Category: simonblack

January 20, 2017
Sovereign Valley Farm, Chile

It’s hard to argue with Barack Obama’s jump shot. I can’t imagine Rutherford B. Hayes having that kind of game.

Or his swagger. Comedic timing. Even charisma.

And there have been plenty of times over the last eight years when, in all seriousness, those qualities have truly mattered.

I can’t imagine anyone not getting goose bumps when President Obama sang Amazing Grace during the eulogy of Reverend Clementa Pinckney in 2015 after the horrific church shooting in Charleston.

During his presidency he had thrust upon him the impossible task of consoling an entire nation over and over again. Personality truly mattered.

But tangible, productive results are an entirely different story, and that’s what I want to examine today.

I’ve read a number of articles this week which glowingly praise President Obama’s accomplishments. Others offer scathing critiques.

Most tend to focus on the Affordable Care Act (ACA), i.e. Obamacare, suggesting that reforming healthcare is one of his most important legacies.

Maybe so.

There are undoubtedly millions of people who now have medical insurance that never had insurance before.

And that is certainly a noble accomplishment.

The problem is that focusing on this single metric is a terrible premise.

Millions of people are no longer uninsured. Check. But that’s where their thinking stops.

What’s the overall quality in the system? What’s the cost?

Those metrics are conveniently overlooked.

Not even two months ago, the Obama administration was forced to publicly acknowledge that healthcare premiums will rise by an average of 25% in just a single year under Obamacare.

Plus, many consumers will only have a single option to choose from as a number of major insurance companies scale back insurance policies they offer.

The administration also admitted last year that overall healthcare spending continues to rise, surpassing $10,000 per person for the first time ever.

Then there’s a question of quality and efficiency.

In 2016, a Johns Hopkins study concluded that the number of preventable medical errors has soared in recent years and is now the third leading cause of death in the United States.

Obviously no one can blame Barack Obama for this trend.

But that’s precisely the point: it’s impossible for any program to be successful when the way you define success is so fundamentally flawed.

Obamacare focuses on one thing: coverage. Are more people insured? Yes. And in their mind, that makes it successful.

But anyone who looks at the big picture will reach an entirely different conclusion.

Premiums rose. Overall spending increased. Quality didn’t improve. Americans aren’t getting healthier.

(Not to mention the matter of that $2 billion website…)

However noble the intentions, it’s hard to consider these results a major success worthy of an enduring legacy.

Then there’s the issue of jobs. President Obama has been credited with ‘creating’ more than 11.3 million jobs.

This entire premise, of course, is total nonsense.

It’s not like the President starts businesses and hires people. The only jobs the President creates are in government.

It’s the private sector that create jobs.

And for a guy who once told entrepreneurs, “you didn’t build that,” (referring to their businesses), he sure is quick to take credit for 11.3 million jobs created.

But OK, let’s play along and give him credit: creating 11.3 million jobs is a very noble accomplishment.

Once again, however, this metric for success is flawed.

What’s the quality of those jobs? At what cost?

Total “goods-producing” jobs, i.e. workers who make stuff, actually declined under the Obama presidency.

Manufacturing jobs, construction jobs… even utilities and media jobs… all fell over the last eight years.

Bear in mind that the US was already at the peak of recession when President Obama took office, with unemployment surging.

Yet today, goods-producing jobs are even below those dismal figures from 2009.

So what jobs were created?

A good chunk of them are in healthcare, which sort of highlights the earlier point that Americans aren’t getting healthier since they need even more workers to care for them.

Additionally there were a lot of jobs created in the federal government.

Plus a full 2 million of those new jobs have been waiters and bartenders.

I’m serious.

At the beginning of the Obama presidency in 2009, there were 9.5 million waiters and bartenders in the United States.

Today there’s 11.5 million waiters and bartenders.

So it’s not like all these millions of workers who supposedly owe their jobs to President Obama are out there discovering the cure for cancer.

Then you have to look at cost.

Despite these 11.3 million new jobs, the number of food stamp recipients in the Land of the Free Lunch increased by 13.9 million during the Obama administration.

Plus, during his 8-years in office, the Obama administration spent a record $28.7 TRILLION and registered a $10 trillion increase in the national debt.

This means that every job President Obama supposedly created cost the American taxpayer $885,000 in debt. Per job.

This is a pretty pitiful return on investment.

And that’s really the bottom line. Debt lasts.

One day his Supreme Court justices will retire. Obamacare may be repealed. History will forget about his charisma and charm.

Edward Snowden may eventually return home. The 500,000+ pages of regulations his administration issued will be replaced.

And even the families of all the innocent victims who were accidentally killed in his drone strikes may move on with their lives.

But the debt will still be there.

Consider this: in the last two weeks alone, the Treasury Department has auctioned off tens of billions of dollars worth of debt in the form of 30-year bonds.

This means that a child who won’t even be born until 2030 will have some high school summer job in late 2046, and an increasing chunk of his income will be taxed to pay off the debt that Treasury Department borrowed a few days ago.

That’s a legacy which outlasts everything else.

from Sovereign Man http://ift.tt/2jGQtPI
via IFTTT

In the mid-1800s at a time when the United Kingdom was still the dominant superpower in the world, an English scientist named Francis Galton wrote a series of papers arguing for the selective breeding of human beings.

Galton’s ideas became known as eugenics.

The concept was that genius and talent were hereditary traits passed from generation to generation, and that, to ensure the growth of our species, the best and brightest should be bred like cattle.

Scientists soon began taking measurements of nose angles and forehead slopes in order to establish a correlation between a physical features and talent.

The scientific community concluded that a person with certain physical features was predisposed for great success and achievement.

But it worked both ways.

If your forehead was too wide, or your nose to jaw ratio too slight, you were viewed as morally and intellectually inferior.

Given that many races share similar physical features, this phony science became the moral justification for segregation, slavery, and even genocide.

Today our species is clearly more enlightened, and we can stand amazed that such ridiculous ideas used to be taken seriously.

There will come a time, however, when our descendents say the same thing about us.

Case in point: half a world away at the World Economic Forum in Davos, Switzerland, Nobel Laureate economist Joseph Stiglitz made remarks earlier this week that the US should “get rid of currency.”

He means paper currency, as in the US should not only get rid of $100 bills… but ALL paper currency– 50s, 20s, 10s, 5s, and even 1s.

You guessed it. Stiglitz suggests that regular people don’t need paper money, and that it’s only useful for drug dealers, terrorists, tax evaders, and money launders.

This thinking is so 20th century, and it’s simply wrong.

ISIS is a great example.

The US military has literally blown up more than a billion dollars worth of ISIS’s stockpiles of physical cash during airstrikes.

But this hasn’t affected their terrorist activities one bit.

That’s because the most notorious terrorist group on the planet famously uses both the world’s oldest currency (gold) and the world’s newest currency (Bitcoin).

Professor Stiglitz has likely never been anywhere near a terrorist, so he likely doesn’t have a clue how they conduct financial transactions.

Stiglitz also relies on the old claim that cash facilitates illicit activity.

Again, this thinking only highlights a Dark Ages mentality.

In the today’s world, drug dealers and prostitutes accept credit cards.

No matter what you’re selling on a street corner, whether it’s hot dogs or marijuana, there are plenty of solutions (like Stripe, Square, or PayPal) to easily allow anyone to accept credit card payments.

But these intellectuals seem stuck in a Pablo Escobar fantasy that drug dealers have entire rooms filled with cash.

What Stiglitz, and perhaps many law enforcement agencies, fail to realize is that one of the biggest tools in masking illegal activity is actually Amazon.com.

Specifically, Amazon gift cards.

If you’re looking to quietly and easily pay large sums of money, even tens of thousands of dollars, you can do so with Amazon gift cards.

Amazon gift cards are essentially a “cash equivalent”.

Amazon sells just about everything on the planet, so its gift cards can either be spent or quickly resold for cash.

(You can obscure a financial transaction even more by using an Amazon gift card to buy another gift card…)

Curiously there are no loud, universal calls to ban Amazon gift cards. That’s because these policymakers and academics are stuck in the 1980s.

Instead, they’ve nearly all jumped on board the “cash ban” bandwagon.

These guys just don’t get it.

Cash isn’t about tax evasion or illegal activity.

It’s about having a choice.

Any rational person who actually looks at the numbers in the banking system has to be concerned.

In many parts of the world, banks are pitifully capitalized and EXTREMELY illiquid.

This is especially the case in Europe right now where entire nations’ banking systems are teetering on insolvency.

In the United States, liquidity is also quite low, and banks play all sorts of accounting games to hide their true financial condition.

Plus, never forget that the moment you deposit funds at a bank, it’s no longer YOUR money. It’s the bank’s money.

As a depositor, you’re nothing more than an unsecured creditor of the bank, and they have the power to freeze you out of your life’s savings without even giving you a courtesy call.

Physical cash provides consumers another option.

If you don’t want to keep 100% of your savings tied up in a system that’s rigged against you and has a long history of screwing its customers, you can instead choose to hold physical cash.

There’s very little downside in doing this, especially since most people are barely making any interest in their checking accounts anyhow.

Physical cash means there is no one else standing between you and your savings.

But Professor Stiglitz and his colleagues don’t want that.

They want a massive, centralized bureaucracy to have control over your savings.

This, coming from a man wrote in his 2012 book The Price of Inequality,

“[T]he success of [Apple and Google], and indeed the viability of our entire economy, depends heavily on a well-performing public sector. There are creative entrepreneurs all over the world. What makes a difference. . . is the government.”

Sam Walton, Richard Branson, Steve Jobs, and millions of other entrepreneurs are apparently worthless. To paraphrase Barack Obama, “They didn’t build that.”

All that matters is the government.

Just like his call to eliminate cash, Stiglitz’s entire book is an impassioned argument for MORE centralization and government control.

150 years ago, Francis Galton’s appalling ideas were considered science.

Stiglitz’s ideas are what pass as science today.

They’re equally ludicrous.

And one day our future descendants will look back on our own time and wonder how so many people could have allowed themselves to be fooled.

from Sovereign Man http://ift.tt/2iWXHP2
via IFTTT

[Editor’s note: Tim Price, London-based wealth manager and co-manager of the VT Price Value Portfolio, is filling in for Simon today.]

Here’s some food for thought.

There’s been so much discussion over the past few years, and 2016 in particular, about the roaring US economy and stellar performance of US companies.

As an example, we are constantly told about the cash piles that US companies have hoarded around the world.

This is meant as an indicator that US companies are accumulating huge profits.

It turns out this is not entirely true.

As Andrew Lapthorne of Societe Generale pointed out at his bank’s investment conference last week, that giant pile of cash is concentrated in the hands of a few companies.

While the largest 25 US companies are rolling in cash, the remaining 99% of corporate North America barely has any.

Specifically, the 25 largest companies in the US have an average cash balance of over 150% of their average debt levels.

But the cash average for every other company averages about 16%, a nearly 10x difference.

It’s a similar story of concentration when it comes to corporate profitability.

The biggest US companies remain very profitable, with an average return on equity that has been very stable at around 16% since the early 1990s.

But the trend of profitability for the remaining 2500 US stocks has been deteriorating for the past two decades, with an average return on equity falling to just 6%.

In other words, all the supposed success of US companies is extremely concentrated, and the health of the overall US market has been obscured by the performance of a handful of mega-cap companies that are selling at record levels.

As value investors, this gives us reason to stay away.

Value investors are bargain shoppers; we’re on the lookout for high quality assets, especially profitable, growing businesses, whose shares are selling at an obvious discount.

As Warren Buffett has pointed out countless times, most people by nature are bargain shoppers.

Everyone wants a great deal, whether it’s on a new car, family vacation, or online purchase.

For some reason, though, that psychology doesn’t apply to investment decisions.

It’s as if people feel more comfortable buying shares of a company that’s popular, expensive, and overvalued.

In the long run, value investing is what matters.

Stock prices fluctuate wildly from day to day, and even year to year.

But a value investing strategy dramatically outperforms in the long run.

As the following chart shows, $10,000 invested in the broader US stock market in 1986 would be worth $291,334.08 today.

That’s a fantastic return on investment.

But had you invested in value stocks, that same $10,000 would be worth $449,358.86 today, over 50% more.

Value stocks beat other asset classes as well—bonds, international stocks, precious metals, real estate, etc.

The approach works.

The difficult part, of course, is finding that bargain discount business, particularly in a sea of overvalued share prices.

But this is when an astute investor starts looking abroad. There are always pockets of value somewhere in the world.

Japan remains a great example today.

Having endured a more than two-decade deflationary recession, Japanese corporate balance sheets are now among the strongest in the world.

Yet given the still inexpensive share prices, Japanese stocks offer something comparatively rare in modern investment markets: a genuine margin of safety.

One intriguing indicator of the Japanese stock market is its low “dividend payout ratio” compared to other countries around the world.

A company’s dividend payout ratio represents the portion of its profits that it pays to its shareholders each year.

Some companies pay a higher portion of their profits to shareholders, while others retain their profits to reinvest back in the business.

Japanese companies, on average, have THE lowest dividend payout ratios in the world, at less than 40%.

By contrast, British companies’ dividend payout ratios exceed 100%. This is hardly sustainable.

As an example, British company GlaxoSmithKline, popular among large equity income funds, made £1.9 billion in 2015… but paid out £3.8 billion in dividends that same year.

No company can indefinitely continue to pay its shareholders more than it makes in profit.

The Japanese stock market is at the other extreme.

Flush with cash, Japanese companies are now able to return capital to shareholders, either through dividends, or through share buybacks.

(When a company uses its cash pile to buy its own stock, the share price tends to rise, which benefits shareholders.)

Stock buybacks in Japan are now accelerating.

Yet unlike in the US and UK where companies go into debt to fund their dividends and share buybacks, Japanese companies can buy back their shares and pay dividends out of cash and profits.

(It may not be too much of a surprise to learn that Japan represents the single largest country exposure in our value fund.)

I’m not trying to encourage you to rush out right now and buy Japanese stocks.

The larger point is that successful investors do not constrain themselves by something as antiquated as geography.

There’s always a great deal to be had somewhere in the world.

And putting in a little bit of effort and education to find it can make an enormous difference in your portfolio.

from Sovereign Man http://ift.tt/2iJZ5Rv
via IFTTT

I’ve got auditors sitting in my office here in Santiago right now.

No, not those auditors. Not the kind from the IRS that strike fear in the hearts of taxpayers.

The auditors in our office are from one of the big international accounting firms, and we invited them to review our agriculture company’s 2016 financials.

This is something that nearly all large, responsible businesses do in order to provide their shareholders with a comprehensive annual report.

I wear multiple hats; as an entrepreneur who has started a few large companies, I have shareholders that I need to keep updated.

But as an investor, I’m a shareholder in a multitude of businesses, and I need to be updated about how those investments are performing.

So this is an especially busy time of year… writing and reviewing multiple reports and business plans.

If that sounds boring, I assure you it’s not. There are few things more interesting to me than creating something valuable and tangible out of nothing.

And that’s ultimately what business is: value creation.

Great entrepreneurs come up with big ideas to solve problems for their customers.

And through sheer willpower, talent, and persistence, they birth their ideas into existence. If enough value is created, the rewards can be incredible.

The same goes for investors.

If a company performs well, the shareholders who invested in it can realize phenomenal returns.

The other day I was on the phone with a few CEOs of some of the companies we’ve invested in, listening to them discuss their progress.

One is a Colorado-based financial technology company, and the other is a Colombia-based medical cannabis producer.

Both businesses are doing exceptionally well and run by extremely talented people that I trust.

As an investor, I couldn’t ask for a better deal. All I had to do was write a check.

In exchange, I’ve got these two guys… some of the most successful and highly skilled entrepreneurs I know, busting their butts every day to add two zeros to the amount of money that I invested.

Obviously there’s risk in any investment… even if you buy government bonds or a bank certificate of deposit.

But an astute investor will reduce this risk by assembling a diversified portfolio of great businesses.

That way, if something goes wrong with a business, the rest of the portfolio will make up for it.

I’ve long argued that a great business is one of the best “real” assets to own.

It can provide so much benefit– cashflow, tax deductions, estate planning vehicle, asset protection, etc.

Plus, in times of inflation, a great business increases in value, so it’s a fantastic hedge.

In times of deflation, a great business generates highly valuable cashflow.

In good times, a great business expands and makes big profits.

In bad times, a great business weathers the storm and increases its market share as its phony copycat competitors get flushed away.

There aren’t a whole lot of asset classes that provide such diversity of benefits.

Now, there are ultimately three ways to own an asset like this.

First, you can start a business yourself. This isn’t as scary as it seems.

Like learning Chinese or public speaking, starting a business is a skill… and one that can be acquired with time, education, and experience.

(We hold an annual entrepreneurship camp every summer designed precisely to help people build those skills.)

Second, you can buy someone else’s business.

It may surprise you, but businesses are bought and sold every day, just like real estate or antique cars.

In 2015, for example, our holding company purchased a retail apparel business in Australia that has been in existence for about 20 years.

It’s a well-established brand, and the business is highly profitable.

Now we’ve hired new management and made several changes to increase those profits even more.

There are ‘business brokers’ around the world who specialize in finding buyers and sellers of private businesses, just like real estate agents match buyers and sellers of property.

But for people who don’t want to buy an entire company, the last option, of course, is to buy -shares- in a business.

When it comes to buying shares, most people naturally tend to think about the stock market.

The shares of large companies traded on major stock exchanges are extremely liquid; it only takes seconds to buy or sell shares of Apple.

Conversely, if you own 5% of a local sandwich shop, those shares are harder to liquidate.

The benefit is that shares in private companies tend to be MUCH cheaper.

As an example, I wrote a check for $1.5 million to purchase the Australian company I mentioned.

It makes that much in a year.

So the effective price was basically 1x annual profit (or a “P/E ratio” of 1), meaning my money is recouped in a year.

Large companies traded on major stock exchanges tend to have irrational valuations.

Consider Netflix, whose stock price is valued at 360 times its yearly profit.

So Netflix investors theoretically have to wait three centuries to recoup their investment.

This difference is phenomenal… and that’s why I generally tend to stick to private companies: you can get much more VALUE for your money.

There are exceptions, of course.

Just like a public company’s stock can sell for an absurdly high price, it’s also possible to sell for a ridiculously low valuation.

My analysts are always looking for profitable, well-managed companies in hidden corners of the market where the shares are so cheap they’re selling for less than the amount of money the company has in the bank.

It’s very hard to lose money when you’re able to buy $1 for 75 cents.

The great thing about these types of investments– cheap, undervalued shares traded on public exchanges, is that they’re available to ANYONE.

You just have to be willing to do the work to find them.

Later this week I’ll show you how my team spots these investments.

from Sovereign Man http://ift.tt/2j563Sd
via IFTTT

Not too long ago my step-dad had to spend a few days in intensive care. Pretty scary stuff.

He had just about every nasty symptom imaginable, from constant vomiting to dizziness to ultra-high fever, but the doctors couldn’t figure out why.

Fortunately his condition improved enough that he was released from the hospital, and now he’s on the mend.

Now, my step-dad is a Medicare patient. But he just found out that he’s been unceremoniously dropped by his Primary Care doctor.

Apparently his physician dropped all of her Medicare patients in one giant culling.

It turns out that physicians across the country have been firing Medicare patients; and according to a late 2015 study from the Kaiser Family Foundation, 21% of physicians are not taking new Medicare patients.

Much of this trend is based on stiff penalties and financial disincentives from the Affordable Care Act (Obamacare), and 2015’s Medicare Access and CHIP Reauthorization (MACRA) Act.

MACRA in particular is completely mystifying.

The law created a whopping 2,400 pages of regulations that Medicare physicians are expected to know and follow.

Many of the rules are debilitating.

For instance, MACRA changed how physicians can be reimbursed for their Medicare patients by establishing a bizarre set of standards to determine if a physician is providing “value”.

As an example, if a patient ends up in the emergency room, his or her physician can incur a steep penalty.

This explains why my step-dad was dropped by his doctor.

The healthcare system has been broken to the point that physicians now have a greater incentive to fire their Medicare patients than to treat them.

One Florida-based physician summed up the situation like this:

“I have decided to opt-out of Medicare, acknowledging that I can no longer play a game that is rigged against me; one that I can never win because of constantly changing rules, and one where the stakes include fines and even potential jail time.”

The irony is that all these new laws and regulations were designed to “save” Medicare.

As we’ve discussed many times before, both Medicare and Social Security are dramatically underfunded and rapidly running out of cash.

Medicare is the worst off between the two; MACRA and Obamacare were supposed to create hundreds of billions of dollars in cost savings.

It’s clear now that this cost savings comes at the expense of physicians… and the result is a rising trend in Medicare patients being dropped.

But even with the cost savings, the Congressional Budget Office projects that Medicare will become completely INSOLVENT by 2026.

As I write this letter, Congress is already taking steps to repeal the Affordable Care Act.

If they finish the job, all the supposed cost savings will be eliminated, and Medicare’s projected insolvency date will be accelerated to 2021.

So the government must either keep legislation that isn’t working and have Medicare run out of money in 2026… or repeal the legislation and have Medicare run out of money in 2021.

Either way, Medicare is toast.

Oh, and bailing out Medicare isn’t an option either.

They would need TRILLIONS of dollars to fully fund Medicare, which is just about impossible for a government that loses hundreds of billions each year and already has a $20 trillion debt.

I’m not suggesting they’ll let Medicare go bust.

More than likely they’ll just come up with some band-aid fix that has terrible consequences.

For example, they could bail out Medicare by stealing from Social Security.

Bear in mind that Social Security is a total mess.

Back in the 1960s there were nearly 6.5 active workers paying into the system for every Social Security recipient.

Today that worker-to-beneficiary ratio has fallen by nearly half.

There simply aren’t enough workers paying into the system to support the swelling number of retirees.

That’s why Social Security is terminally underfunded.

And stealing from its trust funds to support Medicare would merely accelerate the demise of Social Security.

Again, there are no good options to save these programs.

But you can easily take charge of your own health and retirement, and there are plenty of solutions available.

Sure, if Social Security and Medicare are still around when it comes time for you to collect, great.

But you’ll be a LOT more secure, for example, if you set up a robust, flexible retirement structure like a solo 401(k) or self-directed IRA.

These allow you to contribute MUCH more money to your retirement, cut costs, and invest in a variety of asset classes that could produce superior returns.

Even just a 1% improvement in your net returns could boost your retirement savings by hundreds of thousands of dollars when compounded over 20-40 years.

A well-structured retirement plan could even own something like an e-commerce business, where not only the profits, but even the investment returns on those profits, would accumulate tax-free towards your retirement.

There are better options in healthcare as well.

Clearly no insurance plan can substitute for healthy food, good choices, and plenty of exercise.

But it’s amazing how much cheaper high quality care and medication can be if you expand your thinking overseas.

Countries like Canada, Mexico, Thailand, India, etc. are renowned for medical tourism.

Whatever treatment you require, from cancer to fertility, top-tier facilities are available abroad at a fraction of the price, and you can actually be treated like a respected human being.

And the cost savings in treatment is often vastly higher than any travel costs in getting there.

(You’d think Medicare would encourage going abroad for treatment…)

Social Security and Medicare are both finished. The numbers don’t lie, and even the annual trustee reports tell us that they’re pitifully underfunded.

But the good news is you don’t need the government to retire and be healthy.

There are plenty of solutions available to take back control for yourself. It just requires a little bit of education and the will to act.

from Sovereign Man http://ift.tt/2iyEUWY
via IFTTT

One of my interesting friends is in town visiting Chile for a few days.

His name is Gianni– he’s originally from Croatia but lives in Vancouver, and has spent most of his career in the mining business.

Gianni is especially bullish on copper… primarily because he thinks the Age of Big Oil is coming to a rapid close.

He believes that conventional gasoline vehicles will be increasingly replaced with electric cars, which simultaneously reduces demand for oil AND increases demand for copper.

For investors, this presents an interesting opportunity.

Oil and copper prices have been strongly correlated for decades; in other words, as oil prices went up, copper prices went up.

This made sense in the past since both commodities were affected by the same macroeconomic forces.

Fast growing economies tend to consume a lot of copper and oil, pushing up prices.

But now Gianni thinks it’s time for those prices to de-couple.

You may recall that German carmaker Volkswagen is in hot water after being caught falsifying its emissions data. The press is calling it “dieselgate.”

Volkswagen has already been fined $15 billion by the US Justice Department, and roughly $2 billion of that is supposed to be earmarked to build electric vehicle charging stations across America.

This increase in EV charging infrastructure may very well create additional demand for electric vehicles… meaning that oil is going to start losing a LOT of customers, while electricity is going to gain.

Copper remains one of the most important commodities in electrical infrastructure, so prices may very well rise much higher in the future as a result of what’s starting to happen now.

Take a listen to today’s podcast, in which Gianni and I discuss the future of energy, as well as ways to profit from this long-term global trend.

from Sovereign Man http://ift.tt/2iLro38
via IFTTT

The state of Michigan is not exactly known for its balmy weather this time of year.

And residents reasonably do what they have to do to cope with often extreme winter temperatures.

Last Thursday a man named Taylor Trupiano of Roseville, Michigan did what a lot of people do in cold climates.

He walked out of his house, started his car, turned on the heat, and went back inside for a few minutes while his engine and vehicle interior warmed up.

According to Mr. Trupiano, he was only inside for about 7 or 8 minutes.

But by the time he came back to his car, there was already a parking ticket on his windshield– with a fine totaling $128.

Some local police officer had apparently driven by, noticed the vehicle was unattended, written up this heinous infraction, and left.

There are so many things wrong with this picture it’s hard to know where to begin.

First off, the citation that Mr. Trupiano received was a parking ticket. Yet his car was parked on his own private property.

Let that sink in: this man received a parking ticket while his car was parked on his own property.

You can’t even park your car on your own property anymore without being in violation of some series of laws, rules, or local ordinances.

The city government’s reasoning is that, if you leave a vehicle unattended, it may encourage car thieves to steal it.

This is pretty flimsy logic.

Sure, maybe if a car thief is standing right there he/she may take the opportunity.

But it’s not like some lowlife felon is going to turn the other cheek and stop stealing cars just because there are no unattended vehicles with the keys in the ignition.

Criminals bent on theft are going to steal no matter what, just like some murderous thug in Chicago is going to find a gun and kill people regardless of local firearm regulations.

When the story broke on local news, Roseville’s Police Chief told reporters that his department is unapologetic about issuing the citation to Mr. Trupiano.

Sounding like a man who cares more about statistics than actually catching criminals, the Chief claimed that 5-10 unattended vehicles are stolen every winter, which “drives our crime rates up.”

I looked at Roseville’s crime rates. They’re high. This is not a safe place.

With a population of less than 50,000, there are nearly 2,000 property crime incidents per year.

That includes at least a few hundred car thefts– which means that 5-10 vehicles is statistically trivial.

Clearly this issue of unattended vehicles is NOT the root of the problem.

And even if all the citizens of Roseville never again left their vehicles unattended, even on a cold winter day for just a few minutes to let the car warm up, it still wouldn’t make a dent in the larger crime rate.

But that doesn’t matter.

Roseville’s city government deals with its crime problem by establishing obscure regulations to restrict what law-abiding people are allowed to do in their own homes with their private property.

It doesn’t matter whether you are aware that these ridiculous rules even exist: ignorance of the law is not an excuse.

You’re probably in violation of half a dozen rules and regulations right now without even knowing about them.

Naturally, they’re all for your own good… to protect you against all the terrible choices that you might make as a grown adult.

Thank goodness these people are here to save us from ourselves! Of course, there’s always more work to do.

Speaking of statistically trivial risks, I read recently that falling vending machines kill a handful of people each year. Let’s get rid of them.

Roller coaster malfunctions claim 4 lives each year. Maybe they should ban those too.

Sugary drinks are clearly bad for you. Perhaps they should outlaw those, at least above a certain size.

Oh wait, they’re already trying to do that.

This is what freedom means today in the United Nanny States of America.

from Sovereign Man http://ift.tt/2jDuR81
via IFTTT

Yesterday on the drive back to Santiago from one of our blueberry farms, I stopped to visit some friends who lived in the area.

About a year ago they bought some land in Chile’s incredibly fertile 7th region, which boasts a rare Mediterranean climate.

It never gets too hot, and it never gets too cold. Plus, the rich, volcanic soil is packed with powerful nutrients.

As long as you’re in the right spot to ensure ample water security, the place is an agricultural paradise (our agriculture company owns two large farms in the region).

There are literally four other places on the planet with this combination– southern California, South Australia, the Western Cape of South Africa, and parts of the Mediterranean itself.

That’s it.

Yet by comparison to those other places, land in Chile is remarkably cheap.

Our agriculture company purchased several thousand acres in this prime region back in 2015 for about $1,700 per acre.

Similar property in California, especially given how much water we have, would easily sell for 10x to 20x that price.

My friends bought several acres of land for themselves as a sort of homestead, and they’re now living in a gorgeous setting surrounded by mountains and multiple rivers with cool, crystal clear water and a steady supply of fish.

They’re raising livestock and have a garden, plus I got them started with a gift of some baby trees which are already producing fruit in their first season.

It feels like lifetimes away from when they were living in New York City.

We were talking about it all yesterday, about how powerful it feels to be totally independent.

My friends purchased the land outright (again, land is inexpensive). Then they paid about $55,000 to build their home.

The house is quite nice– comfortably spacious with four bedrooms.

And it’s all wired up with the latest gadgetry and home automation, with all sorts of sensors to control appliances and conduct routine tasks.

So they now have a roof over their heads and plenty of land to do whatever they want, and they own it all outright… they don’t owe a penny on any of it.

They can feed themselves, they have their own water, and they can produce their own energy.

This is an extremely powerful feeling, knowing that, no matter what happens (or doesn’t happen), you’re always going be able to thrive.

And that’s precisely the point.

I’m not trying to convince you to rush out and buy some homestead property, or to leave the country.

(Though it doesn’t hurt to at least plant a small garden… or to look into your options to obtain a second residency or even passport.)

The larger idea is that, in the face of such obvious risks, rational people make plans and take steps that make sense no matter what happens.

My friends had concerns. They were living in New York before and didn’t like the trends they saw in their home country.

There was too much debt. Too much war. Too much money printing. Too many lies. Too much spying. Too much violence. Too much uncertainty.

They wanted to distance themselves from conditions that made them uncomfortable.

So they made a very deliberate plan and took steps that led them to where they are today– living in their own paradise. And they couldn’t be happier.

These guys aren’t hiding from the world. He’s still working in technology and she’s still producing art… exactly what they used to do.

They’re able to work from anywhere on the planet, including on their homestead in central Chile.

There’s no downside in them living in a place that makes them happy, working remotely, eating organic home-grown food, and not having any debt.

But if the risks they were concerned about turn into far bigger problems, their decision may end up being the best they ever made.

No matter what, they’re thriving.

You may share some of the same concerns that they had.

If so, it doesn’t mean you have to get on a plane.

That was the right plan for them. It might not be right plan for most people.

But there are countless other steps you can take without having to leave your living room, to ensure that, no matter what happens next, you can thrive too.

For example, you can withdraw money out of a risky financial system, take some easy steps to enhance your digital privacy, or structure a more robust retirement plan that helps ensure you don’t have to rely on a failing pension system.

These are just a few of the dozens of solutions that you can execute yourself… and quite easily.

Most of us have been programmed, practically from birth, to outsource our problems.

When we see big trends and big risks, we’re told to go to a voting booth to elect someone who promises to solve all the problems.

They say, “I’m going to fix the system,” or “I’m going to create jobs.”

Bullshit. We’re the ones who are in control of our own lives. We can fix our own system. We can create our own jobs.

Anyone can get started with a profitable e-commerce business with a very tiny investment.

Anyone can take steps to reduce their exposure to the enormous risks in the system, ranging from insolvent pension funds to unprecedented government debts.

It’s 2017.

Compared to our ancestors who had to slog it out with their bare hands, we have unparalleled resources and enormous, global opportunities at our fingertips.

All it takes to get started is the proper education, and the will to act.

from Sovereign Man http://ift.tt/2jzFpVF
via IFTTT

I remember the first time I ever saw a $100 bill.

It was back in the early 80s, I must have only been 5 or 6 years old.

My parents took my sister and I to a fancy restaurant, and I distinctly remember a man dressed in a dark business suit a few tables over paying his bill with a crisp $100 note.

He pulled it out of his wallet, slid it onto the table, and walked away.

I was dumbfounded. It was more money than I had ever seen in my young life.

None of my friends had ever seen a $100 bill, and I was the big news at school the next day, regaling the whole class with stories of my proximity to such vast wealth.

Of course, back then, a $100 bill truly was a rare sighting because prices were so much lower.

A can of Campbell’s soup was 25 cents. Today it costs 4x as much.

A movie ticket ran about $3.50, according to the National Association of Theater Owners. Today it’s almost to $9.

Gasoline was 86 cents per gallon. Now it’s $2.20, and that’s after a major price collapse.

$100 could practically pay the rent in a lot of places back in the 80s.

That’s obviously no longer the case. Even a mundane trip to the grocery store can easily blow through $100 without feeling unusual.

$100 simply isn’t the awe-inspiring symbol of wealth that it used to be. And that’s because of inflation.

One measure of this trend is the average lifespan of the $100 bill.

As money changes hands during routine transactions, the constant wear and tear eventually starts to break down the paper.

You probably have a few bills in your wallet that look like they’re about to disintegrate.

The more frequently a bill is used, the faster that breakdown occurs.

According to the Federal Reserve, for example, a typical $1 bill lasts for about 5.8 years before becoming so fragile that it gets withdrawn from circulation and destroyed.

A $100 bill, on the other hand, lasts for 15.0 years.

This makes sense given that a $1 bill is used so much more frequently.

But what’s interesting is that, even as late as 2011, the average $100 bill lasted 21.6 years before becoming worn out.

So according to Federal Reserve data, the average lifespan of a $100 bill has fallen by more than 30% over the last several years.

This is primarily due to a significant increase in use, i.e. $100 bills are used more frequently in day-to-day transactions… at the gas station, grocery store, and even coffee shop.

Naturally, this increased use of the $100 bill is because prices are higher than they’ve ever been– you can’t pay the grocery bill anymore with a twenty.

Wages and salaries have also increased over time. But not as fast as living costs.

According to the US Department of Labor, most people are still earning less than they were 17-years ago when adjusted for inflation.

And that’s precisely the point: inflation is a very deliberate and sustained form of theft.

When prices rise faster than income levels, they’re ultimately stealing from your standard of living.

But not just once.

Inflation steals from you month after month, year after year. It never stops.

This has long been a common tactic for financially desperate governments throughout history.

Think about it– if they sent gun-toting police to your house demanding 2% of your wealth, there would be rioting in the streets.

But if the government and central bank engineer 2% inflation, no one cares.

And that’s the really amazing thing about inflation: governments and academia have managed to convince people that a little bit of inflation is totally normal.

They start early, even teaching students this garbage in high school economics classes.

Of course, they always forget to teach the part about how destructive inflation is over time.

2% inflation compounded year after year after year can have an explosive effect, doubling, tripling, and quadrupling prices.

The thing is, though, because inflation occurs so gradually, it feels ‘normal’.

Only when we look back to the past can we see how dramatically inflation has changed people’s lives.

The US Labor Department reports, for example, that in the late 1960s, fewer than half of households with children were dual income.

In other words, one parent supported the family on a single income.

Today in nearly 70% of households with children, BOTH parents have to work in order to make ends meet.

Just like the dramatic decline in the purchasing power of a $100 bill, this trend is a prime example of how inflation steals from people over time.

Policymakers will always downplay inflation.

Back in 2011 Federal Reserve official Bill Dudley infamously responded to soaring food prices by citing the fact that an iPad 2 was cheaper than an iPad 1.

(Prompting one reporter to say, “I can’t eat an iPad!”)

They may even reinvent the way they calculate inflation.

But despite the speeches and statistics, most of which focus on monthly or quarterly changes, the long-term effects of inflation are very much with us.

And they aren’t going away.

It would be foolish to assume that the people who are causing this problem will suddenly fix it.

If anything, they’ll make it worse.

In fact, central bankers around the world have been concerned that inflation isn’t high enough… as if a brief period of price stability is somehow a bad thing.

We should absolutely expect higher inflation.

Central bankers want inflation. Governments want inflation. And they’re the ones who have the power to make it happen.

Real assets, like precious metals, productive real estate, profitable businesses, etc. offer safety from inflation, especially if your savings is denominated in an overvalued paper currency.

More on that later in the week.

from Sovereign Man http://ift.tt/2i8Ut7y
via IFTTT

Steve Kroft has a problem with second passports.

Specifically, the reporter and his team of producers slammed “citizenship by investment” programs in an editorial piece that aired on 60 Minutes this past Sunday night.

As we’ve discussed before, many countries around the world, including Malta, Dominica, St. Kitts, and Antigua, have Citizenship-by-Investment (CIP) programs.

The programs differ between countries, but they all provide an opportunity for foreigners to receive citizenship in exchange for making a donation or investment in the country.

In Dominica, for example, a foreign investor can qualify to apply for citizenship by making a $100,000 contribution to a fund run by the local government (it’s literally called “The Government Fund”).

Presuming the investor meets the other due diligence requirements, he or she can become a citizen and receive a passport from Dominica within a few months.

These programs are all completely legal and run by the governments’ official agencies.

In fact, in most countries it’s legal for the government to award citizenship to foreigners, typically to people who are high achievers in science, arts, or sports.

If Usain Bolt decided that he wants to move to Poland to run for their Olympic Team, the Polish government would award him citizenship in about two seconds.

Governments want to attract talented people who can make valuable contributions or bring recognition to their countries.

So what’s the difference if a Polish investor moves to Jamaica and builds a brand-new school in an impoverished area?

Or if a Canadian invests hundreds of thousands of dollars in a local charity in Antigua?

These seem like equally valuable contributions to reward foreigners with citizenship, especially in poverty-stricken countries.

In Dominica, for example, the funding provided by the CIP program was a major factor aiding the country’s recovery from the devastation of 2015’s Tropical Storm Erika.

The CIP program also helped the economy stay afloat during the worst of the Global Financial Crisis nearly a decade ago.

But Kroft doesn’t like the idea at all and apparently thinks that he should be able to decide what a foreign country is able to do with its own sovereignty.

Naturally, Kroft’s aversion against these programs is fear-based, revolving around concerns over terrorism and security.

His report goes on to showcase an Iranian attorney who obtained a passport from St. Kitts, another Caribbean island with a CIP program.

It was a no-brainer investment for the gentleman; as a global professional, he has to travel frequently to meet clients.

This is extremely difficult to do with an Iranian passport as visa requirements are quite stiff.

With a St. Kitts passport, he can travel visa-free (or obtain visa on arrival) to over 130 countries, including almost all of Latin America, Europe, and much of Asia.

Kroft thinks that Iranians should stay in Iran… and he appeared completely flummoxed upon meeting the man in Dubai, stating tersely “So you’re an Iranian living in Dubai with St. Kitts citizenship.”

“Yes.”

“That’s complicated.”

This Iranian is a man who was born in an oppressive country devoid of economic freedom; yet he worked hard and took active steps to improve his situation by moving to a better place and obtaining a less-restrictive passport.

But Kroft, who by mere accident of birth happens to have a US passport entitling him to travel around the world without a visa, finds this “complicated”.

What small-minded, 19th century thinking.

In Kroft’s worldview, you live in the country where you were born, and you travel with its passport, and that’s that.

If you happen to be, by accident of birth, from another country with less opportunity or more restrictions, then tough shit.

But perhaps the most ridiculous part of the broadcast was that Kroft completely missed the point of a second passport altogether.

Kroft believes that second passports are only for criminals and terrorists.

In fact he lists the names of 10 suspected criminals who obtained CIP passports, conveniently skipping over the thousands upon thousands of law-abiding investors who have gone through the same programs.

In reality a second passport is an ideal part of any rational individual’s Plan B.

A second passport means that if your home country ever deteriorates to the point that you need to leave, you’ll always have a place to go… a safe place where you and your family are welcome to live, work, invest, and do business.

That, of course, is a worst-case scenario.

Yet even if nothing like that ever happens, you’ll still be able to enjoy benefits, like additional visa-free travel options which, in many cases, your children and grandchildren may be able to inherit.

Candidly, citizenship-by-investment isn’t right for most people simply because of the price tag.

I’m sure most of us can find better uses for $100,000 to $1 million, especially when there are MUCH easier ways to obtain a second passport.

For example, you can obtain citizenship in a number of places like Ireland or Italy if you have documented ancestry.

You can also obtain citizenship in countries like Panama, Chile, or Argentina after a few years of legal residency (which you don’t necessarily have to spend in-country).

But the bottom line is that a second passport is a fantastic insurance policy. And this is something that makes sense for anyone.

What’s funny is that the 60 Minutes broadcast on Sunday showcased two other reports.

The first was about the extraordinary murder crisis in Chicago, where casualties have “surged to a level more in line with a war zone than one of America’s great cities.”

The second story was about a company in Cuba that was taken over by the communist government in 1959, and its owners were left with absolutely nothing but the clothes on their backs.

Ironically, both of these stories highlight the importance of having a second passport… of having a Plan B.

What’s yours?

from Sovereign Man http://ift.tt/2ifCgpo
via IFTTT