Category: simonblack

Below is a short email that my friend Sam posted this morning to his Facebook page about his surprisingly positive experience with the US healthcare system.

I thought it a fantastic read, and I wanted to pass it along to you:

I had to run to the emergency room today for what may be a neurological issue. Dizziness, staggering, loss of balance, that kind of thing.

I’m in San Diego, one of the most expensive cities in the world, and I have no insurance. I figured I was screwed.

But instead, the experience was unreal.

I got seen immediately. I didn’t even have time to sit down, they just whisked me into an examination room.

The doctor and nurse were ON IT, and they took their time with the exam and consultation.

The visit ultimately involved staying the whole day for observation, all kinds of tests, sedation and reversal, blood pressure check, a full blood panel work up (results tomorrow, yes TOMORROW keep your fingers crossed) and having both ears cleaned and flushed.

The bill was a mere $374.63.

Do I have some insane insurance plan? Nope.

Am I being super-subsidized by the rest of America? Nope.

Am I a privileged politician with a special “bosses only” healthcare plan? Don’t make me laugh.

It turns out that the care was for my dog, not for me. And we didn’t go to a ‘people’ hospital– I obviously took my dog to an animal hospital.

She and I are both biological machines, mammals made mostly of water (though she sheds more than I do).

The only other real difference is that the government is regulating the hell out of healthcare for people, while (relatively speaking), leaving healthcare for animals alone.

And that, my friends, is the reason Obamacare has flopped, and why your healthcare costs will keep going up.

It’s not greed. It’s not the drug companies. It’s not anything other than the application of government intervention in what should be a free market.

Simon again.

It’s not exactly controversial these days to suggest that the US healthcare system is in bad shape.

According to data collected by numerous independent agencies like the Institute of Medicine, Commonwealth Fund, and Kaiser Family Foundation, the US still ranks dead last among advanced economies in overall quality of its healthcare system.

In fact, the US healthcare system has the worst record in the number of deaths caused by mistakes or inefficient care.

And wait times in the US for urgent care and primary care visits rank lower than every other developed nation.

Americans pay at least 50% more for healthcare in terms of annual spending than people in other advanced nations, yet they receive less care as measured by the number of doctor visits.

Sure, it’s great that there are fewer uninsured people than ever before in the US, but this is a measure of QUANTITY, not a measure of QUALITY.

Undoubtedly the US is home to some of the finest medical professionals in the world.

But they’ve been buried under an expensive, over-regulated bureaucracy that continues to erode overall quality in the system.

A 2015 report from the National Academy of Sciences summed it up by stating, “For Americans, health care costs and expenditures are the highest in the world, yet health outcomes and care quality are below average by many measures.”

But instead of trying to understand WHY the system is so slow, bureaucratic, and expensive to begin with, politicians try to ‘fix’ it by creating more regulations.

It’s as if they believe they can legislate their way to a quality, efficient medical care system, just as they believe they can legislate their way to a better education system or economic prosperity.

This almost never works.

After all, the people who come up with these rules are notoriously unqualified and have rarely ever held a job outside of their giant government bureaucracy.

So despite what may be some very good intentions to fix the system, they invariably make things worse.

The end result is that your pet probably has access to more efficient healthcare than you do.

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On Friday afternoon, New York state Governor Andrew Cuomo signed a bill making it illegal to -advertise- your home for short-term rent on websites like Airbnb.

The law specifically targets New York City homeowners in apartment buildings who advertise their properties, or even just a spare room in their homes, to rent for less than 30 days at a time.

It’s important to note that New York already passed a law a few years ago making it illegal to rent your home out to short-term tenants.

This new law makes it illegal to ADVERTISE… which is basically pre-crime.

Now you don’t even need to commit the egregiously criminal act of renting out your home to a nightly traveler.

Simply informing the public that you’re thinking about it is enough to get slammed with a major fine.

Violations carry a penalty of up to $7,500, dramatically higher than New York’s penalty for reckless driving (up to $300) and even higher than the fine for driving while intoxicated (between $500 and $5,000).

I’m sure we can all sleep more soundly tonight knowing that the courageous politicians of New York are keeping the streets safe from nefarious criminal terrorists trying to earn a few extra bucks from their own private properties.

It’s ironic that New York City already has one of the highest hotel occupancy rates in the world, in excess of 90% in some parts of the city like Times Square.

(Which makes New York one of the only places in the world where a 2-star fleabag like the Comfort Inn can command rates between $249 and $429/night.)

So websites like Airbnb fill an obvious market need.

Last year alone, Airbnb generated $451 million for New York City property owners who rented their apartments or spare rooms to short-term travelers.

That’s 451 million reasons to continue allowing Airbnb to operate in the city.

Everyone wins. Hotels still have high occupancy. Property owners generate supplementary income. Travelers have a better experience in the city. And politicians get their tax slice of $451 million.

But now they’ve screwed up a perfectly good thing that was creating plenty of benefit.

Naturally, they’re citing ‘public safety’ as their primary justification. They can get away with anything if has to do with safety and security.

The text of the legislation states that they must “ensure that all buildings comply with fire, building and other safety codes relative to their class.”

Right. Because renting your apartment to a retired couple who flew into town to see Hamilton means that the entire building will burn down to the ground?

This is really some next level logic.

Driving home the political delusion, State Senator Liz Krueger released a statement in favor of the law, calling it

“a huge victory for regular New Yorkers over the interests of a thirty-billion dollar corporation.”

(Big Sister Krueger also encourages New Yorkers to rat each other out to the authorities should they find one of their neighbors violating the law.)

If this person actually had a clue about anything, she’d realize that Airbnb has NEVER generated a profit and has lost billions of dollars since it was founded.

So this ‘victory’ is against the regular New Yorkers she claims to protect– ordinary people who use the site to generate extra income and help make ends meet in one of the most expensive cities in the world.

Now those people will lose their extra income, and the government will lose the tax revenue it would have generated.

With the stroke of a pen, New York has gone from a win/win scenario to a lose/lose scenario. It’s genius!

More importantly, these politicians are proving to the world, and to the next generation of entrepreneurs, that when you try to do something useful and innovative, you will be penalized.

With stupidity like this so pervasive in government, it’s no wonder why the productive and entrepreneurial spirit is being crushed in the Land of the Free.

Research from the US Department of Commerce shows that the startups in the United States, as a percentage of the total number of businesses in the economy, are at the lowest level since the 1970s.

And this figure has been in terminal decline for decades.

The same Commerce Department data show that fewer jobs are being created by startups than ever before.

Unsurprisingly, GDP growth in the United States has also stalled.

And productivity has actually been declining for the past three quarters.

These are all related stories: when a broken system and out-of-touch political class make it more difficult for people to produce, prosperity suffers.

And it doesn’t take a rocket scientist to see where this trend is going.

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I just had a great lunch with a couple of entrepreneurs that our Sovereign Man: Private Investor group funded a few months ago with a $1.5 million investment.

These guys are incredibly bright entrepreneurs, and they co-founded a wonderful business.

Essentially they’re becoming an Alibaba or Amazon.com, supplying business product needs from office furniture to welding equipment to printer cartridges to local Brazilian companies.

The business has been growing rapidly even though Brazil has been suffering its worst recession since the Great Depression.

Buying into great businesses is ALWAYS my preferred investment. In fact, I think that a great business is the best asset anyone can own.

In good times, a great business makes a LOT of money. In times of inflation, a great business holds its value and acts as a hedge against rising prices.

In times of deflation, a great business produces valuable cash profits.

And even in times of recession when poorly managed companies shrink and shutter, great businesses grow their market share and emerge from recession stronger than ever.

People often fret over finding the right investment manager or financial advisor to generate sufficient investment returns for their savings.

But in reality, no one is capable of growing your investment capital more than honorable, talented, energetic entrepreneurs and managers who run great businesses.

I also prefer to invest in private businesses (as opposed to large companies listed on major stock exchanges) because it puts me so much closer to the action.

Apple may be a wonderful company, but CEO Tim Cook is never going to take my phone call, let alone spend three hours at lunch discussing the company’s strategy.

Last, I prefer to invest in companies that are exporting proven business models overseas– and that’s exactly what these guys are doing.

No one is reinventing the wheel here; there are already dozens of other companies in places like the US, Europe, and China that have built successful business-to-business (B2B) e-commerce platforms.

So launching a business like this in a more developed market like the US would mean they’d have to compete with extremely large companies who’ve had a 10+ year head start.

But in Brazil, no one else is really doing this.

For a multi-trillion dollar economy with more than 30 million active businesses, Brazil is practically virgin territory in the B2B e-commerce space.

That spells opportunity.

And instead of starting from scratch, these entrepreneurs (both of whom are foreign– from Germany and the US) copied a proven business model that is already working in more competitive markets back home.

This is a great way to become very successful overseas.

Most big companies are fighting over profits in very large, highly competitive markets like North America and Europe.

But the rest of the world is often ignored.

So with a little bit of hustle and ingenuity, foreign entrepreneurs can export proven, successful business models from their home countries into lucrative foreign markets where there is practically zero competition.

This dramatically increases the chances of success.

Even starting a simple franchise can be a great example.

In large, developed markets, popular franchises are ubiquitous and have a lot of other businesses and franchises to compete against.

That Burger King down the street has to compete against McDonald’s, Wendy’s, and a dozen other franchise burger joints.

But in smaller markets abroad, top franchise brands are still unique.

(They just opened a PF Chang’s restaurant in my neighborhood in Chile; it’s almost comical how popular it has become, and the owners are minting profits.)

In many respects we’ve done the same thing with our agriculture business in Chile, importing a proven business model and international best practices into a country that doesn’t generally adhere to the highest standards.

This has quickly propelled us to become one of the top companies in our sector, and we’re growing rapidly.

There are countless other examples of people following this approach overseas, and becoming very successful doing so.

I’ve long been a big proponent of living abroad; the tax and lifestyle advantages can be unparalleled, as are the opportunities for your kids’ education and development.

Worst case, it’s an easy excuse to learn a foreign language, and having overseas experience is a great differentiator on a professional resume.

(Not to mention, if you spend time living overseas you could also end up with a second passport– a tremendously valuable insurance policy that your family can enjoy for generations.)

Most importantly, though, the economic opportunities are profound.

There are entire industries that are wide open, just waiting for smart, talented people to import proven business models from their home countries.

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The series of debates in the contest to see who will become Captain of the Titanic is finally over.

And as the smoke clears from the evening’s entertainment, the main headlines are focusing on just one thing: Donald Trump’s pledged refusal to say he will accept the election results.

The media is spinning itself into an absolute frenzy over this, perhaps even worse than the Pussygate tape.

It started even before the debate, with yesterday’s headline in the Washington Post read, “Trump’s election-rigging allegations are affecting people’s faith in democracy”

The media is all collectively vomiting in disgust: how dare anyone question the sanctity and purity of American democracy?

I find this to be such a farce. The election itself is a complete farce.

Citizens aren’t even voting for President. The United States is still tethered to the corpse of an electoral college system that has its roots in the late 1700s, before the Constitution was even ratified.

The reality is that the President is chosen by 538 “electors,” who, in most cases, are not even legally bound to vote for the candidate to which he or she has pledged.

More than half of the states in the US have no laws to punish “faithless electors” who either abstain or vote for a different candidate, and most states have no procedure to void a faithless elector’s vote.

Admittedly, this electoral college system probably made sense… in 1789.

Back then it was too difficult and logistically challenging to have a nationwide election since transportation was so slow and dangerous.

So I can understand why the Founding Fathers established this system in the early days of the nation.

But the fact that this system is still used in 2016 is a complete joke.

They pretend that America’s representative democracy is the most advanced and pristine in the world, and yet it’s still based on a system in which the people aren’t even voting for President.

By definition this is NOT representative democracy.

As for the allegations of rigging, this is one of the things that drives me crazy about the election.

I’m not “for” any candidate. But I’m completely revolted at the blatant anti-Trump media bias.

The Huffington Post, for example, cannot even mention Donald Trump without adding an editor’s note at the end of the article saying

“Donald Trump regularly incites political violence and is a serial liar, rampant xenophobe, racist, misogynist and birther who has repeatedly pledged to ban all Muslims — 1.6 billion members of an entire religion — from entering the U.S.”

Great. We all understand that you think he’s a bad guy.

But what’s sorely lacking is the anti-Hillary editor’s note, something that would read:

“Hillary Clinton is a pathological liar and sociopath who has spent decades engaging in criminal misconduct and abusing her power to enrich herself and her supporters.”

Of course, you’ll never see that. The media still get starry-eyed whenever candidate Clinton walks into the room. It’s revolting.

The one that I find most disturbing is the story that Hillary made up about landing in Bosnia in March 1996.

She claimed that she landed “under sniper fire,” and that they all “just ran with our heads down to get into the vehicles to get to our base.”

Then a video surfaced showing what really happened when she and her daughter landed in Bosnia– it was all hugs and kisses and photo ops. No sniper fire. No running to the vehicles.

Hillary claims to have “mis-remembered”.

Funny thing, when former NBC News anchor Brian Williams “misremembered” being in danger during a ride in a marine helicopter, the guy was crucified and lost his job.

In fact, the people who had the biggest conniption fit over Williams’ misremembering was the media itself. His colleagues turned on him in a nanosecond.

Yet when Hillary misremembers the media gives her a pass.

My dictionary describes the word “RIGGED” as when there’s deliberate activity to produce a result that is advantageous to a certain person.

Well, when the media bias is so brazen, overwhelming and one-sided… RIGGED is absolutely an appropriate word to use.

It’s not sad or disgusting that Trump is questioning the purity of the process or alleging that the election is rigged against him.

It’s sad that it’s actually happening… and that the establishment which is actually doing the rigging refuses to even entertain the possibility that it’s true.

This is banana republic stuff, plain and simple.

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Here’s a great example of how, no matter what’s happening in the world, there’s always an abundance of compelling, lucrative opportunities.

Lately the British pound has plunged to historic lows.

The pound recently touched a 31-year low against the US dollar, and an all-time low against the euro.

And earlier this month the pound shed nearly 3% of its value in the course of a single day.

That’s simply not supposed to happen to a major currency.

A move of just 1% for a major currency is considered shocking. Currencies are supposed to be stable, not ultra-volatile like a penny stock.

Yet these sharp swings keep happening to the pound, mostly out of Brexit fears.

Emotion has taken over. There’s no rational basis for the pound being this cheap—merely panicked selling on the assumption that everyone else is going to be selling.

This is a broken market. And I imagine it must be nerve-wracking to be living in the UK and watching your currency knocked around like some third-world peso.

Yet anytime markets break down like this and emotions take over, great opportunities almost invariably emerge.

We’ve discussed our deep value investment strategy before; financial markets in some parts of the world are so fractured that it’s possible to buy shares of a profitable business for less than the amount of cash it has in its bank account.

That qualifies as a no-brainer– an extremely LOW risk way to generate a built-in profit.

Some colleagues and I are taking this a step further, in fact, and working on a deal to purchase a controlling stake in a listed company that is selling for a fraction of the value of its assets.

(SMPI and Total Access members– watch out for more information on this one.)

These types of opportunities exist almost everywhere that markets have broken down, and the UK is no exception.

I’ll highlight a few simple examples that don’t involve investing tens of millions of dollars.

One asset class that makes sense to consider is collectibles, things like rare coins or wine.

Like gold and silver bullion, collectibles are real assets. And scarce. They’re not making any more 1982 Chateau Petrus.

With collectibles, I prefer to stick to assets with a wide base (i.e. nothing too niche) that are fairly easy to buy and sell.

Art and antiques, for example, can be difficult to value and sell without going to an appraiser and broker.

But certain luxury watch brands, on the other hand, can be sold in minutes, especially the historic high-end Swiss manufactures like Patek Philippe, Rolex, Jaeger-LeCoultre, IWC Schauffhausen, and Vacheron Constantin.

Many of these watches are hand-made and they are NOT mass-produced, so they’re scarce and extremely popular.

Right with the British pound at around $1.22, luxury watches being sold in London and priced in pounds can be had at a steep discount to their US dollar prices across the ocean.

A recent year Patek Phillippe Calatrava model (5119G) is selling for about GBP 12,300 in the UK right now, or right around $15,000.

(And that doesn’t include the benefit of receiving a VAT refund.)

This same watch can easily sell for more than $20,000 in the US.

You could even sell it yourself on Amazon or eBay at a steep discount to that price and still make a very healthy profit.

Technically it should even be possible to sell the watch first in US dollars, and then purchase it in pounds from a UK vendor once you collect the money from your buyer.

That way you can generate a solid profit without actually using any of your own money.

It’s easy to be fearful when markets break down, when terrifying political candidates emerge, and when it seems like World War III is breaking out.

But as a result of all that fear, there are countless opportunities like this to generate low risk, built-in profits.

And thanks to our modern technology, these opportunities are available to anyone in the world who has access to the Internet… and a little bit of hustle.

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[Editor’s note: This letter was written by Tim Price, frequent Sovereign Man contributor and manager of the Price Value International.]

The consumption of financial media can be dangerous. Mixed with overpriced global brands, it can be deadly. In August 2000, Fortune Magazine published an article entitled ‘Ten stocks to last the decade’. As befits something written during the latter stages of the TMT boom, Fortune’s recommendations concentrated on Technology, Media and Telecoms stocks. Their ‘Ten stocks to last the decade’, and their stock prices at the time of original publication, were:

Stock	Price
Nokia	$41.06
Nortel Networks	$79.25
Enron	$83.75
Oracle	$82.375
Broadcom	$240.75
Viacom	$69.00
Univision	$48.00
Charles Schwab	$40.00
Morgan Stanley	$104.06
Genentech	$167.06

How did these ‘Ten stocks to last the decade’ fare? The following table shows their stock prices on 19 December 2012.

Stock	Price as at 14.8.2000	Price as at 19.12.2012
Nokia	$41.06	$4.21
Nortel Networks	$79.25	$0.00
Enron	$83.75	$0.00
Oracle	$82.375	$34.09
Broadcom	$240.75	$33.16
Viacom	$69.00	$54.00
Univision	$48.00	$0.00
Charles Schwab	$40.00	$14.47
Morgan Stanley	$104.06	$19.09
Genentech	$167.06	$95 (Taken Over)

Clearly, Fortune Magazine is unlikely to be winning any investment awards any time soon. Unless it buys them.

All in all, the Fortune portfolio lost 65% of its value over the subsequent decade. Three of its favoured companies went bankrupt, and one was bailed out.

In the words of the legendary value investor Benjamin Graham,

“Investors do not make mistakes, or bad mistakes, in buying good stocks at fair prices. They make their serious mistakes by buying poor stocks, particularly the ones that are pushed for various reasons [by Wall Street]. And sometimes–in fact very frequently—they make mistakes by buying good stocks in the upper reaches of bull markets.”

(Emphasis ours.)

Is there a chance that investors today run the risk of making the same mistake–of overpaying for good stocks during a period when the stock market is, perhaps, somewhat artificially high, courtesy of seven years of egregious and otherwise ineffectual monetary stimulus?

Example. Unilever is a good, if boring, company. It sells soap, shampoo and a variety of foodstuffs. It is also extremely popular with equity fund managers who regard the shares as bond proxies–safe, dependable, low volatility earners. The problem with this groupthink is that–as Benjamin Graham warned–
once the crowd bids up shares beyond a certain point, they no longer offer any “margin of safety”.

Unilever shares have now, arguably, reached that point. They trade on a p/e ratio of 23 times and a price to book ratio of 8. They are not cheap in any Benjamin Graham sense of the word.

And in its well—publicised spat with Tesco last week, the company now seems to be behaving like a cynical, opportunistic, price-gouging profiteer.

(Marmite, for example, is manufactured in Burton-upon-Trent in Staffordshire. As far as we are aware, Burton-upon-Trent does not have its own currency which has suddenly depreciated against sterling which might justify a 10% price hike.)

Unilever is, of course, free to charge whatever it likes for its products. By the same token, consumers are perfectly free to boycott Unilever products and buy something cheaper, and perhaps more appealing. That goes for the shares, too.

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On May 12, 1780, John Adams wrote to his wife Abigail,

“I must study politics and war that my sons have the liberty to study mathematics and philosophy. . . in order to give their children a right to study painting, poetry, music, architecture, statuary, tapestry and porcelain.”

(… to which I would add, “so that their children can hide from the world in their safe spaces.”)

There may be no other quote that so succinctly surmises the rise and fall of empire.

In the early days, people have no illusions about the hard work and dedication required to create a civilization out of nothing.

Yet as a country approaches the zenith of its wealth, the mentality begins to shift.

People become less focused on production and more on consumption… enjoying the benefits of all that hard work.

Towards the end, there’s hardly anyone left alive who can even remember the days that the nation had to work hard and produce.

All anyone has ever known now is consumption… being the ‘richest country in the world’, and enjoying all the benefits that come along with that title.

This is why there’s so much debt.

Wealthy nations have become so accustomed to their lifestyles that, rather than buckle down, work hard, and produce more to keep the good times going, they’d rather simply borrow from future prosperity to pay for consumption today.

In fact, in its semi-annual Global Financial Stability Report released just a few days ago, the International Monetary Fund tells us that overall global debt is at an all-time high, now at over 225% of total world GDP.

Rich countries are leading the way with average debt at an even higher 277% of GDP, a level that makes it “difficult to grow out of the problem.”

Famous economists in rich western countries have come up with all sorts of catchy reasons why no one should worry about the debt–

Reasons like, “because we owe it to ourselves,” or “because we can print our own money…” abound.

People have been spouting this illogic for years to the point that it has become dangerously axiomatic through sheer volume of repetition.

If you say something enough, it eventually becomes true… no matter how wrong it happens to be.

The reality is that debt is incredibly dangerous. Even the ancients understood this.

Much of early theology and human civilization, from the Hebrews to the Romans, focuses on debt repayment and jubilee.

Even the concept of karma in Buddhism and Hinduism is about maintaining a positive moral balance sheet.

Debt is a killer. And the reason why is precisely because one person’s debt is simultaneously someone else’s asset.

Right now if you have, say, a $100,000 bank deposit, you have an asset. But the bank has a debt– they owe you $100,000! It’s your asset, but the bank’s liability.

Similarly, if you have a $1 million mortgage, you have a $1 million debt.

To the mortgage company that receives the interest payment each month, however, that $1 million loan is their asset.

So in fairness, a record amount of debt in the world also means that there’s a record amount of assets.

Here’s the problem: The laws of the financial universe can be bent… but they cannot be broken.

So whenever debt levels grow too large, especially when debt is being squandered on consumption and growing at a far faster rate than the economy itself, then there must be a default.

Yet a default itself is not necessarily a bad thing.

In a default, there’s supposed to be an orderly liquidation process in which a delinquent borrower’s assets are sold off and redistributed to the lenders.

So wealth isn’t necessarily lost, merely transferred from borrower to lender.

But that doesn’t always happen.

When lenders are smart, they make loans backed by high quality collateral.

Think about what a typical home loan is supposed to be: the borrower puts down 20% of the purchase price as a down payment, and the bank loans the remaining 80%.

This means that the bank’s investment is backed by a house (collateral) which is worth 25% more than the initial principal balance of the loan.

This way the bank has an ample margin of safety to recoup its investment in the event that the borrower defaults.

But what happens when the collateral is worthless? Or when there’s no collateral at all other than some delusion about how great the borrower is?

That’s when the entire system runs into major problems.

Think back to the financial crisis: banks weren’t making conservative loans.

They were offering borrowers 105% financing, more money than the homes were worth.

By 2008 bank balance sheets were stuffed full of non-performing loans where the buyers had stopped paying… yet the collateral was worth far LESS than the loan balances.

Poof. Nearly everyone took a bath, and trillions of dollars of wealth was lost in the crisis.

So the real danger isn’t the amount of debt itself, but whether or not there’s any collateral or high-quality assets backing the debt.

Looking at the record $152 trillion in global debt, it’s clear that much of this is backed by nothing but the false promises of once-wealthy nations.

Western governments have spent years increasing their debts, but instead of wisely investing the proceeds in assets for the future, they’ve squandered most of it on war, waste, and consumption.

So when the inevitable occurs and there’s a default, bondholders have almost no collateral to recoup their losses. Trillions of dollars of wealth will be lost.

It’s often considered crazy and treasonous to even imagine a default.

Yet to deny the possibility requires a belief that wealthy nations can continue increasing their debts until the end of time without consequence.

And that may be the craziest idea of all.

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The King of Thailand died yesterday, and the military junta running the country has declared an entire year of mourning.

I saw a quick headline from The Economist which screamed, “The death of the Thai king throws the country into turmoil.”

Really?

This must be a different country from the one I know.

I’ve been traveling to Thailand 3-4 times per year over the past decade, and we have staff who have been living there for at least that long.

It’s perfectly clear to us what impact a new king is going to have on Thailand: there will be a new face on the currency.

And that’s about it.

It’s true that the late King was widely revered, elevated to god-like status by his people.

But in Thailand, as in most places, “he who has the guns makes the rules.” And that has long been the military.

Over the past 15 years, the powerful elite in both the military and wealthy families who actually control the country have engineered several coups to put their own people in power and ensure their interests wouldn’t be interrupted upon the King’s death.

And given that the Crown Prince and heir apparent has spent most of his life outside of Thailand, it’s unlikely there will be any meaningful change to the status quo.

Lately he has been living in Germany with, at least until last year, his pet poodle FuFu who was promoted to the rank of Air Chief Marshall in the Royal Thai Air Force.

Air Chief Marshall FuFu died last year and was cremated after four days of Buddhist funeral rites.

So something tells me the Thai political system isn’t going to be receiving a much-need enema anytime soon.

The military and powerful elite have spent the past several years preparing for this moment to ensure that everything will be, as Thai people like to say, “same same, but different.”

In other words, nothing more than a different face on the currency.

There has been worry and concern for years that Thailand would plunge into chaos upon the king’s death… or that Thai assets and financial markets would collapse.

Stocks had in fact been sliding for days after the rumors began circulating that the king was gravely ill.

Then, as soon as he passed away, stocks actually started to climb, with the MSCI Thailand Capped ETF surging since the King’s death.

Shares of Thai Airways, for instance, are up 15% this morning.

So it appears that predictions of Thailand’s demise have been somewhat exaggerated.

There always seem to be these experts who predict dire chaos and consequences immediately following some event—just like Brexit, just like Colombians’ rejection of the FARC peace treaty.

It almost never happens that way.

The most severe consequences are seldom triggered by a single event, but rather years… decades of bad decisions and negative trends that build into a giant tidal wave of inevitability.

The same principle applies to the US presidential election next month.

No matter who wins, the world isn’t going to explode.

Nor is it going to be all sunshine and buttercups.

Regardless of which candidate the Electoral College chooses to become the next President of the United States, there is no stopping the inevitability of US default, its $20 trillion debt, or the insolvency of Social Security and Medicare.

Same same, but different.

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First of all, I want to say thanks for all the well-wishes.

I’ve been flat on my back for the past several days with a particularly nasty case of the flu that I likely contracted en route to Los Angeles last week.

Picking up the occasional bug is one of the hazards of spending a lot of time on planes… plus I have some special luck with airlines for always being seated next to a guy who sneezes with the explosiveness and ferocity of a biological terrorist.

But, now that I’m better and getting brought up to speed, one of the things that caught my attention this morning was that the US government’s debt level has soared to just a hair under $19.7 trillion.

To give it some context, that’s up over $120 billion in just six business days.

It’s almost as if Barack Obama is intentionally and desperately trying to breach the $20 trillion mark before he leaves office in January.

Of course, this hasn’t been reported anywhere because the media is too busy pretending to be shocked that Donald Trump is a womanizer.

And yet the debt is a much, much bigger story… though admittedly one that is far less entertaining.

The election is merely a fight over who gets to be the band conductor while the Titanic sinks. And the debt is precisely the reason for this.

Total US public debt has skyrocketed over the last eight years by $9 trillion, from $10.6 trillion to $19.7 trillion.

And in the 2016 fiscal year that just closed two weeks ago, the government added a whopping $1.4 trillion to the debt, the third highest amount on record.

Plus, they managed to accumulate that much debt at a time when they weren’t even really doing anything.

It’s not like the government spent the last year vanquishing ISIS or rebuilding US infrastructure. They just… squandered it.

Now, Nobel Prize-winning economist Joseph Stiglitz says we shouldn’t worry about America’s prodigious debt, and anyone who fusses over it doesn’t understand economics.

Stiglitz claims that we wouldn’t judge a private company like Apple based solely on its debt.

We’d look at other factors like assets, income, and growth before making an assessment of the company’s financial health.

And he’s right.

Singapore, for example, is a country with an extremely high level of debt. At first glance, it looks dangerous.

But if you dive deeper into the government’s balance sheet, you see an enormous abundance of cash reserves.

So taking into account just its cash assets, Singapore has absolutely ZERO net debt.

The US, on the other hand, is not in this position.

The Treasury Department publishes regular financial statements detailing its income, expenses, assets, and liabilities.

You already know the income numbers– the government loses billions of dollars per year, and the trend is negative.

As for its balance sheet, the government reports just $3.2 trillion in assets against $21.4 trillion in liabilities, for a NET position of NEGATIVE $18.2 trillion.

Now, when we’re dealing with trillions, it’s clearly not an exact science.

There are many economists who argue that the federal highway system, military, and federal tax authority should count as “assets” that are worth trillions of dollars.

Maybe so. But to be fair, one should also count the trillions of dollars of repairs needed on the highway system as liabilities.

Or the trillions more in cost of wars. Or the $40+ trillion in unfunded liabilities from Medicare, Social Security, etc.

It’s also important to note that America’s debt is growing at a far quicker rate than its economy.

When President Obama took office, US public debt was about 73% of GDP. Today it’s 105%. So even as the economy has grown, the debt has grown much faster.

Any way you look at it, the US government is already insolvent, and its situation is becoming worse.

This leaves essentially two options.

We can choose to willfully ignore this obvious trend and delude ourselves into thinking that the continued expansion of US debt will forever be consequence-free;

Or, we can acknowledge the tiny possibility that maybe, just maybe, there may be some adverse consequence, and plan accordingly.

That’s the great thing about risks– we can take out insurance to protect against their consequences.

That’s why we have fire insurance to protect our homes, life insurance to protect our families.

Of course, there is no policy from Met Life or GEICO which will protect you from capital controls, a default on Social Security, or Global Financial Crisis 2.0.

Yet there are countless options to protect against these consequences.

The premise is simple: if your country is broke, don’t keep 100% of your assets there.

If your banking system is precariously illiquid and questionably solvent, don’t keep 100% of your savings there.

Most of all, it never, ever hurts to have a Plan B and give yourself additional options.

For example, you may be able to take some steps to legally reduce your tax bill; move some funds to a safer, better capitalized bank abroad that pays a higher rate of interest; or obtain a second passport based on your grandparents’ Irish or Polish nationality.

It’s hard to imagine that you’ll be worse off for having taken any of these steps.

And like any great insurance policy, these steps not only protect you against risk, but also give you the chance to make more money and prosper.

(That’s why the ultra-wealthy often invest in insurance policies as an asset class.)

Having a Plan B doesn’t mean hiding in a bunker with a tin-foil hat. Anyone expecting the end of the world is going to be waiting a very long time.

But taking some risk off the table is something that smart, rational people do, especially in light of such overwhelming data.

 

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Back in the 1970s, the BBC started broadcasting a children’s show called ‘Why Don’t You?’ Its full title: ‘Why Don’t You Just Switch Off Your Television Set And Go Out And Do Something Less Boring Instead?’ Out of the mouths of babes. Rolf Dobelli, the best-selling author of ‘The Art of Thinking Clearly’ has gone one better. In his essay ‘Avoid News’ he advocates abandoning news across all forms of media altogether.

The psychologist Paul Andreassen has shown that people who receive frequent news updates on their investments earn lower returns than those who get no news:

“Andreassen divided students into two groups. Each group selected a portfolio of stocks and knew enough about each stock to come up with what seemed like a fair price for it. Then Andreassen allowed one group to see only the changes in the prices of its stocks. Students in that group could buy and sell if they wanted, but all they knew was whether the price of a stock had gone up or down. The second group was allowed to see the changes in price and was also given a constant stream of financial news that supposedly explained what was happening with each stock. Surprisingly, the less informed group did far better than the group that was given all the news. The reason, Andreassen suggested, was that news reports tend to overplay the importance of any particular piece of information. When a stock fell, its fall was typically portrayed as a sign that further trouble lay in wait, while a stock that was on the rise seemed to promise nothing but blue skies ahead. As a result, the students who had access to the news overreacted. Because they took each piece of information as excessively meaningful, they bought and sold far more frequently than the people who were just looking at the price.”

Most of us consume news every day without even thinking about the damage we are doing to ourselves. Financial news may be among the most damaging of all. As Thomas Schuster of Leipzig University puts it:

“The media select, they interpret, they emotionalize and they create facts. The media not only reduce reality by lowering information density. They focus reality by accumulating information where ‘actually’ none exists. A typical stock market report looks like this: Stock X increased because… Index Y crashed due to… Prices Z continue to rise after… Most of these explanations are post-hoc rationalizations. An artificial logic is created, based on a simplistic understanding of the markets, which implies that there are simple explanations for most price movements; that price movements follow rules which then lead to systematic patterns; and of course that the news disseminated by the media decisively contribute to the emergence of price movements.”

Acres of column inches and hours of airtime have already been dedicated to searching for the cause of last week’s so-called “flash crash” in which sterling got whacked on the foreign exchanges. Again. R2D2 and C3PO may know how and why it happened, but the rest of us are pre-destined to be blathering around in the dark. Human beings are simply hard-wired to look for stories, and the financial media are very good at creating them. Our brains abhor a vacuum devoid of meaning, so man’s search for narrative will likely last for as long as we do.

The reality is that for most of the time, about almost everything that takes place in the financial markets – and elsewhere – nobody really knows.

Dobelli argues that news is to the mind what sugar is to the body. We are in this sad state because:

-“..200 years ago we invented a toxic form of knowledge called “news”. The time has come to recognise the detrimental effects that news has on individuals and societies, and to take the necessary steps to shield yourself from its dangers.

-At core, human beings are cavemen in suits and dresses. Our brains are optimised for our original hunter-gatherer environment where we lived in small bands of 25 to 100 individuals with limited sources of food and information. Our brains (and our bodies) now live in a world that is the opposite of what we are designed to handle. This leads to great risk and to inappropriate, outright dangerous behaviour.

-In the past few decades, the fortunate among us have recognised the hazards of living with an overabundance of carbohydrates (obesity, diabetes) and have started to shift our diets.. News is easy to digest. The media feeds us small bites of trivial matter, tidbits that don’t really concern our lives and don’t require thinking. That’s why we experience almost no saturation. Unlike reading books and long, deep magazine articles (which requires thinking), we can swallow limitless quantities of news flashes, like bright- coloured candies for the mind.

-Today, we have reached the same point in relation to information overload that we faced 20 years ago in regard to food intake. We are beginning to recognise how toxic news can be and we are learning to take the first steps toward an information diet.”

As someone who earns a living in part from providing financial commentary and analysis, I am well aware that this advice might seem hypocritical. But I am also convinced that Dobelli is right, and that by reducing (if not necessarily eliminating) our intake of news, we will all be better off physically, emotionally, and spiritually. To sum up his thesis:

• News misleads us systematically
• News is irrelevant
• News limits our understanding
• News risks impairing our physical health
• News increases cognitive errors
• News inhibits thinking
• News changes brain behaviour, not for the better
• News devours our time
• Facts are often wrong and forecasts always wrong
• News is manipulative
• News makes us passive
• News kills creativity.

As a longstanding news consumer I do not expect to go cold turkey overnight. But I am certainly cutting down. Rather than eliminate news altogether, which seems wildly impractical, especially for active investors, there is surely an argument for distilling news consumption down to a focused number of high quality providers, advisors, and commentators. We aspire to be amongst the latter.

And if financial journalists think we happen to be picking on them, well, they’re partly right. The financial media earn a chapter to themselves in Investing Through the Looking Glass. But this is an equal opportunity book. A sound kicking is also administered to bankers, central bankers, economists, and fund managers. (We even propose investment solutions as well as identifying systemic problems.) This may be the perfect Christmas book, and fun for all the family.

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