s podcast, we get into the palpable anger over inequality that is boiling over, and the types of absurd responses we see.
Last week I recorded the most memorable podcast I’ve hosted in some time.
Jim Grant, editor of the famed Grant’s Interest Rate Observer, joined us for a discussion. Grant’s, in my opinion, is one of the finest financial publications out there.
And it’s a treat to have a guy like Jim on the podcast.
He’s written Grant’s for 35 years. And in that time, he’s made some incredible calls (including first writing about the excesses in housing in 2001) and some not so incredible ones… But, most importantly, he’s amassed a cult following of the best and brightest in business and finance.
Central bankers, Wall Street CEOs, hedge fund billionaires… they all read Jim.
In other words, his opinions count. So I hope you’ll tune in to hear what he has to say…
In our discussion, Jim and I talk about the current state of the economy, the latest Fed announcement and some of the insane excesses in the market today.
And Jim sums of the absurdity of today’s market in one, important paradox.
Finally, we share a few ideas on how to protect yourself and maybe even profit from these excesses.
Also, at the end of our discussion, Jim shares a very special offer for Sovereign Man readers.
To learn more about the exclusive deal we’ve arranged, just click here…
And, you can listen to the podcast here.
It’s been a hell of a week here in the Italian countryside. I’ve been treating my team and some friends to a sort of mini-vacation at a 400-year old wine and olive estate that we’ve taken over.
The views, the food, the wine, the company… it’s all incredible. Each night about two dozen of us dine outside under a canopy of grape vines, and the conversations are so stimulating that the dinners often last for 7 or 8 hours.
Being in Italy, though, it’s hard to not notice the obvious deterioration of this beautiful country.
Italy was the world’s superpower TWO times in its history-- first during the time of the ancient Romans, and second during the early Renaissance when city-states like Venice and Florence became the dominant economies of Europe.
Each time they screwed it up.
Too much wasteful spending, too much debt, too many regulations, too many wars, too much debasement of the currency.
It doesn’t matter how strong your country or empire is. If enough time goes by with those destructive forces at play, the country weakens and loses its power. It’s inevitable.
No country in history has ever been able to indefinitely indebt itself, overspend, wage endless wars, etc. without consequence. And it would be foolish to think that this time is any different.
We’re seeing precisely those trends all over the world today, especially in the west.
And to boot, at least here in Europe, nearly the entire continent is suffering from multiple crises at the same time.
Place like Italy, Greece, etc. are dealing with the constant threat of their looming debt crisis.
But they also have failing banking systems with the need for constant bailouts.
They’re dealing with a fertility crisis and shrinking populations. Frequent political crisis (as we saw here in Italy just a few months ago). Pension crisis. Immigration and refugee crisis.
What could possibly go wrong?
There are a few bright spots on the continent. But I think Europe is in pretty bad shape for the long-term.
We cover this in today’s podcast… and speaking of crisis, we manage to work in some discussion about Elon Musk’s latest drama, plus round out the podcast with a quick summary of this year’s amazing entrepreneurship camp that we just finished last week.
You can download the episode here.
In today’s podcast, I share the details of a deal a well-known private bank just offered me (and its roster of other high-net worth clients).
It’s a bad deal in every way… the asset in question is valued insanely high, there’s likely a ton of debt attached to this deal and I doubt anyone who invests will make their money back.
Still, I’m confident this deal will get done. It’s classic top-of-the-cycle economics.
If you look back throughout history, during every boom, there’s one asset that gets insanely bubbly.
In the 90’s, it was tech stocks.
In the 2000’s, it was real estate.
And I tell you what that asset class is today… and why, just like every time in the past, this will end in recession.
I also looked back to see how long it takes for the economy to correct after the Fed starts raising interest rates.
You should listen in for the reveal… But I will tell you, the Fed started raising interest rates in December 2015. And, if history is any indicator, a recession could happen very, very soon.
Luckily, as an individual investor, you don’t have to participate in this madness. You’re allowed to wait it out on the sidelines.
Because better deals will be on the way. And you’ll have the opportunity to buy incredibly high-quality assets for pennies on the dollar.
That’s what I’m doing. And I share a few ideas toward the end of today’s discussion.
You can listen in here…
Last week, Paolo Savona, an Italian man no one outside the country had ever heard of, was denied the position of finance minister.
Italy’s President denied his appointment because Savona is anti-euro. The President believes Italy should remain part of the euro.
I wrote a Notes about the entire situation last week.
But the point I discuss in today’s podcast is that this situation should not have been a major deal… but it wreaked havoc across global markets. Even some of the world’s safest assets sold off.
So if this turmoil in Italy can cause such chaos, what will happen when there’s a MAJOR crisis?
How should you prepare?
The event that will end this 10-year bull market will catch almost everybody by surprise. That’s the nature of the beast.
So you must take time now, while you’re still thinking clearly, to come up with a game plan of how you’ll handle the next downturn. Because when the event comes, and stocks crater, it will already be too late… emotions will take over.
On the podcast, I discuss the types of questions you should be asking yourself and the decisions you should be making today.
I also share some of my experiences from my recent travels to Australia, the Philippines and Bangkok.
You can tune in here.
In today’s podcast, I share more thoughts on Puerto Rico including my experiences opening a business there.
While the island has its problems, I’m still bullish on the long-term future given Puerto Rico’s incredible tax incentives (especially after meeting with their government leader and seeing how open they are to productive people moving in).
I also harp on the latest drama in Argentina…
Less than a year after issuing 100-year bonds, the country (which has a long history of default) is in economic turmoil. And the largest investors who bought these bonds – including JPMorgan and Fidelity – are sitting on huge losses.
These huge investors are so starved for yield, that they willingly lent money to a default-prone government for 100 year. But, as individuals, we have much better options to earn a decent return… with DRASTICALLY less risk.
I share a few of those options near the end of today’s discussion.
You can listen here…
I’m writing from San Juan, Puerto Rico today.
The Sovereign Man team is here to host 150+ Total Access members over the weekend.
And on today’s podcast, we discuss the amazing tax benefits in PR... and why crypto wealth is flocking to the island.
These people think crypto is going to the moon. And by being residents in PR, they’ll pay 0% capital gains tax on any appreciation after they move here.
So I share my thoughts on this, and why they may be in for a tax surprise with their crypto holdings - even with the amazing tax benefits.
Also, following one of the big themes we’ve been covering this year, I discuss fanaticism surrounding crypto (both the bulls and the people calling it a fraud)... and why you should banish fanaticism when making investment decisions.
You can listen in here.
Wells Fargo stole the headlines yet again today for defrauding its clients.
The bank was fined $1 billion today for selling over 500,000 clients auto insurance they didn’t need (which in some cases caused the owners to default on their car loans and get their cars repossessed) and for charging erroneous fees to mortgage borrowers.
If you still bank with Wells Fargo, maybe this will finally serve as a wakeup call to take your money elsewhere.
But this is just the latest in a long string of fraudulent bank behavior…
Wells Fargo also opened millions of fraudulent accounts for their customers without their permission – in some cases moving money from existing accounts (without the customers’ knowledge) to fund the new accounts.
And of course there was the entire mortgage fiasco, where banks would recklessly lend depositor funds to unemployed people to buy homes they couldn’t afford… which ultimately led to the collapse of the financial system (which was then bailed out by taxpayers).
And there’s interest-rate fixing scandals, rogue traders losing billions of dollars, commodity price manipulation, forex fraud… the list goes on and on.
These banks willfully and repeatedly abuse the trust placed with them by the public. Yet people continue to allow this to happen… all while making .05% interest!
In today’s podcast, I explain a few steps you can take to get your money out of the banking system and achieve much higher yields – with less risk than keeping your money with a bank.
Sovereign Man readers know I get fired about with these banking abuses. That’s one of the reasons I started my own bank.
And I’ve got a few choice rants in today’s podcast.
Again, you no longer have to participate in this system. There are plenty of alternatives today.
Tune in to today’s podcast here.
On Monday, I shared a recording from aboard the Investor Summit at Sea, hosted by my friends, the Real Estate Guys.
This is one of the only conferences I attend each year as a speaker. And that’s because I get so much value from the other speakers and attendees – guys like Chris Martenson, Adam Taggart, Robert Kiyosaki, Peter Schiff and G. Edward Griffin.
Yesterday, I was on a panel with Peter Schiff, Chris Martenson and Adam Taggart. And I recorded the discussion for Sovereign Man readers who couldn’t be there in person.
This panel largely centered around agriculture.
As you probably know, I’ve got some experience in the industry… I took thousands of acres of bare, central Chilean land and transformed it into farmland that will soon yield one of the world’s largest blueberry and walnut crops.
But, our discussion didn’t center on my personal experiences with agriculture.
Instead, we dug into agriculture’s global supply and demand fundamentals.
200,000 people a day are coming into the world each day. And they all require food. Also, the number of calories being consumed per capita worldwide is increasing.
On top of that, as developing countries like China and India get richer, the quality of the calories they consume changes – from beans, rice and veggies to more meat (which requires far more resources to produce).
And while demand for food is soaring, arable farmland is on the decline.
This is one of the most important problems of our day. And it’s not an easily solvable one.
We also touch on geopolitical risks like water rights and the economics – and risks – of farmland investments in developing countries (another topic I know well).
A lot of folks say we won’t have a global food shortage because we can just start farming in Africa. But I’m sorry to say that’s not the solution.
It takes a tremendous amount of logistics to produce and transport food. And Africa just doesn’t have it.
In today’s difficult financial and economic climate, there’s a lot to focus on… and to be wary of.
Agriculture’s growing global supply and demand imbalance is one of the trends that certainly has my attention. But even with favorable fundamentals, just like with other asset classes, you can make some major mistakes when investing in this space.
I also closed out the panel by asking everyone what they’re doing with their own money. You’ll want to hear what these smart guys have to say.
Tune in right here…
I’m writing you today from a cruise ship, on my way to Puerto Rico.
Every year, I get together with some of the smartest guys in finance and investing for my friends, the Real Estate Guys, Investor Summit at Sea.
I almost never speak at conferences outside of Sovereign Man events. But I always make an exception for this one.
It’s rare that you get to spend a week chatting with and learning from guys like Robert Kiyosaki, Peter Schiff, G. Edward Griffin, Chris Martenson and Adam Taggart.
And it’s great to spend quality time with the many Sovereign Man readers that attend each year.
But for those of you that can’t attend, just before we got on the boat I recorded a fantastic conversation I had with Chris Martenson and Adam Taggart from Peak Prosperity.
I spent some time with Chris and Adam last year and they’re really great and smart guys. We’re very aligned philosophically, so I was curious to hear their thoughts on the economy today… and where they see some opportunities.
I enjoyed this conversation more than any other podcast in recent memory.
In our wide-ranging discussion, we covered everything from where we see energy prices going to the geopolitical risks we see today (including the recent tragedy in Syria) to the insane, cash-burning business models of today’s tech darlings.
We all agree the stock market today is “priced to fantasy” and toward the end of our discussion, we shared some specific things you can do, right now, to protect your capital and still prosper while waiting for the inevitable correction.
We talk about gold, raising cash, investing in cash alternatives (including assets that are actually safer and higher-yielding than cash in the bank) and what we’re all personally doing with our own money today.
I hope to sit down with these guys again for another talk because there’s still a lot to cover. And I look forward to sharing more insights with you from my time at the Summit.
In the meantime, I’d strongly encourage you to take some time and listen to this excellent discussion. The perspectives Chris, Adam and I share will help you navigate this difficult time of volatility, rising interest rates and historically high prices.
You can listen right here…
I was in the gym earlier today trying to ward off the effects of trans-Pacific travel and 12 hours of time zone changes when the news flashed across the TV that the US government was issuing another round of tariffs against China.
This may be the dumbest move they could possibly make.
It’s so stupid, in fact, that I couldn’t contain myself in print. For this, I had to go to audio… and record a pretty epic rant on the absurdity of tariffs.
In short, if China is crazy enough to produce and sell steel to the United States at prices that guarantee they’ll LOSE MONEY, the US government shouldn’t impose tariffs. They should send the Chinese a fruit basket.
China is basically giving the US free money. Don’t be ridiculous. Take the money.
The US is NOT the loser in this situation. America is the winner. The Chinese are willing to sell steel at below their cost of production. Duh.
But the US government insists that they need to protect the American steel industry because it’s vital to national security.
Seriously? The largest, most advanced economy in the world thinks that the production of a basic commodity is vital to national security?
If that’s the case, then what else is vital to national security-- the lumber industry? Hip Hop? Twitter?
Steel is a tiny industry in the US that employs around 90,000 people. Starting a trade war over this (which is historically BAD for everyone’ prosperity) is just plain silly.
This is my favorite podcast I've done in at least a year. You can tune in here…
On the morning of May 18, 1927 in Bath Township, Michigan, a 55-year old municipal worker named Andrew Kehoe used a timed detonator to set off a bomb he had planted at the local school.
Kehoe was Treasurer of the School Board, so he had unfettered access to the school.
According to friends and neighbors, he was having personal issues with his wife (who he had murdered days prior) and extreme financial difficulties. He was also severely disgruntled about having lost a local election the previous autumn.
Whatever his reasons, Kehoe took out his rage on the 38 schoolchildren he killed that day.
It remains the deadliest attack on a school in US history.
Sadly, it wasn’t the first-- there were numerous reports of school shootings throughout the 1800s and before.
And as we all know too well, it wouldn’t be the last.
Last week’s shooting in Florida is another tragic stain in the pages of US history. And it’s completely understandable that emotions are running high now.
People are demanding action. They want their government to “do something.”
The problem, of course, is what we’ve been talking about so far this year in our daily conversations: emotional decisions tend to be bad decisions-- and that includes public policy.
We keep hearing the phrase “Common Sense Gun Laws,” for example.
And that certainly sounds reasonable. Who could possibly be against common sense?
[As an aside, I do wonder why “common sense” is only reserved for the gun control debate. Why doesn’t anyone demand common sense airport security? Or a common sense federal budget?]
But it’s never quite so simple.
Many of these “common sense” solutions are emotional reactions.
As an example, the Florida shooter in last week’s tragedy is only 19 years old. So now one of the proposals being tossed around is to have a minimum age limit to be able to purchase a firearm.
I suppose if the shooter happened to have been 70 years old, people would be talking about having a maximum age limit instead.
Yet neither of these “common sense solutions” really solves the problem.
A big part of this is because no one really knows what’s causing the problem to begin with.
We know that there are far too many people committing acts of violence in schools and other public places.
And, sure, a lot of the time they use firearms. But we’re also seeing murderous rampages with cement trucks, U-Hauls, and everyday appliances like pressure cookers.
Any of these can be turned into a weapon of mass destruction.
But the debate only focuses on firearms.
One side presupposes that more regulations and fewer guns will make everyone safer.
The other side of the debate, of course, argues that more guns and fewer regulations will make everyone safer.
The reality is that there’s no clear evidence that either side is correct.
Australia is often held up as an example of a nation that passed strict gun laws (including confiscation) in 1996 following several mass shootings.
And yes, gun violence dropped precipitously. Australia now has one of the lowest murder rates in the world.
But contrast that with Serbia, for example, which is the #2 country in the world in terms of guns per capita (the US is #1).
Serbia has a strong gun culture and fairly liberal laws. Yet its gun violence rate is incredibly low, on par with Australia’s.
There are plenty of examples in the world of places that passed strict gun laws, and violence decreased (Colombia).
Others where violence INCREASED after passing strict gun laws (Venezuela, Chicago).
As I write this, bitcoin is trading at $8,600.
That's down more than 50% from the December highs of $20,000.
But is this selloff a natural correction, or something to be worried about?
That's one of the questions I ask my guest Tama Churchouse in today's podcast.
Tama was an investment banker for a decade, most recently with JPMorgan. Then he went on to manage a family office. And in 2013, he started buying and learning about bitcoin.
He started writing a small note to friends and family about the crypto market and it caught on. He decided to make it a full-time job.
And that's led Tama to become one of the most connected writers/investors in the crypto space.
He actually just returned from one of the most exclusive crypto gatherings in the world… It's called the Satoshi Roundtable. It's invitation only and about 100 people make the cut.
The attendees are CEOs of major crypto firms and some of the core developers for major cryptos - it's the who's who of the industry.
Tama was invited because he serves on the board of one of the top blockchain firms in the world.
And during our discussion, he shares a few insights from what he heard in these closed-door meetings (and how these leaders in the field, many of whom are billionaires, feel about the crypto selloff).
Tama also explains why he thinks bitcoin is here to stay, but why 95% of all cryptos will ultimately be worth zero.
As you know, I've been writing a lot this year about avoiding big mistakes.
We discuss this in regard to crypto and Tama shares what he thinks is the easiest way to avoid making big mistakes in the sector.
And, of course, Tama and I share what we think 2018 holds for the crypto market (his view on this is great - it's something I hadn't heard before).
This is one of the best podcasts I've recorded in awhile. And I'd encourage you all to check it out.
I always tell people to learn as much as possible about crypto before buying even one cent of bitcoin. And I guarantee you'll leave this podcast better-educated and more informed on the crypto space.
You can tune in here.
In today’s podcast, I talk with our Chief Investment Strategist, Tim Staermose, about the global economy.
We’re in the midst of one of the longest economic expansions in history. Most assets are trading at all-time highs. Meanwhile, debt is also at all-time highs.
But we don’t have a crystal ball… this boom could easily continue for longer than anyone expects.
However, Tim notes the US economy largely runs on cheap money and cheap oil. And right now, both interest rates and oil prices are on the rise.
Most people aren’t talking about it, but oil prices have jumped 50% in the past seven months.
And that means, sooner or later, people will be spending more money at the pump and more money on debt payments – which leaves less money for everything else.
But if you look hard enough, you can still find value in today’s market.
In this podcast, Tim shares the one sector where he’s personally investing.
You can tune in here.
In today’s podcast, we discuss the recent crypto meltdown (led by Ripple) and how it plays into our recent theme of avoiding huge mistakes.
Here’s the thing about big mistakes… they’re usually obvious and avoidable.
Like when the Social Security Board of Trustees told the world in its 2017 report that the “Trust Fund reserves will be depleted by 2035”… and that an “immediate and permanent reduction” in benefits to all current and future Social Security recipients is a reality.
The government is telling you Social Security is running out of money. What are you doing about it?
Likewise this morning, when Bloomberg reported China (the world’s largest foreign holder of US Treasurys) is considering slowing or halting purchases of US government debt.
This would have potentially catastrophic financial implications… and it’s been a worry for a long time.
But most people simply ignore the possibility.
You can tune in here to learn about some of the big problems that are coming down the pipe and some simple steps you can take to prepare for them.
My colleague, Sean Goldsmith, just returned from a tour of the Caribbean.
He met with several local governments about their ‘citizenship by investment’ programs – a way to receive a passport by donating money or investing in local businesses or real estate.
If you have the means, this is probably the quickest and easiest way to obtain a second citizenship.
We’re exploring ways for Sovereign Man readers to get a special deal on these citizenships… and hope to make a major announcement on that front early next year.
In today’s podcast, Sean updates us on his travels and discussions with the government. And we discuss why everyone should want a second passport… especially today.
In today’s podcast, I chatted with Silver Bullion’s founder Gregor Gregersen.
Silver Bullion is a precious metals storage company based in Singapore.
While here in Singapore, Gregor and I discussed why the gold versus Bitcoin debate is misguided. It’s not an either-or proposition.
Instead, with systemic risks in the financial system, the case for holding both precious metals and cryptocurrency makes sense.
And Silver Bullion offers solutions for both asset classes.
[Full disclosure: I’m a director of Silver Bullion.]
Gregor’s a software engineer with experience in finance. He recently published a 35-page white paper on an exciting way to hold encrypted, secure Bitcoin in cold storage for decades. And with software Gregor developed himself, you can now store gold at their facility, borrow money with your gold as collateral and buy Bitcoin.
You also don’t want to miss Gregor’s opinion on why cryptocurrency and gold will survive the next financial crisis.
In today’s podcast, I tackle the subject of Initial Coin Offerings (ICOs).
Regular readers know I’m skeptical of cryptocurrencies. And I think many ICOs are outright frauds.
We’ve seen celebrities like Paris Hilton, Jamie Fox and Floyd Mayweather all endorse ICOs. A friend of mine who’s raising money in an ICO even told me these things are a bubble.
Still, we see more and more companies raising capital from a rabid public.
But regulators are already sniffing around. And there are two things that could cause this bubble to crash… quickly.
You can listen here.
In today’s podcast, I discuss the recent Paradise Papers fiasco – the massive leak of sensitive, offshore financial information held by the Bermudan law firm Appleby.
This thing has been a complete witch hunt in the media…
The whiny journalists paint the wealthy and famous who parked money offshore as criminals… Though they begrudgingly admit their actions are completely legal.
We explain why the wealthy, gasp, actually do some good for society and why we’d much rather the wealthy are able to keep more of their wealth than hand it over to the government to squander.
But the Paradise Papers issue is more than just a media circus – it’s class warfare.
You won’t want to miss my theory of why people are so angry today and why it’s only going to get worse.
You can listen here.
Bitcoin hit another all-time high today on the back of two, major announcements.
Dedicated Sovereign Man readers know I don’t pay much attention to Bitcoin’s price. Instead, I focus on the market cap and demand fundamentals.
In today’s Podcast, I explain my thoughts on the future demand of Bitcoin and other cryptocurrencies and what these two announcements mean for the sector.
And I share the role of investor psychology in cryptocurrency speculation… And why most people buying crypto today will get crushed – even if Bitcoin hits $1 million a coin.
In today’s podcast, Sovereign Man’s Chief Investment Strategist Tim Staermose joins me to talk about the risks in today’s market…
We cover the rise of passive investing, and why we think it could cause chaos when the market turns – with some of the biggest and most popular stocks (like Apple and Amazon) falling 10% or 20% in a day.
We also discuss the massive amount of debt in the system today and how capitalism has turned upside down.
Tim also explains his value-investing strategy that has led to a 97% success rate in his advisory service, The 4th Pillar… And he shares a couple of his favorite opportunities today.
You can listen to the full discussion here.
Today’s Notes is a bit different…
I recorded a conversation I had with my colleague Sean Goldsmith about my recent travels to Venezuela. I explain how I exchanged my US dollars on the black market for Bolivar (with a taxi driver I’d never met before)… and how the situation in Venezuela will get worse before it gets better. Plus, I share observations and stories of things I saw on the ground in one of the world’s poorest and most dangerous countries.
Then we discuss the tragedy in Puerto Rico… and why I think Puerto Rico is still one of the greatest opportunities in the world today. They’ve run the numbers, and their tax incentives like Act 20 and Act 22 are helping the island. I expect the amazing incentives will stay in place. And, although the hurricane was devastating, the financial aid that comes along with the storm is a catalyst to get Puerto Rico back on its feet.
You can listen to our conversation below.
First it was Pets.com, and all the unbelievably stupid Internet businesses in the 1990s.
Investors were so eager to buy dot-com stocks, all you had to do was put an “e” in front of your business or product and you’d immediately be worth millions.
It didn’t matter that most of these companies didn’t make any money. Investors kept buying.
Later on after the dot-com bubble burst, another big craze developed in junior mining stocks-- shares of small exploration companies looking for big mineral deposits.
The epicenter of the junior mining industry is in Vancouver, Canada, and the stock exchange there (TSX-V) throttled to record highs.
Shares of companies with literally no profits, no revenue, and no assets were worth tens of millions of dollars.
Then that bubble burst.
A few years later, a new hot craze developed-- in cannabis companies.
The market has been flooded with companies (many of them curiously based in Canada’s poor climate and high cost structure) with plans to grow medicinal marijuana.
Their stock prices have soared, with valuations in some cases exceeding $1 billion.
Every time the bubble bursts with these big trends, most of the companies get wiped out.
Only a handful survive-- primarily the ones who focused on building long-term, sustainable businesses instead of chasing a quick buck.
From the ashes of the dot-com bubble, companies like Amazon, Godaddy, eBay, etc. emerged in-tact and are still successful today.
Similarly, while many junior mining companies went completely bust, a handful are still operating and quite profitable.
And there will be a few extremely successful cannabis companies over the next several years who step over the remains of their innumerable, defunct competitors.
Clearly today’s big craze is crypto and blockchain.
Like the dot-com bubble in the 90s, you could add the concept of blockchain to just about anything and have a ‘business’ worth millions, no matter how idiotic the original idea.
(Someone will soon pitch me an idea for an app to publish grocery lists into the blockchain. It’s absurd.)
And like all the other big investment fads in the past, most of the companies in this space won’t exist a few years from now.
There are lot of reasons for that, starting with the fact that building a business is hard.
I’ve done it successfully a few times. And unsuccessfully more times that I care to remember: it’s incredibly difficult, so the odds are against most of these companies anyhow.
But more importantly, these big investment fads always attract people looking to make a quick buck. And that doesn’t work in the long-run.
Case in point: earlier this week a company called HIVE Blockchain Technologies went public.
It’s stock price is already up over 3x… since MONDAY, from an opening of 62 cents to $1.89.
Just prior to that, the company closed a private placement at 30 cents… and a few months ago the company was selling shares between 1 and 3 cents.
In other words, a handful of speculators made more than 600x their money in just a few months with a company that has ZERO revenue, simply because ‘Blockchain’ is so popular right now.
This has become the norm in the world of crypto and blockchain.
ICOs, another hot crypto fad, have been racking up huge returns of their own.
‘Tokens’ issued by crypto startups that have no profit or revenue are seeing similar gains of 2x to 10x or more in a very short period of time.
In the case of HIVE, the company is in the business of mining cryptocurrency.
And based on its current stock price,
Yesterday I recorded a new podcast with my US-based tax attorney to talk about the Trump administration’s new tax plan... or as I like to call it, the plan to have a plan.
Clearly they’re trying to do something positive and significant.
But to say that their strategy is light on details at just a single page would be a massive understatement.
Rather than rehash and recap what has already been covered in the media, my attorney and I dove into some of the more important issues: what’s NOT in the plan, what are the major details to sort out, and what’s SAFE?
Personally, I’m extremely skeptical of major tax reform… though I’d be happy to be proven wrong.
As I’ve written a number of times, the last time the tax code was updated was 1986.
Tech-savvy consumers were still using 5 ¼ inch floppy disks. Many of our readers hadn’t even been born yet.
The 1986 tax code was perfectly reasonable for an industrialized economy dominated by large companies like General Motors.
Today, technology makes it possible for companies to generate income across the world through products and services that are entirely digital.
Yet today’s companies are still forced to use the same hopelessly outdated tax code.
It’s such an embarrassing anachronism, it would be like the US government using those 1980s era 5 ¼ inch floppy disks to run its nuclear program.
The reason I’m skeptical, though, is that each and every line item in the tax code has a certain group of beneficiaries that’s willing to fight tooth and nail to keep it.
There are people who benefit from all the deductions that the administration wants to eliminate. There are even people who will fight to keep the widely-hated Alternative Minimum Tax and Estate Tax.
And the larger problem, of course, is that millions of taxpayers and businesses have made plans and structured their affairs in a way to conform to the current tax code.
Pulling the tablecloth out from underneath them and suddenly changing the rules could end up causing some serious blowback.
So it’s enormously difficult to please a firm majority. And even if they manage to pull this off, they’ll still be accused of not being ‘revenue neutral.’
This is the part I find to be completely absurd.
The tax code is going to affect hundreds of millions of people and businesses in the largest, most complex economy in the world.
Economist cannot possibly predict with any accuracy how a radical overhaul of the tax code is going to impact the US government’s tax revenue ten years from now.
Nevertheless, this is going to be one of the primary arguments against the plan.
One of the points my attorney and I discussed is what will remain safe, i.e. what they’re NOT going to touch.
Retirement accounts are CLEARLY in that category.
If you have an IRA or 401(k), that’s not going to be touched. It would be politically disastrous for everyone.
This means that establishing a robust retirement structure like a self-directed SEP IRA, or a solo(k), is still a fantastic option, regardless of what they do with the rest of the code.
With a self-directed SEP IRA, for example, you create a new retirement plan with a contribution limit that increases from $5,500 to as much as $54,000 per year.
That’s almost 10-fold. Plus the contributions are tax-deductible, meaning you can aggressively (and LEGALLY) reduce the amount of income tax that you owe.
Meanwhile, the idea of a self-directed IRA structure is that your...
Yesterday I told you that the US government had recently released its annual financial report to the public.
And the numbers are pretty gruesome.
For example, the government’s “net loss” in fiscal year 2016 more than doubled, from MINUS $467 billion to MINUS $1 trillion.
It’s astonishing that anyone could manage to lose so much money, let alone in a year where devoid of major wars, recessions, financial crises, or infrastructure projects.
But what else can we expect from an institution that spent billions of dollars to build a website?
Today I wanted to highlight a few other items from the government’s report that are worth repeating:
1) The federal government failed its own audit. Again. (page 37)
Auditors have a bad reputation. People typically conflate ‘auditor’ with the guys at the IRS who harass taxpayers.
This isn’t the case.
Auditors actually work for you.
Their job is to be an independent, objective set of eyes. They go into a company on your behalf and review all the records to make sure that there’s no fraud or deceit.
Every year, big companies submit their financial statements to auditors for inspection, and auditors spend weeks doing their own studies to determine if those statements accurately reflect the company’s true condition.
In fact, our agriculture company is undergoing an audit right now by a large, international accounting firm.
It’s important: audits provide an independent assessment to the shareholders indicating that everything we’ve said about the company is true.
Needless to say, when a company fails its audit report, it’s a BIG deal.
That’s what happened to the US government.
The government submits its own financial statements each year to the Government Accountability Office (GAO), its in-house auditor.
But the GAO gave the federal government a failing grade, yet again, and specifically singled out the Defense Department for “serious financial management problems.”
If this were a private company, the senior executives would be out on the street and probably facing criminal charges.
2) The government’s single biggest asset is $1 trillion in student debt (p.81)
This is pretty sad.
Like any large business or bank, the US federal government holds a number of financial investments.
Big banks, for example, have bonds, loans, and mortgages on their balance sheet.
For borrowers and homeowners, a mortgage is a liability. We owe the bank money.
But to a bank, a loan is an asset; they’ve loaned the money, and they’re the ones receiving interest payments each month from us.
The government also holds loans as financial assets-- specifically student loans.
As of September 30, 2016, America’s youth owed the federal government $953.6 billion from student loans.
By the end of December, that number increased another $100 billion to $1.05 trillion.
This constitutes the US government’s single biggest asset, even more than the aggregate value of their aircraft carriers or national parks.
In other words, the government’s most lucrative asset is the continued indentured servitude of young people in the Land of the Free.
3) This is just the tip of the iceberg… there’s so much more to tell you.
Click here to listen in on today’s podcast-- I’ll explain how, based on the government’s own numbers, their actual “net worth” is nearly MINUS $100 TRILLION.
We’ll debunk so many myths from the debt sheep who think it doesn’t matter.
[Editor’s note: We have made this content available as an audio and video podcast, but I encourage you to watch the video with the slides.]
In the video I mention a preview issue of our 4th Pillar Investment Service.
Click here to download it.
For most of the past week, we’ve been spending a lot of time talking about trading overvalued paper currency for high quality, undervalued businesses.
Right now, this is an absolute no-brainer to consider.
If you’re holding US dollars, it’s critical to understand that the President of the United States, as well as key members of the Federal Reserve, ALL want the US dollar to get weaker.
This means you have an opportunity right now to trade overvalued US dollars, which will likely get weaker, for high quality, undervalued businesses, which will likely get stronger.
This is easier said than done, of course.
Problem #1 is finding a great business.
Problem #2 is making sure that you don’t pay out the nose for it.
Netflix, for example, may be a very nice business with a lot of growth potential… and even more investor hype.
But if you’re going to buy shares, be prepared to pay dearly for them.
It will take several decades for Netflix to generate enough cashflow to recoup your investment.
Successful investors never overpay.
Instead, they patiently seek out great businesses whose shares they can acquire for bargain, discount prices.
This is not rocket science. Successful, rational investing is a skill, and one that can be learned.
Last week I promised to explain how my team finds and analyzes these types of deals to ensure that we can generate strong returns while taking minimal risk.
I ended up recording a full presentation about it.
Even if you’re already an experienced investor, I’d encourage you to watch this presentation, or listen to the accompanying audio.
The presentation explains, for example, why conventional valuation metrics are deeply flawed.
Most people are probably familiar with the famous “P/E” ratio.
I’ll show you why P/E ratios are worthless… and teach you about a FAR better metric to look at… one that few people have ever heard about.
Once you understand it, you’ll never look at investments the same way ever again.
In the video I mention a preview issue of our 4th Pillar Investment Service.
Click here to download it.
One of my interesting friends is in town visiting Chile for a few days.
His name is Gianni-- he's originally from Croatia but lives in Vancouver, and has spent most of his career in the mining business.
Gianni is especially bullish on copper… primarily because he thinks the Age of Big Oil is coming to a rapid close.
He believes that conventional gasoline vehicles will be increasingly replaced with electric cars, which simultaneously reduces demand for oil AND increases demand for copper.
For investors, this presents an interesting opportunity.
Oil and copper prices have been strongly correlated for decades; in other words, as oil prices went up, copper prices went up.
This made sense in the past since both commodities were affected by the same macroeconomic forces.
Fast growing economies tend to consume a lot of copper and oil, pushing up prices.
But now Gianni thinks it’s time for those prices to de-couple.
You may recall that German carmaker Volkswagen is in hot water after being caught falsifying its emissions data. The press is calling it “dieselgate.”
Volkswagen has already been fined $15 billion by the US Justice Department, and roughly $2 billion of that is supposed to be earmarked to build electric vehicle charging stations across America.
This increase in EV charging infrastructure may very well create additional demand for electric vehicles… meaning that oil is going to start losing a LOT of customers, while electricity is going to gain.
Copper remains one of the most important commodities in electrical infrastructure, so prices may very well rise much higher in the future as a result of what’s starting to happen now.
Take a listen to today’s podcast, in which Gianni and I discuss the future of energy, as well as ways to profit from this long-term global trend.
What I’m about to tell you is a true story.
And by the end of it, I hope it will be pretty clear that we’ve been programmed to put far, far too much trust in the banking system.
We’re told that banks are supposedly “risk free”.
And yet every scrap of publicly available evidence shows that banks take every opportunity to prove that they cannot be trusted with other people’s money.
They have been caught colluding to fix interest rates, exchange rates, and commodities prices to the detriment of their own customers.
They make insanely stupid bets with their depositors’ savings… and then when the bets go wrong, they go to the taxpayer with hat in hand claiming that they’re too important to go bust.
But most importantly, as my story will show you, they act with a sanctimonious sense of self-entitlement… that it’s no longer YOUR money in the bank. It’s their money.
And they’re going to do whatever they damn well please with it.
Take a listen in today’s podcast… the first I’ve put out in a very long five months.
One of the most profound moments of my entire adult life came to me when I was learning about my family history, which I’ve managed to trace back over eight centuries.
I discovered so many incredible stories from the past, and the indelible conclusion that I’ve reached is that it’s an absolute miracle that any one of us exists.
The last few millennia have seen war, plague, and some of the worst conditions this species have ever experienced.
Looking back at my own ancestors’ lives I’m astonished at how many close calls I’ve had to never being born. I’ve calculated the odds, I had a 99.99999% chance of never existing.
But despite the odds, my ancestors survived. All of our ancestors survived.
And because of that string of luck, I’m here today. And so are you.
These days, we have it easy by comparison.
Most of us don’t have to deal with genocide, pandemic killer diseases, and civil war… yet we still have our own threats to face.
Governments across the West have amassed unprecedented amounts of debt, and are adding even more with each passing day.
Banks and whole financial systems are highly illiquid and in many cases even insolvent.
Our threats are financial. They are political. They are existential. And they are just as dangerous.
History is generous with examples of how governments, pressed by bankruptcy, have almost invariably turned to plunder the wealth of their citizens.
As well as how insolvent financial systems have culminated in extraordinary crises that have fundamentally changed the face of society.
It’s difficult to ignore these lessons today, especially when we can see things moving in the same direction.
It’s no secret that the US government is bankrupt. They tell you themselves each day as they publish how much debt they owe, to the penny, for the world to see.
It’s no secret either that the Federal Reserve is out of capital on a mark-to-market basis, which you can find stated very clearly in the reports they publish every Thursday.
The information is all right there for anyone who cares to look.
People who ignore these obvious realities do so at their own peril.
In many respects the purpose of our lives is to survive and pass wealth on to the next generation.
And that’s only possible if we can recognize the obvious trends and take action to prepare ourselves for what’s to come.
Luckily, given the modern technology available now in 2016, mitigating these risks is something that anyone can do.
And by taking the right steps it is more than possible to turn this period of chaos into one of opportunity.
Listen in to today’s podcast as I share some deep family history and the steps you can take to ensure that no matter what happens next you are in a position to not only survive, but thrive.
I’ve never been so happy to be so wrong.
Britain’s referendum on whether or not to stay part of the European Union was marred by some of the most blatant propaganda we’ve seen in the West in a very, very long time.
But… at the end of the day, the British government at least accurately counted the votes. No shenanigans.
“Leave” prevailed. So the UK will officially be leaving the European Union.
This has led to some unprecedented moves in the financial markets.
The pound is at its cheapest level in decades. High quality British companies are now trading for extraordinary discounts.
Investors are panic-selling because they don’t know what’s going to happen next.
Britain has been part of the EU for four decades, and now that’s coming to an end.
Nothing scares people more than their fear of the unknown.
In fact, for decades, the political, media, and financial establishments have been pushing people along a very clear path that they wanted us to follow.
Elections always represented the illusion of choice between establishment candidates and their establishment policies.
This referendum, just like the surge of candidates like Bernie Sanders and Donald Trump, constitute a major revolt.
Simply put, this wasn’t part of the plan. So the system is in complete panic.
This is a huge opportunity, especially for foreign investors who have an unprecedented chance to pick up high quality British assets on the cheap.
I wanted to dive into this, so I rang up my colleague Tim Price, London-based wealth manager and one of the sharpest investors I know.
Tim and I discuss several options in both stock and the currency markets, and he even highlights what investments to avoid.
You can listen in to our call here.
Note: Tim and I cover the following… and MUCH more:
* Will the UK experience a major financial recession?
* The pound has cratered. Is it a buy?
* Sell this currency instead.
* Why the polls are always wrong.
* Will the US dollar remain strong?
* Avoid this entire industry if you’re buying stocks.
* What you want to think about buying… and when.
In our daily conversations, we regularly discuss how important it is to own real assets-- especially precious metals.
There’s so much risk in the financial system right now. Just consider your own bank account, for example.
If you’re in the West, more than likely your bank is -extremely- illiquid, meaning that they only keep a small portion of your funds in reserve.
The rest of your money is gambled away in the latest investment fad; and as we’ve reported recently, banks are once again making low-money down home loans to subprime borrowers with YOUR money.
This is the same playbook that nearly causes the entire financial system to collapse back in 2008.
Now, here’s the thing—and a lot of people don’t realize this: the money in your bank account isn’t really YOURS.
Sure, your name is on the bank account. But as soon as you make a deposit, that money belongs to the bank. And you become one of their many, many unsecured creditors.
It hardly seems worth the risk, especially given the paltry 0.1% interest they’re paying you.
We’ve talked a lot about different solutions, like holding physical cash, as well as precious metals.
But when we use the term ‘precious metals,’ most people immediately think of gold.
That makes sense, of course. Gold is the most famous and most widely held precious metal.
But there are three others, namely palladium, platinum, and silver.
Silver in particular may be worth a closer look; we wrote to you several months ago that silver was very cheap on a relative basis, especially compared to gold.
And so far this year silver has been a top-performing commodity.
So today I thought it appropriate to take some time and specifically explore silver.
I sat down this afternoon with the founder and CEO of one of the fastest growing storage and precious metals trading firms in the world, based here in Singapore, and I think you’ll learn a lot from his insights into what he considers the ‘forgotten’ precious metal.
You can listen in below.
No one likes to pay for insurance.
If you don’t smoke, if you go to the gym regularly, and if you generally eat well, it just might not seem worth it.
Especially when the average cost of insuring against just catastrophic health incidents can take up about 4% of your income.
But most of us do it anyway.
After all, paying small amounts over time feels a lot better than having to write a huge check when you’re at your worst.
It’s become the norm to take out insurance against just about every possibility—
We buy car insurance in case we get into a car wreck.
We buy house insurance in case our house catches on fire.
We buy life insurance in case we die sooner than expected.
However, there’s one huge threat to our livelihoods that very few insure themselves against: financial disaster.
In comparison to your house suddenly bursting into flames, financial panic is far more predictable and frequent.
Given that the average business cycle lasts about 6 years, the average person will see at least 10 recessions in their lifetime.
So while we may not know exactly the day or month that it will hit, we know it’s coming.
And unlike a heart attack, financial crises don’t come out of nowhere. They can be diagnosed ahead of time.
In today’s podcast as I do a physical on the United States’ economy, in which the vitals are showing serious signs of strain and weakness:
* Incomes have stagnated across the country, accompanied by a major decline in living standards
* The federal government’s cash balances are so low, that on some days it has less than some private companies
* Banks have made it a habit of holding very little cash reserves, leaving them vulnerable to any shocks to the system
* The Treasury has begun blatantly siphoning off funds from the Fed
* Hundreds of pages of regulations are being passed each day to make you less free
* The government and central bank are already stealing from you
Join me as I show how the decline in freedom, government bankruptcy, and an insolvent financial system are all related. I also cover several ways that you can insure yourself quickly and easily against all of this.
Listen in here.
I come to New York City every year because it’s where the annual meeting of the Atlas 400 group is held.
If you’ve not heard of Atlas, it’s a social club… primarily for like-minded, high achieving, self-made individuals.
I always go out of my way to attend the annual meeting because the other members are some of the most interesting people I know.
The late Jim Rohn used to say that you are the product of the five people you spend the most time with.
And while I’m not certain this is entirely true, I do think it makes sense to surround yourself with high quality individuals that you can learn from.
That’s why I come here each year. And I learned so much this weekend from the high caliber of people in attendance.
I learned from one of the world’s foremost collectibles experts, for example, what are the ‘no brainer’ collectibles investments right now that are likely to go up dramatically in value over the next few years.
One of the most astute financial minds I know walked us through a detailed scenario outlining how the financial system can (and likely will) rapidly unwind.
These weren’t even his own conclusions; the people in the group are incredibly well-networked, and this particular gentleman has been advised by senior members of the financial establishment.
We had an incredibly inspiring presentation by a cutting-edge genomics firm, co-founded by the doctor who first decoded the human genome; they’re very close to revolutionizing medicine and making it possible for all of us to live longer, higher quality lives.
And there was another presentation about effective philanthropy and some of the best ways to give back.
I also made a brief presentation to the group about ongoing discussions I’ve been having with senior government ministers about a unique second passport program.
Bottom line, there’s a little bit of everything at these events.
I wanted to pass this information on to you, so this morning I sat down and recorded what I learned this weekend in today’s podcast.
But in addition to those lessons, I also articulate my thoughts about what’s happening in this country.
Hundreds of years ago, America used to be the Land of Opportunity where people who worked hard and took risks could be richly rewarded for their efforts.
This idea attracted some of the most productively-minded people in the world, and vast fortunes were made as a result.
Even in government, politicians made astute decisions that enhanced the national prosperity.
In the early 1800s, for example, when the US was still in its infancy, the government purchased 827,000+ square miles of land from France for less than $15 million.
It became known as the Louisiana Purchase, and today that amount would be valued at roughly $263 million in 2016 dollars.
When adjusted for inflation, that’s the equivalent of buying land today in the US at just over 40 cents per acre.
A few years later, the US government bought Florida from the Spanish for the equivalent of just $89 million in 2016 dollars.
What unbelievable deals.
Back then the government spent taxpayer funds to buy valuable, productive land for just pennies per acre. (Again, those prices are adjusted for inflation…)
Today they spend over $2 billion to build a website that doesn’t work.
It’s a night and day difference that highlights just how out of control things have become, and how far from its origins the Land of the Free has fallen.
But this is not a bad news story by any means.
And in today’s podcast, we explore these obvious trends, the no-brainer solutions, and the incredible opportunities that surround us in th...
“What is it about this place that makes it so poor?”
It was a simple question posed to me by a friend as we walked the streets of Managua, Nicaragua earlier this week.
Nicaragua is a lovely place. But it’s poor. Very poor. It’s the least developed economy in Central America... and that’s saying something.
But it’s worth considering: what makes an economy like Nicaragua so poor? And what makes others so wealthy?
Having traveled to nearly 120 countries, I’ve seen the full range of rich and poor nations. And I’ll tell you, it has nothing to do with natural resources or anything like that.
I often have meetings with senior ministers and government officials around the world who tell me all about the amazing resources they have in their country.
“We have so much forestry land,” or, “Our bauxite reserves are among the highest in the world…”
Irrelevant. Venezuela has incredible oil reserves. Yet they’ve been living in poverty for years.
(Now that oil prices are down the Venezuelan government has had to declare every single Friday a holiday because they can’t afford to keep the lights on.)
Ukraine has some of the most exceptional farmland on the planet. But the country is totally broke.
150 years ago, Hong Kong was a tiny village of illiterate fisherman.
50 years ago in Singapore they used to defecate in the streets, and visitors would have to step over rivers of feces in the downtown area.
25 years ago Estonia was still part of the crumbling Soviet Union.
None of those places has any resources to speak of. But they’ve become among the wealthiest in the world.
What’s the difference between Hong Kong and Ukraine? Singapore and Venezuela? Estonia and Nicaragua?
One of the things I’ve learned in my travels over the years is that wealthy nations do have some common characteristics.
The first set is cultural. Wealthy nations have a culture that values hard work. Knowledge. Productivity. Innovation. Risk-taking. Saving. Self-reliance.
I’m not trying to say that people in poor countries don’t work hard. Far from it.
The point is that if working hard and saving money are strong CULTURAL values (which tends to be the case in Asia), a country is going to do better.
Second, wealthy nations have much better institutions. The rule of law is strong. Private property rights are strong. Corruption is limited. Regulation is sensible. Taxation is reasonable and efficient.
It’s simple; no one wants to do business in a corrupt dictatorship.
Bad institutions drive away foreign investors. And as capital is one of the critical components of economic growth, choking off external investment suffocates an economy.
Last (and most importantly), wealthy nations have an “inclusive” economy.
This means that people aren’t medieval serfs toiling away for the establishment. If someone develops skills, works hard, and takes risks, they’ve got a good chance of moving up the socioeconomic food chain.
Economists call this “income mobility”. In the United States it’s known as the “American Dream”.
Yet all three of these factors are starting to disappear in the US… and in the West in general.
America’s self-reliant, risk-taking, hard working, pioneering culture helped propel it to become the wealthiest nation on the planet.
But these traits are rapidly vanishing, displaced by a culture that values instant gratification, consumer debt, and government handouts.
The institutions are faltering as well. Rule of Law is less predictable, with the government changing the rules in its sole discretion whenever it likes.
The Internet practically exploded this morning after a detailed report was published proving that dozens of corrupt politicians around the world have been stealing public funds and hiding the loot overseas.
In other news, the Pope is Catholic.
Not to make light of this, but this hardly comes as a surprise. There’s some Grade A filth in positions of power who routinely funnel public funds into their own pockets.
Whether they secret the funds offshore, buy expensive flats in London, purchase Bitcoin, or stuff cash under their mattresses seems hardly relevant.
The real issue is that systems of government routinely put morally bankrupt individuals in control of trillions of dollars of cash.
Seriously, what do people expect is going to happen?
Yet this never seems to be concern. The media outcry always seems to focus on the manner in which public officials hide their assets, not the fact that the funds were stolen to begin with.
This report targets the illicit use of offshore corporations, specifically those set up by a single law firm in Panama.
In reality, this issue hardly boils down to one firm.
There are thousands of law firms all around the world, including in the UK and the United States, that register companies for their clients.
Some of those companies end up being used for nefarious purposes, including fraud and theft.
But it’s crazy to presume that corrupt officials and con artists are the only ones who would ever need a company in one of these “shady” jurisdictions.
(Those “shady” jurisdictions, by the way, include Wyoming, South Dakota, and Delaware.)
Alongside the report is a video with a scantily clad porno actress named Lisa Ann, star of “Who’s Nailin’ Paylin,” a satire in which Ms. Ann spoofs former Vice Presidential candidate Sarah Palin engaged in sexual… congress.
No I am not making this up.
In her video, the porn starlet explains that only arms dealers and scumbags set up asset protect vehicles like anonymous shell companies, which can include something like a Delaware LLC.
Never mind that people in the Land of the Free are living in the most litigious society in human history.
Or that last year the US government stole more money and private property from its citizens through civil asset forfeiture than all the thieves and felons in the country combined.
Given such obvious realities, you’d have to be crazy to NOT take steps to protect your savings.
But if a porn star says that you’re a scumbag who ‘gets in the way of justice’ by setting up a Delaware LLC to safeguard your assets and reduce your legal liability, it must be true.
So let it be written.
Look, the anger and disgust of seeing corrupt people getting away with a crime is understandable, particularly when that crime is stealing from taxpayers.
But nobody ever seems to attack the real problem-- that these people are ever put in positions enabling them to steal taxpayer funds to begin with.
Instead the spotlight is always on how they hide it. That’s like focusing on what color T-shirt the ax murderer was wearing.
My concern is that is if corrupt officials shift tactics and start buying gold, there will be calls to outlaw gold. Or if they start holding cash, there will be even louder calls to ban cash.
These reports are incredibly damning for the dozens, even hundreds or thousands of bad actors who abuse the system.
But at the same time they create a mass hysteria that puts law-abiding taxpayers who value their financial privacy into the same category as some corrupt Af...
Yesterday I received a rather desperate phone call from a relative of mine named Sam.
I used to spend a LOT of time with Sam growing up. And back then he was an amazing guy.
Sam was the kind of person who was so charismatic that you felt happy and excited just being around him.
He was an incredibly positive person with a keen interest in helping others.
I remember how frequently he used to start some meaningful project to benefit his community, or quite often less-fortunate people thousands of miles away that he had never met.
Sam was also incredibly successful. He was just one of those people who always seemed to be able to make money. And over the course of his life he amassed substantial wealth.
Sam was constantly learning and creating; he was in to art, science, technology... a real Renaissance man.
Most of all, Sam was a person of rock-solid integrity. He stood up for his values, and the rest of us deeply respected him.
I’m really grateful to have had his mentorship for so long, and I know that I’m a better person as a result of his influence.
But starting around 15 years ago, Sam started to change.
He went through a major personal crisis… the kind of thing you hope to never have to experience in life.
It was absolutely terrible. And the entire family rallied around him in support.
I personally spent several years of my life going to bat for Sam, and I sacrificed a lot for him. The whole family did.
But Sam never recovered. In fact he just got worse.
He started making the most incredibly bizarre financial decisions, squandering away his wealth in ways that just seemed completely crazy to the rest of the family.
He had dozens of businesses at that point, and ALL of them were losing money.
But he refused to make any changes. He refused to tighten the business spending. In fact he started spending even more, squandering what little wealth he had left.
We tried to help. Some of his accountants approached us at one point and gave us a snapshot of Sam’s finances. It was gruesome.
This guy had easily been the wealthiest person we had all known. But he had been reduced, at least on paper, to poverty.
His debts were astronomical, and he hardly had any savings or assets left other than his house and a few fancy antiques.
But Sam refused to believe it; he insisted on living like the multi-millionaire he had always been, even though he no longer had any income to support his lifestyle.
It was so bad that the entire family had to chip in and start putting money into his bank account on a monthly basis.
But whatever amount we could muster was barely enough to cover Sam’s most basic living expenses, let alone all the luxury he was accustomed to.
And we couldn’t even begin to make a dent in Sam’s debt burden, which was growing by the day. We found out later that he had even gone into debt with some pretty shady characters.
We tried intervening again and again. But Sam wouldn’t listen.
And despite all the help and support we had extended him, Sam ultimately turned on his own family, attacking the people who loved him most.
He used to ring us up, and sometimes even show up on our doorsteps in the middle of the night, demanding money… screaming that we had an obligation as a family to pay him.
He even got violent with some of my relatives; with others he broke into their houses and stole from them.
At some point there was a complete mental breakdown, and he became totally paranoid. He started taking letters from the mailbox and reading our mail.
And he even ratted out a few of my relatives to the authorities fo...
In his History of the Peloponnesian War, ancient Greek historian Thucydides told us the tale of a dominant regional power (Sparta) that felt threatened by the rise of a competing power (Athens).
Sparta felt so threatened, in fact, that all the moves they made to keep the Athenian rise in check eventually escalated the power struggle into an all out war.
Modern political scientists call this the Thucydides Trap.
The idea is that when, out of fear, a dominant power takes certain steps to keep its competitor at bay, these actions ultimately lead to war between the two.
There’s a lot of concern that the US and China will fall into the Thucydides Trap.
This is certainly a valid concern. Both are nuclear superpowers with some of the largest militaries in the world.
But in 2016, modern warfare is not about tanks and aircraft carriers anymore. Modern warfare is insurgent, cyber, and financial.
In fact, if you look at the state of the financial system and the tactical brinksmanship between the US and China, it’s clear that the two are already in a Thucydides Trap.
This power struggle is leading to financial warfare of nuclear proportions; and as with any war, there will be a lot of casualties.
Just over the last several months we’ve seen many exchanges of fire between the two nations.
* The US government claimed legal jurisdiction over the Bank of China, one of the largest banks on the mainland.
* The Chinese launched the Asian Infrastructure Investment Bank, a supernational bank designed to compete with the Western-dominated IMF.
* The US blacklisted one of China’s largest telecom companies, forbidding any US company from doing business with China’s ZTE.
* China has been rapidly expanding its global payment network, UnionPay to become a direct competitor with Western systems like Maestro, Visa, and Mastercard.
And don’t forget, China could unleash its nuclear option at any time-- dumping its vast trillion+ pool of US government debt, which would potentially cause a major crisis for the US dollar.
It’s a bit sad, because almost EVERY action of the US government only escalates the conflict further… and the Chinese eagerly follow suit.
This is how World War III starts. And it will be financial.
Listen in to today’s podcast and learn more about how this conflict will unfold… and how to not to end up as collateral damage.
It’s no secret that the conventional model of success no longer works.
Go to school, get good grades, get a good job, work your way up the ladder, and then enjoy life when you retire.
This idea has been drummed into our heads since we were young, but today it’s totally defunct.
Following that path means you’re likely to end up with a mountain of student debt and an incredibly expensive piece of paper that guarantees neither job security nor even a real education.
In my mind, the best model for education and success is the oldest one: mentorship.
It’s the best way to learn real skills-- studying directly under someone who has mastered the skills that you hope to develop.
It’s the way the world worked for thousands of years, and it’s the way that still makes the most sense today.
For seven years in a row we’ve built our annual Liberty and Entrepreneurship camps around this concept of mentorship.
And in today’s podcast, I make a departure from our normal topics and discuss business mentorship with two of the instructors from this summer’s upcoming camp.
If you’re an energetic, talented young person, you won’t want to miss this podcast… or this year’s Liberty and Entrepreneurship camp.
The camp is an incredible opportunity to learn and be mentored by incredibly successful, knowledgeable entrepreneurs, as well as network with other like-minded, talented young people.
As a reminder, there is no charge to attend the camp; our foundation pays for the entire event.
But don’t think of this as some kind of charity.
For us, this an investment… an investment in relationships with the next generation of bright, talented people. I can hardly think of a better use for paper currency.
Listen in here to the podcast as we discuss specifically what young people will get out of this year’s camp.
And, once you listen to the Podcast, head over to SovereignAcademy.org to apply for this year’s camp. The application deadline is only days away.
I remember several years ago in the Land of the Free when the big wave in the banking industry was to offer “free checking”.
There used to be a time (that a lot of people probably don’t remember) when banks charged monthly or annual fees to maintain your bank account.
This changed several years ago. Banks even started running commercials encouraging customers to open their “free checking” accounts right away.
Of course this is total nonsense. Banks aren’t exactly charitable organizations, and they have an uninterrupted track record of screwing their customers to make money.
In this case, “free checking” is just a ruse to get you to open an account so that they can make stupid investments with your money.
Banks in Europe, for example, are taking your money and buying government bonds that have negative yields and are hence guaranteed to lose money.
That’s what they’re doing with your savings. It’s insane.
In the Land of the Free, banks are once again stocking up on mortgage-backed securities as the most popular investment fad today, as if they have no memory of the 2008 financial crisis.
There’s even one bank in San Francisco that’s offering $2 million loans with no money down, and no private mortgage insurance, to buy real estate in one of the most overpriced areas of the country.
This isn’t “free checking”. It’d be more appropriate if they called it “high-risk checking”.
And the trend shows that it’s getting worse.
On top of everything else now, slowing economy growth almost assures that negative interest rates will be the norm across the entire developed world.
They already have negative interest rates in Europe and Japan.
And as Fed Chair Janet Yellen indicated recently, this is an option that’s on the table even in the United States.
This kind of insanity has serious consequences to the entire financial system, putting your money at even greater risk.
You’ll never hear it from the financial elite. Your banker is never going to say, “open a high-risk checking account today!”
But by holding your money in such a precarious system, that is precisely what you are doing.
This is our topic for today’s podcast: the trend towards “high-risk checking”, and why negative interest rates and capital controls are an almost forgone conclusion.
You can listen in here.
Pop quiz: What was the top grossing movie in the world the last time the US tax code was overhauled?
The answer is Top Gun. And the year was 1986.
(Other major hits that year include Karate Kid II, Crocodile Dundee, and Ferris Bueller’s Day Off)
Think about it-- this a tax code that was created for a highly industrialized economy. And that might have made sense thirty years ago.
But in the decades since, everything has changed. The world is flat. Globalized. And completely digital. An antiquated tax code based on geography and industrial manufacturing simply doesn’t make any sense today.
Our banking system is in a similar position. Banks today continue to insert themselves in the middle of every financial transaction imaginable, just as they did centuries ago.
Savings, lending, transfers, payments, foreign exchange—all of these transactions are highly centralized (and manipulated) by a private cartel that has no business existing in our modern world.
Today there are so many platforms available where we can send and receive peer-to-peer payments on our mobile phones.
We can hold deposits in the Blockchain. We can raise capital to start a new business on any number of crowdfunding platforms.
Banks are no longer necessary for any financial transaction. And yet they still bully their way into dominating the financial system.
This banking system might have been appropriate centuries ago when Medieval merchants needed a centralized way to extend credit. But it just doesn't make sense today.
Similarly, global trade continues to be underpinned by a reserve currency issued by the greatest debtor that has ever existed in the history of the world.
This might have been appropriate in 1944 when they created a dollar-based financial system after World War II. But it no longer makes any sense today.
Banking, trade, and even our systems of government and the way we organize ourselves as a society, are all based on anachronistic traditions that don't belong in the 21st century.
These systems are changing. And it's already happening. All the alternatives and resources already exist.
This happens from time to time in human history. Kingdoms and Empires gave rise to the feudal system. And the feudal system was ultimately displaced by the nation state.
This time is not different, and it’s foolish to think the nation state will last forever.
Dominant reserve currencies have changed over time, from the Byzantine gold solidus, to the Venetian ducat, all the way to the US dollar today. We cannot expect the dollar to maintain its position forever.
We can see these changes happening already.
Wealth and power are shifting. Central bankers are running out of ammunition. Almost every major western government and central bank is on the brink of insolvency if not already bankrupt.
Developing nations are already creating their own alternatives to the US-dominated financial system. Modern technology is turning the commercial banking system into an endangered species.
And people are finally starting to get sick and tired of their system of government, advocating for the most extreme outsiders they can find.
Isaac Newton told us that an object in motion tends to stay in motion. And these changes are very much in motion.
40 centuries of human history demonstrate that political and banking elite will not simply roll over for financial system 2.0 to take over. They will not go gentle into that good night.
And that’s why these great changes bring both great risk, as well as great reward. Or more appropriately, the potential for both great loss and great opportunity.
This week I’ve been down in Southern Chile with the Board of Directors of our agricultural company.
It’s summertime right now, and the weather is absolutely gorgeous.
Last night, after a long day visiting one of the farms I had a chance to sit down with Tim Price to share a bottle of our very own Sovereign Valley wine and record a podcast.
It’s been about two months now since the last episode, so I invite you to listen to our comeback with the Podcast Awakens.
Over the course of a few glasses we dive into discussion about oil prices, financial markets, and an entire investment class that most people haven’t even heard of. One that’s likely to do VERY well this year.
We invite you to clink glasses with us and listen in as we share the best kept secret in finance.
It started in 1921.
World War I was over. The Treaty of Versailles had been signed two years before.
And Germany, the biggest loser from the war, had been stuck with both the blame and the bill.
Germany’s war debt-- which it owed not only for its own war-related expenses, but also for reparations to the victors-- was devastating.
They didn’t have the money, so they started printing it.
Not surprisingly, the German mark began to sink. It started slowly at first, but by 1921 hyperinflation had taken hold until prices soared by thousands of percent.
One of my favorite stories from this period, was of the elderly man who went to the police to report a robbery. Thieves had stolen a wheelbarrow of money.
It was common at the time to use wheelbarrows to transport the huge sums of cash that were required to buy even the most simple things like bread and milk.
When the police asked him how much was in the wheelbarrow, the man corrected them saying that the thieves had only stolen the wheelbarrow, and had left the cash behind.
Undoubtedly the entire society was upturned by this hyperinflation. But as history shows, in any situation, there are always winners and losers.
Pensioners and people who responsibly saved their money were wiped out; whereas people who had borrowed to invest in real assets did extremely well.
Owners of residential real estate suffered under government imposed rent controls, whereas owners of farmland thrived.
For people who saw the decline of the mark coming and bet against it, generational fortunes were made in a matter of years.
In the case of Germany in the 1920s, few people probably expected that hyperinflation would ensue.
Even the president of their central bank, Dr. Rudolf Havenstein, firmly believed that there was zero connection between price levels and the amount of money he printed.
Yet it happened, and those who saw the warning signs and took steps to reduce their risk did very well.
Today there is no shortage of risk in the financial system either.
Negative interest rates are becoming more and more common in developed nations and they’re on their way to America as well.
Every time there’s a recession, the government cuts interest rates by easily half a percent to a percent.
So with interest rates already at zero, when the next recession comes (and it absolutely will), you can expect interest rates to go negative.
Meanwhile, Western banking systems are highly illiquid, meaning that they have very low cash equivalents as a percentage of customer deposits.
This isn’t some wild conspiracy theory. You can see it for yourself in the financial statements banks publish every quarter.
Solvency in many Western banking systems is also highly questionable, with many loaded up on the debts of their bankrupt governments.
Banks also play clever accounting games to hide the true nature of their capital inadequacy.
We live in a world where questionably solvent, highly illiquid banks are backed by under capitalized insurance funds like the FDIC, which in turn are backed by insolvent governments and borderline insolvent central banks.
This is hardly a risk-free proposition.
Yet your reward for taking the risk of holding your money in a precarious banking system is a rate of return that is substantially lower than the official rate of inflation.
And in many cases, it’s even negative. Rates are already negative in Europe, and again, it’s coming to the US. Either way, you’re guaranteed to lose money.
Risk is a funny thing. The reason why it’s so frequently misdiagnosed is because there’s often a huge discrep...
I want to tell you about a time when I was really scared. Terrified.
It was back in 2003, right as George W. Bush made his final decision to send the 'coalition of the willing' north into Iraq.
Saddam Hussein knew he was finished. And, in a fit of desperation, he started launching loads of Scud tactical ballistic missiles towards the invading forces.
Missile attacks are pretty scary. You can't hide behind a rock and duck the blast. And, at least as an individual, you can't shoot back.
I distinctly remember being outside as the missile alarms were going off, looking up into the sky, and thinking, "Well I hope I don't die."
I'm not going to tell any tough guy stories-- I was afraid. And given that there was nothing I could do, I felt totally helpless.
It's that feeling of helplessness that is the closest thing I can tap into in my own experience for the horror and tragedy of a terror attack.
And I know my own experiences don't begin to compare-- we were in a warzone and knew the risks.
With a terror attack, one minute you're enjoying dinner, the next minute it's blood and death and chaos. It's levels beyond anything I'd ever experienced.
And in a situation like that, the desire for revenge is understandable. Emotion is palatable. People want action. They want their governments to DO SOMETHING.
And sure, it's very comforting to think that we could just send the military over to kick everyone's ass and bomb the terrorists back into the Stone Age.
But I hope we can agree that most decisions that we make when we're emotional don't tend to work out very well. Emotional decisions are usually bad decisions.
They make us feel better, but they seldom deliver positive long-term outcomes.
Right now everyone wants to feel better. The world is on war footing, and few people want to think rationally. This is understandable.
But when people's lives and livelihoods are on the line, the situation absolutely demands clear, level-headed thinking. After all, actions have consequences. And it's imperative to make important decisions in full light of the consequences.
I discuss these consequences in today's podcast, along with some astonishing facts and history that you have probably never heard before.
Given how uncomfortable and emotional the topic, this might have been the most difficult one that I've ever had to record. Take a listen here.