Category: simonblack

Get ready for your Friday absurdity! Here are this week’s stories:

Professor advocates for cannibalism to fight climate change

If you’re concerned about the human impact on Earth’s climate, you could plant a tree, install solar panels, ride a bike, or eat your dead relatives.

Don’t let that sack of meat decompose. Put it to good use, save a cow, and sequester that carbon into your own body.

At a summit in Sweden about the future of food, a professor gave two presentations about how eating human flesh could combat the negative effects of climate change.

He claims resistance to cannibalism is “conservative” or even “selfish.”

And of course, the human meat industry will have to start slow, first getting people used to the idea of eating pets and insects. But eventually humans can be “tricked into making the right decisions,” the professor suggested.

We thought it was a bit strange when we heard about human body composting services emerging in Washington state, as an alternative to burying or cremated the dead.

But even we didn’t think soylent green would become a serious proposal so soon.

Click here for the full story.

Experiment to cool earth with chemicals in the atmosphere

Backed by the likes of Bill Gates and other powerful elite, scientists are set to try their first experiment in “geoengineering” to cool the globe.

This experiment will be small scale, spewing chemicals into the atmosphere in order to mimic a volcanic eruption. Eruptions are known to cool the globe, because the particles in the air reflect the sun’s rays away from the earth.

If they deem the experiment a success, it could be replicated around the globe.

Of course, volcanoes can also cause famine, drought, and eliminate blue skies.

But those are risks this enlightened group of elites is willing to take… without anyone else’s consent.

Click here for the full story.

Oregon unions want to limit self check-out lanes at grocery stores

Have you ever used the self-checkout at the grocery store to beat the long lines?

If Oregon unions get their way, those lines will be just as long.

A group of labor unions is collecting signatures in Oregon for a 2020 statewide ballot initiative.

They want to put the Grocery Store Service and Community Protection Act to popular vote, which would prohibit grocery stores from having more than two self-checkout lanes.

The unions say these self service lanes are cutting jobs and are hard for elderly and handicapped to operate.

The self-checkout is also causing social isolation, they say– because we all know how important those social interactions like, “paper or plastic?” are.

Click here for the full story.

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A few hours ago, the European Central Bank announced a bonanza stimulus package: interest rate cuts, money printing, quantitative easing, the whole nine yards.

Europe’s economic growth has ground to a halt. The German economy actually shrank last quarter, according to official statistics.

So the European Central Bank is throwing everything including the kitchen sink at this problem. Their stimulus package is like a monetary defibrillator trying to shock Europe’s economies back to growth.

It’s pretty amazing when you think about it: interest rates in Europe are already NEGATIVE. They’ve been cutting rates for years, and it hasn’t worked.

Back in July 2008, the European Central Bank’s main interest rate was 3.25%.

By the end of 2008, it was clear the global economy was slowing down, and the central bank had slashed interest rates to just 1%.

But they kept going.

By 2013, the ECB had reduced its primary interest rate all the way to zero.

And in 2014, they took the unprecedented step of cutting rates even further– to NEGATIVE 0.10%.

European rates have been negative now for FIVE YEARS. Yet Europe’s economies are still in the dog house.

These results completely defy prevailing economic wisdom.

According to the ridiculous playbook that nearly all central bankers use, cutting interest rates is supposed to stimulate economic growth.

If interest rates are lower, it makes it easier and cheaper for people to borrow money. If it’s cheaper to borrow money, people buy more stuff… which creates more economic growth.

But that’s not happening.

They’ve been cutting rates, even below zero, to the point that you can actually get PAID to BORROW money in Europe. Yet those economies are still stagnating.

So the central bank’s solution? If what you’re doing isn’t working, do more of the same!

It’s astonishing how these economists cling their ridiculous theories…

Unsurprisingly, the European prices of both gold and silver shot up this morning.

Gold is now selling in Europe for nearly 1,400 euros as I write this letter— an ALL-TIME high.

That’s because precious metals are a refuge from keeping your savings held hostage by unelected central bankers who can slash interest rates to negative levels and conjure unlimited quantities of paper currency out of thin air.

It’s not just Europe either.

Across the water in the United States, the central bank has already indicated that they’re going to start cutting rates as well… plus they’re facing pressure from the Tweeter-in-Chief to make interest rates negative, just like in Europe.

That’s a big reason why precious metals prices have been climbing so rapidly; in the past two months alone, the silver price is up 22%.

I’ve been talking about this for months, encouraging you to buy gold and silver. But this isn’t over. There’s a lot more monetary insanity to come from the United States and Europe… so gold and silver prices likely still have a lot of room to rise.

(Silver could actually triple in price, and it still wouldn’t beat its previous record high.)

One big driver of gold demand is actually coming from foreign central banks and governments. They can see what’s happening to the US dollar and euro, and they’re keen to diversify their reserve assets away from negative interest rates.

Russia has been on a gold-buying spree lately, gobbling up more than 18 metric tons of gold in the month of June alone, and nearly 100 metric tons since the beginning of 2019.

China has also added 100 metric tons of gold to its foreign reserves since the beginning of 2019.

Even the central bank of Poland has acquired 100 metric tons of gold this year, nearly doubling its gold holdings from last year.

This is a powerful trend that could continue sending prices higher. So it’s still a reasonable time to buy physical gold and silver.

Over the past few weeks I’ve written to you about why you should consider buying coins (rather than bars), and definitely avoid precious metal ETFs.

Next week we’ll discuss how you could make potentially explosive gains from an increase in gold and silver prices through mining companies.

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Lately I’ve been looking at a number of office buildings in San Juan– I own two businesses that are based here in Puerto Rico, and it’s about time the team moved to a larger space.

I was really impressed with what I saw– there are a number of compelling new commercial real estate projects in Puerto Rico right now… and almost all of them are due to the Opportunity Zone legislation.

We’ve talked about this a few times before: Opportunity Zones are areas that have been deemed ‘economically underdeveloped’. And qualifying investments that take place within those Opportunity Zones are eligible for incredible tax breaks.

There are Opportunity Zones in every single state in the United States, including territories like Guam, US Virgin Islands, and Puerto Rico.

In fact, nearly the entire island of Puerto Rico is an Opportunity Zone. It’s incredible.

Doing business inside a designated Opportunity Zone means that qualifying investors are eligible for tax-free capital gains. Forever.

It works like this–

Let’s say you’re a US taxpayer and have just sold your business. Or perhaps cryptocurrency, stocks, or your real estate portfolio. And, after you sell, you’re sitting on substantial capital gains.

First, congratulations.

Second, you’re going to owe Uncle Sam a LOT of money– 20% capital gains tax, plus the 3.8% Obamacare surtax, plus possibly state and local tax as well.

BUT… if you roll your capital gains into a special fund that invests in Opportunity Zones, you can defer the tax on those gains for up to 7 years.

And any additional gains you make on your Opportunity Zone investments will be tax-free forever, as long as you hold the investment for at least 10 years.

The one sticking point is that, in order to be eligible for this extraordinary tax benefit, you have to invest capital gains in an Opportunity Zone, i.e. money that you’ve recently earned by selling other investments.

But– even if you don’t have a lot of capital gains right now, you can still benefit from Opportunity Zones. Because, for anyone who is looking for funding to start a business or real estate project, Opportunity Zones are an absolute gold mine!

That’s because there’s hundreds of billions of dollars… potentially even more than a $1 trillion… of capital gains in the United States right now that’s looking for interesting Opportunity Zone projects to invest in.

And right now there’s simply not enough great Opportunity Zone investments for all that capital.

This means that Opportunity Zone entrepreneurs and developers have access to a ton of capital that NEEDS to be invested. And the other HUGE benefit is that, since the Opportunity Zone tax benefits require a 10-year holding period, you’ll have investors with a very long-term view.

This is an absolute dream for anyone looking to raise money.

And don’t think that you have to start your business or development in some remote area.

As an example, there are even parts of that are qualified Opportunity Zones– part of the East Village and Lower East Side. Or across the East River in Brooklyn.

So you could literally raise money for real estate projects in New York City and provide your investors with long-term, tax-free gains.

Or, you could start a tech company in certain neighborhoods of Austin, Texas, or even parts of Silicon Valley, which are designated Opportunity Zones. And if those companies become successful and end up being acquired in the future, the gains would be eligible for the Opportunity Zone tax benefits.

There are Opportunity Zones everywhere, from American Samoa to Zanesville, OH. And there are likely plenty of ways for created, talented individuals to create value in all of them.

(Take a look at the Opportunity Zone map here.)

But it’s not just the financial incentives that make Opportunity Zones so compelling.

I’m seeing it first hand here in Puerto Rico. The neighborhoods where these Opportunity Zone investments are taking place are clearly on the rise. You can taste it. The streets are cleaner, the neighborhood is nicer. New businesses are moving in, so there’s a new bustle and energy where before there was gloom.

All the economic activity is creating jobs, plus tax revenue for the local government.

Everyone wins.

Of course, that doesn’t stop the Bolsheviks from dumping all over this tax incentive. They can’t stand win/win deals. They hate the fact that investors (who are already wealthy) receive tax breaks from their Opportunity Zone investments.

About two weeks ago, the New York Times (AKA the Daily Worker) did a hit job on Opportunity Zones  with an article entitled, “How a Trump Tax Break to Help Poor Communities Became a Windfall for the Rich”.

It’s just a Bolshevik propaganda piece howling about rich people receiving tax breaks, and making absurd assertions that these Opportunity Zone investments aren’t helping poor communities.

I was literally standing in some of those poor communities last week, witnessing incredible transformation in progress.

But none of that matters to Bolsheviks. All they care about is making sure that wealthy people don’t benefit.

They can’t stomach a win/win deal. And they’d rather see no one benefit, than a rich person receive a single penny in tax breaks.

It’s pure insanity.

But here’s the good news: these people aren’t in power. At least, not yet. Which means, whether you’re an investor, entrepreneur, or developer, this Opportunity Zone trend still has ENORMOUS potential, and it’s absolutely worth considering.

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Buckle up, this one’s going to be entertaining… because I should have called this note “Why you should always read the fine print.”

This morning I read through the prospectus and annual reports of the most popular Gold ETFs in the world.

First, some background:

ETF stands for ‘exchange-traded fund’. It’s sort of like a mutual fund that’s listed on the stock exchange, meaning investors can buy/sell shares of an ETF just like they would buy/sell shares of Apple, Ford, or (God help us) Netflix.

But unlike Apple, which is an operating business with employees, products, revenue, etc., an ETF is NOT an operating business. It’s a fund that merely pools capital to own assets.

The benefit for investors is that ETFs can be an easy and convenient way to invest in certain assets which would otherwise be difficult to buy.

If someone wants to buy Egyptian stocks, for example– they could open a brokerage account in Cairo… or buy an Egypt ETF that’s listed on the New York Stock Exchange.

The ETF is a LOT easier for most investors.

But there are also ETFs for gold and silver. And I find this mystifying.

We’re not talking about Egyptian stocks. Gold and silver are easy to buy. You could have Canadian Maple Leaf gold coins delivered to your home with a few mouse clicks.

So gold ETFs provide no added convenience.

Yet there’s an enormous amount of downside.

First off– it’s important to know that if you buy an ETF, you’re paying for a ton of unnecessary expenses.

The ETF has to pay custodian fees, marketing fees, listing fees to the New York Stock Exchange, audit fees, management fees, etc.

I’m chairman of the Board of Directors for a company that’s listed on a stock exchange, and trust me– the listing fees are REALLY expensive.

If you own physical gold in your own safe, you wouldn’t have to suffer the cost of paying lawyers, auditors, and investment bankers.

But GLD does. Which means that as a GLD investor, YOU are fundamentally paying those costs.

And remember that ETFs aren’t operating businesses. Apple makes money selling overpriced hardware. But GLD has no products, and hence doesn’t generate any revenue.

So how do they pay for this mountain of expenses?

By selling gold.

Your gold.

GLD trustees periodically sell off the gold (that’s supposedly owned by the investors) in order to pay expenses.

Right in its own prospectus, GLD tells us:

The amount of gold [held by GLD] will continue to be reduced during the life of the Trust due to the sales of gold necessary to pay the Trust’s expenses”

And like I said, those expenses are NOT cheap. I’ll come back to that.

This is important because GLD (and several other ETFs) are structured as ‘flow-through’ trusts.

So when they sell gold to pay expenses, this can create hidden tax headaches for GLD investors. The IRS could treat those gold sales as if you personally had sold gold, triggering capital gains consequences.

GLD’s 2018 annual report states this clearly on page 21:

“When the Trust sells gold . . . to pay expenses, a U.S. Shareholder generally will recognize gain or loss. . .”

But aside from the excessive costs and possible tax consequences, ETFs are simply not designed for your benefit. They’re designed for Wall Street’s benefit.

GLD, for example, has a terribly complex structure involving a ‘sponsor’, ‘marketing agent’, ‘trustee’, ‘custodian’, and various ‘Authorized Participants’.

These middlemen standing between you and your gold are all big Wall Street banks who suck value from your investment.

Here’s something really incredible: with GLD, the physical gold is supposed to be held with the ‘Custodian’, which is HSBC Global.

But according to GLD’s legal documents, the Custodian has the right to use Sub-Custodians. Yet they’re not required to have any written agreement with the sub-custodians.

Those sub-custodians can then shift your gold even further to sub-sub-custodians, which also does not require a written agreement.

This is directly from GLD’s report:

“The Custodian’s selected subcustodians may appoint further subcustodians.”

“These further subcustodians are not expected to have written custody agreements with the Custodian’s subcustodians that selected them.”

This is where it gets really ridiculous:

“[T]he Custodian does not undertake to monitor the performance by subcustodians of their custody functions or their selection of additional subcustodians and is not responsible for the actions or inactions of subcustodians.”

In other words, the gold could end up with some sub-sub-sub-custodian. No written agreement is required.

And, even though the primary custodian (HSBC) is receiving handsome fees, they have no obligation to monitor the sub-custodians, nor can HSBC be held responsible if someone screws up.

Moreover, the report states:

“The Custodian and the Trustee do not require any direct or indirect sub-custodians to be insured or bonded with respect to their custodial activities…

“Therefore, Shareholders cannot be assured that the Custodian maintains adequate insurance or any insurance with respect to the gold held by the Custodian on behalf of the [ETF].”

So, not only is there zero requirement to even have a written agreement before storing your gold with some sub-custodian, there’s also no requirement to insure the gold that they’re storing.

SOUNDS LIKE ANOTHER WIN FOR THE LITTLE GUY!

Seriously, you have to be insane to buy GLD.

Sure, it’s convenient to click a button and buy GLD with your brokerage account.

But it’s also convenient to buy physical gold coins on Amazon. Jeff Bezos can deliver them to your house via drone strike later this afternoon.

Yes, GLD is liquid. You can sell shares anytime during market hours. But physical gold is also liquid. You can sell it anywhere in the world.

So gold ETFs have no real advantage.

But the disadvantages are numerous. You’re paying a ton of unnecessary expenses, dealing with potential tax consequences, and enriching big Wall Street banks who have no obligation to do anything on your behalf.

No thanks.

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Happy Friday everyone. Let’s bring on the weekly absurdity!

School cop handcuffs and screams at autistic 8-year-old

An eight year old autistic boy in Southlake, Texas became agitated in his guidance counselor’s office.

At one point the child became fidgety and took out a jump rope (that had been provided to him by the school). Amazingly enough, the counselor felt threatened by this and asked the school cop to come into the office.

So the cop handcuffed the child, screamed in his face, and mocked his frustration. The cop also claimed that the child had a weapon, which he described as “homemade nunchucks”. This ‘weapon’ turned out to be the jump rope that the child was twirling.

When the parents came to retrieve their child, the officer continued to harass the parents, sarcastically telling them, “great parenting.”

Click here for the full story.

82 days in jail for possession of honey

A Jamaican man legally residing in the USA returned from his yearly visit to his home island.

With him he brought two bottles of honey. Unfortunately the airport drug dog thought the man’s bag smelled suspicious. And an initial test said the honey was actually meth.

Another drug test revealed that the honey bottles were shockingly filled with honey.

But they still didn’t want to release him, even on bail. They wanted to send the honey off for more advanced testing.

EIGHTY TWO DAYS LATER the results came back. Honey. US Customs finally released the man from jail… but by then he had already lost his job after being absent for nearly three months.

Click here for the full story.

MSNBC calls it “incendiary” to say there are two genders

MSNBC is an allegedly non-biased news outlet. All they do is report the facts, right?

Last week, an anchor reported that a candidate for Governor “is out with a new TV ad this week, making incendiary comments about gender.”

Here’s what he said: “As a Doctor, I can assure you, there are only two genders.”

To MSNBC, it is a newsworthy reportable fact that this statement is “incendiary.”

Not up for debate, not worthy of scientific thought, just incendiary… to state a basic fact that everyone agreed on until a couple years ago.

Click here for the full story.

Boy suspended from school after going target shooting with his mom

This story starts out almost too wholesome to believe.

On a crisp afternoon in the forests of northern Colorado, a mother and her son Nate bond over some target practice. They shoot cans with rifles and handguns.

I bet mom even ruffled Nate’s shaggy hair as she gazed proudly at what a fine young man he was growing into. It’s straight out of the Andy Griffith Show.

And imagine a teen that isn’t too embarrassed to post a video on social media of him spending the afternoon hanging out with mom.

But because that video included guns, someone called the police to report that Nate was a threat to the school.

The police investigated, rolled their eyes, and said there was nothing illegal about target shooting and posting the video online.

But then the family got a phone call from the school, telling them Nate couldn’t return to school until after a “threat assessment hearing.”

Click here for the full story.

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Last week we dove into a series about different ways to own gold. And I explained in that first article why it’s a great idea to own physical bullion– gold you can hold in your hand.

With physical gold, there’s no middleman standing between you and your wealth. And when properly stored, it’s very difficult for some frivolous creditor or out-of-control government agency to steal it.

When it comes to physical gold, I explained that I prefer gold coins over gold bars.

Gold bars are completely non-uniform. A typical 400-ounce gold bar (like the ones you see in the movies, or that you imagine are stacked up in Fort Knox) could weigh as little as 350 ounces, or as much as 430 ounces. They’re all different.

On the other hand, 1-ounce Canadian Gold Maple Leaf coins are generally all the same. They’re uniform… minted and crafted to the exact same standard.

The uniformity of gold coins like the Canadian Maple Leaf makes them much easier to buy/sell.

If you want to buy or sell a gold bar, it has to be weighed and assayed with special equipment first. But if you want to buy or sell a Maple leaf, it’s simple– because the coins are pretty much all the same.

Now, there’s one special sub-category of gold and silver coins that are worth mentioning: collectible coins.

Collectible coins, just like Canadian Maple Leaf coins, have value because of their gold or silver content.

But collectibles also have additional value for their rarity.

Whereas the Royal Mint of Canada produces new Maple Leaf coins every single year, no one can go back in time to mint more Venetian gold ducats from the 14^th century. There’s only a fixed number of those coins in existence.

Because of that, collectible coins sell for a significant premium to the value of their gold or silver content.

This concept of ‘premium’ is an important one: ALL coins, whether a rare coin or a bullion coin like a Canadian Maple Leaf, generally sell for an additional amount above the gold price.

That’s because, unlike a gold bar which is simply poured into a cast (and rather unevenly at that), a coin has a lot of craftsmanship that goes into the minting process. It’s more expensive to produce, therefore it costs a bit more.

That premium can be between $20 and $150 per coin.

As I write this article to you right now, the price of gold is $1,545 per troy ounce. But a 1-ounce Canadian Gold Maple Leaf is selling for $1,565– a $20 premium to the ‘spot’ price of gold.

But that $20 premium isn’t a sunk cost; if you ever sell your coin, your coin will be worth whatever the spot price of gold is in the future, plus the premium. So you’ll recoup the $20 down the road.

(In fact, in times of high demand for gold coins, premiums can increase significantly, so you could actually make even more money if you ever sell.)

With rare coins, however, premiums are MUCH higher. Remember, you’re not only paying for the gold/silver content in the coin, you’re also paying for its rarity.

That premium with rare coins could be hundreds, thousands, tens of thousands, or more.

Here’s an example– right now there’s a Venetian gold ducat from the early 1400s for sale on eBay for $1,000.

A gold ducat from that era contained 3.545 grams of almost pure gold. And based on the current gold price, there’s approximately $175 worth of gold in that coin… meaning that the coin’s rarity is worth $825. That’s the premium.

(If $825 sounds high, there are some rare coins which command premiums in excess of hundreds of thousands of dollars.)

One important point to remember about collectibles is that, unlike bullion coins, rare coins are not all equal.

There’s typically no price difference between a 2013 Canadian maple leaf and a 2018 Canadian maple leaf.

But there can be a significant price difference between a ‘Buffalo Nickel’ from 1913 and a Buffalo Nickel 1918. Prices vary based on the rarity from that particular year and model.

There can even be significant price differences between two of the same rare coins from the same year, depending on their condition.

Just like a ‘mint condition’ baseball card is worth more than the same card that’s heavily worn, coins in better condition fetch higher prices.

There are coin grading systems, like PCGS, which rate coins on a standardized scale; so an “MS-66” rating means the coin has fewer scuffs and blemishes (and is hence worth more) than a “MS-64” rating.

It’s clear that investing in rare coins takes a lot more education and research than buying a standard bullion coin like a Canadian Maple Leaf. So I’d definitely recommend that you NOT go out and start buying ancient Roman solidus coins or medieval Dutch guilders unless you really know what you’re doing.

But if you want to get your feet wet, there are some rare coins that offer solid value compared to the typical premiums they sell for. The $20 Saint-Gaudens “double eagle” is a great example.

In the past $20 Saint-Gaudens double eagle has sold at a premium of hundreds of dollars above the spot price of gold.

Today, however, the premium is quite low– I’ve seen these coins selling for premiums of less than $50 above the price of gold.

That’s almost as cheap as a Canadian gold Maple Leaf coin, but with the added benefit of owning a coin that’s rare. Again, no one can go back in time to the early 20th century and make more of these coins.

So it’s possible that, in a few years, we could not only see a MUCH higher gold price, but MUCH higher premiums for the Double Eagle. So you could make money both ways.

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On January 20, 1841, after delivering a series of military defeats to Imperial China in the First Opium War, British forces landed in Hong Kong and took control of the island.

Hong Kong was hugely important for the British economy because it ensured access to the Chinese market. And they went to war multiple times to keep control of the island.

In 1898 the two empires signed a lasting peace treaty whereby Britain agreed to turn the island over to China in 1997. And Hong Kong prospered for decades under British rule.

But by early 1980s, Hong Kong started experiencing more turbulent times.

International businesses, bankers, and traders were becoming concerned about the Chinese handover that would take place 15 years later.

And when China’s Deng Xiaoping expressed his desire to hit the gas pedal on Hong Kong’s return to China, investors panicked.

Between September 1982 and September 1983, the Hong Kong dollar lost 25% of its value against the US dollar.

Within a week, by early October, it had lost another 15% of its value. And it continued losing ground by the day.

The currency was in free-fall. So in mid-October 1983, the Hong Kong government stabilized the currency by fixing the exchange rate to the US dollar.

It has remained that way for the past 36 years.

This ‘pegged’ exchange rate provided a lot of benefit to Hong Kong back then, helping cement its status as an international financial center.

And I’ve been writing about this for years: the pegged exchange rate means that the Hong Kong dollar has all the benefits of the US dollar, without any of the baggage.

The US dollar has international recognition and stability. Hong Kong’s currency is pegged to the US dollar, so it shares those benefits too.

But while the United States is drowning in debt with $50+ trillion in unfunded pension liabilities, Hong Kong has massive financial reserves, positive cash flow, and a healthy current account surplus.

For the past months we’ve watched Hong Kong’s most dramatic political turmoil in decades.

Millions of people have protested, and it’s becoming a full-blown revolution.

Just this morning the Chinese government asserted its right to declare a state of emergency– pretext for sending armed troops into Hong Kong to quell rebellion.

Does this mean Hong Kong’s pegged exchange rate is finished?

Throughout financial history there are a examples of central banks that tried, and failed, to maintain a pegged exchange rate.

The most notorious example is the UK in the 1990s, which had pegged the British pound to the German Deutsche Mark at minimum level of 2.773.

The market did not believe that Britain could maintain the peg. And they were right.

In 1992, a group of speculators (including George Soros) bet so heavily against the British pound that the central bank spent all of its cash reserves defending the exchange rate.

With an insolvent central bank, the British government finally capitulated and devalued the pound.

In the case of Hong Kong today, though, that scenario is highly unlikely.

Hong Kong’s Monetary Authority (HKMA) has an absurd amount of firepower to maintain the exchange rate indefinitely.

HKMA is, by far, one of the most well-capitalized central banks in the world.  For every Hong Kong dollar in circulation, the HKMA has TWO dollars of foreign currency in reserve.

In other words, the HKMA could fend off speculators and defend the pegged exchange rate to the very last Hong Kong dollar… and STILL have hundreds of billions of dollars left over.

And HKMA will still have those cash reserves even in a nightmare scenario where Chinese tanks and millions of people are in the streets.

This is a political issue. A MAJOR political issue. But it’s not a financial one.

It’s also important to remember that Hong Kong’s pegged exchange rate has survived plenty of apocalyptic events before.

There was the Asian Financial Crisis in 1997, the dot-com crash in 2000, the Global Financial Crisis in 2008, plus plenty of other non-financial crises like swine flu, bird flu, and, of course, the handover to the Chinese.

The peg has always survived.

But here’s a VERY critical point: just because the HKMA is ABLE to maintain the peg, and just because they have done so for decades, doesn’t mean they will continue to do so.

At the end of the day, Hong Kong’s pegged exchange rate needs to make sense for Hong Kong. And for China.

It’s becoming more clear that this is no longer the case.

Back in the 1980s, the US was Hong Kong’s primary trading partner. Having a dollar peg was incredibly convenient.

It was also a convenience for mainland China, because the peg gave Chinese businesses (through their Hong Kong subsidiaries) easy access to foreign markets and US dollars.

Today those things are no longer necessary.

Hong Kong is now a first-world economy that no longer requires US economic support.

Hong Kong’s primary trading partner today is China, not the US. And China has so much economic power that its businesses don’t need US dollar convertibility through Hong Kong.

The biggest issue is that maintaining the peg requires Hong Kong to mirror US interest rate policy, essentially sacrificing part of its economic sovereignty.

That’s something that definitely doesn’t make sense, for Hong Kong, OR for China– especially with a trade war looming.

It’s worth noting that HKMA’s CEO, Norman Chan, a long-time defender of the currency peg, is retiring this month.

And it remains to be seen whether his successor will share the same enthusiasm to spend hundreds of billions of dollars maintaining a peg that might not make sense anymore.

Bottom line– Hong Kong will unlikely be ‘bullied’ by speculators into dropping its currency peg.

But it’s entirely possible they may choose to willingly do so… simply because the US dollar peg doesn’t make as much sense as it did in 1983.

So if you’re holding Hong Kong dollars, please do bear this possibility in mind.

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Welcome to our Friday roll up, where we highlight the most interesting, absurd, and concerning stories we are following this week.

Local tax collector ruins children’s entrepreneurship event

Every summer, a Utah non-profit agency called the Libertas Institute holds an entrepreneurship event for children.

It’s a wonderful idea– children as young as 5 gather together in a marketplace to buy and sell products and services that they’ve created to one another.

And parents are strongly encouraged to step back and let their kids be in charge– advertise, negotiate, count money, and make the sale. So it really is children doing business with other children. Obviously no one is getting rich from this; the larger point is to start cultivating the desire within the next generation to build and grow their own companies.

The Libertas Institute held one such event at Spanish Fork, Utah a few weeks ago on August 7. And for the first time since they’ve been holding these, the local tax collectors showed up, demanding that the kids pay city sales tax on the day’s transactions.

Moreover, the tax collectors insisted that even kids who didn’t make a single sale that day should still file tax forms with the state government.

Click here for the full story.

San Francisco continues reinventing the English language

The City of San Francisco is back at it. A few weeks ago we told you they were ‘gender neutralizing’ the English language, changing words like “manhole” into “maintenance hole”.

They’re terrified that someone might be offended by words like “manhole”, so they’ve cleansed the dictionary and demanded that all city workers and agencies begin using the new gender-neutral language.

Now they’re extending their sensitivities to even more groups.

The word “felon” will henceforth be replaced with “justice involved person”. Because we’d hate for felons to be offended.

And a convict going back to prison will now be a “returning resident.”

I can’t even imagine how that will sound in a courtroom: “That justice involved person is going to be a returning resident!”

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Cop tries to shoot innocent teenager, misses, and hits another innocent bystander

On the morning of February 10, 2015, a cop saw a group of teenagers a few blocks from their school. One of them was holding a toy gun– the kind with a giant, bright orange tip on it..

So without any warning, or any request to drop the weapon, he shot at the kid with the toy gun.

But the bullet missed the intended target, and instead hit another one of the teenagers.

Despite this appalling blunder, the cop handcuffed and detained the students for five hours– probably in a desperate attempt to try to find something to pin on them to take the focus off the fact that he just shot an innocent, unarmed kid.

The student that was accidentally shot has tried to sue the police officer.

But a federal appeals court has just thrown out the case, ruling that the police officer ha ‘qualified immunity’.

In other words, the cop cannot be sued for something he did in the performance of his official duties… even when his official duties involved shooting at a bunch of teenagers with no warning.

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Got Milk? You’re a rapist.

Humans have been herding and breeding livestock for their milk for about 10,000 years.

That likely played a huge role in developing an advanced human society.

But we are now such an advanced species that proponents of feminist theory now claim artificial insemination of cows is rape, and milking them is sexual abuse.

In a paper called “Readying the Rape Rack: Feminism and the Exploitation of Non-Human Reproductive Systems,” one such enlightened thinker argues that feminists need to incorporate non-humans females into their movement.

And the paper demands that women should challenge the “outdated stereotype about women being caretakers and most importantly child-bearers [which] remains consistent in the dairy industry.”

Sounds like comparing dairy farming to rape might be insensitive to actual rape victims… But what do I know, I’m just a patriarchal oppressor.

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Cop and Paramedic assault a 76-year old man trying to help

A self-described frail 76-year-old man, Freddie Judd, heard his friend’s store was burning down.

So Judd drove to the scene and saw firefighters struggling to open the main door to the store.

Judd went up to an officer to try to give her the keys to the front door.

According to court documents, the officer then threw Judd to the ground and handcuffed him, at which point a nearby paramedic came over to help beat him.

Judd did not resist, but he was still beaten, and sustained a broken elbow.

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In 1978, a scruffy-looking Frenchman named Patrick Hernandez signed his first-ever recording contract.

He had spent the better part of the previous decade touring ballrooms in France, backing b-class singers without any real success to show for himself.

But in late 1978, he released his very first single, “Born to Be Alive.”

The song was an instant hit. It hit the number 1 spot in France, and within a few months, sold over a million copies in the US alone.

And Hernandez became a sensation. By the end of 1979, he had amassed fifty-two gold and platinum record awards from more than fifty countries.

Just like that, he was set for life.

And 30 years later that same single still earns him around 1,200 euros per day…roughly 438,000 euros per year.

Even his official music video has over 100 million views on Youtube – the envy of most professional YouTubers.

Imagine getting paid hundreds of thousands of dollars per year for something you created over thirty years ago!

It’s rare, but it’s possible… and one of the best ways to do it is with royalties.

Royalties are cash payments you receive from assets you’ve created or own. Millions of people worldwide earn royalties every year – on assets as diverse as books, songs and movies– but also from lesser-known sources like oil wells, gold mines or real estate.

Royalties are an all-time favorite of investors around the world – including Warren Buffett.

That’s because once you own the asset, all you’ve got to do is collect your cash every month or quarter.

I personally love royalties. To me, they are real assets – and generate income no matter what’s happening in the economy.

In times of inflation, the value of your asset goes up, protecting your savings.

In a deflationary period, the cash that the asset produces becomes even more valuable.

And the cash flow can be incredible…

Imagine owning a piece of the song “Yesterday”, written by Paul McCartney for the Beatles in 1965.

Over the past 54 years, the song’s earned its owner (ATV publishing) over $30 million… just from this one song alone.

But thanks to technology, you no longer have to be a rockstar to invest like one.

Platforms like RoyaltyExchange.com offer retail investors the opportunity to invest in songs by artists like Drake, Eurythmics and Barry White.

That’s because artists are often asset-rich but cash-poor… so they sell a part of their assets to raise a large sum of money for a new venture.

Royalties aren’t just limited to music by the way. You may be familiar with royalties on books, tv shows, films, photographs, patents, designs, etc.

But they’re also very popular with natural resource investors.

For example, oil wells typically pay royalties to the companies or investors that funded their original drilling and exploration.

The same is true in the gold mining industry. In fact, one of the most popular investments in the gold industry is a company called Franco-Nevada Corporation.

Franco-Nevada provides upfront working capital to mining companies in exchange for a portion of the mine’s production– at a contractually bound price.

That means they generate consistent royalty income on the gold mined out of the ground by other mining companies.

And while the stock prices of most major gold miners have gone nowhere for the past five years, Franco-Nevada shares have more than doubled over the same time frame.

Now, I’m not formally recommending Franco-Nevada stock. The idea I want to get across is that royalties can be a fantastic asset to own.

And in a world of ultra-low interest rates, acquiring assets that pay you 9-13% per year potentially for life could be one of the best investment decisions you make.

If you are already a member of our flagship international diversification service, Sovereign Man: Confidential you can learn more about this lucrative strategy in our in-depth report on the topic.

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Every morning here in Puerto Rico, I wake up around 6am as the sun rises over the ocean in front of my house. And I pretty much head straight to the gym.

Once there, one of my favorite medieval torture devices is a fairly new exercise bike called a Peloton.

In case you haven’t used one before, a Peloton is like any other stationary exercise bike. You pedal a lot, and it sucks.

The key difference is that Peloton bikes are connected to the Internet, and the company live streams classes directly to the integrated monitor on your bike.

So instead of going to a spinning class, you can simulate being in a class and having someone yell at you from thousands of miles away.

You might be thinking– can’t you get the same experience on a regular stationary bike while watching some YouTube videos?

Why yes, that would pretty much be the same experience.

But Peloton prides itself on building wellness, connectedness, and happiness– all the ‘ness’s’ that Millennials love. So it’s pretty popular.

And following in the footsteps of WeWork, Peloton formally filed paperwork yesterday to go public on the NASDAQ under ticker symbol PTON.

The company anticipates a share price that will value the company at roughly $8 billion.

Yet according to its filing, the company lost $195 million in the fiscal year ending June 30, 2019. That’s four times worse than the company’s $48 million loss in Fiscal Year 2018.

It’s normal for early-stage businesses to lose money at first. Rome wasn’t built in a day. But usually management can provide guidance about the light at the end of the tunnel.

Not Peloton.

Just like WeWork, Peloton expects to continue losing money for the foreseeable future, and acknowledges that they may never achieve profitability.

Peloton also provides the most absurd statements as its company mission. Just like how WeWork aims to ‘elevate the world’s consciousness’, Peloton claims that it “sells happiness”.

It’s SEC filing also contains a bunch of fluffy graphics showing off their diversity, community, and interconnectedness.

Then they go on and on talking about how they’re a technology company because they live-stream cycling classes.

After that comes Peloton’s financial statements… their awful, gruesome financial statements… that show no path to profitability.

And then the fine print: it turns out that, just like WeWork, Peloton is selling a different class of shares that come with limited voting rights.

Specifically, the founders and key insiders will have TWENTY TIMES the voting power as new investors who will own shares post-IPO.

It’s worth mentioning that these same founders and key insiders have handsomely rewarded themselves at shareholder expense.

Despite quadrupling losses in Fiscal Year 2019, founder/CEO John Foley paid himself a whopping $21 million in total compensation. That’s more money than the CEOs of Ford, Home Depot, and Cisco (an ACTUAL tech company) to name a few.

Peloton’s President/COO received another $21 million. And the company CFO earned nearly $11 million.

So, Peloton, while pretending to be a technology company, lost $195 million last year, yet paid its top three executives more than $50 million (up from $17.9 million in Fiscal Year 2018).

Those same executives have no plan to turn a profit. Yet they expect to sell shares to investors at an $8 billion valuation… while simultaneously limiting those investors’ voting rights.

I know what you’re thinking: SIGN ME UP!!

Seriously, this absurdity has become almost formulaic now. We’ve seen it over and over again. So anyone out there who wants to become a billionaire, just follow these simple steps:

Step 1: Find a product that people love… then make a slightly better version of it, and price it WAY BELOW your cost so that you lose money on every unit sold.

Step 2: Create a ridiculous mission statement. It doesn’t matter what you’re selling– your real mission is things like consciousness, happiness, and community. And use the word ‘technology’ a lot. No matter what you’re producing, always pretend that you’re a tech company.

Step 3: Raise money from investors at an obscene valuation on the basis that you’re a visionary tech company. Don’t bother forecasting profits and creating conservative pro-forma statements, from which investors can derive a sensible valuation of your business. Instead, let the investors imagine how profitable your company can eventually become.

Step 4: At a minimum, double your losses every year. And, as you continue to burn through investor capital, raise even more money at progressively higher valuations.

Step 5: At the peak of the stock market bubble, take your company public at twice your last valuation.  Reward these gullible investors with limited voting rights, and consolidate your power over the company as you steer it towards greater and greater losses while showering yourself with gigantic compensation packages.

Congratulations. You’re now a billionaire.

In some respects I have to hand it to these Peloton guys.

They’re selling a product that (a) is prone to intense competition over very fickle and fad-oriented consumers; and (b) few people will buy in a recession.

They probably recognize that there are multiple recession threats looming (which could easily threaten the entire company). And they can see that the stock market is still at its peak.

So what better time to cash in on peak investor insanity than right now? Get in before the market declines, before the recession hits. Their timing couldn’t be better.

Yet amazingly enough, this is what passes as an actual investment these days.

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