Why Puerto Rico should be on your radar

In the year 1841, people across countless sleepy villages in Ireland were participating in the most advanced census that had ever been conducted in European history.

The whole of Ireland was still under the control of the United Kingdom at that point, and parliament had passed the “Population Act” the year prior to modernize their national statistics.

According to the data collected, Ireland’s population in 1841 was approximately 8.25 million.

That was the high water mark.

Just four years later, Ireland was plagued by the Great Famine (also known as the Potato Famine), in which over 1 million people died.

Another 2 million left Ireland, never to return. They made new lives for themselves in Boston, London, and New York.

The next several decades in Ireland gave rise to a deeply socialist movement known as the Land War, aimed primarily at seizing and redistributing private property.

This compelled even more people to flee.

By 1926, Ireland’s population was less than HALF of what it had been in 1841.

But the misfortune didn’t stop.

Ireland was hit hard by the Great Depression. And they tried to fix it by resorting to onerous taxes and tariffs, costly trade wars, and debilitating regulation.

The Irish economy continued to stagnate for decades, falling farther and farther behind the rest of Europe, even at a time when other European nations were themselves devastated by war.

It wasn’t until the 1980s, nearly a century and a half after the Great Famine, that the Irish government took a different approach

They began aggressively deregulating business and cutting taxes, including an experiment with a 10% corporate tax rate on manufacturing enterprises.

The efforts started working; multinationals began moving in to take advantage of the educated, English-speaking workforce and the low tax rates.

Within a decade, Ireland was one of the fastest growing economies on the planet. And the government doubled down on its pro-business initiatives by enshrining a 12.5% corporate tax rate, one of the lowest in the developed world.

It’s no coincidence that Ireland boasts one of the healthiest economies in Europe– a rare bright spot on a continent plagued by perpetual debt crises and radical socialism.

Ireland is a fantastic case study of how low taxes and economic freedom can help drive prosperity for everyone.

And I intend to tell this exact story to the Governor of Puerto Rico when I see him at a private function this coming weekend.

Puerto Rico is in a similar position right now; it’s not exactly the Great Famine of 1845… but a decade+ long economic depression has completely devastated this island.

When people come here to visit and see all the blight on the island, they always ask me, “Wow, did the hurricanes do that?”

“No. Ten years of economic stagnation did that. The hurricanes just finished it off.”

Like Ireland in the 19th century, Puerto Rico has lost a lot of its population– nearly 20% in the last decade. And most of those people are probably not coming back.

They’ve resettled in places like New York, Florida, etc. where the wages are higher and the jobs are plentiful.

Back here in Puerto Rico, the unemployment rate is still hovering around 10%. And well-paying professional jobs are difficult to find.

Even more than 18-months after the hurricanes ravaged the island, electricity here is still unreliable (and the power company is bankrupt).

The roads are in terrible condition. And the government has had to trim a number of programs and basic services.

In the midst of all these challenges, I find it remarkable that they followed in Ireland’s footsteps and passed some incredibly ambitious tax legislation to attract productive individuals and businesses.

We’ve talked about these tax incentives several times before; individuals can live in Puerto Rico and pay 0% tax on their investment income, while certain businesses can qualify for a 4% corporate tax rate.

(The individual incentive primarily benefits US citizens; foreigners who want to take advantage would have to go through US immigration, since Puerto Rico is a US territory. But ANYONE can benefit from the corporate tax incentive.)

Again, this is simply astonishing.

Most politicians would have gone down the road of higher taxes and more socialism. Soak the rich and chase them out.

But instead they decided to roll out the red carpet, hoping that the incentives will create jobs and prosperity.

So far it’s working, and I’m seeing it first hand.

The unemployment rate is slowly coming down and economic growth is finally picking up steam.

Don’t get me wrong, there’s a LONG way to go and an absolutely absurd amount of regulations they need to cut in order to truly streamline doing business here.

Hiring and firing employees in Puerto Rico, for example, is a lengthy process, and I still can’t make heads or tails of the paperwork.

And there are so many various government agencies involved in doing business here, each of which has its own separate reporting requirements.

But as they continue to unwind that bureaucracy, Puerto Rico has the potential to emerge as one of the most compelling places in the world to do business: direct access to the US market, without any of the tax consequences.

At the moment there’s also an incredible amount of opportunity here.

For example, a general contractor with experienced crews can make an absolute fortune in Puerto Rico given the demand for new construction, from low-income housing to custom luxury homes.

Bottom line: I think the worst is over for Puerto Rico. The government here has been doing the right things to get the economy moving again… and it’s working. So I want to strongly recommend that you keep this place on your radar.


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Five important stories we’re paying attention to

Last week we started a new feature in Notes from the Field– a Friday roll-up of bizarre, often overlooked stories that my team and I think are following with great interest.

Based on the positive feedback we received from last week’s article, we thought we’d continue the trend. So here are a few important stories that we’re paying close attention to:

The City of Chicago Paid $113 million in police misconduct cases last year

Call me crazy, but this strikes me as a LOT of money to pay in settlements over police misconduct, which includes things like excessive force, brutality, etc.

In 2017 the Chicago police paid around $60 million in settlements… so the 2018 total of $113 million was almost DOUBLE that figure, nearly 100% growth in a single year.

What’s more– over the past decade, Chicago has paid out an average of one police misconduct lawsuit every two days.

That’s unbelievable. But perhaps the most unbelievable part is that the bill for these misconduct settlements are paid for by– you guessed it– the taxpayers.

And the first country to create a national DNA database is . . .

Rwanda — the African nation known for the 1994 genocide which killed up to a million members of a minority group — could become the first country to implement a national DNA database.

The proposal would require all 12 million citizens to submit DNA that will be stored by the government. The purpose is to crack down on rampant crime.

But the clear potential for abuse should be obvious… and sets an ominous standard for the rest of the world.

Amazon fever spreads as another business pulls out of NYC

Hedge fund billionaire Ken Griffin was already getting publicly roasted over buying the most expensive apartment in NYC history for $238 million.

Just like the Amazon headquarters that had been planned for New York City, you would think residents would be happy to have that kind of capital injected into their economy. His property taxes alone would amount to millions of dollars each year.

On top of buying the most expensive apartment in New York, Griffin was also planning to move the headquarters of his $29 billion hedge fund to the Big Apple.

But protests over a tax break for Amazon (which led the e-commerce giant to pull out of its planned New York HQ2) are causing Ken Griffin to rethink those plans, citing what he calls “the current climate”.

No doubt this will be celebrated as another victory by the anti-capitalists.

US State Department denying visas to people investigating US war crimes

This one is really bizarre: the US State Department has revoked and will deny new visas to anyone involved in the International Criminal Court investigations of US war crimes in Afghanistan.

You read that correctly: the ICC is conducting a probe into allegations of war crimes by US forces in Afghanistan. But rather than cooperating with the investigation and being transparent about the proceedings, the government is trying to prevent them from entering the country.

Federal Reserve rejects a bank for being too safe

As a banker, this one has me totally perplexed.

There’s a new bank in the United States called “TNB USA”. Its business model is simple: park 100% of its customers’ funds in the Federal Reserve. They won’t make loans, they won’t gamble away their customers’ savings on the latest investment fad.

Yet when TNB applied for a master account at the Federal Reserve, they were REJECTED because the Fed thinks the business model is too risky.

That’s right. According to the Fed, NOT taking any chances with your customers’ savings is risky. Unreal. We’ll definitely be talking more about this one next week.


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The 10th Circle of Hell

On the evening of March 25 in the year 1300, Italian poet Dante Alighieri stepped through the gates of Hell, passing beneath an overhead inscription that read “Abandon all hope, ye who enter here.

Dante summoned all of his courage and proceeded, plunging deeper into the despair of hell.

This is the ‘Inferno’ tale of Dante’s Divina Commedia, an epic poem completed just before his death in 1321.

Dante’s version of hell is divided into nine concentric circles, each representing a different category of evil. The deeper they go, the worse the evil… and the worse the torment.

The Second Circle, for example, is for adulterers, who now spend eternity being rocked back and forth by strong winds.

The Seventh Circle is for violent murderers and tyrants, who are condemned to eternally drown in a river of boiling blood and fire.

Worse than murderers and tyrants, however, are the fraudsters and impostors who spend eternity in Circle Eight.

Dante views these white-collar criminals as a disease on society, and condemns them to spend eternity suffering from their own debilitating, painful diseases.

But he saves the worst for last: liars.

Standing near the center of hell, Dante comes across the Ninth Circle. It’s a frozen lake, where, trapped inside the ice itself, are those guilty of betrayal, violating the trust that had been placed in them.

Dante views this as the worst form of evil and invokes Biblical figures like Cain (who killed his brother Abel) and Judas Iscariot who are infamous for their betrayal.

It’s unfortunate that Dante stopped at nine. Because if there were a 10th Circle of Hell, I could nominate a few candidates.

I say that because I have unfortunately made a terrible mistake.

Off and on for the past few years, I was an investor in an arrangement that turned out to be a complete fraud. And a number of other people invested in this as well because of me.

The two people who ran the scheme spent years building a sterling reputation, all the while manufacturing phony documents, fake IDs, and mountains of evidence to prove that their operation was completely legitimate.

And they fooled a lot of very sophisticated people, including some of the most prominent investment banks and financial media in the world, in addition to external auditors, lawyers, etc.

Just like serial killers who go on a violent rampage, I’m not going to dignify these scumbags by mentioning their names. At least, not yet.

[We’ve already made efforts to notify anyone who may be affected by this fraud.]

One of the individuals has already been apprehended. And the other (I suspect) will soon be sporting a DayGlo orange jumpsuit.

Ever since I discovered this I’ve been working nearly round-the-clock to fix it. But because there’s still so much ongoing, I can’t say much else.

As I’ve told some of the other investors, I have no intention of broadcasting our battle plan to the enemy.

The larger point behind this letter is to simply let you know that I made a mistake.

I’ve spent nearly ten years writing this column, providing countless ideas and research. But I don’t always get it right.

And whenever that happens, I think it’s important to get out in front of it, acknowledge my mistake, and do everything I can to fix it.

As a final point, I also want to let you know about an important internal change here at Sovereign Man.

Some of you know that I’ve taken on a quieter role in the organization over the past two years while other people ran the day-to-day operations of the business.

Well, effective immediately, I’m back in the driver’s seat. And I’m looking forward to continuing this journey together with you, and with the exceptional team of professionals at Sovereign Man.


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The US government canceled 362,000 passports last year. Was yours one of them?

Starting in 2021, Americans will require permission to visit Europe… technically the 26 borderless countries within Europe’s Schengen area.

The process will start out simple enough, taking about ten minutes to complete and costing around $8.

The EU estimates it will grant about 95% of the Americans who apply three years of access to the region.

But what if you are part of that unlucky 5%?

Over 12 million Americans travel to Europe each year. So upwards of 600,000 Americans could have trouble entering the EU starting in 2021.

That’s if everything goes according to plan…

But if these Americans had a passport from within the region– like Italy or Spain for example, then they wouldn’t have to rely on chance.

And having a second passport would help them from some potential serious issues at home, too.

For instance, last year the US government cancelled 362,000 passports, all from people who they believed owed some back taxes.

I say ‘believed’ because they don’t actually have to prove it.

There’s very little due process– they don’t have to go in front of a of judge and provide evidence to an objective, independent third party.

Instead, revoking a passport is a simple administrative procedure.

Aside from taxes, the government can also deny or revoke a passport if you owe (or if they believe that you owe) more than $2,500 worth of child support.

That’s how it is now. But with the rise of so many socialist politicians, who knows what excuse they might come up with next to cancel a passport.

Having multiple passports is a great insurance policy.

It means that you’ll always have a place to go, where you can live, work, invest, bring your family, etc.

And it also means you have the ability to move and travel.

If you only have one passport and some bureaucratic blunder causes yours to be revoked or frozen, your whole life can be turned upside down.

Fortunately there are a number of simple, cost effective ways to obtain a second passport (which, by the way, is 100% legal).

If you’re part of what I call the lucky bloodline club, you could qualify for a second citizenship and second passport, just for having ancestors in countries such as these:

  • Armenia
  • Germany
  • Greece
  • Hungary
  • Ireland
  • Israel
  • Italy
  • Latvia
  • Lithuania
  • Luxembourg
  • Poland
  • Portugal* (see note below)
  • Romania
  • Spain* (see note below)
  • United Kingdom

Ancestry is generally the easiest and cheapest way to get foreign citizenship. But it can take time.

The process usually involves contacting your nearest consulate and setting up an appointment… which might take months depending on the consulate.

But that will give you time to gather all the necessary documents proving your line of ancestry—things like your grandparents’ birth, death, and marriage certificates.

*Then there’s an ancestral quirk that could qualify you for a second citizenship in Spain or Portugal. Both countries brutally expelled all Jewish residents around 500 years ago. And now they offer amends in the form of citizenship for the descendants of “Sephardic” Jews.

Also if you’re Jewish, you easily qualify for Israeli citizenship, which comes with great tax benefits if you actually move there.

And by the way, all passports aren’t equal. Many countries on this list are among the top ranked passports according to our Sovereign Man Global Passport Ranking.

For instance, a German passport is ranked 7th best in the world, because it gives you visa free access to 158 countries which cover almost 60% of the Earth’s surface, and account for 77% of the world’s GDP (Gross Domestic Product).

Italy is ranked 8th, and Luxembourg, UK, Hungary, and Greece are all in the top 16.

A US passport falls 26th in the rankings.

There are other ways to get a second citizenship.

If you were looking to move abroad anyway, spending a little over two years in Argentina makes you eligible for a passport. Right now it’s cheap too, with European style for South American prices.

And for as little as $100,000 you can expedite the process and obtain a second citizenship by investing in a country. Many Caribbean countries offer this deal, and so do European countries like Austria, Bulgaria, and Malta.

Whatever route you take, you definitely want to get the process started now. Here’s a free resource that details four ways anyone can obtain a second passport.


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What the exodus from these states teaches us

Every week in Notes, we highlight the most important things happening around the world that can impact your wealth and your freedom.

But there are so many more things happening than we’re able to cover in these pages. So, we’re trying something new today.

Once a week, we’re planning to share a collection of stories we think are important, scary, amusing or maybe all of the above.

You can find the first edition below. We’ve seen a current theme recently…

Lots of people are breaking up with their states… and finding ones that treat them better.

New Jersey, this is an intervention… you’re only hurting yourself

Record numbers of rich are fleeing New Jersey, including billionaire David Tepper who alone took hundreds of millions of annual tax dollars with him.

Yet the state continues to raise taxes.

When the governor called for the newest proposal, he specifically targeted and demonized millionaires.

He wants to apply the state’s top income tax rate of 10.75% to anyone making over $1 million per year. Currently only those earning $5 million or more pay that rate.

Slow your roll New Jersey… apparently these people love you (for some reason), but they aren’t going to continue enabling this behavior much longer.

I love New York (I just can’t afford the taxes)

We’ve said it many times before, reducing your tax bill is one of the easiest ways to boost your bottom line.

We also talked about how the Socialist backlash, led by New York Rep. Alexandria Ocasio-Cortez, helped chase away Amazon–and millions of jobs, and billions of dollars–from New York City.

Turns out high New York City real estate taxes also chased away none other than AOC’s mom.

She now saves $9,600 per year on taxes living in Florida.

It’s not over until the dog moves out

Yes, sometimes you have to break up with your state, even if you used to love it. But that doesn’t mean the state is just going to let you go… after all, you’ve been through a lot together.

 Wherever you move, bring the dog. Otherwise you’re just sending mixed signals. If you say you moved, but leave the dog in New York, New York still thinks you’re together.

With so many rich people moving out, New York is doing deep-dive audits to make sure you really moved out… or if you just added another residence for tax purposes.

And where the dog lived was the deciding factor in one recent tax case.

1% of California Taxpayers pay 50% of the taxes… so what if they leave?

It would take just a few thousand of California’s richest residents fleeing to cause a budget catastrophe from which it would be hard to recover.

Meanwhile, the state only has 12% of the country’s population, but over a third of US welfare recipients.

With the new federal tax law capping state and local deductions at $10,000 California is looking less and less attractive.

And into Arizona’s loving embrace they go

Most of the 122,000 people who moved to Arizona last year came from high tax states.

People are likely moving to Arizona because they have less restrictive business regulations than most states.

One area where Arizona does need improvement is in their excessive occupational licensing requirements.

But unlike New Jersey, which doubles down on failing policies, Arizona is reversing course to welcome professional newcomers.

Legislators are working on laws to recognize out of state professional licenses, reduce fees, and waive requirements for certain jobs like salon workers.

State power is a great Plan B for a collapsing Fed

During the government shutdown earlier this year, the Governor of Utah offered an obvious remedy.

He wrote an article arguing that the solution to the instability caused by government shutdowns is to give states their power back… the way it was always meant to be.

And this separation of power actually makes the USA more antifragile against major crises stemming from mismanagement, and corruption in Washington DC.

So make sure you’re living in a state that would thrive without the feds, if that shutdown ever becomes permanent.


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103: Podcast with Marin Katusa: The best gold investments to make today

Today’s podcast is with my friend and former colleague, 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.


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One thing Congress gets right: funding their own pensions

Turns out Congressmen make a lot of money…

A study found that while the average American’s net worth increased 3.7% per year between 2004-2012, members of Congress averaged 15.4% annual gains.

That high level of pay means half the members of Congress are millionaires today… and continue to collect their $174,000 annual salary.

Of course it’s you, the taxpayer, paying that cushy salary.

But did you know the taxpayer also foots the bill for insane retirement benefits for Congress?

Each retired member can start collecting a pension at age 62 if they’ve spent just five years in Congress.

And they’ll collect 80% of their $174,000 annual salary.

That’s almost $140,000 a year, for the rest of their lives… for five years of service.

Where can I sign up?

Meanwhile, 40% of Americans can’t cover an unexpected $400 emergency expense… 57% have less than $1,000 in savings.

And a third of baby boomers—the generation currently retiring—have NOTHING put away for retirement.

While Congress’ pension is secured by your tax dollars, only 13% of regular Americans have pensions today. And even if you were promised one, collecting it is another story…

A recent Boston College report estimates 25% of private US pension funds—the pools of capital that pay out retirement benefits—will go bankrupt in the next decade. Public local, state, and federal pension funds are in even worse shape: $7 TRILLION short on what they promised to pay retired government workers.

But most Americans are relying on a different broken retirement fund… Social Security.

The Social Security Administration admits it is $50 trillion underfunded, and will run out of money by 2034.

That means cutting payouts, raising the retirement age, or both. And even that is only a short term solution…

There are, however, at least two Senators who see the injustice in all of this. They introduced legislation to eliminate pensions for members of Congress.

They say it’s not fair that while the poor get poorer, Congress gets richer.

The median American household net worth declined .94% per year from 2004 to 2012. And over the same period, 100 members of Congress watched their net worth gain 114% per year.

Members of Congress added $316.5 million to their net worth during this time period.

(But it wasn’t the Socialists in Congress who introduced the bill to address this wealth gap. They’re happy to ignore this prime example of the rich literally stealing from the poor.)

Getting rich at the taxpayers’ expense, collecting a salary 3x the median household income, and getting a six-figure lifetime pension…

That’s Congress’ reward for sinking the US government $22 trillion in debt… for creating debt bubbles in housing and student loans… for utterly failing to address a broken Social Security system… for wasting billions on things like a broken Obamacare website, defending Congressmen from sexual assault lawsuits… and fighting like children during a government shutdown while millions of Americans were out of work.

But whatever happens next with the economy, whatever destruction their actions cause, rest assured, they’ll take their money and run…

Just like they did in 2008 before the big financial crash. Strange how 34 different members of Congress rearranged their investment portfolios within two days of talking to top Treasury and Federal Reserve officials.

One Senator even sold up to half a million dollars’ worth of Lehman Brothers stock the day after he met with the Treasury Secretary… just months before the firm declared the largest bankruptcy in history.

These politicians suffer no consequences for the policies they force on the entire nation. On the contrary, they personally gain tremendously from the turmoil they cause.

Even if their pensions are cut — I’m not holding my breath — it is largely a symbolic move. It won’t make a dent in the dire debt and liabilities of the US government.

Unlike members of Congress, you’re on your own for retirement.

One option is, if you can’t beat them, join them. Run for Congress and watch your net worth skyrocket. Even without their golden pensions you’ll be all set for retirement.

But a more realistic (and ethical) solution is to plan your retirement assuming the government promises will not be fulfilled.

One solution is to take matters into your own hands by using self directed structures for your IRA or 401(k).

But perhaps a better solution is to become a better investor. Saving an extra couple grand a year, and putting it into the right places can make a huge difference over the course of a couple of decades.

Sovereign Man’s Chief Investment Strategist Tim Staermose was on our Podcast last week explaining two different targeted investment strategies with proven track records. You can listen here.

Worst case scenario is we are wrong—the government by some miracle saves Social Security, pays off the debt, funds its pensions, doesn’t tank the economy and avoids another recession…

And you’ll still be better off having prepared for the worst.


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Europe is so weak it can’t even handle 0% interest rates

Europe’s leading economic policy makers have officially thrown in the towel.

Last week, the European Central Bank admitted economic conditions are so dire that it already has to reverse its monetary policy.

I’ll get back to that in a minute…

Following the Great Financial Crisis in 2008, central banks printed trillions of dollars and pushed interest rates to their lowest levels in human history. Low interest rates (and lots of new money sloshing around the system) mean people should go out and buy things that would otherwise be out of reach… new houses, new cars, businesses, etc.

And, in theory, all of that activity creates jobs and helps the economy grow… in theory.

Ten years into this monetary experiment, central banks did create growth…

US Gross Domestic Product (GDP) was about $15 trillion in 2008. Current GDP is about $22 trillion. That’s $7 trillion of economic growth.

Impressive… until you figure the cost of that growth.

Over the same period, the US national debt increased from $10 trillion to $22 trillion.

So, it took $12 trillion of debt to create $7 trillion of economic growth.  

The marginal utility of all of this new debt is decreasing (remember this point for later). And it’s the same story all over the world.

The US economy is so dependent on cheap money, it can’t even handle 2% interest rates (the Fed hiked rates from 2.25% to 2.5% last December and stocks fell 20%).

But Europe is even worse. Europe has negative interest rates. And the European economy is so weak (it grew 0.2% in Q4), it can’t even handle ZERO percent interest rates.

Last week the ECB announced it would keep interest rates negative. And it’s starting its third round of cheap loans to banks (who, in turn, are supposed to lend to businesses and households).

The bank also cut its growth forecast from 1.7% (already pretty bad) to 1.1%.

The euro zone is the third-largest economy in the world. And, ten years after the GFC, it can’t keep the machine running unless interest rates are negative and it continues to dole out cheap cash to banks. This is a pretty big deal. And it’s the clearest sign yet of what’s to come… there’s trouble ahead.

Remember, the marginal utility of the money being printed by central banks around the world is plummeting. Each dollar they print produces less and less economic activity.

For example, the US only added 20,000 jobs in February (a far cry from the expected 181,000 jobs).

But they persist…

The ECB is all in on negative interest rates and easing. Canada recently warned its economy was weaker than realized. The US halted its rate hikes and may reverse course. Interest rates are negative in Japan and standing pat.

There are currently $9.7 trillion of negative-yielding bonds in the world (up 21% from October 2018 through January). I’d bet we’ll soon see the total number of negative-yielding bonds in the world surpass the 2016 high of $12 trillion.

When you’re in a world with trillions of dollars of negative-yielding debt, nothing really makes sense.

Interest rates are the price of money. And when that price is negative… what does that say about the world?

One of the best things to do in this economic environment is to own real assets, whether it’s shares of a thriving business, precious metals or other commodities.

For gold, you can buy either gold bullion or collectibles. And our friend, Van Simmons, says $20 gold pieces are one of the best deals in the market today. Collectible coins usually trade a big premium to the spot price of gold. But you can buy these coins for about the same price (even though the premium over spot has been as high as $1,700).

So you get exposure to gold and all of that potential upside. We wrote about it in Notes last year.

But exposure to other commodities, like copper, uranium, silver, etc. also makes sense.

I’m recording a podcast today with one of the best resource investors out there. I’ll send it out this week, but he’ll share some of his favorite ways to invest in the beaten-down resource market.

We’re about to see a world with a whole lot more negative-yielding debt. You should position yourself accordingly.


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Predictions for gold from a legendary natural resource investor

Here’s when you know that you’ve made it into popular culture…

It’s when you get credit for a great quote, but no one really knows who said it first.

If there’s any doubt, people’s go-to list is usually either Albert Einstein, Mark Twain or the former New York Yankees catcher, Yogi Berra.

For example, there’s the quote, “predictions are hard, especially about the future,” which is often attributed to Berra. And “compound interest is the eighth wonder of the world,” attributed to Einstein. For Twain, pick a random quote, and people may give him the credit.

Another guy who has the investing world quoting him – but hasn’t yet made it into popular culture – is legendary investor Rick Rule. Rick is the President and CEO of Sprott US Holdings and an expert natural resource analyst..

But Rick’s knowledge goes well beyond just natural resources.

Regarding economic cycles, Rick has famous, often-repeated quips like, “Bear markets are the author of bull markets, and bull markets are the author of bear markets.” In his 40 years as an analyst, Rick has lived through the highly cyclical commodities markets.

Low prices in a sector cause lots of producers to shut their doors. Eventually supply of that commodity starts to drop and prices level off. Then, when demand eventually returns, there isn’t enough supply or companies producing to the commodity to meet demand. Prices soar. And the cycle starts all over again…

We spoke with Rick in December of last year for our premium publication, Sovereign Man: Confidential. He was one of the people on our all-star panel that we asked for their thoughts and big predictions for 2019.

So, with one quarter in 2019 nearly gone, I thought we could check-in on Rick’s 2019 look-ahead on gold so far…

Notes readers know we’re bullish on gold.

We haven’t had a major gold discovery in the past 15 years (and miners have cut their exploration budgets to 11-year lows to survive tough times).

And after a grinding, eight-year bear market, the gold price is starting to tick up.

Remember, bull markets always follow bear markets. Gold is about to get more expensive. Rick agrees…

In December, he suspected that a gold market had started or was about to begin.

Besides nearly a decade of low gold prices, America’s increasing debt will also drive prices higher.

“We need to ponder the fact that our communal debt, federal, state, and local, both on balance sheet and also off-balance sheet by way of entitlements, is estimated by the Congressional Budget Office to be nudging $200 trillion.”

Meanwhile, “household net worth across the United States, assets minus liabilities, not including our communal liability… is about $100 trillion.”

Simply put, the US has stacked up its liabilities, without the assets to back them up.

With this much outstanding debt, the US will have to either turn on the printing presses full-blast and devalue the US dollar, which would dramatically increase the gold price.

Or, the US could risk a default, which would have investors scrambling away from the dollar, and again, would increase the price of gold.

This growing debt bomb is actually becoming relevant in 2019.

Buyers of US government debt, like China, are getting the picture and decreasing their exposure to US liabilities. And the Federal Reserve isn’t buying as much debt as it did in the last decade.

Rick sums it up, saying “Our ability to continue business as usual is beginning to be constrained by arithmetic.” Just last week, Treasury Secretary Mnuchin suspended investments in two federal retirement funds to prevent exceeding the debt ceiling.

For all these reasons, Rick’s investment solution for 2019 is to return to fundamentals.

“I think 2019 will be probably an excellent year to establish positions in investments that one is attracted to on a fundamental, rather than a momentum, basis.”

There’s nothing more fundamental than gold. It’s been a proven store of value for over 5,000 years. It’s protected people’s wealth during times of runaway inflation, wars and massive government debt.

And today, gold is one of the few asset classes that’s not been bid up to near historic highs. If the world begins to lose faith in the US dollar – as Rick thinks is possible – then we’re in the beginning stages of what could be a historic bull run.

Gold has plenty of room to run from here.

I encourage you to diversify at least a portion of your wealth into precious metals.


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He retired at 35 – here are some of his investment strategies

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.

You can listen to the podcast here.

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.


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