Category: simonblack

My friend Richard got destroyed by the system.

As a financial advisor in Sacramento, California, he spent years building a thriving firm and has even landed a few celebrity clients.

Richard did well for himself. Successful. Married. Wonderful kids. Financially secure.

But back in 2008 things started to turn sour.

His wife left him and took the kids, along with half of everything else.

The divorce forced the liquidation of many of their assets, including a substantial investment portfolio he had built up.

Richard didn’t want to sell; by the time the divorce was being fought, it was 2009 and the stock market had crashed.

But Richard had no choice. They liquidated and suffered major losses.

Most painfully, since Richard’s business was so successful, the judge ordered him to pay alimony of nearly $20,000 per month.

It didn’t matter that, practically overnight, most of his new business had dried up due to the Great Recession.

Thus began the long indentured servitude known as alimony.

The idea behind alimony is to make sure that the ex-spouse can maintain a comfortable standard of living while s/he gets rebuilds a life and financial base.

It shouldn’t be abused as a lottery ticket.

In Richard’s case, it’s been 7+ long years and nearly $2 million in alimony paid. But the payments never stop.

Even though the kids are now grown and out of the house, his ex-wife has zero incentive to go out and find a job to support herself.

Why would she bother working hard when she can do nothing and collect $20k from her ex-husband?

Yet due to the length of time they were married, and California’s ridiculous legal code, there’s no end in sight for Richard’s alimony payments.

So Richard has the government taking 50% (between federal and state income tax) from his left pocket, and his wife taking nearly a quarter of a million dollars per year out of his right pocket.

Naturally if he stops paying either one of them he’ll face the long arm of the law.

Speaking of the law, the Dodd-Frank Act that was passed several years ago to reform the financial system totally crippled his business.

It’s one of the costliest and most painful regulations ever created for financial services businesses, and Richard constantly has regulators breathing down his neck.

It’s amazing. Despite taking half of his income, the government makes it increasingly difficult for Richard to produce.

Richard turned 50 this year, and he was miserable.

Instead of slowing down and enjoying life, he’d been working harder than ever to earn less than ever, with very little time left over to build a personal life for himself.

His problems also started to manifest in other ways. He’d gained weight, and was drinking more, and I doubt he’d gone on a date since 2013.

Sadly, Richard is not an isolated case. There are countless people across the country who have been destroyed by the system.

He came to me for help earlier this year, which I was more than happy to extend.

Initially we established a new financial advisory business for Richard in a more favorable jurisdiction.

That jurisdiction was Puerto Rico.

Under Puerto Rico’s generous incentive laws, Richard’s new firm is able to provide financial services for worldwide clients without the pain of onshore US regulations.

It’s made things much easier for him so that he can focus on servicing his clients’ needs and winning new business, as opposed to filling out forms and pleasuring regulators.

The new firm is growing rapidly as a result. And best of all, his Puerto Rico profits are taxed at just 4%, instead of the 50% he was paying in California.

Richard still has the California business. And to reduce the taxes there, my advisors set him up with something called a “Captive Insurance Company”.

This one is a real goldmine.

It’s completely normal for businesses to have certain insurance expenses, for example fire insurance, earthquake coverage, liability, etc.

These are all legitimate, tax-deductible business expenses.

A “Captive Insurance Company” is a separate business that you might own or control, which basically acts as your own insurance company.

So instead of paying insurance premiums to State Farm or All State, you’re paying premiums to your own insurance company.

This is completely and totally legal, and there’s an entire section on this in the US Tax Code.

Like any insurance premium, the premiums you pay to your own insurance company are tax deductible to your original business.

So Richard’s California-based financial advisory firm is able to deduct the insurance premiums that it pays to Richard’s captive insurance company.

Under US law, captive insurance companies qualify for tax-free status as long as their net premiums are below $2.2 million per year.

Richard’s California-based financial advisory firm is now paying his captive insurance company for several new, completely legitimate insurance policies.

For example, his captive company insures his financial advisory firm against risks like cybersecurity and civil unrest.

It makes sense for any business to insure against these risks.

The California company’s profit is now lower, which means that it pays less tax.

Meanwhile, the insurance premiums paid to his captive insurance company are subject to ZERO tax.

So he’s paying less federal and state tax from the California business, 4% tax in Puerto Rico, and 0% tax on his insurance company’s profits.

These are just two of the steps that we’ve taken. But the end result is pretty clear.

Richard is less-regulated, so he’s able to focus more on building and growing his business.

He’s earning more, and he’s able to keep more of what he earns.

Most of all he’s happier. He’s laid off on the booze, started hitting the gym, traveling more, and actually having a personal life.

It’s been a huge transformation.

All that it took to completely turn his life around were the proper tools to solve his problems, the knowledge about how to use them, and willingness to execute.

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There are two words that kept coming up over and over again over the last 20+ months during the US Presidential circus: “fair share”.

Hardly a day went by without hearing that certain taxpayers “need to pay more of their fair share.”

It sounds really great, and given the voter statistics, this idea resonated with tens of millions of people. After all, who could possibly be against fairness?

When you dive into the numbers, however, the data doesn’t support this assertion at all.

According to IRS figures, households that earn more than $1 million annually, roughly 0.4% of all taxpayers, pay a total of $364 billion in federal income tax.

This amounts to roughly 27% of all the US federal individual income tax that’s collected.

So in other words, the top 0.4%, pays 27% of the total tax bill.

If you extend this analysis to the upper middle class, i.e. the top 24.5% of households earning more than $100,000 per year, the numbers are even more dramatic.

(Bear in mind this includes two spouses earning $50,000 each.)

This group of households earning between $100,000 up to $1 million contributes 50.4% of all US federal individual income tax.

Combined, the two groups, which comprise the top 25% of US taxpayers, pay nearly 80% of the total tax bill.

(In case you’re wondering, the bottom 50% of income earners contributes less than 5% to the total tax bill.)

This isn’t intended to be a slight against any income group; rather, I’m honestly wondering exactly how much these people consider to be “fair”?

Because it’s not intuitively obvious to me that sticking 25% of the people with 80% of the bill is “unfair.”

Now, the common refrain from the “fair share” crowd is that taxes go to fund our roads, schools, police departments, fire fighters, etc., and that rich people can afford to pay more.

But there’s a big problem with this logic.

All the benefits that people cite, from fire fighters to public schools, are typically funded at the state and local level… and paid for with state and local taxes. NOT federal tax.

Your federal tax dollars don’t fund local fire departments.

Instead you’re paying for a giant, bloated, federal bureaucracy that squanders tax revenue on some of the most obscene waste imaginable.

You paid $2 billion for the Obamacare website that didn’t work.

You paid $1 billion for the military to destroy $16 billion of perfectly good ammunition.

You paid $856,000 for the National Science Foundation to teach mountain lions how to run on treadmills.

And you paid an incalculable sum of money to drop bombs by remote control on innocent civilians and children’s hospitals in countries populated by brown people.

None of this money is going to fix the pot hole in front of your driveway.

But despite their argument being totally specious and unsupported by IRS data, the “fair share” cries grow ever louder.

Warren Buffett, a 0.01% guy himself, has been a loud voice claiming that wealthy people should pay more.

Buffett complains every year that he pays less tax as a percentage of his income than his secretary.

And this has created a popular belief that wealthy people pay very low tax rates.

Again, IRS statistics disprove this claim; the average tax rate for top income earners in the US is over 30%, versus 9.8% for the bottom half of income earners.

Moreover, there’s nothing stopping Warren Buffett from writing a bigger check to the US government.

If he feels so strongly about his “fair share,” he’s free to make a donation to pay down the national debt.

But he hasn’t done that. Quite the opposite, in fact.

Several years ago Warren Buffett pledged to leave nearly all of his wealth to the charitable foundation run by Bill and Melinda Gates.

And he donates billions each year to other charities.

Warren Buffett could have bequeathed his entire fortune to Uncle Sam.

But he didn’t. That’s because Buffett knows his money can do more good in the world by funding those private organizations instead paying for more federal waste.

And this statement is true whether you make $50 million per year, or $50,000.

Bottom line, it’s not evil for anyone to want to keep their hard-earned savings and income out of the federal government’s ignominiously wasteful hands.

Nor is it evil to take completely legal steps to reduce what you owe, no matter what the specious “fair share” crowd says.

(By the way, regardless of your income level, there are always options to reduce your tax bill.)

Taking these steps is totally sensible.

And if you’re like me and feel disgusted by much of the destruction that your federal taxes have funded, you might even feel a moral obligation to do so.

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In light of the insanity that has transpired over the last several weeks, today I thought I would show you a beautiful, forgotten corner of the world.

This is a video that my friend Shawn took of his home in New Zealand. He lives in a very small town, and his house is entirely off-grid.

He has solar panels and wind turbines to power the house, plus he’s able to produce his own food. The orchard has plenty of fruit and nut trees, and he and his wife have planted a raised-bed garden.

They collect their own rainwater, plus there are two fresh water ponds on his property, which spans several acres.

Best of all, they’re right near the beach with gorgeous 360-degree views of the Pacific. He gets to surf all the time, and his kids walk to their school on the beach barefoot every day.

It’s safe. Quiet. And he and his family absolutely love it. They couldn’t be happier.

Yet despite living in this very small town in New Zealand, a few hours from Auckland, Shawn is still able to manage his thriving business.

Shawn is a master of film and TV production. In fact I’ve hired his company to produce all of our major Sovereign Man events over the years… he’s so good I couldn’t imagine working with anyone else.

And he’s worked with some of the biggest names in entertainment, including James Cameron.

You’d think that being all the way down in a remote corner of New Zealand would make it difficult to run an international business.

But with all the modern technology we have available, it’s possible to live anywhere in the world and still do business and generate income.

No one has to be a slave to geography anymore; we have the freedom to choose where we want to live based on the freedom and lifestyle we’re trying to achieve.

Shawn is a great example of that ethos. I hope you enjoy his video.

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OK, this is pretty nuts.

According to data released by the Treasury Department yesterday, the US national debt has soared by a whopping $294 billion since the start of the 2017 fiscal year, just 45 days ago.

That’s an annualized increase of 13%.

So if they keep up this pace, the national debt will increase by $2.4 trillion this fiscal year, surpassing $21 trillion by next September.

It’s hard to believe how rapidly the debt is growing; debt growth is far outpacing the growth of the US economy… and there’s no way to pretend that this is good news.

That doesn’t stop leading economists from trying.

Nobel Laureate Paul Krugman says “debt is good” because the US economy has grown so much over the last 200 years despite not having been debt-free since 1835.

This kind of logic is astonishing.

Aside from a few anomalies like World War II and the American Civil War, debt levels over most of early American history were low.

100 years ago in 1916, US debt was about $3.6 billion; as a percentage of GDP (i.e. the size of the US economy), that was about 7%.

Today’s debt of $19,867,119,032,053.28 is actually bigger than the entire US economy at over 106% of GDP.

Yet in Krugman’s view, the fact that America prospered a century ago when the debt was 7% of GDP means that the nation will continue to prosper with a debt at 106% of GDP.

Amazingly enough, Krugman has been awarded our society’s most esteemed prize for intellectual achievement. It boggles the mind.

To be fair, there is such a thing as “good debt” versus “bad debt”, and it’s not difficult to distinguish between the two.

If you can borrow money at 5% in order to make a safe investment that has a 25% return, for example, that may very well qualify as “good debt”.

If you borrow money at 5%… or even 1%… and then squander the borrowed funds on useless trinkets, that’s clearly “bad debt”.

In 1803, the startup US government negotiated the Louisiana Purchase from France, a real estate acquisition that doubled the size of the US.

It was the mother of all distress sales. France was desperate for cash, and the administration of Thomas Jefferson negotiated a price that valued the land at around $15 million.

Adjusted for inflation to 2016 dollars, Thomas Jefferson paid about 40 cents per acre to acquire the land that comprises fifteen states and has generated trillions in economic activity.

Naturally the US government had to borrow money that year to conclude the Louisiana Purchase with France, so the national debt increased slightly in 1804.

But when you consider the extraordinary economic benefit of that purchase, it clearly qualifies as “good debt”.

Fast-forward to our modern era and we see that the debt is increasing by more than a trillion dollars each year.

What are the good citizens of the United States receiving in exchange for taking on so much debt?

It’s not like the government bought up half of Mexico or colonized Mars.

No, instead they wasted $2 billion on the Obamacare website, most of which went to a company whose top executive just happens to be an old friend of Michelle Obama.

Today, the US government has to borrow money just to pay interest on the money it’s already borrowed. This is almost the textbook definition of bad debt…

In fact, the government now spends nearly all of its tax revenue just on mandatory entitlement programs like Social Security and Medicare, plus interest on the debt.

The real kicker is that Social Security and Medicare are massively underfunded and quickly running out of cash… so they’ll both require a major bailout (i.e. MORE debt).

Interest payments, meanwhile, total hundreds of billions of dollars each year even though interest rates are at record lows.

Today the government pays less than 2% interest on its debt.

Ten years ago in 2006, the average interest rate on US debt was over 5%.

Back then 5% was considered incredibly low compared to the higher interest rates of the 1980s and 1990s.

But today, 5% would bankrupt the US government. It’s pitiful.

So unless interest rates stay at these record lows forever (or perhaps go negative), the government’s interest payments are going to explode.

Debt… particularly bad debt… is an absolute killer.

Excess debt has been responsible for bringing down some of the largest companies in the world. It bankrupts individuals.

And excess debt has caused the decline of some of the largest superpowers in the history of the world.

There are a lot of people, led by their cheerleader Paul Krugman, who outright ignore this problem and pretend that the US government can continue expanding its debt forever without ever suffering a single consequence.

And I know there are a lot of people keeping their fingers crossed hoping that a new administration will steer the ship in the right direction.

Look, I’m all for hope and optimism.

But it’s important to stay rational. These problems aren’t going away.

And you won’t be worse off for having a Plan B that provides solid protection from the consequences of these obvious trends.

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Less than a week after India’s surprise move to scrap its highest denomination cash notes, another front in the War on Cash has intensified down under in Australia.

Yesterday, banking giant UBS proposed that eliminating Australia’s $100 and $50 bills would be “good for the economy and good for the banks.”

(How convenient that a bank would propose something that’s good for banks!)

This isn’t the first time that the financial establishment has pushed for a cashless society in Australia (or anywhere else).

In September 2015, Australian bank Westpac published its “Cash Free Report”, suggesting that the country would become cashless by 2022.

In July 2016, Australian payments firm Tyro published an enormously self-serving blog post touting the benefits of a cashless society and saying, “it’s only a matter of time.”

Most notably, two days ago, Citibank (yes, THAT Citibank) announced that it was going cashless at some of its Australian branches.

The media and political establishments have chimed in as well.

In February of this year, the Sydney Morning Herald released a series of articles, some of which were written by officials from Australia’s Department of the Treasury, suggesting that eliminating cash will “save billions”, and that “moving to a cashless society is the next step for the Australian dollar”.

This is how it works.

The government, media, banks, and even academia have formed a single, unified chorus to push this idea out to consumers that “cashless” is good for everyone.

And it’s happening across the planet, from Australia to India to Europe to North America.

They’re partially right.

Going cashless probably will save a lot of money; paper currency is costly to transport in large quantities due to the need for security.

It’s also accurate to suggest that going cashless will be “good for the banks.”

As UBS pointed out yesterday, “de-monetizing” Australia’s $50 and $100 bills would force anyone holding those notes to deposit them back in the banking system.

Bank deposits would rise as a result, and consequently, so would bank profits.

Governments would benefit from a cashless society because all savings would be in the banking system, and they have full regulatory control over the banks.

This means that your politicians would have more control over your savings and fewer obstacles to impose capital controls or engage in Civil Asset Forfeiture.

Even policy wonk academics would have a rare opportunity to take their lousy theories and PhD dissertations for a test drive.

Everyone benefits from a cashless society… except for you.

For individuals, cash still has plenty of important advantages.

Cash is one of the few remaining options for financial privacy that doesn’t create a permanent record of every purchase or transaction you make.

It’s also an easy way to reduce your exposure to risks in the broader financial system.

Think about it– the banking system is full of institutions that never miss an opportunity to demonstrate they cannot be trusted with our money.

Hardly a month goes by without some major banking scandal; they’re caught colluding on exchange rates, manipulating interest rates, fraudulently establishing fake accounts without customer consent (and then charging us fees on top of that).

It’s disgraceful.

In addition, bank safety is far from certain.

In many banking systems across the world (especially in Europe right now), banks have precariously low levels of capital and are already suffering the effects of negative interest rates.

Even in the United States, banks routinely employ very clever accounting tricks to conceal their true financial condition.

There’s also the fact that, the moment you make a deposit at a bank, it’s no longer your money. It becomes the bank’s money.

And they can do with it as they please, whether it’s freezing you out of your account or making idiotic investments with minimal reserve requirements.

You have no say in the matter.

As a bank depositor, you’re nothing more than an unsecured creditor of a financial institution which may or may not allow you to withdraw your own savings.

If you don’t believe me, take a trip down to your bank and ask to withdraw $25,000. See how quickly they treat you like a criminal terrorist.

Bottom line, conventional banking is not risk-free. And holding cash is one way to reduce that risk.

Cash essentially eliminates the middleman between you and your savings… at least, the portion of your savings that can be easily exchanged for goods and services in the economy.

Cash is a pitiful store of value over the long-term. Precious metals and other real assets are much better alternatives.

But we still can’t walk into Starbucks and pay for a cup of coffee with a quarter-ounce silver coin.

So until that day comes, cash remains an asset that you’ll want to hold.

Just make sure you don’t go overboard. The War on Cash is very real. So if you have more than a couple of months worth of living expenses, you’re taking on unnecessary risk.

Also, keep the denominations low.

As the case with India shows (see the photo), governments have no compunction about violating the public trust with immediate effect and without warning.

So if you’re in the US, don’t keep a mountain of $100 bills in your safe. Keep 10s, 20s, and 50s.

If you’re in Europe, definitely avoid the 500 and 200 euro notes, opt for 20s and 50s.

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When I was in Texas over the weekend taking a quick break from a whirlwind trip around the world, I went to one of the biggest shopping malls in Dallas to buy a birthday present for the CFO of our agriculture business.

The mall is called the Galleria, and it’s particularly interesting for shoppers because it has an ice-skating rink on the ground floor.

An ice rink might not sound like a big deal, but in a state like Texas that’s legendary for sweltering heat, it’s still quite a novelty.

Kids especially love the ice, and it’s common to hear them begging mom and dad for a 30 minute skate pass.

I was standing on a terrace overlooking the rink on Friday, busy firing off some emails to my staff, when I overheard one such conversation.

It didn’t even register until I heard the mother say, “Kaden- you can’t go ice skating… you might fall down!”

The words immediately passed through my mental filter as if someone had just shouted out my name across the food court.

You might fall down? Duh. It’s a ten-year old boy on ice skates. Of course he’s going to fall down.

I’m really not sure when this happened. I’m nearly 38, so I grew up in the 80s and early 90s.

When I was a kid, my friends and I used to ride our bikes all over town by ourselves until it was dark.

Today that would be enough for our parents to be arrested… or at least paid a visit by Child Protective Services.

My friends and I chased each other around and played that occasionally got rough.

Now even ‘Tag’ has been outlawed in countless school districts who consider the game physically and emotionally distressing to children.

I only remember having to have a few inoculations as a child.

The CDC website doesn’t go back to the 1980s, but it does show that in 1995, the government only endorsed shots against five diseases for children.

Today it’s 14, and the actual number of shots has soared.

Again, I don’t know precisely when any of this changed. But it’s painfully obvious how different things are now for kids.

Major cultural changes like this always start in the home with what parents teach their children… as in, “Kaden, you might fall down.”

What is the big lesson that this child is learning? Because, “Kaden, you might fall down,” could just as easily be, “Kaden, you aren’t allowed to take any risks or try anything that’s new and challenging.”

Risk taking is supposed to be part of the American DNA. The US is supposed to be the country that rises to major challenges.

And there’s certainly no shortage of challenges now.

The national debt now stands at $19.8 trillion. Social Security and Medicare are woefully unfunded, and many other government trust funds are flat broke.

The Federal Reserve has printed itself into near insolvency and created massive financial bubbles around the world.

Hundreds of thousands of pages of regulations now exist, debilitating small businesses and creating extraordinary disincentives to produce.

Socialist dogma is growing stronger. The top 25% of income earners in the US already pay more than 80% of the taxes. And yet the bottom 50% wants you to pay even more of your ‘fair share’.

It’s madness.

Being comfortable with major challenges and risk taking is more important than ever. And they’re a big part of any individual’s success in life.

Taking a chance on a new job on the other side of the country, successfully investing in the stock market, starting a new business… all of this requires being comfortable with risk and challenges.

But that’s not what children are being taught.

They’re being taught that they’re made of glass, and if they try anything difficult they might fall down and hurt themselves.

That’s not how life works. Everyone falls down.

Not to sound cliché, but it seems far more important to teach children how to get back up quickly.

And more importantly, teach them to figure out WHY they fell down in the first place and HOW they can get better.

This is the “Can-Do”, risk-taking, pioneering spirit that made the United States the wealthiest country in the history of the world.

And if those values aren’t passed down to the next generation, they will absolutely disappear.

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Several months ago, the voters of the United Kingdom chose to walk away from the European Union.

They called it “Brexit”. And it rocked the world.

The entire establishment– banks, businesses, media, politicians, celebrities– had been pushing the British people to remain in the European Union.

And all the so-called experts scared the bejeezus out of voters with predictions of doom and gloom consequences should Britain leave the EU.

All-out panic ensued in financial markets when the Brexit results were announced.

And Britain’s FTSE stock index tanked when trading commenced the following morning.

But then something interesting happened.

Investors realized rather quickly that the world hadn’t come to an end. British companies hadn’t simply closed up shop and stopped operating.

Brexit or not, British Airways and EasyJet would keep flying. Royal Dutch Shell and British Petroleum would keep pumping oil and gas.

So within a matter of days, British stocks rebounded and surpassed their pre-Brexit vote levels.

The same thing happened a few weeks ago here in Thailand.

News that the Thai King was on his deathbed rocked local financial markets.

Thai stocks began a steep selloff as investors, both foreign and local, dumped their assets in the face of so much uncertainty.

The Thai King had been a fixture in the country for so many years that there’s hardly a single investor alive who can remember a time without him.

The King passed away a few days later. But once again, investors were surprised to find that the world didn’t come to an end.

Thailand didn’t plunge into chaos. Thai companies kept operating. Everything was OK.

And within a matter of hours, Thai stock prices rebounded.

Naturally the same thing happened with the US presidential election.

There were countless pundits in financial media predicting that a Trump victory would cause a major decline in US stocks.

This chorus grew so loud that it eventually became a self-fulfilling prophecy.

Late into Tuesday night’s election coverage when it became clear that Trump was the front-runner, US stock futures collapsed.

Of course, US stock markets were closed at the time; it was well after midnight in the US, and markets wouldn’t open for at least another 8 hours.

But here in Asia, financial markets were absolutely open for business; it was around 1pm local time when it became clear that Trump was going to win.

Now, even though US stocks are obviously traded primarily in US stock exchanges, there are a number of ways to buy and sell US companies in overseas markets.

It’s commonplace for major companies to have secondary stock listings on a foreign exchange (say, London, Frankfurt, or Hong Kong).

So even when US markets are closed, investors can still buy and sell shares of large companies– as long as they have access to trade in those foreign stock markets.

That’s what I did. It was early in the afternoon, and I bought shares of an ETF listed in Hong Kong that tracks the US S&P 500 index.

At the time, US stock futures were down by roughly 5%.

And while I don’t normally like ETFs, I was making a very short-term bet that the Trump victory chaos would be very short-lived, just like Brexit and the Thai King.

US markets opened eight hours later. But by then, the panic had already started to calm.

Despite absurd predictions by faux-experts like Paul Krugman who said that US markets would “never” recover, the world didn’t come to an end.

As I wrote yesterday, investors quickly realized that nothing had fundamentally changed.

Disney is still making movies. Star Wars is still going to be released. Captain America and Thor are still going to battle aliens.

Mark Zuckerberg is still peddling your personal information to the highest bidder.

Monsanto is still genetically modifying your food.

US stock prices began to recover from the Trump shock within minutes of the market opening.

I had already made my investment in the S&P 500 ETF eight hours earlier when the index was still down 5%.

So when stock prices came roaring back, I made a very quick profit.

But most US-based investors who only trade US-listed investments missed out on this opportunity; by the time the US market opened and they were able to buy, prices were already moving higher.

This is a pretty clear example of one of the regular themes of this letter.

It’s easy to think exclusively in terms of what’s within our own borders, i.e. if you live the United States you only trade US stocks on the US exchanges through a US brokerage.

But if you expand your thinking to the entire world, you open up more options for freedom and prosperity.

In this case, expanding one’s thinking about financial markets to include the entire world– specifically, buying US stocks on a foreign exchange– created an opportunity to act (and profit) before other investors had the chance.

As I often write, there’s no downside risk in doing this.

You’ll never be worse off for having the option to buy and sell financial assets overseas, especially when this structure can also provide other benefits.

For example, you can hold funds to trade overseas at a foreign brokerage located in a jurisdiction which has very favorable laws protecting you against frivolous lawsuits.

So if life ever throws a curve ball your way, this type of structure is a great insurance policy to make sure that you and your family will be OK. It’s a great part of a Plan B.

But as Tuesday night’s example shows, even if nothing bad ever happens, a structure like this can also provide more options to put more money in your pocket.

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One of the most consistent aspects of travel is that, no matter where I go, the Clinton News Network (CNN) follows me around like the albatross in Rhyme of the Ancient Mariner.

I walk into an airport lounge, there it is. I hit a hotel lobby, there it is. I go for breakfast, there it is.

So when I woke up this morning here in Thailand and flipped on the TV, the first thing I saw was Wolf Blitzer having an orgasm every time Hillary won an electoral vote.

It’s almost comical to suggest there was any semblance of objectivity throughout the entire cycle.

Hillary Clinton had the full and unabashed backing of the entire media establishment.

And the banking establishment. And the political establishment. And countless billionaires, Hollywood celebrities, rock stars, international press, foreign leaders, and even the President of the United States.

Yet all of those big guns proved to be ineffective against a citizenry that’s fed up with the status quo.

At least the losing side has accepted its defeat with quiet dignity.

University students across the country have come out of their safe spaces to protest by the thousand, chanting “F*ck Donald Trump” and “Not my President”.

The students’ sudden fury may be what caused the Canadian government’s immigration website to temporarily go down (though I’m sure this will somehow be blamed on the Russians).

Liberal papers like the Huffington Post are running headlines like “An American Tragedy”, while NYT bloggers are calling Trump voters “racist, xenophobic, misogynistic and homophobic.”

Celebrities had some real gems like “Well, congratulations America you f–ked this one up,” and “I feel like I’m about to give birth to a baby that’s already dead.”

Comedian Chelsea Handler posted one of the most bizarre Tweets of the night, saying “My condolences to the President and First Lady. We will keep aiming high. We may not have you honored you this time, but we will honor you.”

So apparently this exercise of American democracy has dishonored the President.

Nobel Prize-winning economist Paul Krugman commented that tumultuous financial markets would “never” recover. Wow. Never.

But the word “never” apparently means 49 minutes to a Nobel laureate, because that’s how long it took for the S&P 500 to turn positive for the day once the market opened.

Investors ostensibly realized that, despite the Trump victory, Disney will keep making superhero movies, Coke will keep distributing poisonous flavored water, and Mark Zuckerberg will keep selling your personal data to advertisers.

Krugman followed up that genius prediction with an even bigger one, writing that “we are probably looking at a global recession, with no end in sight.”

(I have heard that he suffers from myopia…)

Then there were all the all the expressions of shock from Clinton supporters who found the loss incomprehensible. They couldn’t possibly understand why she lost.

It reminded me of a wonderful quote from George Orwell (author of 1984) who wrote in a scathing essay on nationalism at the end of World War II:

The nationalist not only does not disapprove of atrocities committed by his own side, but he has a remarkable capacity for not even hearing about them.

I thought the late-night quickie from Clinton campaign chairman John Podesta summed it up perfectly.

While Hillary stayed in her $20,000/night suite at the Peninsula Hotel, Podesta was sent to tell the crowd of Clinton supporters that “She is not done yet!”

Nonsense. It was a big fat lie. Minutes later she called Donald Trump to concede the election.

Anyone trying to understand why she lost might take note of this deceit– even at the bitter end. She lied to her own supporters.

Anyhow, it’s done now… looking like another bizarre outcome where one candidate wins the popular vote, but the other candidate wins the election because of the way the electoral college is set up. That’s how much your vote actually counts.

So here we are, disgust from so many, euphoria from others, and LOTS of uncertainty about what’s to come.

Just remember that uncertainty creates both significant risk as well as great opportunity.

Meanwhile, all the disgust and euphoria– these are intense emotions that cloud judgment.

We human beings tend to make very bad decisions… and miss a lot of important cues… when we’re emotional.

Example– while the entire world was transfixed on the contest to see who will be Captain of the Titanic, the government of India scrapped their two largest-denomination notes, 500 and 1,000 rupee, effective almost immediately.

It would be like the US government saying “At midnight tonight the $50 and $100 bills are no longer valid.”

Why? Well the official reason from the Indian government is to combat money laundering or some such nonsense.

But they’ve also admitted that they’re trying to move towards a “cashless society”.

Bottom line, these trends are still happening.

So if your guy won, enjoy. If your guy/gal lost, don’t panic.

Either way, just keep your eye on the ball.

from Sovereign Man https://www.sovereignman.com/trends/meanwhile-as-the-world-watched-the-election-this-happened-20464/
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What do you think have been the best performing assets over the past several years?

Perhaps it’s Facebook stock, whose price is up 3.2x since it debuted in 2012.

Or maybe Apple, whose stock has soared 4x since 2010.

But neither of those companies’ stock performances holds a candle to Colorado’s sixth Congressional district.

Back in 2010 when incumbent Rep. Mike Coffman handily won the race, total election spending that year, including funds from PACs and other outside groups, totaled $758,926.

Fast-forward six years, and Colorado’s 6th district is now fetching $17,866,308 in total election spending.

That’s a 23.5x increase in just six years, putting Apple’s stock performance to shame.

Of course, a Congressional seat isn’t exactly an investment in the traditional sense.

But let’s be honest: no one puts up millions of dollars to back a candidate without expecting a return on that investment, just like no one invests in Apple stock without expecting a return.

They’re both investments.

Stock prices rise over long periods of time if (a) companies perform well and increase investor returns, and/or (b) financial bubbles artificially inflate prices.

It’s the same with politics.

If donors feel like they’ll receive a better return on investment with a particular candidate, more money will flow towards his/her campaign… and hence the “price” of the election increases, just like a stock price.

Additionally, just like stock prices, election prices can increase due to an inflationary bubble.

Only this isn’t a financial bubble or credit bubble engineered by a central bank’s idiotic monetary policy.

This is a corruption bubble. And it keeps getting bigger.

There was a time once long ago when being a politician was considered honorable service.

It was a burden. It meant reluctantly uprooting yourself from your business or profession for several years to represent the interests of your community.

When your service was up, you would return home and it would be someone else’s turn to serve.

It’s different now.

Clearly there are still some people who truly care and do their best for their constituents.

But the system is stuffed full of career politicians who spend tens of millions of dollars to put themselves in positions of power… and stay there forever.

This is a far cry from representing the interests of your community.

Rather, they’re representing their own interests and those of their donors.

And everyone’s in on it. Banks. Mainstream media. Hollywood. It’s ridiculous.

Given the massive amount of money and power involved, these people say and do anything to get elected.

They lie, cheat, and steal. They manipulate, deceive, and conspire.

Amazingly enough, what they do often meets the classic legal definition of fraud: making deliberate misstatements of fact with the intent to deceive and personally benefit while causing injury to another party.

Well, there’s definitely no shortage of deliberate misstatements with an intent to deceive voters.

It’s fairly easy to see that winning the election personally benefits the candidates.

And yes, there’s injury to another party, as in, the entire country.

It’s disgraceful. Everything about the system is fraudulent.

Yet they continue bullwhip people, telling us that we have an obligation to participate in this fraud.

The common refrains are “don’t boo, vote,” and, “if you don’t vote you can’t complain.”

(My personal favorite is “Vote or Die!” Nothing goes better with government than threats of physical violence.)

But these are all weak justifications of a broken system.

If I get food poisoning every time I go to a restaurant regardless of what I order, I’ll eventually realize that there’s something rotten in the kitchen and stop eating there.

I won’t feel any moral obligation to keep showing up just because I have the ‘freedom’ to do so.

Politics shouldn’t be much different. If the system consistently fails us, why keep showing up?

The rotten kitchen isn’t going to improve simply because we keep coming back, nor will the rotten system change because we keep using it.

We can’t change this reality. And we can’t change the minds of millions of other people who still believe in the system.

But what you can do is ensure is invest that time and energy in yourself… and ensure that no matter what the outcome, no matter how big the corruption bubble becomes, you’ll be in a position of strength no matter what happens next.

from Sovereign Man http://ift.tt/2fWKeGP
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There are problems, and there are solutions. Problems first.

1. Banks.

That a bank as big as RBS could crash spectacularly, twice, says something about the immutability of human nature. This is not to single out the Scots. Citibank, one of North America’s largest banking organisations, has also gone bankrupt at least twice.

Picking out another example, in the early 1980s the major US banks went on a lending spree in Latin America, determined to test the observation of Walter Wriston, a former head of Citibank, that “countries don’t go out of business”. But fairly soon afterwards, 27 countries did. In the summer of 1982, large American banks lost close to all their cumulative past earnings. The loss was equivalent to everything they had ever made in the history of American banking.

2. Central Banks.

We have no choice but to use government money. US banknotes, for example, technically Federal Reserve Notes, bear the wording “This note is legal tender for all debts, public and private”. No other form of money is accorded that status. As savers and investors we are thus forced to play an inflationary game not of our own making, using rules designed by politicians and the banking lobby to dispossess us of our true wealth. The latest iteration of this long con is the currency depreciation that comes with quantitative easing (a polite term for money printing), the sole purpose of which is to refloat a sunk banking sector by instilling illusory faith in the buoyancy of asset prices. As the British economist John Maynard Keynes said, the process of currency debauchery “engages all the hidden forces of economic law on the side of destruction and does it in a manner which not one man in a million is able to diagnose”.

3. Economists and Financial Theorists.

The financial theory behind CAPM [the Capital Asset Pricing Model] doesn’t hold up in any approximation to a normal financial market; it doesn’t work in theory or in practice. Building on the work of Harry Markowitz, the CAPM was the creation of Jack Treynor, William Sharpe, John Lintner and Jan Mossin. Sharpe, Markowitz and Merton Miller would go on to receive the 1990 Nobel Memorial Prize in Economics – always a dangerous sign – for their contribution to financial economics. Fischer Black and Myron Scholes would go on to develop the so-called Black-Scholes model for derivative pricing in 1973.

Bad economics. Overly crude modelling. Widespread adoption within the financial services industry. What could possibly go wrong? First the Long-Term Capital Management collapse and then the financial crisis of 2007/8 showed exactly what.

Adherence to flawed economic models helped trigger the credit crisis. Adherence to questionable economic theories has dictated our authorities’ response to that credit crisis. What if the authorities are simply wrong? Trillions of dollars, pounds and euros have been spent on quantitative easing and extraordinary monetary stimulus since the bankruptcy of Lehman Brothers. It is by no means clear that those trillions have been well spent.

4. Fund Managers.

You have probably never heard of Edward G. Leffler. But in the words of the Wall Street Journal columnist Jason Zweig, Leffler is “the most important person in mutual fund history”.

Leffler’s claim to fame is that he invented the open-ended fund. He originally sold pots and pans, but he was not slow to appreciate that selling investments might be more lucrative. In March 1924, he helped launch Massachusetts Investors Trust, the first open-ended fund. Its charter said that “investors could present their shares and receive liquidating values at any time.”

Its impact was similar to that of Henry Ford’s development of the assembly line. It turned asset management into an industrial process. Whereas closed-ended funds – in the UK we call them investment trusts – contain a fixed amount of capital, open- ended funds had the potential for unlimited growth. As Zweig fairly observes, like any human innovation, the open-ended fund could be used for good, or ill. At a stroke, the invention of the open-ended fund created a schism in the asset management industry. Institutional investors would thereafter have to make a choice. They could be asset managers, or they could be asset gatherers. But they could not be both.

5. The Bond Market.

It is certainly staggering that even after expanding its balance sheet by $3.5 trillion, the Fed has been unable to trigger visible price inflation in anything other than financial assets. One dreads to contemplate the scale of the altogether less visible private sector deleveraging that has cancelled it out. One notes that while bonds are behaving precisely in line with the Ice Age Thesis, stock markets – by and large – are not quite following the plot. Of course, if interest rates squat at zero or lower, and bonds are expensive, then investors will inevitably chase income and returns in a more attractive-seeming market – namely that for listed stocks. The by-product of these malign trends is that it makes rational investment and asset allocation, and more narrowly the pursuit of real capital preservation, almost impossible.

6. The Stock Market.

When it comes to dying hard, the cult of equities has few peers. You might have thought that two bear markets since the millennium, the Enron / Worldcom scandals, the Global Financial Crisis and the current widening stagflation would have beaten equity investors into some kind of sense of submission, or at least acceptance. Not a bit of it. Notwithstanding the fact that the FTSE 100 ended December 1999 at the level of 6930, and at the time of writing 17 years later stood at just over 6100, the investment media continue breathlessly to report stock market activity to the exclusion of just about everything else.

7. The Financial Media.

One of the iron laws of financial trading is that there is always someone out there smarter than you are. The billionaire Mike Platt, co-founder of the hedge fund BlueCrest, alludes to this law when he talks about the type of trader that would be a good fit for his business:

“I look for the type of guy in London who gets up at seven o’clock on Sunday morning when his kids are still in bed, and logs on to a poker site so that he can pick off the US drunks coming home on Saturday night. I hired a guy like that.”

In short, it helps to have an edge. And by definition, the mass financial media cannot give you that edge. You may think you’re pretty smart by subscribing to the financial cable channel CNBC. Think again.

So much for the problems. What about the solutions? Well, for those, you’ll simply have to buy the book.

from Sovereign Man http://ift.tt/2f95SpP
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