Category: simonblack

No one likes to pay for insurance.

If you don’t smoke, if you go to the gym regularly, and if you generally eat well, it just might not seem worth it.

Especially when the average cost of insuring against just catastrophic health incidents can take up about 4% of your income.

But most of us do it anyway.

After all, paying small amounts over time feels a lot better than having to write a huge check when you’re at your worst.

It’s become the norm to take out insurance against just about every possibility—

We buy car insurance in case we get into a car wreck.

We buy house insurance in case our house catches on fire.

We buy life insurance in case we die sooner than expected.

However, there’s one huge threat to our livelihoods that very few insure themselves against: financial disaster.

In comparison to your house suddenly bursting into flames, financial panic is far more predictable and frequent.

Given that the average business cycle lasts about 6 years, the average person will see at least 10 recessions in their lifetime.

So while we may not know exactly the day or month that it will hit, we know it’s coming.

And unlike a heart attack, financial crises don’t come out of nowhere. They can be diagnosed ahead of time.

In today’s podcast as I do a physical on the United States’ economy, in which the vitals are showing serious signs of strain and weakness:

• Incomes have stagnated across the country, accompanied by a major decline in living standards
• The federal government’s cash balances are so low, that on some days it has less than some private companies
• Banks have made it a habit of holding very little cash reserves, leaving them vulnerable to any shocks to the system
• The Treasury has begun blatantly siphoning off funds from the Fed
• Hundreds of pages of regulations are being passed each day to make you less free
• The government and central bank are already stealing from you

Join me as I show how the decline in freedom, government bankruptcy, and an insolvent financial system are all related. I also cover several ways that you can insure yourself quickly and easily against all of this.

Listen in here.

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Just days ago, in the midst of the Puerto Rico debt morass, 24 members of Congress introduced the “No Bailouts for State, Territory, and Local Governments Act.”

The title pretty much sums it up.

Congress knows there’s a massive wave of defaults looming at the city and state level.

Detroit and Puerto Rico are just the tip of the iceberg.

Aside from a few top performers like Alaska, South Dakota, and Wyoming (which, ironically, have no state income tax), many US states have atrocious finances.

Illinois and Maine, for example, have dangerously low levels of cash relative to the debts and obligations they have to pay.

New Jersey and California have are among several states that are technically insolvent, meaning they lack sufficient assets to make good on all the promises they’ve made (like pensions and bonds).

And as the case of Puerto Rico shows, these fiscal imbalances can become a major crisis. Quickly.

Needless to say, the US federal government is in the exact same boat.

Uncle Sam has the worst finances of the bunch– $19 trillion in debt, $40+ trillion in long-term pension liabilities, and decades worth of budget deficits.

But unlike state governments, the US federal government has an ace in the hole: the Federal Reserve.

Right now the Fed is one of the largest holders of US debt; whenever the US government goes into debt, the Fed essentially bails them out by printing money and buying Treasury bonds.

This convenient relationship with the Federal Reserve has allowed the US government to kick the can down the road for years.

Every time they run a budget deficit and need more cash, the Fed prints money.

But states can’t do that.

They don’t have the ability to conjure money out of thin air like the central bank.

So when they run out of funds and can’t borrow anymore, the natural tendency would be for states to seek a bailout from the US federal government.

That’s what happened in Puerto Rico. The island is in default, and as a US territory, they’ve gone to the federal government with hat in hand.

Of course, the US government is too broke to bail anyone out, including itself.

So this new bill was put on the table to prohibit any federal agency, including the Treasury Department, from bailing out ANY bankrupt city, state, or territory (cough, cough Puerto Rico).

What’s even MORE interesting is that the bill specifically prohibits the Federal Reserve from “financially assisting State and Local governments.”

In other words, the Fed is not allowed to print money to buy bonds issued by city or state governments.

So Congress is basically rigging the system in its favor and telling the Fed, ‘Hey, all that money you print is going to end up in OUR pockets!’

As the most insolvent government of them all, Congress needs all the bailouts it can get, and they can’t afford to have any competition from cities and states.

This pretty much tells you everything you need to know about the financial system:

There is so much debt in the system, and these governments are all so absurdly bankrupt, that Congress proposed a special law to make sure they get to steal 100% of the money that the Federal Reserve is conjuring out of thin air all for themselves.

It’s pure insanity.

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[Editor’s note: Tim Price, London-based wealth manager and frequent Sovereign Man contributor, is filling in while Simon is en route to Europe.]

As human beings it’s in our nature to seek out a great deal.

Whether we bag a steep discount on a new car, or stumble across that hidden gem of extraordinarily cheap airfare, we love the feeling that we’re getting a lot for our money.

If you’ve ever found a $20 (or 20 pound) note in an old jacket pocket, you know that feeling well.

But what’s really incredible is that this instinct to seek value rarely applies to investing.

Most investors will follow the rest of the crowd and buy extremely expensive stocks.

We invest when share prices are going up… AFTER the companies have become popular and more expensive.

What’s even more bizarre about this behavior is that there are so many obvious examples of how well value investing can work.

In fact, some of the most successful investors in the world (like Warren Buffett) have made nearly incalculable fortunes by focusing on value.

And many of them have been vocal in trying to educate the public of the virtues of value investing.

Yet as human beings, we are hard wired to stick to the crowd. We are, after all, highly social creatures.

So since most investors tend to prefer owning ultra-popular, expensive companies, it’s quite difficult to break away from the crowd and own something unpopular.

Not to mention, it can take months, even years for the price to measurably appreciate.

So it’s even more difficult to maintain discipline and wait patiently on a company that has a depressed stock price.

The ethos of value investing is simple: buy high quality businesses managed by competent people of integrity at valuations that are as low as possible.

And the longer-term results of this mindset are compelling. Just look–

In his book What Works on Wall Street, author James O’Shaughnessy compares the returns of two different investment strategies: value versus ‘anti-value’.

O’Shaughnessy reviewed historical data to determine how much money you would have made had you invested $10,000 in the 50 ‘most expensive’ vs. the 50 ‘least expensive’ US stocks over a period of five decades.

He calculated most vs. least expensive based on the companies’ Price/Book and Price/Earnings ratios.

Price/Book ratio tells us how much a company is valued in the stock market relative to the value of its net assets, or it’s ‘net worth’.

Price/Earnings tells us the same relative to the company’s profits.

For example, with a stock price of $71, pharmaceuticals giant Bristol-Myers Squibb is valued by the US stock market at roughly $120 billion.

It has net assets of $32 billion and net income of $1.5 billion. Thus, BMS has a Price/Book ratio of 3.75, and a Price/Earnings ratio of 80.

These are both high.

While it’s not such a robotic calculation, value investors seek companies ideally with Price/Book ratios of 1 (or less), and Price/Earnings ratios in the low single digits.

The bottom line? Had you invested $10,000 in the most expensive companies, you would ultimately have ended up with as much as $793,558 after 53 years.

That sounds impressive, until you realize what you could have earned by buying the LEAST expensive companies: over $22 million.

This data is extraordinary and shows that value investing works… as long as you have the discipline to be independent from the crowd.

Tim Price is co-manager of the VT Price Value Portfolio and editor of Price Value International.

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Out here in Eastern Washington’s Yakima Valley are beautiful, seemingly endless fields of abundance and wealth.

But not ‘wealth’ in the conventional sense. I’m not talking about paper money that’s conjured out of thin air by central bankers.

I’m talking about real wealth. Real assets.

Growing up in a lower middle class household where my parents had to work three jobs each just to pay the rent, I never understood what any of that meant.

Like most people, I used to think that ‘wealth’ was how much money you had in your bank account. And for us there was never enough.

It took me years to realize that wealth doesn’t have anything to do with bank balances… it has everything to do with value creation.

And there is perhaps no better example than agriculture.

Agriculture is one of the most fundamental forms of creation. And it’s so simple. You put seeds in the ground, and something real (and valuable) grows.

It’s an amazing process.

I first got involved in agriculture several years ago when I acquired a large farm in central Chile and saw first hand how much wealth (both physical and financial) could be created.

Planting fruit trees on raw land, for example, is like any other successful startup.

It took Facebook and Google a few years to get their businesses off the ground before they could start producing positive cashflow.

Agriculture can be the same way: it takes a bit of time for the trees to grow. But after a few years, they’ll produce fruit (and profits) for decades to come.

The key difference is that with agriculture, nature does most of the heavy lifting.

Plus, every single person on the planet needs to eat. Not even Facebook and Google have that kind of reach.

This is what makes agriculture such a great investment. The fundamentals are incredibly compelling… almost chilling.

The supply of arable farmland, especially on a per-capita basis, declines every year.

And many major agriculture-producing regions around the world are experiencing extreme water crises.

Yet at the same time, world population growth creates greater demand for food, and rising wealth in developing nations drives more food consumption per person.

Think about it: poor people in poor countries consume very few Calories per day.

When economic conditions change and their financial situations improve, they not only start consuming more Calories, but the quality of those Calories changes.

Instead of consuming grains and vegetables that don’t require much land to grow, they’ll start eating more meat (which requires MUCH more land to produce).

This trend is pretty simple: there are more people demanding more food that requires more land at a time when the amount of land available per person is declining.

With such obvious fundamentals, it seems clear that agriculture is a great long-term investment.

It has been that way for a while. As we’ve discussed before, apple trees have outperformed Apple stock for decades.

Even something as mundane as timber outperformed conventional asset classes like stocks and bonds for 27 years.

It seems crazy that agriculture is even considered an ‘alternative’ investment. This is about as real and fundamental as it gets.

And again, it can be quite profitable. But it helps to have a global perspective.

A few years ago I founded one of the largest agriculture businesses of its kind in South America to acquire high quality farmland in central Chile that produces fruits and nuts.

(That’s actually why I’m here in Washington– I’m meeting with some major North American fruit producers based in the valley.)

Growing in Chile has tremendous advantages. While top-quality farmland here can fetch $8,000 to $25,000 per acre, we’ve paid less than $2,000 per acre in Chile.

Not to mention, our labor and operating costs are much lower in Chile.

Plus, because we are in the southern hemisphere and harvest when it’s winter in North America and Europe, the prices that we get paid are quite a bit higher.

This is turning into a fantastic business. But what’s really amazing about agriculture is that the return on investment is even higher when you go small-scale.

For example, you can buy a pack of 10 organic tomato seeds for about two bucks.

Plant them in the ground (or in a planter box on the window sill) and let nature do most of the work.

Those seeds will produce plants, which in turn will produce tomatoes.

Even a pitifully neglected plant can produce 15 pounds of tomatoes, which can either be eaten or sold.

Either way, at $1.50 per pound, you’ve created $225 worth of value across all ten plants from your $2 investment in less than 5 months. Not bad.

(By the way, each tomato produces dozens of seeds, each of which can be planted to grow even more tomatoes. So from a single seed you could create limitless value.)

If you have a house with a yard, you can take things a step further and plant some fruit or nut trees that are appropriate for your local climate.

Not only does this create wealth from the fruit it produces, but it would also likely increase your property value.

This is real wealth. Real profits. Real value. And no matter how hard they try, central bankers cannot control how much fruit your trees produce.

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Almost one year ago to the day, I introduced you to Joe— a US Army combat veteran who lost his leg while deployed to Afghanistan in 2010.

Joe’s story was unfortunately all too familiar… except for one major twist.

Joe’s particular wound was so severe that the Army had to amputate nearly all of his right leg, practically up to his hip.

Now, it’s a rather sad statement that the United States of America is home to the most advanced prosthetic technology in the world.

But since Joe only had four inches of leg bone remaining, no existing prosthetic device could fit him. He needed something even more advanced.

He found out about a procedure called Osseointegration, which essentially involves fusing a titanium rod into the hip, and then attaching a prosthetic leg to that rod.

Joe was an ideal candidate for Osseointegration, and he asked the US government for support.

But the FDA in its infinite wisdom decided that the procedure was too risky for Joe.

Nevermind the fact that it was perfectly fine for Joe to take the risk and get his leg blown off in Afghanistan to begin with.

No… the FDA bureaucrats felt that Joe wasn’t grown-up enough to make his own decisions. So they declined to approve Osseointegration.

Now, Osseointegration was a perfectly valid procedure in other parts of the world—Australia, Germany, Sweden, etc. But not in the Land of the Free.

So if Joe wanted to get his leg fixed, the government told him he was on his own, that he’d have to go to one of those countries and pay for the procedure himself.

By the way, it was going to cost $70,000.

That’s about the time that I found Joe, roughly a year ago. He was trying to raise money on the Internet, and wasn’t coming close to making a dent in the bill.

I was infuriated by his story… how some callous, bumbling, idiotic bureaucracy had denied him the procedure and left him to fend for himself.

I was in a position to help, so I did.

As I’ve written before, one of the benefits of living overseas is that you can generate six-figure income and pay little to no tax.

It’s called the Foreign Earned Income Exclusion. And it’s not some creepy loophole for selfish billionaires.

It’s just part of the tax code that millions of Americans living abroad can benefit from.

I’ve been able to shield plenty of income from tax with the Foreign Earned Income Exclusion…

… income that would have otherwise been used by the US government to send guys like Joe (not to mention countless civilians) to get their legs blown off.

So instead of income being taxed and earmarked for destructive purposes, I used my tax savings to buy Joe a new leg.

Last night we had dinner together, and I couldn’t believe his progress.

He’s walking around now with his new leg, totally unsupported. He doesn’t even need a cane, let alone crutches.

He recently got married and told me that he was able to dance with his wife at their wedding.

He’s even going to participate in a 5K in the next couple of weeks. Incredible.

But perhaps most importantly, there’s been a major knock-on effect from his procedure.

Joe is actively going to medical conferences now, showcasing how effective the procedure has been for him.

And in part because of Joe’s efforts and clear medical success, the US government is starting to permit other amputees to undergo Osseointegration.

I was stunned when he told me this last night.

All of this has happened in less than a year: his life has turned completely around, and even the federal government has now reversed its position on Osseointegration given Joe’s clear evidence that the procedure works.

This drove home such an important lesson: the most powerful change we can make has nothing to do with how we vote, but rather what we choose to do with our finances.

If your income is heavily taxed and goes to support government lunacy, you’ll end up with even more government lunacy.

But if you take the perfectly legal steps to reduce the amount of taxes that you owe, your money can be invested in the change that actually matters to you.

There are so many ways to do this.

Anyone can maximize tax-advantaged retirement contributions, itemize deductions on 1040 Schedule A, or even re-domicile certain business income to a tax-free state.

You can take federal tax deductions and receive credits for everything from medical expenses, university tuition, unreimbursed vehicle expenses for legitimate business purposes, job hunting expenses, side-business expenses, and more.

A little bit of extra effort pays off, and doing this just makes sense.

Slashing your tax bill is certainly the easiest return on investment you’ll ever make.

But more importantly, if you disagree with the way that government wastes your money on war and destruction, reducing the tax revenue they have to squander is the most powerful weapon you have to truly affect change.

PS. There really are dozens of ways to cut your taxes. If you want to learn more about the Foreign Earned Income Exclusion you can read about here.

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On 23 June 2016, this British citizen will be voting to leave the European Union.

To me it’s clear: the EU has not only become too big for its own good, it’s too big to do hardly anything good.

Back in 1975 when the UK first confirmed membership in the EU (when it was called the European Economic Community), it made sense.

Britain has always thrived on international trade, and the EU promised more trade.

But that’s not what happened. The EU didn’t turn into a peaceful, efficient, multi-national trading bloc that enables commerce and prosperity.

Rather it has become an ever-expanding, unaccountable bureaucracy ruling over vastly disparate nations who are increasingly at odds with one another.

And it is precisely the size of this Leviathan that’s the problem… something that was first identified several decades ago by economist Leopold Kohr.

Kohr was an Austrian Jew who only narrowly escaped Hitler’s Germany just before the outbreak of the Second World War.

He had been born in Oberndorf in central Austria, a village of just 2,000 or so.

And Oberndorf’s tiny size came to play a crucial role in Kohr’s thinking about the wealth of nations.

Kohr’s premise was simple: when you get too big, you start having serious problems.

This applies to political unions, from the Roman Empire to the EU, as well as to companies.

Even Warren Buffett has warned that large companies will eventually find it difficult to grow.

Kohr graduated in 1928 and went off to study at the London School of Economics with the likes of fellow Austrian Friedrich von Hayek.

In September 1941, Kohr began writing what would become his masterwork, ‘The Breakdown of Nations’.

He wrote that instead of expanding, Europe should be shrinking back into small political regions (like Switzerland) with a commitment to private property rights and local democracy.

“We have ridiculed the many little states,” wrote Kohr sadly, “now we are terrorised by their few successors.”

Simply put, size creates unavoidable limits… and problems.

And as the European Union has grown ever larger, it smashes horribly into Kohr’s thesis.

We can see this with the spate of problems in Europe ranging from horrific youth unemployment to major border crises to negative interest rates across the continent.

Of all the world’s population centers, Europe is the slowest growing (i.e. most rapidly shrinking) in the world.

The promises of growth and prosperity proved hollow. Yet the Eurocrats want to give Europeans even more: more regulation, more negative interest rates, more size.

Perhaps ECB Governing Council member Vitas Vasiliauskas sums this up the best from his comments last week:

“Markets say the ECB is done, their box is empty. But we are magic people. Each time we take something and give to the markets – a rabbit out of the hat.”

Vasiliauskas is the perfect embodiment of the EU bureaucracy: they believe they are special people capable of performing miracles.

The arrogance and hubris in this statement are overwhelming and tell you everything you need to know about the unelected, unaccountable people who control our lives.

If you want to understand this issue even more, I highly recommend the documentary Brexit: The Movie.

It’s a well-presented masterpiece of government overreach that would likely win an award for Best Comedy if it weren’t sadly true.

If you’re pressed for time, here’s a 60-second snippet detailing the tens of thousand of regulations that crowd our daily lives:

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Recently I was having drinks with a friend of mine who is an ultra-successful US real estate developer and investor.

He told me that his team had just closed a large real estate transaction worth hundreds of millions of dollars, and they got a sweetheart deal from the bank.

The bank is loaning them almost all of the money at an interest rate of around 2%.

But it gets better.

If the Federal Reserve raises interest rates, he has the option of locking in the rate that he has now… so his interest rate will basically never go up.

But if the Federal Reserve lowers interest rates, the rate that he pays on the loan will go down.

In other words, he got an amazing deal from the bank… and it might even get better. But it will never get worse.

Now, this is obviously fantastic for the borrower.

But for the bank, this is an absolute sucker’s bet. There’s almost zero upside.

The bank is putting up the vast majority of the money, their return on investment is next to nothing, and the tiny return they are getting might even go down.

More importantly, if interest rates go up, or if inflation increases, the bank is going to lose a LOT of money.

Of course, the bank isn’t going to lose its own money. Banks never use their own money when they make these crazy loans.

No. Instead, they use their depositors’ money. YOUR money.

So while this is clearly a great bank if you are borrowing money, it would be crazy to be a depositor at this bank. That’s YOUR capital at risk.

This insanity is pervasive across most western banking systems.

They take in depositor funds, keep VERY little of it in reserve, and then go make the most asinine financial speculations with their customers’ savings.

So when banks make stupid bets, it’s ultimately the depositors who bear the risk.

And in exchange for that risk, you are paid a rate of practically 0%. It makes absolutely no sense.

Now, banks are supposed to have ‘Resolution Plans’ to ensure that their risky bets won’t put depositors at risk.

But just last month the Federal Reserve and Federal Deposit Insurance Corporation issued a scathing report criticizing the resolution plans of many major US banks.

Among the usual suspects were banks like JP Morgan, Bank of America, and Wells Fargo, all of whom had resolution plans deemed to be “not credible”.

On top of all of these risks, banks still maintain woefully substandard balance sheets.

Liquidity is a major problem at US banks, which typically hold the tiniest percentage of customer deposits (often as little as 1% to 3%) in cash equivalents.

The rest of your hard-earned savings (97%+) is gambled away on crazy loans and other investment fads.

Look, it doesn’t take a rocket scientist to see that this banking system clearly has a lot of risk.

Bank liquidity is shockingly low. Bank solvency is questionable. Bankers continue making seriously risky bets with your money.

And even eight years after the last crisis, major banks still don’t have credible plans to deal with the consequences when their risky bets don’t work out.

(Note- this is just the FINANCIAL risk. We haven’t even begun to talk about the legal risk, i.e. how easy it is to have your savings account seized or frozen.)

If you look at the data objectively, it’s obvious that it makes no sense to keep 100% of your savings locked up in this system.

As we’ve discussed before, holding physical cash is one option. You can dramatically reduce your bank counterparty risk by cutting out the financial middleman.

Another excellent option to consider is establishing a bank account offshore in a stronger, more credible, debt-free foreign jurisdiction.

Look at Hong Kong as an example.

As a jurisdiction, the government of Hong Kong has ZERO net debt, and the central bank is easily one of the most well-capitalized on the planet.

The average bank in Hong Kong maintains plentiful liquidity at 18.3% of customer deposits (which is 3 to 6 times higher than most US banks).

Capital reserves at Hong Kong banks are also strong, averaging 13.5% of the banks’ total balance sheets (this is twice as conservative as most US banks).

Plus Hong Kong’s deposit insurance fund is actually solvent and maintains its required capital levels.

It’s a night-and-day difference.

In the US banking system, the government is bankrupt, the central bank is insolvent, the deposit insurance fund is undercapitalized, the banks are illiquid, and they’re making high-risk loans that put customers and taxpayers on the hook.

In Hong Kong, the government has no net debt, the central bank is extraordinarily well capitalized, the insurance fund is solvent, and the banks are highly liquid and with plentiful capital reserves.

If you look at the data objectively, it’s obvious which of these two jurisdictions is the safer place to hold at least a portion of your savings.

(That said, the world is a big place, and there are plenty of examples aside from Hong Kong.)

Contrary to the media propaganda, having a foreign bank account isn’t about dodging taxes or anything shady.

Rather, it can be a rational, common sense, no-brainer solution to address the serious risks in your home country’s banking system.

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I come to New York City every year because it’s where the annual meeting of the Atlas 400 group is held.

If you’ve not heard of Atlas, it’s a social club… primarily for like-minded, high achieving, self-made individuals.

I always go out of my way to attend the annual meeting because the other members are some of the most interesting people I know.

The late Jim Rohn used to say that you are the product of the five people you spend the most time with.

And while I’m not certain this is entirely true, I do think it makes sense to surround yourself with high quality individuals that you can learn from.

That’s why I come here each year. And I learned so much this weekend from the high caliber of people in attendance.

I learned from one of the world’s foremost collectibles experts, for example, what are the ‘no brainer’ collectibles investments right now that are likely to go up dramatically in value over the next few years.

One of the most astute financial minds I know walked us through a detailed scenario outlining how the financial system can (and likely will) rapidly unwind.

These weren’t even his own conclusions; the people in the group are incredibly well-networked, and this particular gentleman has been advised by senior members of the financial establishment.

We had an incredibly inspiring presentation by a cutting-edge genomics firm, co-founded by the doctor who first decoded the human genome; they’re very close to revolutionizing medicine and making it possible for all of us to live longer, higher quality lives.

And there was another presentation about effective philanthropy and some of the best ways to give back.

I also made a brief presentation to the group about ongoing discussions I’ve been having with senior government ministers about a unique second passport program.

Bottom line, there’s a little bit of everything at these events.

I wanted to pass this information on to you, so this morning I sat down and recorded what I learned this weekend in today’s podcast.

But in addition to those lessons, I also articulate my thoughts about what’s happening in this country.

Hundreds of years ago, America used to be the Land of Opportunity where people who worked hard and took risks could be richly rewarded for their efforts.

This idea attracted some of the most productively-minded people in the world, and vast fortunes were made as a result.

Even in government, politicians made astute decisions that enhanced the national prosperity.

In the early 1800s, for example, when the US was still in its infancy, the government purchased 827,000+ square miles of land from France for less than $15 million.

It became known as the Louisiana Purchase, and today that amount would be valued at roughly $263 million in 2016 dollars.

When adjusted for inflation, that’s the equivalent of buying land today in the US at just over 40 cents per acre.

A few years later, the US government bought Florida from the Spanish for the equivalent of just $89 million in 2016 dollars.

What unbelievable deals.

Back then the government spent taxpayer funds to buy valuable, productive land for just pennies per acre. (Again, those prices are adjusted for inflation…)

Today they spend over $2 billion to build a website that doesn’t work.

It’s a night and day difference that highlights just how out of control things have become, and how far from its origins the Land of the Free has fallen.

But this is not a bad news story by any means.

And in today’s podcast, we explore these obvious trends, the no-brainer solutions, and the incredible opportunities that surround us in the world today.

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Yesterday I had one of those nightmare travel experiences that just makes you want to scream.

Lan Airlines has a nonstop flight from Santiago to New York City, and I booked it months ago.

Normally my travel schedule is very last minute; I don’t really know where I’ll be two weeks from now, let alone six months from now.

The only two events for the entire year that I actually put on the calendar are my entrepreneurship camp in Lithuania, and the annual meeting for the Atlas 400 group that takes place in New York.

So this trip has been on my calendar for a while.

And yesterday I did what I have done hundreds of times before– I went to the airport well in advance of the cut-off time to check-in for my flight and head out of the country.

I’m not one of these people who shows up 3 hours before a flight. I have better things to do with my time, and as I typically fly business class, the check-in procedures are pretty swift.

Normally I’ll even check-in online so that I can go straight to the gate, but Lan’s website wasn’t working for me yesterday, so I had to stop by the desk.

When I arrived, the check-in agent told me that the flight was already “closed”.

That was my first sign that something was wrong: airlines typically close international flights precisely 60 minutes prior to departure. I arrived 70 minutes prior to departure, so there should have been plenty of time.

“No problem,” I told them, having been in this situation many times before. “Just re-open the flight and check me in.”

“We can’t, sir,” they replied, “We’ve already given your seat away to someone else.”

The conversation rapidly deteriorated from there. The check-in agents told me there was NO WAY they could get my seat back, and that I would be unable to fly.

I immediately figured out what happened: Lan had oversold the flight.

Airlines do this all the time. If they have capacity on a plane for, say, 350 people, they’ll often sell 360 seats (or more) hoping that a number of passengers won’t show up.

If too many people show up and they don’t have enough seats, they’ll reinvent their own rules and start closing the flights early as an excuse to bump the excess passengers.

In this case, I ended up being one of the unlucky people who got bumped.

I’ve been on hundreds of flights in my life and have traveled extensively for more than a decade to 120+ countries, so I recognize that these things happen from time to time.

The real insult, though, was the complete disregard of most of the staff. I remember asking the head check-in supervisor, “OK, so what are my options to get to New York…?”

To which she looked at me and callously replied, “You have no options,” and went right back to updating her Facebook status.

I ended up sorting myself out with the help of a sympathetic Lan employee named Miguel, so I should be arriving to New York in time for at least part of the Atlas 400 annual meeting.

I will unfortunately miss tonight’s welcome dinner and the chance to catch up with old friends in the group.

I also had a meeting scheduled this afternoon with some high level government ministers to discuss their country’s economic citizenship program, so we’ll have to go through the hassle of rescheduling.

And, oh yeah, there’s the financial cost too. New York is an expensive place to stay, and since my room was pre-paid and non-refundable, this little mishap set me back $2,000.

But as I was reflecting on the experience later, it made me realize that this is the perfect metaphor for government entitlement programs like Social Security.

I bought this ticket months ago. In other words, I paid into the system in advance in exchange for their promise that my seat would be there when it came time for me to collect.

And all along the way, they continued making promises to me, sending emails about the in-flight meals and seat selection…

… just in the same way that politicians keep making promises about Social Security.

But it turns out that the airline didn’t actually have enough resources. They had too few seats, and had made too many promises to too many people.

All the resources (seats) they DID have had already been doled out to the people who were at the front of the line.

But when people like me showed up a bit later to collect the seat that had been promised to them (i.e. anyone under the age of 50 who expects to collect Social Security), suddenly they had no more resources available.

They arbitrarily changed their own rules to deny me what I had paid for in advance… and then looked me straight in the eye and said, “You have no options.”

That, in a nutshell, is the future of Social Security, and effectively all underfunded government pensions.

PS-

As we’ve written about before, most Western government have very little chance of being able to keep the promises they’ve made to their citizens, especially when it comes to retirement.

There are solutions, though.

We’ve talked about a number of different options in the past for alternative investments and better retirement structures, and this will continue to be a theme in this letter.

Having a Plan B for your retirement just makes sense; you won’t be worse off having an additional pool of savings or income stream.

But building a great Plan B takes time. And the earlier you get started, the better off you’ll be.

Here are some resources to help you get started:

1. Why you need to look beyond conventional investment strategies for your retirement savings
2. Some examples of unconventional investment options available to you
3. Free Sovereign Man Report on the Threats and Solutions for your IRA

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[Editor’s note: Sovereign Man team member Peter Keusgen, lead editor of our private investment service, is filling in while Simon is en route to New York City today.]

I’m sitting in a café in an upscale part of Sao Paulo, Brazil, a short walk from the Renaissance Hotel, watching the news come in about the impeachment of Brazil’s president Dilma Rousseff.

And I believe the reason I’m in this café is the same as the reason for Rousseff being impeached: a totally backwards, bureaucratic, inefficient government and financial sector.

Let me elaborate.

This is my first time to Brazil; Simon Black sent me here earlier this week to conduct deeper due diligence on a private company that we are considering investing in.

The business is EXTREMEY promising and growing rapidly, which is really a tremendous accomplishment in this country.

Right now, Brazil is in its worst recession in 80 years. That’s means a lot in a country that has had horrific hyperinflation and burned through at least half a dozen currencies.

There’s a lot of noise right now about corruption and nepotism (hence the impeachment of Dilma Rousseff).

But the real problem here is the bureaucracy. Brazil is legendary for it.

When I speak to the business people here, they claim that taxes are their biggest headache. Not the amount of taxes that they owe– the number of taxes.

There can be dozens of taxes that productive citizens have to pay, and that can cripple a small business.

Brazil’s infamous bureaucracy is difficult for foreigners to deal with as well. Which brings me to why I’m at a coffee shop near the Renaissance Hotel.

I left my hotel this morning in search of an ATM. As luck would have it, there was an HSBC branch nearby.

That ended my string of good luck for the day.

The international ATM connection was down, so I couldn’t withdraw any cash.

‘No worries’, I thought, ‘I’ll just go inside the bank to exchange my money.’

So I locked my bag in the lockers provided (it’s not permitted to bring bags into the bank) and went inside to exchange money.

But no. Apparently this bank doesn’t have a license to change money.

Not much of an international bank…

They recommended that I change money at a hotel. OK great. I was going to a hotel anyways, so I told my taxi to take me to the nearest one.

But the hotel only had a limited license to exchange money for its guests, and I wasn’t a guest of that particular hotel.

So to exchange money, I’d have to go to another hotel which had a license to exchange currency for foreigners.

So my miserable Odyssey continued with a 20-minute cab ride to the Renaissance Hotel, the nearest option, and I used the last of my local currency to pay the driver.

Downstairs at the Renaissance, sure enough, was the exchange booth. I presented my passport and a US $100 bill and was given the rate of 2.86 Brazilian real per dollar.

Whoa. Wait a minute. The spot rate was 3.44 Brazilian real per dollar.

So the money exchange booth was charging me 17%! It was unbelievable.

It seems that as there are so few places to exchange money that the handful of businesses who are licensed have an effective oligopoly on the market.

With the competition eliminated, their license to exchange money has become a license to screw people.

On top of that, the process took forever. I was given a receipt with 58 lines and two signatures that was more than a foot long (no exaggeration).

It’s obvious that with so much paperwork there’s clearly a mountain of bureaucracy holding down the system.

I’ve spent years of my life in developing countries in Southeast Asia where people can’t wait to exchange their money for foreign currency.

In Myanmar, for example, dollars can be exchanged freely anywhere within 1% of the spot rate.

And even though they didn’t even have ATMs until a few years ago in Myanmar, today you can withdraw money in downtown Yangon from a bank located on the other side of the planet.

There’s a long standing joke in the international investment community that Brazil is the country with the most potential– and always will be.

In other words, no one expects that Brazil will ever get its stuff together and start realizing its potential.

A lot of people think that changing Presidents is going to solve the problem. It rarely does… not just in Brazil, but anywhere in the world.

Governments create rules and regulations, not wealth and prosperity.

What really moves the needle is technology, production, and savings… and the abilities of entrepreneurs to bring those resources together to solve problems.

And that’s why I’m here. The business we’re looking at provides a great platform for Brazilian companies to streamline and drastically cut out this costly bureaucracy.

It’s an amazing solution to a huge problem, and the company’s growth rate is astonishing.

That’s what entrepreneurship is all about– solving big problems. Problems are opportunities in disguise… and Brazil has plenty of both.

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