Local government foils evil terrorist entrepreneurs once and for all

Tens of thousands of years ago, humankind was practically an endangered species.

Our early proto-ancestors had little means to protect against the harsh elements or defend against terrifying predators.

And finding enough food was a constant challenge.

Tribes of humans would roam from place to place, foraging for whatever they could eat until they had exhausted nature’s resources… and then be forced to move on to a new location.

And the idea that early humans were champion hunters is largely myth; we were scavengers for the most part, nibbling scraps off dead animal carcasses that had already been picked clean by predators higher up the food chain.

It was hardly a sustainable way to live.

Then everything changed around 10,000 years ago.

Our ancestors discovered that they could plant seeds in the ground and grow their own food. LOTS of food– far more than they could eat.

And that excess food could be invested– to support the labor of other members of the tribe to develop better tools and build structures… or to trade with other tribes for their surplus foods.

It was the first time ever that human beings enjoyed a regular surplus, where they could consistently produce more than they consumed.

I call this the Universal Law of Prosperity: consistently producing more than you consume.

And if our early ancestors had not discovered this simple principle, we would likely all still be squatting in the wilderness.

The Universal Law of Prosperity applies to everyone equally– whether proto-humans, modern day individuals, nation states, businesses, etc.

And it’s easy to understand: if you spend more than you earn, sooner or later you’re going to run into serious trouble.

We talk about this a lot in our regular conversations– there are so many violations of this principle everywhere you look.

Some of the most popular companies in the world these days burn through cash, consistently spending far more than they earn.

Governments are in debt up to their eyeballs, blowing trillions of dollars on programs they cannot afford.

And too many individuals are living way beyond their means, consuming far more than they produce.

In most of the West– and ESPECIALLY in the Land of the Free– the entire system is designed for consumption.

Think about it: the United States is easily one of the best places in the world to be a consumer.

US consumers can buy almost anything they want. They have access to the finest brands, the best restaurants, the largest malls and markets.

They can order anything online and get same day delivery. Soon drones will float down from the heavens to deliver boxes straight to their doorsteps.

And there is no shortage of banks and finance companies willing to step up and offer US consumers endless quantities of debt.

After all, why bother saving up for anything when you can indulge now and push off the consequences into the future?

Yes, the United States has consumption down to a science. And sadly this has become the most critical component of the US economy.

Economists fret over how much consumers spend during the holiday season; as they say, ‘the US consumer drives the economy.’

That’s kind of a pathetic statement. No one ever says the US producer drives the economy. Or the US entrepreneur drives the economy.

That’s probably because governments make it harder and harder to be productive.

One ridiculous example is Louisville, Kentucky– where hardworking entrepreneurs are being punished for the egregious crime of selling food to hungry people.

They’re specifically targeting mobile food trucks– the guys who sell hot dogs and burgers on the street.

A few years ago Louisville’s local government tried to ban them altogether, but lost in a lawsuit.

Now the city has recently put forth new rules requiring mobile food trucks to relocate at least 250 feet every TEN MINUTES.

And they would only be allowed to operate during daylight hours… forced to shutter when the sun goes down like some bizarre zombie apocalypse.

I can just imagine what nefarious entrepreneurial terrorist plot these do-good bureaucrats think they’re foiling with such heavy regulations.

And I’m sure the fine citizens of Louisville will sleep easier knowing that the sweet sound of the Ice Cream Man will fall silent at sundown.

Another example– just last week, the New York Police Department raided multiple apartment buildings, issuing 27 citations for suspicion of Airbnb rentals.

Well it’s about damn time these vile criminals were brought to justice.

Imagine the nerve of some owners who actually felt entitled to rent out their own private properties to supplement their incomes in one of the most expensive cities in the world while simultaneously providing cost effective lodging options for out-of-town travelers.

I truly hope that world leaders can come together in a new Coalition of the Willing to defeat this evil scourge once and for all.

It’s the same everywhere you look.

Want to start a business? File a bunch of forms, apply for permits, deal with bureaucracy.

As we’ve talked about before, most states in the Land of the Free require absurd and costly licensing requirements for even simple occupations like being a locksmith or house painter.

That’s the whole point: it’s easy to consume… difficult to produce.

It’s easy to go into debt. It’s difficult to save.

(Just think– how much does your bank pay in interest? 0.03%? Even if you’re lucky enough to be productive and save money, the return is pitiful.)

All this is literally the opposite of what it takes to create prosperity.

This isn’t rocket science. If everything in the system favors consumption over production, debt over savings, it’s pretty easy to see where that trend eventually leads.



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This precious metal has almost NEVER been so cheap

Even after yesterday’s 600-point plunge in the Dow, bargains are hard to find.

The air is just starting to be let out of the 10-year “everything bull market” caused by a decade of ultra-low interest rates and the Fed printing trillions of dollars.

I don’t know if the volatility we’re seeing today is just a blip or the start of a much larger correction. But I do know we’re closer to the end of this cycle than the beginning. And a correction is due.

While we’re waiting on the market to plunge, remember, the US has amassed a record $21 trillion in debt… and is running $1 trillion deficits. And this is during “boom” times. Normally deficits of that size occur when governments are funding giant wars or staving off a recession.

At the same time the government is ratcheting up its debt pile, the Federal Reserve is reversing course and raising interest rates, meaning all of that debt will be more expensive in the future (and 70% of the government’s debt matures in the next five years).

Last year, the government spent $263 billion just paying the interest on its debt. A recent Wall Street Journal article estimates the government will spend more on interest than it spends on Medicaid in 2020; more in 2023 than it spends on defense and more in 2025 than it spends on all nondefense programs.

By 2028, the Congressional Budget Office estimates the US government will be paying nearly $1 TRILLION in annual interest payments.

It’s a vicious cycle of debt. And it will eventually mean disaster for the US dollar.

Diversifying your wealth outside of your home currency is an important part of any Plan B. That’s why I advocate owning gold, holding money in offshore bank accounts (ideally in a different currency) and investing in productive assets domestically and abroad.

But today, you’ve got an opportunity to diversify your wealth outside of the US dollar buying a precious metal that has almost never been this cheap in history.

Today, an ounce of gold costs $1,200. It’s one of the few assets that hasn’t exploded to record high prices in the decade.

But you can buy an ounce of platinum for just $857 today – a nearly 30% discount to the price of gold.

That’s one of the largest discounts in history (historically platinum is one-third more expensive than gold). And it’s an incredible bargain considering platinum is 100 times rarer than gold and costs way more produce.

Even the richest platinum ore gives up only about one ounce of end-product for every five tons of it mined.

More than 70% of the world’s platinum supply is mined in South Africa, and vulnerable to supply interruptions due to the power shortages that plague the country… so in addition to being an excellent way to diversify out of the dollar, owning platinum is also going long instability in South Africa – a solid bet.

The biggest industrial use for platinum is in catalytic converters for automobiles. And the metal has sold off recently over trade war fears and the emergence of electric vehicles.

However, every time platinum’s discount to gold has gotten so large, it’s corrected itself. Sure, it’s possible gold falls, but it’s much more likely that platinum soars given that gold is already so cheap.

There are a few ways you can gain exposure to platinum. You can buy the physical metal from a dealer. You can also buy a Platinum ETF – our friends at Sprott offer a good one. Or you can get more speculative and buy small, platinum miners.

One of the best investments of Tim Staermose’s career (Tim is Sovereign Man’s Chief Investment Strategist) was a small, Zimbabwean platinum miner… He made something like 20 times his money.

So if you want to get some wealth outside the dollar and pick up an insane bargain at the same time, consider platinum today.


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Trouble brewing in Hong Kong

Hong Kong has for decades been one of the most stable places in the world.

When the British took Hong Kong over in the late 1800s, it was nothing more than an irrelevant backwater made up of fishing villages and illiterate fishermen.

But after a few decades, it became one of the most prosperous places in the world.

And that wasn’t an accident. Hong Kong allowed unbridled capitalism to dominate and it worked extraordinarily well.

Sure, a handful of people got super wealthy. But, in general, there’s been bountiful prosperity across the board.

As a result of the prosperity and bent toward capitalism, Hong Kong has become one of the most important financial centers in the world. And for decades, it’s had a very well capitalized banking system.

And one of the key reasons for that is the Hong Kong dollar (HKD) has been pegged to the US dollar (USD) since the early 1980’s.

The peg is a double-edged sword for Hong Kong.

The key advantage is international stability. As long as the USD remains the global reserve currency, the fact that it’s interchangeable with HKD means economic stability.

The disadvantage is that the peg doesn’t give Hong Kong any independence. They have to follow US interest rate policy regardless of whether or not it’s good for them.

And that’s definitely caused problems, which are accelerating this year.

The US is just coming off a decade of ultra-low interest rates meant to boost domestic growth. But HK, which wasn’t in a dire, economic situation to begin with, has also had a decade of low rates.

One of the results of that is that Hong Kong has become one of the most expensive property markets in the world. It makes London look cheap.

And the property market in Hong Kong is highly leveraged. People typically get bank loans to buy property without putting much money down.

And a lot of those loans are like what we saw in the US in 2008 – no money down, low teaser rates, variable rate loans, etc… the type of lax lending that rocked the entire financial system.

I expect we’ll see a similar, financial crisis in Hong Kong down the road as a result of this lax lending against property.

And now that interest rates are rising in the US, they’re rising in Hong Kong…

So the local mortgages will reset at higher rates that people can’t afford. I expect we’ll see a wave of defaults that will slam the banks big time.

If that were the only problem in Hong Kong, I wouldn’t be terribly concerned because the banks there are so well capitalized.

However, the ongoing dispute between the US and China adds another risk.

The US-imposed sanctions against China are problematic and will force the Chinese to scramble for the dollars they need to engage in international commerce. Even though the dollar isn’t the local currency, China still needs dollars to buy oil, copper and pretty much everything else on the global stage.

And that takes a steady supply of dollars.

Right now, China gets a lot of USD from the US, because China runs a big surplus with the US. And those dollars fund China’s deficit with its other trading partners.

If that dollar supply gets cut off because of a trade dispute, China will need another supply.

And where is there a giant supply of dollar’s available for the Chinese?

Hong Kong is sitting on around half a trillion USD.

In a crisis, China could take those dollars and repeg the HKD to the renminbi.

I’m not saying that’s likely. But it’s more of a possibility now than it has been in the past. And things change.

Still, I felt compelled to raise this with you as a potential risk – albeit a somewhat minor one.

I’ve often discussed holding HKD as a risk-free way to hold USD. If the USD ever tanked, Hong Kong could remove the peg and allow the HKD to float freely.

But this new risk changes the situation…

Enough so that I’m taking my money out of HKD and reducing my exposure to Hong Kong banks.

I don’t think this will become a major catastrophe or that this HKD scenario is even that likely. But it is riskier than it was.

It’s sensible to take some money off the table. The HKD trades in a tight band with the USD and it costs very little to switch in and out.

And you can put that money into 28-day T-bills, which are yielding over 2%.

If I had to choose between making 2%+ in T-bills and the potential threat of the HKD being repegged to renminbi, I’m taking T-bills.

This week I’m telling Sovereign Man: Confidential readers more about what’s happening with the Hong Kong dollar and what they can do about.

But for now, I think it makes sense to take some money out of HKD. It makes sense regardless of what may or may not happen in the future.

And like many things we discuss regarding a Plan B, there’s no downside.


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Want a free $100K a year? Quit your job and move here…

According to the latest jobs report, averages wages for US workers increased 3.1% – the strongest growth since 2009.

 Median individual income in the US is now around $31,000, which means the typical American put an extra $1,000 in their pocket last year.

That’s solid extra cash.

But if you really want to see your wages grow, quit your job and become homeless.

 Just be sure you move to San Francisco.

There are about 7,500 homeless people in San Francisco.

The number of homeless in the city has stayed constant for years, but the rest of the population has been booming. And that expansion means tech companies and their workers are now coming face to face with homelessness on a daily basis.

And the collective guilt of the Silicon Valley elite is just too much to handle.

Before Tuesday’s election, San Francisco was already spending over $50,000 on each and every homeless person.

That’s well above the median individual income… and it actually rivals the median household income of about $60,000.

So the average homeless person in San Francisco is using up more resources each year than the average American household earns in wages (and has to pay tax on).

And that money does NOT include the costs of police officers, nurses, doctors, and prison staff who deal with the consequences of homelessness.

But on Tuesday, the good people of San Francisco saw fit to almost double that homeless benefit. 60% of San Franciscans voted for a tax on businesses to support homeless people.

And now the city will spend over $90,000 per year, for each homeless person in the city.

If those costs were split evenly among the residents of San Francisco, each man woman and child would fork over $770 per year to support the city’s homeless.

But Silicon Valley will foot the extra $300 million.

The new tax levies an extra 0.5% on large businesses’ total receipts… No, not profit, but revenue.

So a business could turn no profit, but bring in $100 million in revenue, and it would still owe the homeless people of San Francisco half a million dollars.

That’s half a mil that can’t be used to hire new workers or invest back into the business.

But why bother toiling for 3% wage growth anyway? Homeless people just got an 80% raise.

Now, each homeless person in San Francisco takes three times as much as the median individual income, and 150% of the median household income.

But hey, San Francisco is a rich city. Maybe they can afford to lift homeless people above the middle class.

So what’s the plan then? How will all this extra money be used to alleviate homelessness?

Actually… the money was the plan.

And it has been the plan for the 30 years that spending on homeless programs has increased in San Francisco.

And that plan hasn’t changed as homelessness has increased along with the cash.

So the new plan is throw more money at the same problem, and hope it goes away.

San Francisco doesn’t even have the metrics to say what “success” is with this new tax. Where is that money going? Who is it helping? Has it improved the situation? By what measures?

The data just isn’t there. No one has bothered to track it.

For $90k per person, you could hire someone to follow every homeless person around and clean up the, well, let’s say “mess” they leave behind on the streets.

Hell for that price, you could rent every homeless person in San Francisco a room at the Marriott every single night of the year, and still have money left over… or just buy them a home outside of town.

But the streets are still littered with waste, next to the tents that house the homeless on every street corner.

It should be obvious by now that the problem isn’t a lack of funding. The problem is handing out an absurd amount of free money to the homeless population and having absolutely no plan for how that money will be put to work to solve the homeless problem.

But now that there’s a free $100k worth of benefits up for grabs, why wouldn’t every hobo west of the Mississippi come running?

It’s a gold rush fit for the times we live in.


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Here are all the ways inflation is happening today

Something strange happened in the markets last month that signals trouble ahead…

When stocks fell from their September highs, you would have expected investors to run for cover in the world’s safe-haven asset – US Treasurys.

But that’s not what happened.

While stocks were plunging, Treasurys also fell. Yields on 30-year Treasurys increased to 3.4% from 3.22% (and yields have already more than doubled from their 2016 lows).

It’s a sign that the market is worried about the US government’s ability to pay its exploding debts and that inflation is creeping back into the market. That makes me a bit nervous because we haven’t seen inflation in a decade.

We’ve seen an increase in oil prices, food prices, rent and many other things that eat into people’s savings. Unemployment is low and US wages increased 3.1% in September (the highest in nine years). And core inflation is already running above the Fed’s target of 2%.

In general, inflation is nothing to panic about. The Fed is supposed to raise rates when inflation heats up, which it’s been doing.

But as rates have moved higher, we’ve already seen stocks and real estate fall.

The entire financial system has been dependent on super low rates for the past ten years. The Fed held rates at zero for a decade and printed trillions of dollars.

The increase in prices and interest rates to date is only the beginning.

Just take a look at what’s happening in the economy right now…

Food companies like Coca-Cola, Mondelez, Hershey and Kellogg are all raising prices as both ingredient and transportation costs increase. Kellogg’s CEO recently said in an interview, “We think 2019 will be more inflationary than we have seen historically since the recession.”

McDonald’s and Chili’s both raised prices.

Airlines are paying 40% more for jet fuel than they were a year ago.

Manufacturing companies are paying 8% more for aluminum and 38% more for steel than a year ago… and they’re dealing with a 10% tariff on Chinese goods.

Paint company Sherwin-Williams increased prices in its stores as much as 6% last month, with the CEO saying “Raw material inflation has been unrelenting and accelerating.”

Even Apple is falling victim to inflation. The company raised prices on its new MacBook Air and iPad Pro by 20% and 25%, respectively.

Companies are passing along price increases to you, the consumer. And that makes it harder for you to “tread water” financially.

The Fed will have to further boost interest rates in reaction to this inflation.

But it’s raising rates while the US government is running trillion-dollar deficits into perpetuity. And now it will have to pay more interest on that debt (which it already can’t afford).

The world hasn’t seen inflation in a decade now. But it’s coming. And while the Fed is raising rates to combat inflation, there’s zero chance it hits the perfect mix to keep markets chugging along.

Remember, we’ve already seen the stock market and real estate panic crash in response to a small interest rate hike.

And I think there’s more pain ahead as inflation really starts to work its way into the economy.

With inflation looming, I’d want to own some gold. I’m also happy waiting it out in 28-day Treasury bills, so I’m liquid when buying opportunities arise.

And next week, I’ll share another interesting asset you can hold to combat inflation (something that’s trading close to its post-crisis lows).


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Once again Warren Buffett has given us a major warning that everything is expensive

Buffett’s holding company, Berkshire Hathaway, just announced a blockbuster quarter, earning nearly $7 billion.

And Buffett’s still sitting on over $100 billion of cash. That means he’s got enough money to buy almost any company he wants, anywhere in the world.

But the only move Buffett made in the last quarter was buying $928 million of Berkshire Hathaway stock.

Some people might say this is a sign that Buffett thinks Berkshire’s stock is incredibly undervalued.

To be fair, nobody knows Berkshire better than Buffett. And shares may present a good value at this level – an all-time high price.

But it’s clear to me that Buffett simply can’t find anything else worth buying.

Remember, Buffett’s got over $100 billion in cash (and he could use debt to fund an even larger acquisition).

So he could buy stock in any publicly traded company. Or he could buy most any private company (the last time he did this was Precision Castparts in 2016 for $32 billion).

He’s got so much cash he could even buy any one of the 451 out of 500 largest companies in the US – Nike, Starbucks, Goldman Sachs, etc.

But, nope… He just bought back some Berkshire stock.

In addition, he’s selling longtime holdings like drywall maker USG and IBM (for a $1 billion loss).

I wrote about Buffett and his giant cash pile in February, just after Berkshire released its annual report.

Back then, Buffett had a whopping $116 billion. But still couldn’t find anything to buy. As he said:

In our search for new stand-alone businesses, the key qualities we seek are durable competitive strengths; able and high-grade management; good returns on the net tangible assets required to operate the business; opportunities for internal growth at attractive returns; and, finally, a sensible purchase price.

That last requirement proved a barrier to virtually all deals we reviewed in 2017, as prices for decent, but far from spectacular, businesses hit an all-time high.

As we wrote back then, it seems people are still willing to pay far too high a price for not that great of businesses.

Buffett is famous for saying “be fearful when others are greedy and greedy when others are fearful.” And he’s sticking by that mantra today.

Like Buffett, I’ve also been raising cash. In fact, I’m sitting on more cash today than at any other time in my life.

And, like Buffett, I’m mostly holding that cash in 28-day T-bills.

However, unlike Buffett, I don’t have $100 billion to spend.

If I make a 20-50% return on a $5 million investment, that’s meaningful to me. But that’s peanuts to a guy like Buffett.

He’s got to put billions of dollars to work to generate enough cash to make a difference. And that severely limits the areas he can hunt for value.

But I’m able to look at all kinds of opportunities – like loans backed by fine wine, loans backed by bullion or European real estate and various, small-cap stocks around the world.

Despite most markets trading at or near all-time highs, there’s still a ton of value if you’re willing to do some extra work and look outside the US.

In The 4th Pillar, Tim Staermose just identified a consumer products company in South Korea trading for a 12% discount to its net cash backing.

He’s also recommended a security that holds portfolio of blue-chip stocks (including companies like Starbucks) trading for over a 20% discount to their market value.

And those are just two of the many opportunities you can take advantage of today in his 4th Pillar portfolio.

Value investing has been left for dead as the dumb money has chased up the value of companies like Uber and Tesla.

But when you can buy a profitable company for less than the amount of cash it has in the bank, it’s pretty hard to go wrong.

I’ll bet Buffett would make those investments if he could.


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Politicians now threatening and encouraging violence in the Land of the Free

“Between now and November 6, you better put a catcher’s mask on your face because I’m going to stomp all over your face with golf spikes.

Unfortunately this isn’t trash talk from some middle school bully… it’s a public threat made by a Pennsylvania gubernatorial candidate to his incumbent opponent.

With the midterm elections tomorrow, I wanted to take some time today to remind you who your vote actually supports.

Politics has likely never been more divisive in the US… and the politicians continually stoke this flame, often times, like with the quote above, inciting their constituents to carry out violent acts against the opposing party.

It’s completely despicable that this has become the state of government in the land of the free… instead of focusing the public’s attention on solving the big problems the US faces (like debt), politicians stoke partisan flames to advance their own self interests.

And they encourage outright violence. One congresswoman encouraged supporters to attack members of the Cabinet if they saw them in public…

“If you see anybody from that Cabinet in a restaurant, in a department store, at a gasoline station, you get out and you create a crowd and you push back on them, and you tell them they’re not welcome anymore, anywhere.”

Calling for violence because you don’t agree with the opposing party is totally pathetic. It’s something I’d expect to see in a third-world country, not the world’s leading economic power.

And it’s one of the many, many reasons I don’t vote.

At the end of the day, you’re forced to choose between two, self-serving candidates who will say whatever BS they have to gain/retain power.

People think they can use their vote to get “the right guy in power.” But the truth is, the new guy just turns into the last guy… because the whole system is broken.

The government spends almost every tax dollar it takes in to pay interest on its debt and on entitlements like social security and Medicare.

And the government’s own projections show the country going only deeper and deeper into debt.

So any choice leads to the same set of dire, economic consequences.

And by voting, you’re saying you accept the current system. You may have your gripes, but you ultimately believe it’s fair and it works.

The reality is, there are far better ways to actually vote.

For one, you can vote with your feet… that’s something I did a decade ago when I moved abroad.

But that’s not for everybody… some people can’t just move.

But you can also vote with your dollars. You should take all the legal steps at your disposal to reduce what you owe the government.

If you don’t like the candidates, simply stop participating in the system. Stop giving them resources to squander “for your benefit.”

Remember, the government spends YOUR money, not theirs. So if you want them to stop wasting money, stop giving them so much.

One way to do this is to move to Puerto Rico, where you can pay 4% corporate tax and zero tax on capital gains through Acts 20 and 22.

I recently decided to do this.

You can also take advantage of opportunity zones.

Normally, you’d pay 23.8% capital gains tax (including the Obamacare surcharge). But through opportunity zones, you can trade in overpriced stocks and real estate and invest that money in designated “opportunity zones” across the US.

Not only will you defer your initial capital gains tax for up to seven years… you’ll pay ZERO capital gains tax on that new investment, forever.

I’ve got to stress, you should always follow the law when reducing taxes. Luckily, there are lots of incredible and completely legal ways to drastically reduce the taxes you pay.

So while everyone else lines up to vote in the midterms, then proudly posts a picture of their “I voted” sticker on social media…

Just remember, there are better ways to make your vote count.


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Even Warren Buffett is fed up with these guys. . .

It wasn’t that long ago that IBM was easily the most dominant tech company in the world… the king of its industry.

Back in the 1980s nearly every large company, government, and institution used IBM’s products and services. It was the ultimate.

Yet over the last 30 or so years, IBM went on to miss literally every single major tech trend in the industry’s history. 

Initially they totally owned the PC market… and then lost all of their market share to smaller rivals like Compaq and Dell.

They dominated in software… until that division too faded into obscurity as Microsoft became the industry leader.

IBM completely missed the Internet revolution. They missed mobile. Social. The cloud.

While Apple was launching the iPod and iMac, IBM randomly decided to spend billions of dollars of its shareholder’s capital to buy a consulting division from the accounting firm PricewaterhouseCoopers.

They briefly tried their luck at enterprise services, but then got embarrassed by Google, Microsoft, and Amazon.

IBM has basically been directionless for years, frustrating even Warren Buffett.

Buffett was a longtime shareholder of IBM, and as an investor he’s notorious for holding his positions ‘forever’.

But even someone with Buffett’s long-term thinking got fed up with IBM’s lackluster performance and rudderless leadership… and Buffett finally dumped all of his IBM stock earlier this year at around a $1 billion loss.

Bear in mind that IBM is a declining business– its revenue has fallen for 22 consecutive quarters.

Now the company is trying to turn itself around and play catchup with the rest of the industry.

Their new solution is buying a software company called Red Hat… for $34 billion.

This is the largest deal in IBM’s long history, and one of the largest acquisitions in global financial history.

But what’s really crazy is that IBM paid a HUGE premium, essentially paying 60% MORE for Red Hat shares than what they were worth prior to the deal.


More importantly, the price IBM paid amounts to 120 TIMES Red Hat’s average cash flow over the past few years.

120x. That will give IBM a return on investment of 0.8%.

Seriously! IBM’s management could have made twice as much money for its shareholders by investing that $34 billion in 28-day Treasury Bills (which currently yield around 2%).

Maybe the Red Hat acquisition will work out. Maybe there’s some grand strategy that will finally stop the bleeding at IBM.

Frankly I’m skeptical. Red Hat is a great company, but their whole business model revolves around developing and servicing an operating system called Linux… which is actually freely available to anyone who wants it.

There are countless distributions of Linux floating around on the Internet– Ubuntu, Fedora, Mint, openSUSE, Arch, CenOS, Kali, Elementary, ChromiumOS, etc.

So IBM basically just paid $34 billion to buy a company that develops free software.

Good luck with that.

Again, maybe it works out. But at such a HUGE price point and crazy valuation, there’s a LOT of risk… way too much downside relative to the upside.

Smart investments are the exact opposite– very little downside relative to the upside.

One of the ways to get the odds back in your favor is to be extremely selective with what you buy (especially when we’re this late in the cycle).

Instead of overpaying for mediocre companies, or paying tons of money for wild moonshots, it just takes a little bit more work to find better value.

It’s like shopping for a car– you don’t walk into the first dealership you see and pay sticker price. That’s crazy.

Instead, you shop around, do some research, and maybe end up on a floor model liquidation at a huge discount.

Investing capital should be no different. Here’s a great example–

Back in 2016 Sovereign Man’s Chief Investment Strategist recommended shares of a small, Australian oil & gas exploration company called Carnarvon Petroleum.

The company was trading for less than its net cash backing.

In other words, at the time of his recommendation, the value of all the shares of the company was actually LOWER than the amount of CASH the company had in the bank.

In theory you could have bought every share of the company, shut down the business, emptied the bank account to recoup your investment, and still had a few million bucks left over.

So the downside was obviously quite low. Yet there was significant upside potential given that the business itself was growing.

Eventually the rest of the market realized that this was an unbelievable deal. And the shares soared. (Tim’s 4th Pillar subscribers earned as much as 410% on the recommendation.)

 That’s a perfect example of the types of gains you can achieve when you’re selective with what you buy… and only acquire high quality assets when they’re selling at discounted prices.

That leaves plenty of room for upside while limiting your downside.


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Detroit police murder a family’s dogs in their own home

This one is pretty disturbing.

In January 2016, Detroit police were tipped off that someone was selling small quantities of marijuana out of their home.

Given that the City of Detroit’s murder rate exceeds that of Mexico, you’d think that the Police Department would have had bigger fish to fry.

Apparently they didn’t. So the cops obtained a search warrant and went over to the house.

They knocked, waited a moment, then busted down the door, where they found the resident Nikita Smith had just put two of her dogs in the basement, and was enclosing a third one in the bathroom, before going to open the door.

One of the dogs got out of the basement and returned to her owner, Ms. Smith.

The cops claim the “vicious” beast was “charging.” So they unloaded with a shotgun blast to the animal’s head, plus seven more rounds from another officer’s handgun.

But the blood lust didn’t end there.

The officers knew that there were two more dogs in the home– one in the basement, one in the bathroom. Both were restrained, as was Ms. Smith.

The cops could have called animal control. They could have done a dozen other things.

Instead, Detroit Police officers went into the bathroom and killed the second dog… then down to the basement where they killed the third dog.

Finally, with all three dogs executed and the home’s resident in custody, police conducted a full search of the home… finding a big fat ONE OUNCE of marijuana, barely enough to qualify as a misdemeanor.

Then the cops called animal control to clean up the dead dogs’ bodies.

The charges against Ms. Smith were ultimately dismissed because the cops didn’t even bother to show up for the court hearing.

And an internal police investigation found that shooting the dogs was justified.

All said and done, the cops simply entered a woman’s home, and went room by room killing her pets, charged her with a petty misdemeanor, and then didn’t even bother to see through this ridiculous insult to justice.

Most people consider their pets members of the family. But under law, they are property.

That’s what adds insult to injury. There is no recourse for murdered pets, it is simply unlawful destruction of property.

So Smith sued the officers for unconstitutionally destroying her property, in violation of the Fourth Amendment right against unreasonable search and seizure.

But the courts dismissed the suit. You see, Smith had committed another crime. She failed to get the dogs licensed.

The dogs weren’t family members. They weren’t even property. They were contraband, according to the court, and Smith had no legal right to them because they weren’t registered.

Smith is trying again– she filed an appeal earlier this month in the US Court of Appeals, hoping to be able to hold the Detroit Police Department accountable for its actions.

I wish her the best; it’s hard enough holding them accountable for killing humans, let alone pets.

This whole situation is pretty revolting.

Police can kick down your door because a neighbor gives them some phony tip or claims to have witnessed a completely trivial, victimless ‘crime’.

They can execute your pets like Nazi war criminals without even a slap on the wrist.

And when you try to seek damages, you get snubbed by the courts for failing to follow some ridiculous bureaucratic procedure.

Does this whole charade make the public any safer? I’d worry who would be the next victim of these trigger-happy police… or these completely abusive rules… not the person selling cannabis (which by the way has already been partially decriminalized in Michigan.)

At the very least it’s a total waste of resources for such a trivial crime, especially in a cash-strapped, bankrupt city like Detroit.


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How the government uses its giant facial recognition database

In July 1996, flight TWA 800 exploded in mid-air, 12 minutes after taking off from JFK International Airport in New York. All 230 passengers on board were killed.

It would be four years before an investigation concluded the likely cause of the explosion was a short circuit in the plane’s fuel tank.

But at the time, President Clinton felt the overwhelming need to do something.

People suspected terrorism. So Clinton issued new airport security rules.

From then on, identification was required to board an airplane.

Before that, you just needed a ticket.

After the attacks of September 11, 2001, airport security escalated.

The TSA (Transportation Security Administration) and DHS (Department of Homeland Security) were born.

Screening procedures intensified. Agents could now feel you up and down. Then came naked body scanners and the Real ID requirement.

Real ID standards were part of the post-9/11 security hysteria. But they are just now coming into full effect.

The federal guidelines require states to issue IDs that meet certain federal standards, or else the ID cannot be used for flying.

One of these standards is that the photo on the ID has to work with facial recognition systems.

CBP (Customs and Border Protection) has now completed a pilot program for using biometric data for boarding flights exiting the country. Biometric data includes unique identity markers like fingerprints, iris scans, and facial recognition.

The DHS audited the pilot program, and found that it was a success. They caught 1,300 people who had overstayed their visas.

Wait, what? I thought this was supposed to be about national security?

But that’s not what you get from the propaganda piece on the CBP’s website.

One of their “success stories” involved a Polish couple leaving the country. They were using fake documents. But the biometric data revealed they were ordered deported and hadn’t left.

Now they were leaving. So the CBP let them leave. But first they warned them, with official documentation, that if they returned again they could face felony charges.

How is that a success story, worth the cost of tens of billions of dollars?

CBP makes it seem as if the entire purpose of this technology is to find foreigners who are entering (or living) in the country illegally.

Except that it isn’t just the foreigners that are being targeted.

The CBP, TSA, and DHS are building facial recognition databases for everyone– US citizens included.

These pilot programs scoop up whatever official pictures the US government has of you.

This includes passport photos, ID photos, and photos taken upon reentering the United States after international travel.

Delta Airlines has even started testing a new program that scans your face prior to boarding your flight and matches it against this government database.

(One of our members of team Sovereign Man recently suffered the indignity of this procedures at Atlanta’s Hartsfield-Jackson International Airport.)

JetBlue has a similar program, and claims that “The customers are really delighted by it. . . they think it’s cool and they’re having fun.”

I’m not sure who these dairy cows are who think that it’s cool and fun for the government to have a giant database of biometric data.

Even if you could trust the government with this info, you absolutely cannot rely on them to keep it private. Or secure.

The Department of Homeland Security knows this well.

In 2014, over 25,000 DHS employees had their personal details stolen from a database managed by a contractor that performed background checks.

If you think hackers stealing your Social Security Number is bad, just imagine them gaining access to your biometric data.

But, hey, nobody cares.

Americans long ago gave up freedom for security.

Now they are delighted to give up even more freedom. Not even for security… for convenience. If they can shave a few minutes off of their boarding procedure, they’re “delighted,” regardless of the cost.

It’s really shocking when you think about it.

Explosions and terrorist attacks were all the excuse needed to deprive Americans of privacy while traveling.

Now Americans trade their most intimate personal details to save three minutes boarding a plane.

It wasn’t that long ago that you didn’t even need an ID to fly.

Right now Americans can still opt out of facial recognition. But it is only a matter of time until it isn’t optional.

And with Real ID deadlines coming to a close, there is no denying the federal government access to your biometric data.

They don’t have to ask, “Papers please.” They already know.


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