Congressman wants to ban Bitcoin because it threatens the Federal Reserve

Happy Friday everyone. Here’s our weekly roll-up of some of the most bizarre (and often disturbing) stories from around the world that we’re following:

Apparently it’s a crime to sit down in public

A dangerous criminal in the United Kingdom has been sentenced to 20 weeks in prison after an egregious crime spree.

This psychopath admitted to the heinous crime of SITTING in public THREE TIMES, without a valid excuse.

The homeless man had already been given a “criminal behavior order” which banned him from sitting on the ground. But this social deviant just went ahead and did it anyway.

The Ministry of Justice says the average price of incarceration in Great Britain is around £32,500 per year.

So now instead of sitting on the ground in public, taxpayers will spend about £12,500 over 20 weeks for him to sit in a jail cell.

Click here for the full story.

A US Congressman wants to ban Bitcoin for threatening the Federal Reserve

A US Congressman, Brad Sherman, is worried that Bitcoin and other cryptocurrencies will threaten US foreign policy, tax collection, and traditional law enforcement.

So his solution is to ban it.

Last week he urged his colleagues to make it illegal to mine, sell, or use Bitcoin and other cryptocurrencies in the United States.

The problem, he says, is that the US currently gains much of its power from the fact that most international money moves in US dollars, through the Federal Reserve.

“It is the announced purpose of the supporters of cryptocurrency to take that power away from us… the advantage of crypto over sovereign currency is solely to aid in the disempowerment of the United States and the rule of law.”

His version of “rule of law” includes things like civil asset forfeiture, just straight up stealing cash from people without even charging them with a crime.

So yes, if that is the type of “traditional law enforcement” Congressman Sherman fears will be undermined, he is correct.

And since US foreign policy involves funding endless wars with an inflationary fiat currency… well, he’s right again.

The aim of cryptocurrency is to hand the power of the purse back to the people.

Which is why it is comical that he thinks the cryptocurrency movement even could be nipped in the bud if they tried.

Click here for the full story.


Maine wants to void its citizens’ Presidential votes

If a bill passed by the Maine Senate becomes law, the state will join 15 other states which have nullified their citizens’ choice for President.

These states have pledged to ignore their own voters, and just hand the state’s Electoral College votes to whichever candidate can scoop up the majority of the national ballots.

So if this passes, votes in Maine will no longer count– the state’s delegates will just automatically be cast for whoever people in the other 49 states choose.

For a country that prides itself on representative democracy, this is a truly bizarre trend.

Click here for the full story.

Eminent domain takes now, pays later

The Supreme Court long ago decided in Kelo v. New London that the government can use eminent domain to steal your property.

Of course they still have to give you “just compensation.” But now they can take your land, and delay payment for several years. Here’s how it works:

When a company (often a company that builds oil pipelines) wants your land, they’ll petition the government to seize it under eminent domain authority.

The pipeline company then makes a ridiculous, lowball offer to compensate you for your land. But before you even accept, the government has already awarded them your property.

So you either have to accept their pitiful offer, or battle them in court for years to seek more appropriate compensation (let alone the fact that your land was seized without your consent).

This system is obviously an enormous disadvantage to people who are having their property seized, and the Institute for Justice is now helping affected landowners take this to the Supreme Court.

We’re following this one very closely to see how the Court votes.

Click here for the full story.


Taxpayers pay for defense contractor’s 9400% profit margin

A $4,300 half-inch steel pin worth about $46 is just one of the products TransDigm supplies to the Pentagon.

This isn’t unusual for them– nearly all of the company’s products earn them between 95% to 9400% profits.

Now they are being brought in front of Congress to answer for these prices. But it takes two to tango.

Undoubtedly this company is taking advantage of government incompetence and bureaucracy, and they’re making a fortune. But the government is just as much to blame for being incompetent and bureaucratic in the first place.

Now Congress wants to show that they’re ‘doing something’ by chewing out these contractors in public. But it’s not like the system will really change. And the taxpayers will keep paying for it.

Click here for the full story.


from Sovereign Man

Crypto prices are surging… is it time to buy again?

Last week the price of Bitcoin was double what it was on April 1 of this year.

Then it crashed by almost 20% in matter of days. Then it surged again. And at the time of this writing, the price of bitcoin is just shy of $8,000.

That’s a pretty volatile ride.

Naturally the “experts” are back to predicting Bitcoin will hit anything up to $10,000 this month, and $100,000 this year.

Obviously no one truly knows where Bitcoin will go. As with all speculations, it could go substantially higher from here. Or lower. Or nowhere.

Long-time readers know that I’m not anti-crypto. A decentralized financial system fully aligns with my ethos of independence and diversification.

I was also an early adopter of Bitcoin and have made a few investments in crypto-related businesses.

But I am anti-stupidity.

And back in 2017 during the worldwide crypto-craze, there was an unbelievable amount of stupidity taking place, including people taking out second mortgages on their homes to buy Bitcoin.

Not to mention there were scams galore… to the point where email spammers sent out tens of BILLIONS of messages encouraging people to buy some ICO token or new cryptocurrency.

Multiple cryptocurrencies and tokens were being created on a daily basis, to the point that there were thousands and thousands of them, often being promoted by celebrities ranging from boxer Floyd Mayweather to Paris Hilton.

It was a classic bubble mentality… people rushing in to the market who didn’t know the first thing about crypto.

Within a few months they all got burned.

Now that Crypto prices are charging higher again, these same people are starting to feel the Fear of Missing Out (FOMO), and wondering whether they should jump in, whether this time is different.

Just remember that, over the long term, the price of just about everything is decided by supply and demand.

So when we look at Bitcoin and other cryptocurrencies, the real question to ask is: will there be more people using Bitcoin in the future? Or fewer people using it?

And I’m talking about actual, real ‘use’. The vast majority of crypto transactions these days are just speculators betting on whether or not the price will increase.

It’s basically just gamblers selling these coins to one another. And that’s not real use.

I’m talking about being able to buy groceries with crypto… and the majority of transactions being for those sorts of purchases.

There are some promising signs that this might finally start to happen.

Stores like Whole Foods and Nordstrom are starting to accept Bitcoin through an app that has partnered with the Winklevoss twins’ crypto company Gemini.

That’s certainly beneficial in terms of actual real cryptocurrency transactions in major mainstream retailers.

Even Facebook is developing a cryptocurrency that can be used with its messaging software Whatsapp.

Given Facebook’s 2+ billion members who could become potential users, this stands to create global reach.

These developments lead me to believe that there is a high chance we will see much more adoption and use of cryptocurrencies in the future, which is why I remain overall bullish.

But just because there appears to be a strong future for crypto doesn’t mean that any specific coin is going to a great investment.

Bitcoin is by far the most popular cryptocurrency, and the one that most people acquire when they’re first getting their feet wet.

But Bitcoin is also the oldest of the major cryptocurrencies, which means that it’s the most technologically inferior.

And it’s always seemed strange to me that the most technologically inferior coin is simultaneously the most valuable.

Just be mindful of that fact before rushing back in to crypto. There are a lot of coins and tokens out there, some of which have superior technology and more specific uses (like privacy, financial clearing, information-sharing, etc.)

And there are also a number of new ones that will hit the market, including proprietary coins developed by tech giants like Facebook, and financial giants like JP Morgan.

So perhaps education is the safer choice for now. Before making any investment, take time to really learn about the developments and the market, as well as how to safely purchase and store your digital assets.

Just like cryptos didn’t disappear when crypto prices crashed to $3,000, they’re also far from having reached their full potential.

This journey still has a long way to go. So any investment in your education will pay dividends long into the future.


from Sovereign Man

May 22, 2019
Sovereign Valley Farm, Chile

Last week when Uber finally went public, the stock set a record for the largest first-day dollar loss in IPO history: over $6 billion vanished from the company’s valuation in a matter of minutes.

But that shouldn’t be surprising since Uber doesn’t actually make a profit.

And the company acknowledged in its IPO filing that it may, in fact, NEVER turn a profit, given that it expects operating costs to “increase significantly in the foreseeable future.”

As we’ve discussed before, Uber is far from alone. Most of the new, high-flying, popular tech companies lose money and burn through their investor’s cash faster than a California wildfire.

Snapchat, Lyft, Tesla, WeWork, etc.

And then there’s Netflix, which is actually in one of the worst financial positions imaginable.

Technically, Netflix is profitable; the company posted a $1.2 billion profit in 2018. But the devil is in the details…

After-tax Profit (also referred to as ‘net income’ or ‘earnings’) in many cases is heavily influenced and manipulated by bizarre accounting principles that don’t make sense in the real world.

A better measure of the financial performance of a company’s core business is Operating Cash Flow (OCF).

OCF strips out all the accounting gimmicks and focuses on how much money the core business earned.

And Netflix has NEGATIVE operating cash flow. It’s been negative for years.

In other words, Netflix loses money. And on top of that it has to invest billions of dollars more in new content… so they have to go deeper into debt each year.

But since the company technically shows accounting profits (despite being cashflow negative), Netflix has to pay tax.

It’s pretty much the worst situation a company can be in. Yet it remains one of the most popular stocks in the world.

It’s not just a select few companies either. Compared to historic averages, the entire US stock market is overvalued.

One notable measure is the ‘CAPE’ ratio or ‘cyclically-adjusted price/earnings ratio’.

The CAPE ratio refers to how much investors are willing to pay for every dollar of a company’s long-term average earnings.

The median CAPE ratio based on data that goes back to the 1800s is about 15.6, meaning that investors are typically willing to pay $15.60 for every $1 of a company’s long-term average earnings.

But for the last year or so, investors have been willing to pay about 30-34x annual earnings for the typical company in the S&P 500.

In other words, they’re willing to pay about twice as much as the historic average for the same earnings.

In recent time, the CAPE ratio has only been this high twice before: just before the tech bubble crash of 2000, and just before the 1929 stock market crash.

In both instances, stocks dropped more than 50% shortly after.

I don’t have a crystal ball, but it’s clear that we are overdue for a major correction.

Most people have been conditioned to think that the only investments available to them are stocks, bonds and real estate– and only in their home country.

But the world’s a big place. I’ve been to 120 countries all over the world, and there is no shortage of opportunity outside the mainstream, if you’re willing to look for them.

Next month, for example, we are taking our highest level Sovereign Man: Total Access members to one of the oldest cities in the world inside Uzbekistan for a boots on the ground look at some compelling investments.

After 25 years in power, the brutal post-Soviet dictator died two years ago, and his successor surprised everyone by implementing free-market reforms. He floated the currency, opened Uzbekistan up to foreign investment, and started privatizing government-owned businesses.

So instead of buying shares of expensive, loss-making companies, we are looking at companies selling for one to three times earnings in a rapidly growing economy.

Halfway across the world, a friend of mine based in Colombia is buying up small mom and pop shops for a fraction of their yearly profits– less than 0.5x earnings.

And our own Chief Investment Strategist, Tim Staermose, consistently finds deeply undervalued companies that generate healthy cashflow.

One of Tim’s recommendations, for example, was Kitagawa Industries– a mature, cashflow positive company with a stock price so low that the company was selling for LESS than the amount of cash it had in the bank.

Tim paid 76 cents for every $1 of cash the company had in the bank, not to mention all of the company’s other assets and income.

Kitagawa Industries, of course, is not a company most people have heard of. It’s not trendy like Uber or Netflix.

Call me old fashioned, but I still think the point of investing is to make money. So Kitagawa seemed like a much better deal.

Buying the stock of a company selling for less than the worth of its tangible net assets– or even better, less money than it has in the bank– provides substantial downside protection.

And, not surprisingly, Tim’s Kitagawa recommendation recently generated profits of 249% after just 17 months.

Bottom line– it’s a big world. There’s no reason to force yourself into expensive index funds or money-losing, popular investments.

There are always pockets of opportunity where you can make money without taking on the same level of risk.

It just takes a different way of thinking– an independent, global view and a willingness to look beyond what’s popular and mainstream.


from Sovereign Man

After so many years, this place is still amazing

Like many of our readers, I’ll never forget the Great Crash and the Global Financial Crisis from more than a decade ago.

Some of you may be too young to remember. But it was pretty gruesome.

One of the largest investment banks in the world collapsed in September 2008, nearly dragging down the world economy with it.

Practically overnight it became apparent that the global financial system was a house of cards. Some of the world’s leading banks were insolvent. Insurance companies were bankrupt. Entire governments (like Iceland) went bust.

Real estate prices sank. Stocks plunged. Tens of millions of people around the world lost their jobs. And taxpayers were forced to fork over a trillion dollars to bail out the financial system.

People were panicking.

The value of their retirement savings had been cut in half in a matter of days, and any plans for the future were put on hold out of fear of what might happen next.

I remember watching this all unfold and thinking to myself, “I want to set myself up in a way that none of this matters… where the stock market could crash, the economy could tank, the banks could fail, and it wouldn’t affect me one bit.”

So I began thinking deep thoughts about resilience, independence, and self-reliance… which quickly led me to sustainability and agriculture, and the realization that being able to produce my own food would be incredibly powerful.

As I traveled the world (I’ve now been to more than 120 countries), I kept these ideas in the front of my mind: where could I acquire some land to become resilient and independent?

Asia was out. With few exceptions, most Asian countries have laws which prohibit foreigners to own real estate.

Africa, for all of its potential, was out. In order to be resilient, I needed stability and predictability.

Most of Europe was out. In order to be resilient, I needed large scale– hundreds of acres of land. And purchasing land of that size in Europe (at least in the places with the most productive climate) would be cost prohibitive.

Same in North America.

So my search brought me to Latin America, and eventually to Chile: great climate, inexpensive land, stable country, and no restriction to buy property as a foreigner.

I liked this place from the first time I ever set foot on Chilean soil.

There was an energy and optimism here that was almost palpable, and every time I came back, I noticed that things had improved– more infrastructure, more development, more foreign businesses investing here.

Unlike most of the world, Chile had managed to avoid taking on massive government debt during the financial crisis. The banks were stable. The economy was steady.

By comparison, Chile was one of the few bright spots in the world. And the more I investigated, the more I became convinced that this was the place I was looking for.

In time, I found the land I needed– over 1,000 acres in an incredibly fertile valley about 2 ½ hours south of the capital city.

The soil is rich in volcanic nutrients from the nearby Andes Mountains. And the climate is the best that you could ever hope for in agriculture: warm and sunny… but not too hot. Mild winters. Predictable rains.

I can grow practically anything here that’s not tropical– so no bananas or papayas.

But just about everything else is exploding from my organic orchard: apples, oranges, figs, almonds, walnuts, nectarines, peaches, apricots, loquats, persimmons, pears, grapes, plums, cherries, blueberries, strawberries, blackberries, olives, etc.

We make olive oil from our own olives, flour from our own wheat. And there’s plenty of livestock like free-range chickens, pigs, etc.

I’m able to generate my own electricity and drink my own water (the ground water reserves are massive), and do so without any interference from the local government.

In general the government here just stays away… for which I am incredibly grateful.

They also make it extremely easy to come here: though they’ve recently started to change their procedures, Chile’s immigration laws have traditionally been quite fast and flexible.

Most of Team Sovereign Man lives in Chile, and they hail from all over the world– North America, Europe, Russia, Asia, South America. And they all obtained residency with minimal time and hassle.

That’s a rare treat: it’s highly unusual for a country to make it so easy for foreigners to obtain legal residency.

But as a business owner, it means you can literally hire anyone in the world if they’re willing to relocate, so you’re not just constrained to the local market.

I also found this country to be ripe with enormous business opportunities.

A few years ago I started an agriculture business that has now grown to become one of the largest producers of blueberries in the world, with over $100 million in assets, thousands of acres of land, and hundreds of employees.

In another ten years it will be a global agricultural powerhouse.

And it’s something that I could not have done in the US or Europe: the land prices and government bureaucracy alone would have killed it from the start.

But in Chile the business has grown from a simple PowerPoint presentation to a dominant player in the industry in just five years.

As many of you know, I relocated to Puerto Rico last year to take advantage of the island’s extraordinary tax incentives.

And I’m loving it. Puerto Rico is a wonderful place to live, and I really enjoy my lifestyle there.

But I do still travel back to Chile and spend time here. And even after more than a decade since my first trip here, I’m still impressed by the growth, opportunity, potential, and promise of this country.

So if you’re looking for a place that might fit well with your own Plan B, definitely put Chile on your radar.


from Sovereign Man

Five years in prison for offending someone online…

Let the weekly absurdity begin!

New SAT scoring will combat Asian privilege

The infamous SAT has been used since 1926 as a sort of university entrance exam to objectively test high school students’ scholastic aptitude. Until now.

Test administrators announced plans this week to include an ‘adversity score’ for every student taking the SAT.

This score will excuse poor test results if the student lives in a high crime neighborhood, went to a poor high school, is living in a single parent or low income household, and so on.

And this should really put a dent in Asian privilege. Yes you read that right. With an average SAT score of 1223, Asians achieve the highest marks among all the ethnic groups tracked by SAT administrators.

But these same Asian test takers also typically come from dual-parent, higher-income households. So they’ll be penalized because of their parents’ success.

This is truly amazing thing to be teaching young people.

Universities and the SAT administrators don’t want high school students to identify as strong, self-reliant, independent individuals who seek to solve problems and overcome adversity.

Instead they’re encouraging young people to make their socioeconomic circumstances the strongest part of their identities. And, based on those socioeconomic circumstances, cultivate a guilt or victim mentality, and expect penalties or handouts for the rest of their lives.

Click here for the full story.

Harvard lynch-mob runs professor off campus

Harvard Professor Ronald Sullivan has spent his career as a lawyer defending some of the poorest people in the country.

He was previously the public defender in Washington DC and personally overturned dozens of wrongful convictions.

Professor Sullivan also represented Michael Brown’s family after the teen was shot to death by police. Huffington Post even called him the “man who dealt the biggest blow to mass incarceration.”

But now he and his wife– the first black student housing deans in Harvard history– have been run off campus by an angry mob of #metoo zealots.

His crime: joining Harvey Weinstein’s defense team.

Sullivan believes in justice for ALL, and that even a man like Weinstein who has already been convicted by the Twittering classes in the court of public opinion, is entitled to competent legal defense.

“It is particularly important for this category of unpopular defendant to receive the same process as everyone else — perhaps even more important…

“To the degree we deny unpopular defendants basic due process rights we cease to be the country we imagine ourselves to be.”

Powerful words that absolutely ring true. But now all these whiny students at Harvard claim they no longer feel safe with Sullivan on campus, and they’ve demanded the university do something.

Sadly, Harvard has buckled under the pressure, and they announced earlier this week that they would not renew his appointment as Faculty Dean at Harvard College’s Winthrop House.

These Social Justice Warriors are starting to feed on their own.

Click here for the full story.

Prison for online trolls in Australia

Online trolls could soon face up to five years in prison, if the Prime Minister of Australia gets his way.

It’s already illegal to “menace, harass or cause offence” online in Australia. That’s right. It’s illegal to offend someone in Australia.

And that cybercrime carries up to three years in prison if “reasonable persons” would consider the online behavior offensive or menacing.

But the Prime Minister wants a stiffer penalty of up to five years for offending someone else’s delicate feelings.

As usual, the government keeps their laws nice and obscure so that they can make the case that practically anyone has broken them.

Click here for the full story.

Charges dropped against Florida Man with “I Eat Ass” bumper sticker

Speaking of offending people, last week a sheriff’s deputy in Florida arrested a man because he had a bumper sticker which eloquently read “I Eat Ass.”

I almost have to admire the transparency. This man leaves no question about where he stands on the issue.

The officer pulled the man over because of the obscene sticker, and insisted he removes all or part of it. But the man refused, citing his First Amendment free speech right to display potentially offensive bumper stickers.

So the officer charged him with violating obscenity laws, as well as resisting arrest without violence.

The prosecutors determined bringing a case against him would be met with a valid First Amendment defense, so the charges were dropped.

Read the full story here.

San Francisco chasing away tech companies with IPO tax hike

San Francisco has long had what they refer to as an “IPO tax”; this is a tax on the value of shares that companies give to their employees.

And the tax is on the value of the shares itself. So when a big company goes public and all those employee shares are worth hundreds of millions of dollars, the city of San Francisco rakes in the tax revenue.

Ten years ago during the last recession, San Francisco cut its IPO tax. There was a bit of revolt by some local tech firms who threatened to leave the city over the tax, and San Francisco wanted to prevent this exodus at all costs.

But not anymore.

Now the local government intends to raise the tax from 0.38% to 1.5%, an almost 4x increase.

This is pretty hilarious given that they slashed the tax a decade ago to tempt companies to stay.

But now that it’s cool and trendy to chase productive businesses away, San Francisco wants to jack up the IPO tax.

This is in addition to new taxes passed in November on large corporations to support the homeless population.


from Sovereign Man

This is a much better alternative to keeping your money in a bank

The banking scandals are all starting to blur together.

When I heard that five big banks were fined by regulators today, I had to think…

Was that the scandal over employees creating fake accounts? No. Was it the scandal over recommending investments “highly likely to lose value”? No, not that one either.

Today’s fine didn’t stem from when banks scammed customers into buying auto insurance they didn’t need, illegally repossessed vehicles, accidentally foreclosed on homes, colluded to defraud investors, or rigged interest rates.

This time the banks colluded to rig foreign exchange rates. They even informed competitors on their own clients’ transactions, and coordinated to sit out certain auctions to manipulate the rates.

The most persistent myth in the world has got to be that banks are a safe place to keep your money. If they aren’t outright screwing you, they are risking your money on terrible investments, and not giving you any of the return.

And the organizations meant to ride to the rescue– the FDIC, the Federal Reserve, and the US government– are all practically bankrupt.

You still need to keep cash somewhere though, especially today when essentially all asset classes are at all time highs.

But large US banks are NOT the place to keep all your cash. They don’t even give you a tenth of a percent in interest for the pleasure of being treated like a doormat.

That’s why I circumvent the banking system and hold a good chunk of my cash right now in US government Treasury Bills.

Now, before you call the authorities to report that someone has kidnapped Simon Black and replaced him with a US Treasury Department bureaucrat, let me explain.

I would NEVER put my money into long-term bonds in a massively indebted country like the US. People who buy 30 year US government bonds are insane. It’s hard to imagine what the country is going to look like next YEAR, let alone 30 years from now.

But the shortest duration bonds (technically known as ‘bills’) are just 28 days.

And however you feel about the US government, or even Donald Trump, it’s a pretty safe bet that they’re not going to default in the next four weeks.

While other people risk their money buying stocks at record high prices, or hold their money in a risky bank for a 0.02% interest rate, 28-day T-bills pay an annualized return of 2.4%.

The best way to buy 28-day T-Bills is to open an account at Treasury Direct, which you can do here.

All you’ll need is a US Social Security Number and a US bank account. It’s a remarkably simple process.

The government sells 28-day T-bills once a week. So when you want to purchase, you just log in, click a few buttons to indicate how much you want to buy, and the Treasury Department will automatically debit the money directly from your bank account to buy the T-bill.

You can also choose to automatically roll over four weeks later into a new T-bill. Or you can choose to have the proceeds deposited directly into your bank account.

One very easy way to do it is to split your savings into fourths; so let’s say you want to park $400,000 into 28-day T-bills.

You’d buy $100,000 worth on January 1st, then another $100,000 on January 8th, then another $100,000 on January 15th, and another $100,000 on January 21st.

Then, the following week, on January 28th, the original $100,000 T-bill that you purchased on January 1st will mature, and you could roll that over for another 28-days.

Or if you find you need the money, you could choose to redirect the funds back to your bank account.

This is an easy approach that could literally earn you 100x more interest than what your bank is paying you, without the hassle.

It’s pretty pathetic that the Treasury Department is an easier financial partner to deal with than the banking system, but at least for now, that’s the reality.


from Sovereign Man

Central banks are buying gold at the fastest pace in six years

Earlier this month the World Gold Council published its quarterly report– and it shows that central banks and foreign governments from around the world are buying up gold at their fastest pace in six years.

This is pretty big news, and it says a LOT about the future of the dollar.

Remember, central banks and foreign governments hold literally TRILLIONS of dollars of reserves… and traditionally they do this by buying US government debt.

It sounds strange, but to big institutions, banks, etc., US government debt is equivalent to cash. They use it as a form of money.

More importantly, they hold US dollars because that’s the global standard: the US dollar has been the world’s primary international reserve currency for seventy five years.

So US debt is extremely liquid. In fact, the $22 trillion US debt market is the biggest and most liquid market in the world.

But foreign governments have started breaking with the tradition of buying treasuries.

As the World Gold Council’s report showed us, foreign governments and central banks have been buying a LOT more gold than in previous years.

Net gold purchases in Q1/2019 among foreign governments and central banks was nearly 70% greater than Q1/2018… and the highest rate of first quarter purchases in six years.

The Chinese in particular, have been stockpiling gold faster than ever, while at the same time, Chinese ownership of US treasuries as a percentage of total holdings has been gradually declining over the past years.

And it’s not just China.

Russia, Turkey, Qatar, and even Colombia – a long-time ally of the US – have been diversifying and buying a lot more gold.

There are a few obvious reasons behind that.

The debt of the US federal government recently reached $22 trillion. And it isn’t getting any better– they add at least $1 trillion to the debt each year.

And the Congressional Budget Office forecasts that the Uncle Sam will NEVER again see an annual budget deficit of less than $1 trillion starting in 2021.

That has serious impact on the ability of the US government to repay its obligations to foreign creditors.

And if the Bolsheviks come to power next year and offer free goodies (paid for with more debt) to anyone with a pulse, the debt burden will explode.

Anyone who thinks owning 10-year US treasuries – or even worse, 30-year government bonds – is risk-free, is completely insane.

The dollar’s problems aren’t limited to the US government’s pitiful finances either.

Even the Federal Reserve– the central bank of the United States– is close to insolvency, according to its own financial statements.

And the Fed’s coffers are routinely plundered by Congress in order to fund pet projects in Washington.

It’s so ridiculous that, in late 2015, Congress passed a law to steal $53.3 billion from the Federal reserve, putting the central bank on the brink of insolvency.

Then of course there’s the looming prospect of escalating US trade wars… and it’s easy to see why so many foreign governments and central banks are diversifying out of the dollar and into gold.

History shows that reserve currencies come and go.

There was a time when the British pound was the dominant currency in the world. And before that, Dutch guilders, Spanish pieces of eight…

Reserve currencies go all the way back before the gold solidus coin of the Byzantine Empire.

Today, the US dollar is the dominant currency in the world.

This is unlikely to change in the near future. But it would be equally foolish to assume that the dollar’s dominance will last forever.

Gold, on the other hand, has been a constant of wealth preservation for nearly all of human history.

It was first used as money more than 3,000 years ago. And an ounce of gold continues to buy roughly the same amount of goods over time.

There are a number of reasons for that. Gold is scarce, portable, and it can stand the test of time without corroding.

Today, I own gold as an insurance policy. It’s a form of wealth with no counter party risk, and one that has global demand.

Virtually anywhere you can possibly go in the world, gold has value, and it’s definitely worth your consideration.

One interesting benefit– we’re living in a time where nearly every other asset is at an all-time high. Stocks, bonds, real estate, etc.

A single troy ounce of gold sells for nearly 50% below its record price from 2011.

Given what’s happening with central banks, foreign governments, and US debt, it’s clear that demand is rising.

But simultaneously, the supply of gold is under a lot of pressure. We’ve discussed before that large mines have been closing, and large producers haven’t invested in new discoveries.

So there could be significant potential for rising gold prices in the future.


from Sovereign Man

AOC and Bernie Sanders hate this tax incentive

At the Sun Valley investment conference in mid-1999, Warren Buffett made a rare prediction about the stock market.

1999 was THE top of the dot-com craze.

And Buffett saw countless companies going public, attracting billions of dollars of investor capital, despite being UNPROFITABLE and having NO business plan to EVER make money, ever.

This made absolutely no sense to him, and Buffett warned that the technology bubble was about to pop.

In normal times, every investor in the world would have listened to him.

But those weren’t normal times. People thought he was just a bitter old man who had missed the tech boom with no understanding of the “new economy”.

So Buffett was largely ignored.

Of course, only a few months later, the market peaked… and then fell 78%.

Investors realized that there was no ‘new economy’, and that they had thrown their money into a bottomless pit of expensive, popular, lossmaking investments.

They say history doesn’t repeat, but it certainly rhymes. And today things are looking a lot like 1999.

It seems every month there’s another high-flying ‘tech’ company going public– a company with no profit and no plans to make a profit.

Uber is a great example– the company went public last week on the heels of an SEC filing that it may NEVER achieve profitability.

Another completely goofy example is WeWork– a business that leases office space.

There’s nothing technologically advanced this business, yet investors seem to treat WeWork like it’s the second coming of Google.

WeWork has burned through billions of dollars of investors’ capital, and it owns almost NOTHING.

But somehow it’s still worth $20 billion.

Lyft, Pinterest, Tesla, Snapchat– NONE of these businesses generates a profit.

(And Snapchat is down more than 60% since its IPO two years ago).

Even the much beloved Netflix burns through billions of dollars of investor capital in its efforts to produce great original content.

If you’re a fan of Narcos and Stranger Things, you can thank Netflix bondholders– they’re footing the bill for all those shows, subsidizing your entertainment at their expense.

And the company’s financial condition deteriorates each year.

Netflix ended 2018 with a cash burn nearly FOUR TIMES WORSE, and a debt level nearly FIVE TIMES WORSE than in 2015.

And competition from titans like Amazon, Disney and AT&T (which now owns HBO) is really heating up.

Imagine Netflix were a private company– producing great content, winning awards, and losing billions each year.

Then one day the owners knock on your door and ask if you’d like to buy Netflix… for $150 BILLION.

(Let’s assume you had an extra $150 billion lying around.)

Would anyone in his/her right mind buy Netflix at that price?

Why buy a company facing so much competition, so many losses… that you’d have to keep dumping money into year after year?

Even if you managed to turn the company around to the point where it was earning $10 billion per year (making it one of the most profitable companies in the world), your annual return on investment would be less than 7%.

So you’d be taking on a LOT of risk for a fairly limited upside.

Of course, Netflix isn’t a private company; it’s listed on a major stock exchange and one of the most popular investments on the planet.

But the analysis shouldn’t change one bit.

When you buy a single share of a business on the stock market, you have to imagine you’re buying ALL the shares…

… and ask yourself whether you’d really want to buy the ENTIRE company at that price, and whether the potential reward is worth the risk.

Don’t get me wrong– I’m a big fan of some of Netflix’s shows.

So I sincerely hope that legions of investors keep them in business by continuing to buy the stock and the company’s ever-expanding debt.

But I suspect that in the next economic downturn, funding will dry up. It always does.

In times of recession, panics, and bear markets, cash becomes a scarce commodity. Few people are willing to invest in ANYTHING. And a lot of these money-losing companies will starve to death as a result.

This is essentially the same as Buffett’s warning 20 years ago: loss-making businesses will fail. Not exactly a bold prediction.

Now, Buffett would be the first to acknowledge that no one knows when this might happen; this sort of insanity can continue for a long time.

But if you’re heavily invested in the stock market and dependent on that money for say – your retirement – you should seriously consider taking some money off the table.

There’s no shame in locking in gains after the LONGEST bull market in HISTORY at a time when asset prices are near their all-time highs.

And, at least for now, there’s a great way to achieve extraordinary tax benefit on those gains by rolling them into an Opportunity Zone Fund.

We’ve talked about this a few times before (and will continue to do so– it’s important.)

But the basic idea is that you can move capital gains into a fund that invests in underdeveloped areas across the United States.

It can even be a fund that you set up– it’s neither expensive nor complicated to do so.

(Premium members: we’ll soon be sending you a special report on how exactly to do this, step-by-step).

The benefit is that you’ll not only defer any taxes on those gains for several years, but any additional gains you make on your fund’s investments will be tax free FOREVER.

I don’t think this tax incentive is going to last.

The Bolsheviks are coming, and they hate this program… so I’d expect we could see this canceled as soon as 2021.

Alexandria Ocasio-Cortez, Bernie Sanders, and Elizabeth Warren would love to kill this immediately.

So definitely give this idea strong consideration– there’s very little downside in locking in big gains and even bigger tax benefits. And the chance to do so is right now.


from Sovereign Man

More ridiculous Civil Asset Forfeiture shenanigans

Each Friday we highlight a number of important, and often bizarre stories from around the world that my team and I are closely following:

Chicago police run a vehicle impound racket

Imagine dropping your car off at the local mechanic because you need to get your engine tuned up.

A few days later you come back to pick up your car, only to find out that it has been impounded by the police.

That’s what happened to one couple in Chicago.

It turned out that one of the mechanics took their car out for a joy ride. He was driving too fast, was pulled over, and arrested for driving without a license.

The police then impounded the vehicle, even though it wasn’t his.

The couple went down to the police station to get their vehicle back, but the police insisted that they pay thousands of dollars, even though they did nothing wrong.

Meanwhile, the police are charging them storage fees to keep the vehicle in the impound parking lot.

The couple managed to scrap together the money to have their vehicle released… only to find out that the police had already sold it at an auction!

This wasn’t an isolated incident either. The City of Chicago does this countless times per year, for offenses as minor as littering and playing loud music.

(Chicago brings in about $28 million per year impounding cars and running up storage fees.)

Now the Institute for Justice is helping the couple lead a class action lawsuit challenging this Civil Asset Forfeiture racket.

They argue the scheme violates due process, by forcing innocent vehicle owners to account for crimes drivers committed. Plus, holding the vehicles ransom until fines are paid is an unconstitutional seizure.

Click here for the full story.

Appeals Court diminishes the Fourth Amendment

An US federal appeals court recently ruled that when police suspect a driver of Operating While Intoxicated (OWI), officers can search the vehicle for drugs and other contraband.

This applies even if police have no reason to suspect that there are any illegal substances in the vehicle.

This may sound like a small issue, but it is another example of the Fourth Amendment being chipped away.

Police are supposed to have a very narrow latitude to search you. Everything they do must be justified by reasonable suspicion related to a specific offense.

Smelling alcohol on your breath isn’t supposed to give them carte blanche to turn your vehicle inside out.

Click here for the full story.

Should Life Insurance cover death by auto-erotic asphyxiation?

Autoerotic asphyxiation is the process of intentionally strangling yourself (or being strangled) for sexual pleasure.

The goal is to limit airflow to the brain to cause a euphoric feeling, but restore airflow before you suffocate and die.

Sometimes people go a little bit too far, and actually die in the process.

But some life insurance companies are not willing to pay out benefits for accidental deaths related to this fetish.

One widow was paid out most of her husband’s death benefits, but could not collect the extra coverage for accidental death. The insurance company said that they will not pay because the death resulted from an “intentional self-inflicted injury.”

So she sued. And the latest court ruling sided with the insurance company. But the courts have already flip-flopped twice on this one case.

Other courts have had similar disagreements, which come down to the semantic meaning of a word.

Clearly autoerotic asphyxiation is intentional and self-inflicted. But is the desired result correctly categorized as an injury? Or is an injury an undesired side effect?

Either way it will be entertaining to watch when the Supreme Court picks up the issue.

Click here for the full story.

Warren Buffett had some choice words for America’s worst corporation

We’re not the only ones who have noticed just how horrible large banks can be.

Warren Buffett and his partner Charlie Munger usually take some time at the Berkshire Hathaway annual meeting to offer their advice to large companies.

They said the reason Wells Fargo has faced so many scandals over the past few years is because they hire leadership from Wall Street instead of community bankers.

For years the bank provided incentives that rewarded employees for recommending investments likely to lose value, sticking customers with unnecessary products and accounts that charge unnecessary fees.

Employees even opened accounts and transferred customers’ money into them without telling the customers, all to get bonuses.

Most likely, they said, the big banks will maintain the status quo… because the short-term financial incentives of bank executives are completely misaligned with those of the customers and long-term interests of shareholders.

Click here for the full story.


from Sovereign Man

Here’s a lesson from the 108,000 millionaires who left their home countries last year

According to a recent report from Bloomberg, more than 108,000 millionaires left their home countries last year in search of greener pastures.

Most emigrated from countries like China and Russia… no surprise there.

India also saw a large outflow of millionaires as tax authorities tightened their grip. And Turkey continues to see an exodus, in the wake of strong-man President Erdogan.

But Western countries like France and England also lost boat loads (or planes full) of millionaires. Excessive taxation is the most obvious reason.

For instance France taxes the net wealth of households worth more than €1.3 million. As a result there are fewer and fewer households worth more than €1.3 million every year. What a surprise!

And the United States was the second most popular destination for fleeing millionaires.

There are plenty of great reasons to move to the US: safety, a strong economy, certain personal freedoms. It still has a reputation worldwide as a good home for the wealthy.

But if these wealthy immigrants stick around the US for a few more years, they’ll find that the country is rapidly turning into what they left behind: a country that is deeply suspicious and resentful of wealthy people.

That is especially true of New York City, which is still a top destination for global millionaires.

NYC’s mayor, Comrade Bill de Blasio, came right out and told his “brothers and sisters” that the private wealth in New York City is in the ‘wrong hands. He thinks your money should be in his hands.

Then, of course, the Queen Bolshevik herself, Comrade Alexandria Ocasio-Cortez, led the charge to chase away Amazon’s new headquarters.

Amazon would have brought billions of dollars and 25,000 jobs to the city. But the Bolsheviks had to torpedo that idea, because some rich people would have also benefited.

Then NYC demonized hedge fund manager Ken Griffin for spending $240 million on an apartment in Manhattan. The government introduced new taxes– in addition to property taxes– specifically targeting him, and others who invest tons of money to live in the city.

Not surprisingly, this all made Ken Griffin back off his plans to move his $29 billion hedge fund from Chicago to NYC.

These wealthy immigrants who fled Europe’s insane taxes might soon realize they’ve jumped out of the frying pan and into the fire…

Sure, New York City is not as Communist as China. Come to think of it, perhaps that should be Comrade de Blasio’s new slogan– “New York: Not as communist as China…

Not quite.

And yet, nearly all of the 2020 Presidential candidates are crawling over each other to out-Bolshevik one another.

Despite the fact that Sweden abandoned it’s wealth tax when it didn’t work, and France eviscerated it’s wealthy population, Elizabeth Warren proposes the same plan.

Bernie Sanders does his part by proposing shockingly high estate taxes, much like the inheritance taxes many of these wealthy immigrants are leaving behind.

We’ve heard calls for 70% income taxes, nationalization of entire industries, and free EVERYTHING.

Again, this is precisely why many of these people left their home countries in the first place.

But that’s the funny thing about wealth: it’s incredibly mobile.

Centuries ago in the Middle Ages, wealth was tied to the land. If you were rich, it’s because you had huuuuge tracts of land, and legions of medieval serfs working for you.

That was all fine and good. But it was virtually impossible to pick up and move… and bring your welath with you. The King could always confiscate your lands. And you’d instantly become poor (or dead).

Today, wealth is portable. We can shift funds across the world with a mouse click, and spread our assets across multiple jurisdictions and territories with hardly any effort.

The world is a big place, and there are a lot of jurisdictions where wealth, talent, and productivity are still highly regarded.

Just a three hour flight from New York City, Puerto Rico rolls out the red carpet for people who want to contribute to the economy.

As we’ve discussed before, Puerto Rico offers a 4% corporate tax rate, along with ZERO dividend tax when you take the money out of your company and put it in your pocket.

If you live in the US (on the mainland, that is– since Puerto Rico is part of the US), you’ll pay 10x that amount in federal tax alone, not including state tax.

Regardless of whether or not this is a good option for you, the lesson remains: the ability to remain MOBILE and AGILE is a large part of any Plan B.

[A very important part of this is having a SECOND PASSPORT– which you could obtain in a number of ways: ancestry, residency, or even ‘economic citizenship’.]

Whether you are from China, Bangladesh, France or the USA, there may come a time you decide it’s time to hit the eject button and get out of Dodge.

This can happen suddenly. And it’s best to have a plan in place before you need it.

Think about it like you would an insurance policy: you don’t call the insurance company after your roof catches fire. You have it in place as soon as you buy your home… and sleep well knowing that you’re covered.

That’s all a Plan B really is. It’s a perfectly sensible thing to think about.


from Sovereign Man