Category: simonblack

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Desperate?

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

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

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

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

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

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

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

Good luck with that.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Source

from Sovereign Man https://ift.tt/2SEqgke
via IFTTT

This one is pretty disturbing.

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

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

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

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

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

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

But the blood lust didn’t end there.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

This whole situation is pretty revolting.

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

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

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

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

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

Source

from Sovereign Man https://ift.tt/2SwETpl
via IFTTT

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

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

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

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

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

Before that, you just needed a ticket.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Department of Homeland Security knows this well.

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

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

But, hey, nobody cares.

Americans long ago gave up freedom for security.

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

It’s really shocking when you think about it.

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

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

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

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

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

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

Source

from Sovereign Man https://ift.tt/2qh7BOd
via IFTTT

[Editor’s note: Sovereign Man’s Chief Investment Strategist, Tim Staermose, is filling in for Simon today.]

The year was 1999. I was working for a small newsletter company with its Asian research offices based in Manila, Philippines.

The dotcom boom was in full swing. And, just like today, companies with no profits, burning through hundreds of millions of dollars of investors’ capital in a race to build scale and grab market share or attract “eyeballs,” were the market darlings of the day.

I didn’t get it.

Moreover, having just seen how ugly things can get when a market mania goes bust – after witnessing the Korean economic collapse in 1997-1998 first-hand, while working in Seoul, I was extremely cautious.

I wasn’t about to go chasing after the next hot concept stock, in the hope of selling for a profit to a “greater fool.” But that was about the only trading strategy still working at that time… a bit like now.

The internet, technology, media and telecoms (TMT) boom of the late 1990s, when dotcom fever was at full pitch, was a textbook stock market mania.

All the signs were plain to see, for anyone who cared to look. Unprofitable companies at dizzying valuations, a belief that profits didn’t matter, and that “this time it’s different” mentality were all salient features.

They say that history doesn’t repeat in markets, but that it often rhymes. Well, it would seem to be rhyming now.

According to my friend Jeff Brown, from Bonner & Partners’ Exponential Tech Investor, the value of tech IPOs in 2018 is estimated to hit $9.73 billion. That’s the highest level since 2000.

Once again, a rapid technology innovation cycle appears to have captured the imagination of investors. Technology company founders and their venture capital backers are taking advantage of that to bring their companies to the public markets now, in droves.

The thing worth keeping in mind is that last time around, the stock market actually peaked, as measured by the tech-driven NASDAQ index, in December 1999. The money raised from IPOs on the other hand peaked in 2000.

Meanwhile, just like in the 1997-1999 period, today many staid, old-school businesses like consumer staples and household products companies are suffering a period of benign neglect from stock market investors.

Stocks of companies such as cereal maker General Mills (12x earnings), Kraft-Heinz (13x, after stripping out a large one-off tax gain), and Newell Brands (4.8x), are all selling at multi-year low price-to-earnings multiples (P/Es). And their dividend yields comfortably exceed those available on 10-year Treasury bonds (now just over 3%).

On the other hand, you have stocks such as Amazon selling for 158 times earnings and Twitter at 58 times earnings. And that’s without even getting into the absurd valuations of the likes of Tesla, which sports a $47bn market value, versus Ford Motor Company which made over $7.6 billion in net profit last year, on a market cap of $37bn

In my mind, as I have mentioned before, today is a bit like a re-run of the 1997-1999 period in US markets. Back then, defensive consumer staples stocks in the so-called, “old economy” sectors were left in the dust by the sexy new technology, media and telecom stocks that the market lapped up and bid up to absurd valuations.

At the time, back in mid-1998, I remarked to a colleague that I couldn’t understand how savagely the market was marking down extremely high-quality, stable businesses, such as European household products and food manufacturer Unilever, or US personal care and sanitation products company Kimberly Clark.

Did the market really think that some “new economy” competitor was going to come along and digitize their products and put them out of business?

I remember quipping to him that I thought people were still going to need to wash their dishes, eat ice cream, and wipe their butts after going to the toilet. So, perhaps it was time to look at buying something like Unilever or Kimberly Clark for the long-haul.

Alas, I didn’t act on my own advice.

Kimberly Clark would have been a great investment. From $49.38, when tech stocks peaked in December 1999, it rose to $68.55 by December of 2000, even as the rest of the market cratered, as the defensive characteristics of the business came to the fore.

Indeed, from the nadir of $36.49 it hit in mid-1998 at peak “old economy hatred,” Kimberly Clark’s stock climbed 88% in two and a half years, while also paying a healthy, reliable dividend stream and continuing to grow its earnings.

These are the sorts of stocks I think you should be looking for today – as valuations for the technology and internet high-fliers go nuts, and the “boring,” safe businesses again get left behind.

In particular, what I’m looking for are solid, safe, businesses so cheap now that even in the event of a severe market downturn, they will likely not suffer much – if any – downside.

And fortunately, those businesses are available today, if you know where to look. The consumer staples sector in the US is one place you can find reasonable valuations in the stock market. But if you look abroad, you can find some incredible deals.

I just recommended a South Korean company that makes boring products like toilet paper in last month’s The 4^th Pillar… the company has been around for decades, it’s profitable and pays a dividend and you can still buy shares for less than the net cash in its bank account.

And I’m about to recommend another “boring” but profitable company also trading below net cash and paying a dividend.

When you invest in high-quality companies like these at such low prices, you don’t have to worry so much about the daily moves the market makes. And unlike everyone else, you can rest soundly when we have days like today.

Source

from Sovereign Man https://ift.tt/2CIKaFa
via IFTTT

Tell me this isn’t crazy–

A few days ago the creator of the most famous consumer ‘credit score’ in the United States announced a major overhaul in how it rates borrowers.

Consumers live and die by this ‘FICO score’. A high FICO score means that it’s easy to obtain loans at lower interest rates.

And a bad FICO score (in theory) means that you have a history of not paying your debts… hence making it difficult to obtain loans.

Well it turns out there are tens of millions of people in the US who either don’t have FICO scores at all (i.e. NO credit history), or they have BAD credit.

So FICO decided that they would reinvent the way they calculate the scores– giving a big boost to people with bad credit.

Virtually overnight, people who have a history of not paying their bills will immediately be deemed creditworthy.

And poof… they’ll have access to more debt than ever before.

No offense, but what a bunch of idiots.

This company is deliberately lowering its standards and pretending that people with a terrible credit history are actually top quality borrowers.

Gee where have we seen this before?

Oh that’s right… just before the massive financial crisis ten years ago! It’s genius!

It wasn’t even that long ago during the housing boom in the early 2000s that banks were doing EXACTLY the same thing– deliberately lowering their lending standards and providing loans (WITH NO MONEY DOWN) to borrowers with bad credit.

Everyone was in on it. The big ratings agencies like S&P and Moody’s all played along.

Even the federal government gave its seal of approval to this ridiculous charade.

But eventually the bubble burst. Interest rates started rising and the borrowers could no longer pay.

Housing prices tanked. Banks lost billions. The stock market plummetted. The economy went into a tailspin.

It unraveled so quickly… and it all started with a system that churned out far too much debt, far too easily, to borrowers who had no hope of paying it back.

And that’s precisely what we’re seeing now.

It starts at the top: the US government is sitting on a record $21.7 trillion in debt.

That’s several trillion dollars more than the size of the entire US economy.

Each year the government burns around a trillion dollars, and the Treasury Department expects to sustain those grim deficits for the foreseeable future.

State and local governments are in a similar position– in debt up to their eyeballs and drowning in unfunded pension obligations.

And each year it gets worse. The government’s own projections show the debt only increasing– they have no chance of paying it off.

Even in the private sector, most corporations aren’t much better off.

Not including banks, companies in the US have around $7 trillion in total debt.

Go figure, that’s the highest amount on record. Ever.

More than 40% of all corporate debt is rated just one notch above ‘junk’ status.

And a full 14% of companies in the S&P 500 don’t even generate enough revenue to make interest payments.

Then there’s the consumer– supposedly the rock solid pillar that drives the US economy.

Consumer debt is on pace to reach a record $4 trillion this year.

Credit card debt is at an all-time high. Auto loans are at an all time high. Student debt is at an all time high.

And the average American has little chance of repaying that debt.

According to a recent study published by the Federal Reserve, 40% of adults don’t have enough money to cover a $400 emergency expense like a medical bill or flat tire.

 And 21% of Americans have ZERO savings.

Neither governments, nor most businesses, nor the consumer, has any chance of paying down these debts.

And yet the money keeps flowing.

Companies like FICO are even lowering their standards to give even MORE debt to consumers who are already too heavily indebted.

And investors across global financial markets clamor to buy bonds of companies and governments that routinely burn through billions of dollars in cash.

It’s pretty extraordinary how history repeats itself.

The financial system creates gigantic problems caused by too much debt… then tries to solve that problem with more debt.

The house of cards eventually collapses… people lick their wounds for a few years… and the whole cycle begins anew.

If you’re looking for a great book on the topic, check out Howard Marks’ Mastering the Market Cycle: Getting the Odds on Your Side.

Marks is the billionaire founder of Oaktree Capital and one of the most successful investors in history.

In short, his book describes what we have been discussing for months–  There are always ups and downs, booms and busts. NOTHING moves in a straight line forever.

The economy (and financial markets) have been moving UP in a straight line for most of the last ten years.

And by any historical perspective, this is one of the LONGEST up cycles on record.

We’re seeing the same foolish shenanigans that we almost always see– too much money, too much debt, too much stupidity.

Could it last for several more months, or even years? Absolutely.

Or perhaps it’s possible that the tide has already started to turn.

We won’t know until some point in the future when we look back and say, ‘Oh yeah, that was the top. Duh. Shoulda seen that coming… All the signs were there.’

Just remember last time– the US stock market peaked in October 2007. The big meltdown didn’t take place until almost a year later.

And all along the way– the pundits, the government, the Federal Reserve– everyone kept saying that the economy was strong and healthy… right up until the worst financial crisis since the Great Depression hit.

We’re seeing so many of the same signs that we saw ten years ago.

It would be foolish to think that it will be rainbows and buttercups forever… that this time will be any different.

Source

from Sovereign Man https://ift.tt/2ArVTX3
via IFTTT

Apollo Robbins is better at what he does than anyone else in the world that I know is at what they do…

He calls himself a gentleman thief… Apollo is a renowned pick pocket, magician and mentalist who has entertained crowds for years. But I think he’s so much more than that…

He’s a zen master on human behavior. And he’s the world’s foremost expert on the very scarce resource of attention.

Apollo attended our Total Access gathering in Las Vegas last weekend.

And the crowd was absolutely mesmerized by his demonstration of showing how effortlessly manipulated our thoughts and attention can be.

He showed us how easy it is to manufacture the illusion of control and choice in his “marks” – in this case, our audience members.

You can watch his Ted Talk to learn more about Apollo and how he controls attention, which controls reality… and also see how quickly he can steal your watch while he elegantly directs your attention elsewhere without you having any idea.

To help you understand what I’m talking about, at our event, he invited my mom on stage, along with seven other volunteers.

He asked her to pick a random phone number out of a phone book and read it aloud. As she read the number, each of the seven people on stage held up a card Apollo had given them… and it was the exact number she called out.

Obviously, it’s impossible for Apollo to predict beforehand which number, out of the tens of thousands in there, my mom would have chosen. Instead, he controlled the outcome…

My mom thought she was in control, but it was all an illusion. She was picking the phone number Apollo wanted her to pick. He framed her reality and used very subtle technics to manipulate her actions and decision-making.

I’ll get back to the illusion of choice in a moment after I tell you more about our event…

Our Total Access gathering was primarily an investment conference. I invited the CEOs of our Sovereign Man Private Investor portfolio companies to update us on their performance and discuss plans for the future.

And the news was mostly solid.

We have one company going public at a huge multiple of where we initially invested. There’s another that’s very close to signing an eight-figure deal with a major, national chain. And there are two other deals where we’ll generate a safe, double-digit return with minimal risk.

I’m generally pleased with the results. But I think the investments we discussed in Vegas are a good example regarding the illusion of choice when it comes to investing.

When people invest their savings, they feel like they have this giant universe of options… but it’s really an illusion.

You’re just being led to the choices that the big system wants you to make. They want you to pick stocks, bonds and mutual funds – the assets they’re selling you.

These are the conventional assets that the media, “financial experts,” banks and institutions have been steering people toward for years.

What do you think the New York Stock Exchange and Goldman Sachs want from you today?

They want all the small investors out there to throw their money into the market and buy their fee-producing assets.

And they want you to buy this stuff at a time when prices are at all-time highs and the smart money is starting to exit… you’re the patsy while everybody else gets their money out.

Still, most people think they have a choice because they can choose between Netflix and Tesla, or one S&P 500 ETF versus another. It gives us a sense of control.

The reality is, we’re just being led to a decision they want us to make…

But you have far more control than they want you to believe.

And that’s not just in investing… you have far more control over everything in your life, from finances to health to education.

While the powers that be give you a couple of options and say you’re free to choose, it’s important to remember…

There’s an entire, alternative universe of better options out there.

Personally, I like to maximize my risk-adjusted returns, where my expected return is far, far greater than the risk that I am taking.

For example, I’m about to close a deal that will pay 12%+ annual interest on a loan backed by a property that’s worth 2.5x the loan exposure. And I’ve already got legal and administrative custody of the property, so it’s very low risk.

I’d much rather make investments like that than buying overpriced stocks and bonds today. Sure, stocks could go up another 20% from here… but they could also drop 40%.

Last time I checked, nobody got rich by following the crowd in buying expensive and popular assets. If you want outstanding performance, by definition, you can’t do what everyone else is doing.

Listen, you don’t have to do what I’m doing. I’m not suggesting that you do.

What I am suggesting is that the most important thing you can do is divorce yourself from the idea that you have to choose from the very narrow set of options that you’ve been provided.

Source

from Sovereign Man https://ift.tt/2Jdmp96
via IFTTT

Meital took one simple, legal step to save about $30,000 in taxes every year.

She used to be an international photographer based in NYC, making about $100,000. But despite that income, she was still living paycheck-to-paycheck.

As a self-employed person, she often forked over some $30,000-$50,000 in taxes to Uncle Sam every year. (Self-employed, sole proprietors in the US pay some of the highest tax rates out there.) Add in NYC living costs and there was nothing left for savings.

Lonely and broke, she asked her cousin, a rabbi (the family is Jewish), for advice. He suggested she move to Israel, which offers easily attainable citizenship to Jews around the world.

Meital calls the move “the best decision [she’s] ever made.”

But there’s another huge benefit: It turns out that gaining Israeli citizenship and living in Israel also renders tremendous tax benefits to new citizen/residents.

 The ability to increase your income — and keep more of it — is one benefit of holding a second passport and moving abroad.

But a second citizenship also greatly expands your freedom. It gives you unfettered access to another home base. If things go south in your home country, you and your family have more options for where you can live, work and invest.

If you’re Jewish, gaining an Israeli passport is generally a fast, relatively straightforward process. You just apply, fill out the forms and wait about a year.

And new citizens who move to Israel get an enormous tax break… for a decade.

In 2008, the Knesset (Israeli parliament) passed an amendment exempting new immigrants from tax on income from abroad. Someone who starts a restaurant in Israel isn’t exempt, but a new immigrant who makes money elsewhere, like Meital does with her photography, generally doesn’t have to pay Israeli taxes on that income.

And again, new citizens are exempt from Israeli taxes for the first ten years they live in Israel.

Additionally, because Israel and the US have what’s called a double taxation treaty, dual US-Israeli citizens like Meital are only required to pay taxes in one place — in this case, Israel.

(Dual citizens still have to file a US tax return, and potentially other documents telling Uncle Sam they have foreign bank accounts.)

This is one of the few safe and legitimate ways for US citizens to drastically reduce taxes. Puerto Rico is another.

Meital was amazed at how much she can save: $30,000 a year in taxes… times ten years…

And there are other financial benefits… the Israeli government pays people when they have kids – $41 per month for the first kid and $52/month for the second/third kids. And that cash is deposited directly into your Israeli bank account.

Each kid eligible for that benefit also gets a savings account opened in their name, and the government deposits about $14 per month per child.

And new Israeli citizens are exempt from military conscription (though, depending on your age and when you arrived in Israel, you could be drafted in the case of war).

While the financial gains are nice, Meital has had to adjust to a different culture, a different language, and the constant threat of terrorism and war.

And Israel is not cheap.

But Meital has a grand arbitrage plan — live in Israel for the foreseeable future, then retire somewhere less expensive, having saved hundreds of thousands of dollars in taxes.

Frankly, this option wouldn’t have been available to her if she stayed in New York… she would have continued laboring away while the government took the lion’s share of her wages.

An Israeli citizenship gave her more money and more options.

Plus, she can pass on that second citizenship to her descendants.

If you’re Jewish — or are converting to Judaism — then Israeli citizenship may be just the option for you.

If you’re not Jewish but want to see how you might qualify for a different, second passport, you can get all of that information here.

In addition to more freedom, you may find a second citizenship also gives you a greater sense of belonging.

Source

from Sovereign Man https://ift.tt/2AiWp9R
via IFTTT

Shares of Netflix soared today on news the company lost a record $859 million in cash in the third quarter.

Why are investors applauding this egregious destruction of capital?

Well, it’s because investors only look at one number when Netflix reports earnings – subscriber growth.

And on that metric, the company outperformed, adding 6.96 million subscribers, bringing the global total to more than 137 million.

At 137 million subscribers, Netflix has about 2% of the global population as customers.

There are still around 90 million traditional TV accounts in the US (and about 36% of those also have a streaming account).

So there’s definitely room for Netflix to grow in the US and abroad (where the majority of growth is coming today).

But there’s a lot of competition for those new subscribers.

Netflix is up against YouTube (Google), Facebook, Amazon, Apple, Disney, AT&T, Fox… and all of the traditional cable companies that are fighting to maintain subscribers (and testing new offerings to compete with NFLX).

These are companies with DEEP pockets. They also have hundreds of millions of existing subscribers (in Facebook’s case, billions) to market to.

At the very least, all of the other companies in the space are going to drive the cost for programming way up… bringing margins way down.

But let’s not forget the price Netflix is currently paying for that growth…

The company has burned $1.7 billion in cash this year through the third quarter.

So every new subscriber comes at a giant loss.

And Netflix is making up for those losses with debt.

The company has $8.3 billion in long-term debt, up from $6.5 billion at the end of 2017. And it’s paid $291 million in interest so far this year.

With interest rates rising, that interest expense is only going up.

The company has also spent $6.9 billion on content this year (meaning it should surpass its estimates of $7-8 billion). And it’s on the hook to pay out another $18.6 billion for content in the future. 

 Still, the market values this money-losing, debt-laden and fiscally irresponsible company at $156 billion today.

That’s almost as much as Disney (at $174 billion), a beloved company with a nearly 100-year history that makes billions of dollars in cash every year and, gasp… pays a dividend.

All of the popular companies that are losing money today (Netflix, Uber, Tesla, etc.) are simply a transfer of wealth from investors to customers… because the companies don’t charge enough for their product.

Uber has never turned a profit. But it’s about to go public at $120 billion.

And Tesla is worth more than Honda, despite losing money, missing production deadlines and having a borderline psychotic founder.

I got an email from a company called TransferWise – a tech company that provides low-cost international transfers.

It explained the company has been losing money on every single transaction it makes.

They clearly said they can’t continue providing this service at a loss… and that prices are going up.

They even thanked their customers for hanging in there while they “learn from [their] mistakes.”

Who’d of thunk it?

When you deliberately sell something for less than what it costs you to provide the service, it’s not sustainable.

What a revelation.

It’s as if these companies don’t realize the fact going in… you can’t lose money forever.

TransferWise understands now… all these other companies won’t be that far behind.

But for now, the madness continues…

Uber’s about to go public at $120 billion.

Tesla is worth more than Honda.

Netflix is worth almost as much as Disney.

Lyft, another rideshare service, is also looking at an IPO. But it’s only expected to fetch $15 billion – about one-tenth of Uber.

If Lyft could figure out how to lose more money, then maybe it would have a real business.

These companies are run so poorly, you’d think they were managed by the US Congress.

On the topic, it’s a similar mentality with people still believing the US is the wealthiest country in the world.

It’s got $21 trillion in debt, debt-to-GDP is at 106% and the country is running $1 trillion annual deficits.

Yep, other than that, it’s the wealthiest country in the world.

Source

from Sovereign Man https://ift.tt/2QU6lfa
via IFTTT

[Editor’s note: While Simon is traveling today, other members of the Sovereign Man team penned today’s missive.]

February 2013, a 500+ foot yacht docked on the west side of Manhattan.

The boat, named Eclipse, belonged to the Russian oligarch, Roman Abramovich – one of the richest men in the world. And the media went wild speculating why Abramovich had parked his mega-yacht in the US for more than a month.

On April 8, with the boat still docked, Abramovich’s girlfriend Dasha Zhukova gave birth to a baby girl at New York Presbyterian hospital.

And because Abramovich’s daughter, Leah Lou, was born on US soil, she gained a US citizenship (in addition to a Russian citizenship).

Leah didn’t realize it, but her father was giving her a tremendous gift by harboring his yacht in the US.

We talk a lot at Sovereign Man about having a Plan B.

You can take a few simple steps to, for example, get some money outside your home jurisdiction or get a second residency.

That way, if things go south in your home country, you’ll have more options and more freedom. And if nothing happens, you won’t be any worse off.

Lots of folks consider a second passport the “holy grail” of a Plan B.

Should you need to leave your home country for any reason, a second passport gives you another place where you can live, work, invest and retire.

There are a few ways to get a second citizenship.

You can naturalize, which requires you to move to a foreign country and live there for several years.

You can also get a second citizenship if you have ancestors from countries like Italy or Ireland.

Many countries, from St. Kitts to Malta, also sell citizenships for anywhere from a couple hundred grand to a couple million dollars.

But today I want to tell you about a much easier solution.

Like Roman Abramovich, you can give your future child a second citizenship from the moment of his or her birth.

If you have your baby in one of the 30+ Jus Soli countries (states granting automatic citizenship to any child born on their territory), your newborn will automatically acquire two citizenships – one from your home country and one from the country of their birth.

And later in life, your child have more options for where they can live, work, invest and retire.

And with a second passport, your child will enjoy visa-free access to more countries around the world, which again means more freedom.

All it takes to give that invaluable gift is approximately three months spent on the ground and a few thousand dollars spent on travel and a private clinic.

Almost all Jus Soli countries are located in the North and South America and traditionally, the US has been the go-to destination to have your baby.

But what most of those parents don’t realize is that they also sign their children up for a world-wide taxation by Uncle Sam, even if their child never sets a foot on American soil again after they leave… Generally, every US citizen has to start paying taxes to Uncle Sam by the age of 18.

Instead, I’d consider having a baby in Chile.

According to our recent study, Chile boasts the best travel document among all Jus Soli countries, hands down. In fact, it is the 6^th best travel document in the world, way ahead of the USA (26^th place) and Canada (25^th).

Chilean citizens enjoy visa free access to the US, Canada, Europe, Brazil, Russia, and many more…

Also, Chile is very peaceful. The last time Chile had a war was almost 130 years ago. And your child does not risk a military conscription as a Chilean citizen.

Having a baby there can also be beneficial for you if you decide to move to Chile yourself – parents of a Chilean citizen can legally reside in the country, no conditions attached.

But that’s not all. Chilean citizenship comes with two additional benefits.

First, any Chilean citizen can easily move to and live, work, study… in any other country in South America because of the Mercosur. Mercosur is a free-trade union of countries, which includes Argentina, Brazil, Paraguay and Uruguay, and associate members of Chile, Peru, Ecuador, Colombia, Guyana and Suriname.

And second, a national of any Spanish-American country (plus Brazil) also can obtain a citizenship in Spain after just two years of residency there, instead of the usual ten. And they won’t have to give up their original citizenship – something that Spain requires from other candidates naturalizing there.

(These Spain-related  benefits only apply to people born in Chile. If you naturalize in Chile at an older age, that won’t work for Spain.)

And if your child does not live in Chile, he/she will not owe a dime to a Chilean government in taxes.

That’s a tremendous amount of benefit for not a lot of effort.

You are usually in full control of where your children are born. If you strategically select the birthplace of your children, dedicate a couple of months of your time to it and a few thousand dollars, you will set them up for a lifetime of benefits.

While we think Chile is the best option, there are plenty of other countries where you can have a child and that child will automatically gain a second citizenship – Canada and Brazil are two others, for example.

If you’d like to learn more about the different ways you can obtain second citizenships for you and your family, here’s a great, free resource to get started.

Source

from Sovereign Man https://ift.tt/2NLSKVo
via IFTTT

On June 15, 1215, King John sat in a field in Runnymede, England, surrounded by angry nobles.

His Barons—the big landowners throughout England—had rebelled and seized London, forcing King John to sign an agreement guaranteeing certain rights to the people of England… and restrictions of his power.

This agreement was called the Magna Carta. And it would become one of the most important documents in history.

Centuries later in 1678, Charles II was King of England. Like many kings, Charles was terrible with money.

And when he ran out of it, he started demanding extra taxes from his knights, and imprisoning those who refused to pay.

The King was once again surrounded by angry nobles, this time in the Parliament building. There he signed the writ of Habeas Corpus in exchange for more money.

Best tax dollars ever spent. Habeas Corpus said that government officials could not imprison people for no good reason. Prisoners had the right to go before a judge to determine if their imprisonment was justified.

Just because the government accused you of something didn’t mean they could do whatever they wanted to you.

About a hundred years later, American colonists got fed up with the King of England once again.

The government exists to serve the people, they said. If the government wants to accuse, search, or arrest you, they better have a good reason. And they better allow you every opportunity to clear your name.

In 1791, the Bill of Rights enshrined into law the right to speak out against officials, the right to be considered innocent until proven guilty, and to be secure against unreasonable search and seizure.

These concepts of individual rights were shaped in the UK and US. But they apply universally.

Unfortunately, some governments seem determined to erase all this progress.

If you’re traveling to New Zealand, you should be aware of the Customs and Excise Act of 2018. It just went into effect at the beginning of October.

New Zealand Customs and Border agents can now demand passwords for any electronic devices you bring into the country. They can download the entire contents of your phone or laptop, and search through it for evidence of a crime.

Agents could always search phones and laptops at the border. But now they can fine you up to $5,000 ($3,300 USD) for refusing to hand over the passwords, codes, and encryption keys to your devices.

The new law also allows Customs agents to collect biometric data from anyone entering the country. That means they can take your fingerprints, photo, or iris scans, store them, and share them.

And even worse, New Zealand’s Customs website explains:

“Making an arrest without a warrant can now be done with no limitation to timeframe.”

So now you officially have no rights at the New Zealand border.

Agents can search your electronics without cause, and fine you for refusing to give out your password. They can collect, store, and share any of your biometric data they want.

They can arrest you without a court order, and hold you for as long as they like.

It’s not like New Zealand is some third world country… They actually adopted the Habeas Corpus Act in 1881 while under British rule.

Along with the the UK, USA, Australia, and Canada, New Zealand’s legal system is part of the Western tradition. This is the legal basis, starting with the Magna Carta, that protects common people’s rights against overreaching authorities.

These countries also make up the Five Eyes intelligence alliance… They have all agreed to share secrets from their spy agencies with one another.

For a visualization of the Five Eyes Alliance, just look at a map of Oceania from George Orwell’s 1984—the dystopian classic portraying the ultimate authoritarian police state.

And unfortunately, New Zealand isn’t the only Five Eyes government acting like Big Brother—the embodiment of the omnipresent surveillance state in 1984.

Since 9/11 the US has also been searching travelers’ electronics at the border. But they kept the practice small scale for a while.

With the 9/11 terrorist attacks fresh, it didn’t really bother anyone. Anything in the name of national security…

But by 2015 Customs and Border Protection searched the electronic devices of 8,503 airline passengers throughout the year.

In 2016 it escalated to 19,033 searches.

And in 2017 Customs Agents searched the phones and laptops of 30,200 travelers.

Just like in New Zealand, agents didn’t get warrants for these searches. They didn’t even require probable cause.

In January of this year, US Customs sent out new guidance about phone and laptop searches at the border.

It says they can search anyone’s electronic devices “with or without suspicion.”

It says passengers are “obligated” to turn over their devices as well as passcodes for examination. If you refuse agents can seize the device.

That is all considered a “basic search.” No suspicion needed.

To add insult to injury, the January guidance starts, “CBP will protect the rights of individuals against unreasonable search and seizure and ensure privacy protection while accomplishing its enforcement mission.”

This is another page taken from Orwell. Doublethink. They want us to believe two contradictory ideas at the same time.

They treat everyone like a criminal, they say, to protect the innocent.

They search the innocent to protect their rights.

Habeas Corpus, the right to be secure against unreasonable search and seizure, the rights of the accused… these are quickly becoming lost to the memory hole of history.

Source

from Sovereign Man https://ift.tt/2PzLdut
via IFTTT