An excellent way to protect your US Dollar holdings

Last week we saw how quickly a currency crisis can destroy someone’s savings.

In just one week, the value of the Turkish Lira plummeted over 30% after the US imposed sanctions against Turkey.

So anyone holding all of their savings in Turkish Lira got hammered.

This was an unfortunate reminder of the importance of a Plan B – an insurance plan to make sure your wealth and your family are safe no matter what happens around the world.

So often, people concentrate their risk in a single country or jurisdiction… their job is there, their home, their savings and investments…

And if something goes wrong in that one country, you’re completely exposed.

That’s why I routinely write about the steps you can take to implement a solid Plan B – things like a second residency or citizenship, an offshore bank account and various, offshore tax structures.

Today I want to discuss another, simple step you can take to fortify your Plan B: diversifying currencies.

Last week, we saw the Turkish Lira lose one-third of its value in a matter of days.

Turkey is considered a ‘developing market’, so its currency is a lot more volatile than larger, wealthier nations of like the US, China, and the eurozone.

But even the largest economies in the world can see major swings in their currencies.

In the summer and early fall of 2016, for example, the British pound lost nearly 20% of its value after the Brexit vote.

And back in 1992, the British pound lost 10% of its value in a week when speculators bet that the Bank of England couldn’t maintain its exchange rate target.

So, wild fluctuations are possible with -any- currency. Even the major ones.

The lesson from Turkey is clear: if you’re concentrated in a single currency, it’s possible for your savings to lose a LOT of value if there’s a sudden catastrophe.

One long-standing alternative to paper currencies is to own gold and silver– which have continued to have value for thousands of years.

(For more on how you should hold gold, you can read on here…)

But you can also choose to hold a portion of your savings in different currencies.

Consider the Hong Kong Dollar, for example.

The Hong Kong dollar has been pegged to the US dollar since 1983, and remains within a very tight range of between 7.75 and 7.85 Hong Kong dollars per US dollar.

So as the US dollar moves up and down against other currencies, so does the Hong Kong dollar.

Essentially the two currencies are completely interchangeable.

But here’s the bonus: the Hong Kong Monetary Authority is incredibly well capitalized.

In other words, Hong Kong’s central bank has vast cash reserves that it’s able to deploy in case of crisis.

In fact it’s one of the ONLY central banks in the world to have such a substantial reserve fund.

And if that weren’t enough, the Hong Kong government (which is separate from the central bank) also has its own substantial cash reserves. It too consistently runs a budget surplus.

So think about it like this– because of the pegged exchange rate, holding Hong Kong dollars is VERY similar to holding US dollars.

Hong Kong dollars have all of the upside and stability of owning US dollars. But none of the downside.

With US dollars, the government is broke with a $21+ trillion debt and trillion dollar budget deficits. Social Security is totally underfunded. The highway infrastructure fund is insolvent. The central bank is barely solvent.

So if you hold US dollars, you are assuming all of those long-term risks.

Holding Hong Kong dollars eliminates those risks; your ‘counterparty’ is now the Hong Kong Monetary Authority and HK government, both of which are in fantastic financial condition.

In investing terms, holding Hong Kong dollars is like having a free ‘put option’ on the US dollar, because if the US dollar ever ran into problems, Hong Kong would likely de-peg its currency and let it appreciate freely against the USD.

Now, every few years there always seems to be a bunch of fear and worry about the Hong Kong dollar.

Back in the 1990s people panicked that the Chinese takeover would put an end to Hong Kong’s financial stability.

Then the flue pandemic in 2009 caused a big decline in the Hong Kong dollar as well.

Today there are a lot of investors worried about the Hong Kong dollar once again, primarily due to problems in China.

Those concerns are always overblown.

With a cash reserve of $440 billion, the Hong Kong Monetary Authority has so much ammunition to defend its currency they could literally purchase every single Hong Kong dollar in circulation, and still have billions left over.

This is one of the healthiest central banks and governments in the world.

And that makes it a very sensible option to consider in your own Plan B.

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097:

It’s been a hell of a week here in the Italian countryside. I’ve been treating my team and some friends to a sort of mini-vacation at a 400-year old wine and olive estate that we’ve taken over.

The views, the food, the wine, the company… it’s all incredible. Each night about two dozen of us dine outside under a canopy of grape vines, and the conversations are so stimulating that the dinners often last for 7 or 8 hours.

Being in Italy, though, it’s hard to not notice the obvious deterioration of this beautiful country.

Italy was the world’s superpower TWO times in its history– first during the time of the ancient Romans, and second during the early Renaissance when city-states like Venice and Florence became the dominant economies of Europe.

Each time they screwed it up.

Too much wasteful spending, too much debt, too many regulations, too many wars, too much debasement of the currency.

It doesn’t matter how strong your country or empire is. If enough time goes by with those destructive forces at play, the country weakens and loses its power. It’s inevitable.

No country in history has ever been able to indefinitely indebt itself, overspend, wage endless wars, etc. without consequence. And it would be foolish to think that this time is any different.

We’re seeing precisely those trends all over the world today, especially in the west.

And to boot, at least here in Europe, nearly the entire continent is suffering from multiple crises at the same time.

Place like Italy, Greece, etc. are dealing with the constant threat of their looming debt crisis.

But they also have failing banking systems with the need for constant bailouts.

They’re dealing with a fertility crisis and shrinking populations. Frequent political crisis (as we saw here in Italy just a few months ago). Pension crisis. Immigration and refugee crisis.

What could possibly go wrong?

There are a few bright spots on the continent. But I think Europe is in pretty bad shape for the long-term.

We cover this in today’s podcast… and speaking of crisis, we manage to work in some discussion about Elon Musk’s latest drama, plus round out the podcast with a quick summary of this year’s amazing entrepreneurship camp that we just finished last week.

You can download the episode here.

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The world’s greatest investor is running out of things to buy

It was late October, 1989.

East Germany was disintegrating, and the Berlin Wall was days away from coming down.

The Soviet Union was just starting to fall apart.

George H. W. Bush (the elder) was President of the United States.

And the #1 movie in the world was John Travolta’s Look Who’s Talking.

It was during that month that the US stock market, as measured by the S&P 500 index, began a decline that would last for roughly 12 months.

The stock market finally reached its lowest point the following year, on October 11, 1990, when the S&P closed at 295.46.

It would never see a level that low ever again.

Starting the following day, the S&P 500 began a historic rise that would persist for nearly a decade– a total of 3,452 days.

In financial parlance this is known as a bull market, when stocks and other asset prices generally rise for years at a time.

Prior to 1989, the average US bull market only lasted about 46 months– 1402 days.

And the longest on record was the bull market of the late 1970s that lasted 2,274 days, about 6.25 years.

So the 1990s bull market (which ended on March 24, 2000) completely shattered the previous record by more than 50%.

Now, you may recall the 1990s– there were a lot of game-changing events that drove stock prices ever higher.

The fall of the Soviet Union was tremendously important in creating greater stability in the world and vastly expanding lucrative global trade.

China underwent a series of MAJOR economic reforms that rocket-propelled the economy into a huge profit center for US companies.

And of course, the Internet became a worldwide sensation.

On the backs of these trends (plus a gift of relatively low interest rates by the Federal Reserve) the US stock market became the envy of the world.

It all ended in 2000 after the dot-com crash.

Stocks sputtered for a few years, started to rise a bit, then crashed again in late 2008 at the onset of the Global Financial Crisis.

The market finally bottomed out on March 9, 2009 when the S&P 500 hit the ominous level of 666.

And for the past decade, the market has been moving ever higher– up a total of 325% since then.

So far this current bull market has run an unbelievable 3,446 days, which means it’s just ONE WEEK away from officially becoming the LONGEST BULL MARKET IN HISTORY.

One thing we know for certain is that all markets move in cycles.

There are always ups and downs, booms and busts. Tough times ALWAYS follow the good.

And, at 3,446 days… within a week of the all-time record… this bull market is clearly VERY late in its cycle.

The nature of this particular bull market is also quite peculiar.

Unlike the 1990s, there are no game-changing geopolitical or technological trends underpinning this bull market.

Instead, the key driver of higher asset prices has been 10 years worth of nearly 0% interest rates, giving EVERYONE the ability to borrow cheaply.

This has driven real estate prices to all-time highs, in many cases to absolutely absurd levels.

Bond markets are still near all-time highs.

Companies like Netflix and Tesla which lose money and rapidly burn through their investors’ capital have no problems borrowing billions of dollars.

And there are still trillions of dollars worth of bonds out there with NEGATIVE yields. It’s ridiculous.

Many stock markets around the world are at/near all-time highs as well, with investors paying record high valuations for their shares.

This means that, in many cases, investors have literally never paid a higher price for every dollar of a company’s revenue, earnings, and assets.

And the shares of nearly every well-managed, high quality business have been bid up to mind-blowing levels.

Legendary investor Warren Buffett seems to have thrown up his hands with the ridiculousness of this market.

I’ve written before that Buffett has stockpiled $110 billion. But there’s nowhere for him to invest it.

Bargains are so scarce, in fact, that Buffett is going to resort to buying back shares of his own company, Berkshire Hathaway.

This is a pretty big deal.

Buffett has had a longstanding policy that he would not use company funds for stock buybacks unless the share price became materially undervalued.

But Buffett hasn’t made a major acquisition in more than two years; asset prices are simply too expensive, and he’s too seasoned to overpay for investments.

So, a bit anxious to deploy their massive pile of capital, Berkshire Hathaway’s board changed its policy on share buybacks.

Buffett now has far more latitude to use the company’s money to buy back its own stock.

It’s a subtle change, but the implications are clear:

Buffett has few places to invest his $110 billion cash pile. So he wants the freedom to buy more Berkshire stock (an asset he is intimately familiar with and which he controls).

Said another way, Buffett has so much cash that he had to break his own, longstanding rule in order to safely deploy capital.

It’s interesting that, while all of this is happening, small investors are piling into the stock market en masse.

The CEO of TD Ameritrade (one of the largest stock brokerages in the world) stated earlier this year that “[t]here is an enormous amount of new retail money coming into the market. . .”

Other brokerages like eTrade and Schwab have seen similar trends.

So while small, individual investors are piling in, Buffett is standing pat… and resorting to buying back his own stock just to have a safe place to deploy some capital.

No one knows how much longer this historic bull market going to last. Or what’s going to end it.

But it’s safe to say that there are fewer days ahead of us than behind us.

And, in times like these, it might make more sense being prudent than being greedy.

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These people lost one-third of their savings in a single week (not in crypto)

Let me say up front– I know I’ve been a bit quiet lately.

It happens every year around this time when I hold the annual Liberty and Entrepreneurship Camp that I’ve been sponsoring for the past nine years.

The event is incredible: I bring in top entrepreneurs and business executives, plus students from all over the world– places like Ivory Coast, Brazil, Singapore, Russia and the United States.

It’s five days of mentorship that seemingly goes round-the-clock. It’s exhilarating… but exhausting.  And the Notes from the Field schedule always suffers as a result.

I’ll tell you more about the event later this week.  But in the meantime, I thought it was more pressing to talk about the unbelievable situation currently unfolding in Turkey… because it’s pretty extraordinary what’s happening right now.

As you may know, Turkey has imprisoned a US pastor named Andrew Brunson for alleged terrorism and espionage.

Obviously the US government wants him back. So Uncle Sam has slammed Turkey with economic sanctions.

Turkey’s economy was already wobbly before the sanctions. The country is suffering the effects of debilitating debt and persistent recession.

Now the economy is getting absolutely destroyed.

Turkey’s currency, the lira, is down some 45% this year. Just yesterday the lira was down a whopping 7%.

If you don’t speculate in currencies very much, a 7% move in a single day is basically unprecedented. It almost never happens. So this is a pretty big deal.

And over the past week, the currency was down as much as 35%.

Think of it this way: in just one week, the savings of the Turkish people lost over one-third of its value.  

I often write about the overwhelming amount of debt in the economy today and the negative effects it can have on currencies.

And Turkey is an important reminder of the consequences: In a matter of days, a third of your savings can vanish.

Bottom line: things like this CAN and DO happen.

This is why I write so much about the importance of having a Plan B. If you have 100% of your assets and 100% of your income domiciled in a single country, you’re taking on a lot of risk.

Think about it– even the most diligent savers and investors in Turkey who have been responsibly socking away plenty of money and investing in safe, quality businesses, are being nearly wiped out as a result of this crisis…

… because they didn’t diversify.

Leaving all of their assets in Turkey means that, if something happens to Turkey, they’re in for a LOT of pain… no matter how safe their local investments might have been.

This is a critical lesson to learn. It always makes sense to diversify some of your assets and income abroad to safer, more stable countries—ESPECIALLY if your home country is drowning in debt.

It’s a simple idea when you think about it: don’t keep 100% of your livelihood in a bankrupt country.

 Yet this concept of international diversification often defies human nature.

We tend to focus on our own backyards and are often indoctrinated with a sense that anything outside of our home country is garbage… or inherently risky.

Obviously this is completely ridiculous.

The world is a big place full of lucrative opportunities and sensible safe-havens. And it’s easier than ever to explore the available options.

You can acquire physical gold and store it overseas, for example, without leaving your living room. (And this can be a GREAT insurance policy against potential problems with your home country’s currency.)

You can invest in safe, highly-profitable foreign businesses denominated in foreign currencies with a few mouse clicks.

Smart, sophisticated people have been diversifying abroad for literally thousands of years.

Today, thanks to modern technology, it’s never been easier to take advantage of these options.

But even still, there’s nothing more important than taking action. Because by the time a major crisis occurs, like we’re seeing in Turkey today, it will be too late.

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Introducing the Sovereign Man Global Passport Ranking

For the remainder of this week and through the weekend, I’m in Trakai, Lituania – just outside the capital of Vilnius – for our 9th annual Blacksmith Liberty & Entrepreneurship Camp.

Each summer, I host 60+ students from around the world in this picturesque setting.

But these aren’t your normal “students.” These are entrepreneurs.

Some have already started businesses and are seeking the next step in their professional development. Others are still in the early stages of exploring different business ideas.

Regardless of where our students fall on the spectrum, this experience is a valuable experience that they won’t get anywhere else. These four days are far from a traditional Entrepreneurship (Theory) 101 college course.

Instead, it’s an immersive experience that teaches practical business skills (i.e. how to start a business, how to execute a business plan, how to raise funds and wisely invest capital, etc.). My goal this year is to deliver an executive-MBA-style education in the three days we have.

And the instructors aren’t college professors who have never left the classroom, but some of my friends and colleagues who’ve built incredibly successful businesses.

This year, we have students from USA, Brazil, Australia, Mali, Colombia, Netherlands etc.

For some students, getting here to Lithuania was simple: 1) Buy a ticket and 2) Get on a plane.

Others had to endure the bureaucratic pain and wait time to obtain a travel visa… based solely on the fact that their home country doesn’t play nice with Lithuania.

It’s amazing that our birthplace has so much impact on our lives.

But fortunately, your birth country doesn’t have to forever dictate the terms. A little planning and action can expand your options for living, conducting business, investing and travel.

I’m talking about a second passport.

Already this week, I’ve highlighted how to get a Brazilian passport and how to get a Uruguayan passport. These are citizenship by naturalization paths, which means after spending time in the country, you’re eligible for a second passport. You can also get a nearly free second passport if you have Irish or Italian ancestors. Or you can invest in – or donate to – a country like St. Kitts in exchange for a passport.

Today, I want to discuss the quality of passports in general.

You may have seen some of these traditional passport rankings published by immigration attorneys and businesses offering related services. They typically just count each passport’s number of visa-free countries it allows to produce their ranking.

The analysis stops there.

This traditional method is flawed – it doesn’t account for the “quality” of the accessible countries.

For example, let’s imagine that passport A gives visa-free access to just two countries in the world – France and China. And passport B also provides access to only two countries – Tuvalu and Comoros.

If you assess the quality of both passports the traditional way – by counting the number of countries – then both passports equally provide visa-free access to two nations.

But clearly, the passport B holder is getting more value. I would certainly rather have visa-free access to France and China than Comoros and Tuvalu.

So, to fix this shortcoming in passport rankings, my team came up with a solution.

We assigned each country an “attractiveness” score, based on: 1) Its number of international arrivals (i.e. the world’s collective attractiveness “vote”) and 2) Its Gross Domestic Product.

In terms of “attractiveness”, the US placed first. China and France were second and third, respectively. And in case you’re wondering, Comoros placed near the bottom… and Tuvalu was dead last.

Then, using each country’s attractiveness score, we referenced each passport’s number of visa-free countries it allows. The sum for each country produced a ranking of 193 passports.

Even though the US was the most “attractive” country according to our data, it didn’t take the top passport spot. In fact, the US passport didn’t crack the top 25… while a European microstate placed third and a South American country was sixth.

Discover how your country’s passport ranks here.

(You’ll also see each passport’s access to the world’s GDP, surface area, population and United Nations Educational, Scientific and Cultural Organization (UNESCO) Heritage sites of cultural or natural significance. These factors didn’t affect the ranking and are just additional, useful information.)

We believe that this ranking is the most accurate measure of a passport’s travel value.

Remember, additional travel opportunities are just one benefit of a second passport.

If 100% of your life – your business, your investments, your assets – are based in one country, you’re taking on tremendous sovereign risk. You could lose all that you’ve worked so hard for… and even lose your freedom.

But with a second passport – a Plan B – you have a hedge.

A Plan B is an insurance policy – one that ensures that you’re in a position of strength. Even if you never need to use it, you won’t be any worse off.

And if you do need it, you’ll be thankful for your planning and decisive action.

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How to get a second passport in a South American beach paradise

Yesterday, I shared how you can get a Brazilian passport for your entire family by having a baby within the country’s borders.

Today, we’ll continue our discussion of building a proper Plan B. Again, a Plan B is simply an insurance policy.

So many people have the vast majority of their assets in their home country. But that puts you and your assets at tremendous risk.

If anything goes wrong in your home country, you could lose your assets and maybe even your freedom.

But by building your personal, Plan B, you can make sure you’re in a position of strength no matter what happens. And, even if nothing happens, which is what we all hope for, you won’t be any worse off.

One of the ultimate aspects of a Plan B is a second passport. And today, I’ll tell you how you can get a passport in a wealthy, beach paradise…

Punta del Este, Uruguay is a summertime playground for wealthy Europeans and South Americans (especially Argentines).

I lived in Punta a few years back… there’s no doubt it’s an idyllic beach town. And while I’m writing you today to explain how you can get a second passport from Uruguay, let me share a bit more about Punta, its economy and culture.

Punta is located about 100 miles east of Montevideo, Uruguay’s capital.

As you can see in the photo below, it has a modern skyline dotted with high-rises. The beaches, of course, are first-class.

The city’s permanent population is about 100,000 people. But during the high season – mid-December until March – the population quadruples. (Remember that Southern hemisphere’s seasons are inverted.)

During the season, Punta is a never-ending party, bustling with exciting nightlife and a first-class restaurant scene. On the off season, for comparison, most of the restaurants are closed and the government will even shut off stoplights to save money.

A house that rents for $1,500 per month in the off season jumps to $10,000 per month in January.

(If you want to experience Punta yourself but don’t want to spend a fortune, early December and March are the best time to visit – the weather is still great, and the prices are reasonable.)

But outside of Punta, Uruguay is rural.

Even in Montevideo, you’re more likely to see a horse carriage than a Porsche. In fact, there are almost four times more cattle in Uruguay than there are people. No other country comes close to this “cows to people” ratio.

But Uruguay is a paradise for the right person and has attracted many expats to its shores.

The Uruguayan culture – together with Argentina and southern Brazil – has a strong Southern European feel.

Also, the unique combination of its laid-back atmosphere, good weather, rich culture, fantastic beaches, and great food – Uruguay is a carnivore’s dream – creates an atmosphere that you may want to enjoy for the rest of your life.

However, lately, I’ve heard rumblings that obtaining a legal residency in Uruguay has become complicated and getting a second passport there is almost impossible.

One of our own Sovereign Man: Confidential subscribers spent several years in Uruguay, applied for naturalization and was denied.

But we still get loads of questions from readers about our current opinion of Uruguay for residency and citizenship.

After talking to our legal contact on the ground and several people who successfully went through the process, the verdict is clear: Obtaining a second passport from Uruguay is still very doable, you just need to follow few simple rules.

You start with obtaining a residency. For that, you don’t need to invest in the country or buy expensive property. You just need to prove that you can support yourself.

My contact on the ground tells us that showing $1,500 per month in income is usually enough. For a family of four, she advises demonstrating around $5,000 per month.

(That’s higher than similar financial requirements in Chile and Argentina. For a family of four, Chile wants to see around $3,000 in monthly income. And Argentina will be satisfied with just $1,000 a month.)

You can combine any kind of income, including your rental income, pension, social security payments, dividends, and even your location-independent income coming from your online business or freelance activities.

After spending the required number of years in a country, you will become eligible to file for naturalization in Uruguay. Uruguay is unique in its approach, as it differentiates between married and single applicants. If you are single, you can apply for naturalization after five years as a resident, and if you are married three years is enough.

But for your naturalization application to be approved, the government wants to see your successful integration into Uruguayan society.

Getting a local job or starting a business and paying taxes is a big step. Putting your kids in one of the Uruguayan schools works, too. So does a local gym membership, church and doctor’s office.

Frankly, if you live in Uruguay full time, or at least spend significant time there, you’ll integrate naturally as you settle in.

The unlucky subscriber I mentioned above spent enough time for naturalization, but during this time, his family didn’t integrate.

They didn’t interact with the locals. Instead of going to the gym, they jogged in the park. They didn’t sign up for any social activities. They homeschooled their children. In short, there weren’t many visible and provable ties to their community.

Uruguayan officials deemed the family’s integration insufficient and denied their citizenship application.

But, this same thing doesn’t have to happen to you. Use this unfortunate example to your advantage. Because if you follow a few simple rules, you will get a second passport from Uruguay.

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Have a baby in this country and get a passport within 2 years

I’ve been talking a lot about economic and market risks in Notes lately.

But there’s a potentially even larger risk that you’re completely ignoring today.

If you live, work, invest, own a business, bank or hold assets in a single country, you’re putting all of your eggs in one basket.

You’re making a very large bet that everything will be alright in that one country – forever.

It would only take one bout of political turmoil, a natural disaster or a tanking economy for you to potentially lose your money and your assets… maybe even your freedom.

And that’s why I regularly discuss the benefits of having a solid Plan B.

A Plan B is simply a personalized insurance policy that increases your freedom, protects your hard-won assets, helps you make money and ensures that you are in a position of strength no matter what happens (or doesn’t happen) next.

And having a second residency or, preferably, citizenship is a cornerstone of any successful Plan B.

There are a number of ways to get a second citizenship.

If you have ancestors from countries like Ireland or Italy, you potentially get a second passport for free. Or you can pay to get an economic passport from countries like St. Kitts of Malta. There are also countries where you can naturalize over a certain number of years and earn a passport.

But, today I want to share another way to get a second passport…

In Sovereign Man: Confidential, our premium intelligence, we recently interviewed a young Pakistani couple who obtained Brazilian citizenship and passports for their entire family. They did so by having a baby in beautiful Florianópolis, on the country’s southeast coast.

Right on the Atlantic Ocean, tourism is a huge industry for Florianópolis and greater Santa Catarina state. Government officials have an economic incentive to keep the region safe.

Brazil’s violent crime is largely concentrated in Rio de Janeiro and other cities. With a homicide rate of 12.9 per 100,000 people – about half of Rio’s rate – Santa Catarina state is one of the safest areas of Brazil, comparable to the island of Bermuda.

So, with less anxiety for your family’s safety, you can focus on Brazil’s great benefits.

When your child is born in Brazil, there are benefits for your newborn, all your older children and you and your spouse.

First, your child automatically gets Brazilian citizenship.

Second, your other children are immediately eligible for “residency of indefinite term” (i.e. permanent residency), which grants them the right to stay within Brazil indefinitely.

Once your older child has his or her residency card, those 10 years of age or younger at the time of receipt are eligible for provisional naturalization. Within six to nine months of applying for provisional naturalization, your child will receive Brazilian citizenship.

If your child is older than 10 when they receive their residency card, you can submit your child’s citizenship application after you become a Brazilian citizen.

(For comparison, in my adopted country of Chile, children not born there must wait until they are 14 years old to apply for Chilean citizenship… even if their parents gained residency when the child was one-year-old.)

And finally, immediately after your newborn’s birth, you and your spouse have the right to apply for a “residency of indefinite term,” which grants you both the right to stay, live and work within Brazil.

After securing residency, one year later you can apply for citizenship. You’ll need to pass a Portuguese language test, and then wait for a few months for the Brazilian government to process your citizenship application.

So, within two years of having a baby in Brazil, your entire family can have second passports in hand. Certain economic programs would charge hundreds of thousands of dollars for the same result.

Plus, a Brazilian passport is a solid travel document.

Brazilian citizens enjoy visa-free travel to 147 countries, including Europe’s Schengen area – the 26-country free trading and passport-free bloc – and the United Kingdom. This earned Brazil a solid “B+” grade in our 2018 passport ranking. In fact, among South American countries, only Chile and Argentina rank higher on our list.

Brazilian citizenship comes with another benefit: membership in Mercosur – a free trading union of countries, which includes Argentina, Brazil, Paraguay and Uruguay.

Passport holders in these countries can also easily obtain residency and work permits in the other member countries.

Mercosur is not exactly the Schengen area of South America. Schengen is truly borderless. Mercosur’s walls are half way down, but not entirely. You still must apply for residency, work permits, etc. in the other countries. But, the processes are much easier for fellow Mercosur members than for the rest of the world.

Also, easy residency benefits apply to Associate members of Mercosur (Bolivia, Chile, Colombia, Ecuador, Guyana, Peru and Suriname).

At Sovereign Man, we often hesitate to issue superlatives.

But from our research, Brazil is THE BEST country to secure permanent residency and a second citizenship by having a baby.

Again, your citizenship isn’t instant. But, you won’t have to pay $140,000 or more for a second passport (the cost of Antigua & Barbuda’s citizenship by investment program for a couple and two children under 12; the cheapest in the Caribbean).

In my opinion, a second passport is one of the best, lifelong gifts you can give to your children. And they can then pass on this gift to their children and so on… all because of your planning and decisive action.

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Tesla stock soars on news they ‘only’ lost $717 million

Sometimes I feel like I’m living in an alternate universe… it’s like the financial version of the ‘upside down’ from Stranger Things.

Case in point: last night the infamously loss-making electric car maker Tesla announced its quarterly earnings.

As usual, the numbers were gruesome. Tesla’s net loss was TWICE AS BAD as the previous quarter, a record NEGATIVE $717 million. That’s a LOT WORSE than analysts were expecting.

After adjusting for various capital investments, Tesla’s total cash burn for the quarter was MINUS $740 million… which is a bit better than what analysts were expecting. Congratulations.

Oh yeah, and Tesla cult leader CEO Elon Musk mustered an apology to all the analysts he insulted on the previous quarter’s earnings call (where he derided them for asking “boring” and “bonehead” questions).

And now the stock has soared 12%.

Is this really what capitalism has come to?

Companies are richly rewarded for posting record losses that are worse than anyone expected because the grown men who pilot them can refrain from publicly hurling childish insults at financial analysts while managing to ‘only’ burn $740 million of shareholder capital?

Give me a break.

In total, Tesla has burned through $5 billion of its investors’ cash.

And nearly half of the money it has left in the bank is in the form of customer deposits, which are often refundable. So that money’s not even safe.

Most likely Tesla will have to raise billions of dollars over the next few years just to stay afloat.

And yet, despite these losses, and despite the fact that their CEO is sidetracked making flamethrowers, limited-edition Tesla surfboards and promising to solve Flint, Michigan’s water crisis. . .

. . . and despite the fact that he seems more concerned with Twitter spats than running the business (the Wall Street Journal ranked Musk as the second-most active tech CEO on Twitter behind Salesforce.com’s Marc Benioff, with 1,256 tweets this year through mid-July) . . .

. . . shareholders still granted their CEO the largest executive compensation package in the history of the world earlier this year (worth a potential $50 billion). . .

. . . and have now doubled down on their investment, sending the stock price up 12%.

As W.C. Fields once said, “If you can’t dazzle them with brilliance, baffle them with bullshit.”

No doubt Musk is full of both.

(If you want to dispute the latter, please refer to Musk’s tweet in which he called the British cave diver who helped rescue the trapped boys in Thailand a pedophile.)

Now, it may surprise you to hear me say that I appreciate what Musk has done for consumers.

This guy gave a swift kick in the gonads to the entire auto industry, forcing them to reinvent themselves and create more innovative products.

So now all the big manufacturers are getting in on driverless car technology, AI and electric vehicles.

And the cars they produce are more advanced than ever before. This is great for consumers, and most of the credit goes to Elon Musk.

Plus, to be fair, Tesla makes great cars. (Unfortunately they lose money on every single one that they sell…)

I certainly hope the company is able to pull it off. I sincerely do.

I also hope the Dallas Cowboys win the Super Bowl this year. But the odds are slim.

The odds are also stacked heavily against Tesla. They’re rapidly running out of cash at a time when interest rates are rising and competition is stiffening.

They’re no longer the only game in town when it comes to luxury electric vehicles, so they’ll have to contend with Mercedes, BMW, Audi, etc. going forward.

And, let’s be honest, Tesla isn’t exactly the most prudently-managed company in the world.

You can say a lot about Elon Musk’s vision and tenacity. But often the greatest visionaries don’t make the best business executives.

Business is… well, serious business.

Recruiting, training, managing thousands of employees and dealing with intricate details in a complex manufacturing business… these skills don’t always go hand-in-hand with creative genius.

Clearly Elon Musk doesn’t work alone. But there’s been an alarming exodus of top executives who have departed Tesla over the past few years.

(Check out this list compiled by Bloomberg of the dozens of senior execs who have left Tesla since 2016, including Chief Accounting Officer, Chief Financial Officer, President of Global Sales, Director of HR, etc.)

But Musk is undeterred… he’s staying the course.

It reminds me of something Barack Obama once said– “If you’re walking down the right path and you’re willing to keep walking, eventually you’ll make progress.” #DidIjustquoteObama??

Unless, of course, you’re on the wrong path. In which case you’ll eventually lose everything.

Elon seems content to remain on his loss-making, cash-burning path.

Regardless of the consequences, regardless of the feedback that the market is providing.

But we’ll see. Anything’s possible.

In light of such obvious risks, however, it still seems like a sign of pure lunacy.

To wit:

Tesla manufactures electric cars. BMW also manufactures electric cars.

Tesla loses money on every sale and posts record losses. BMW is profitable.

Tesla burns through billions in cash. BMW pays its shareholders a 5% dividend.

Yet with a $50 billion market cap, Tesla is now worth exactly the same as BMW.

Something is wrong with this picture.

But perhaps Elon can convince us otherwise on Twitter.

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Why Japan may spark the next crisis

In a world full of reckless and extreme monetary policy, Japan no doubt takes the cake.

The country has total debt of more than ONE QUADRILLION YEN (around $10 trillion) pushing its debt-to-GDP ratio to a whopping 224% – that puts it ahead of financial basket case Greece, whose debt-to-GDP is around 180%.

Japan spent 24.1% of its total revenue (appx. 23.5 trillion yen) last year servicing its debt – both paying down principal and interest. And that percentage has no doubt moved even higher this year.

And, keep in mind, this isn’t some banana republic. It’s the world’s third-largest economy.

The country’s economy is so screwed up that the Bank of Japan (BOJ), the central bank, has been conjuring trillions of yen out of thin air to buy government debt.

The BOJ printed yen to buy basically all of the $9.5 trillion of government debt outstanding. When it ran out of bonds to buy, BOJ started buying stocks. Now it’s a top 10 shareholder in 40% of Japanese listed companies.

Most recently, the central bank has started “yield-curve control,” which basically means they’ll do whatever it takes to make sure the government doesn’t have to pay more than 0.1% interest.

But something interesting has happened over the past few weeks…

Despite the BOJ’s promise to hold rates and bond yields down, the other owners of Japanese government bonds (JGBs) have been getting nervous. And they’ve been selling.

The selling pressure pushed bond prices down (and, inversely, yields and rates up)… In just under two weeks, yields on 10-year JGBs soared from 0.03% to 0.11% – an 18-month high.

If you own an asset and you don’t think it will perform well, you sell it. And clearly that’s how people feel about Japanese debt. The bonds pay close to zero, after all.

Japan has been fighting deflation for a long time. And with deflation, when the purchasing power of your money increases every year, you may consider holding a bond that pays close to zero… because you’re still maintaining your purchasing power.

But for the past decade or more, Japan has been committed to producing inflation. And now it’s getting inflation of around 1% a year (with a target of 2% annual inflation).

Now, anyone holding JGBs is guaranteed to lose money. And who in their right mind is going to hold an asset that guarantees you’ll lose money?

So people are selling those bonds. And yields are going up as a result.

Yields increasing from 0.03% to 0.11% may not sound like a big deal to you. But think about what it means for Japan…

The country already spends a quarter of its tax revenue just to service the debt. They cannot afford even the tiniest increase in interest rates.

And because bondholders are selling, and rates have been rising, the BOJ has intervened three times in a single week… buying up all the bonds people are selling in a desperate attempt to hold interest rates down.

This is a clear-cut case of BLATANT financial desperation.

And, to be honest, it’s a bit scary.

Japan is already in debt up to its eyeballs… but the BOJ is telling the world that they’re just getting started buying more bonds, no matter what the cost.

It’s crazy when you hear the most powerful economic policy makers in the world’s third-largest economy say that they’re going to hold interest rates down with ZERO consideration for the consequences.

It means they don’t care about fiscal responsibility, they don’t care how much they will plunder the power of people’s savings through inflation, or about their underfunded pensions struggling to generate returns. None of that matters.

The government’s only focus is to hold down interest rates… which they have to do to make sure Japan doesn’t go bankrupt.

If interest rates in Japan went to, say, just 1%, the nation’s annual debt service would literally exceed all of government tax revenue.

Here’s why this is a really big deal…

Remember how crazy things got in June, when some Italian finance minister didn’t get the job?

Markets around the world completely freaked out.

The potential downfall from what’s currently happening in Japan would be 1,000x worse. Remember, this is the third-largest economy in the world.

The Japanese government is fighting for its life right now (with absolutely ZERO concern for its other financial obligations). And it’s clear that they will spend whatever it takes to combat a rise in interest rates.

This won’t end well.

And it’s time to start loading up on the safest assets you can find.

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Guest post: Japan just showed us exactly how screwed the country really is

It’s been a busy week for the Bank of Japan…

The market believed Japan’s central bank would back off its massive bond-buying program and negative interest-rate policy with yesterday’s policy decision (it didn’t), so investors were dumping bonds in advance of the meeting. That sent yields on 10-year Japanese government bonds (JGBs) soaring from 0.03% to 0.11% in just under two weeks.

So the BOJ stepped in, for the third time in one week, saying it would buy unlimited government bonds to keep yields down. That’s the strategy behind Japan’s latest form of quantitative easing called “yield-curve control.” Essentially, it’s stepping in to buy bonds any time yields rise above 0.1%.

So, when yields hit 0.11%, an 18-month high, the bank bought another $14.4 billion in bonds.

But this is just the latest iteration of Japan’s aggressive and unprecedented QE. Since 2012, Japan has been hell bent on keeping its interest rates near zero.

The BOJ printed yen to buy basically all of the $9.5 trillion of JGBs outstanding. When it ran out of bonds, BOJ started buying stocks. Now it’s a top 10 shareholder in 40% of Japanese listed companies. And today, it’s vowed to spend unlimited money to keep yields below 0.1%.

Never mind what the planned exit strategy is (which will no doubt be catastrophic), let’s take a quick look at Japan’s debt situation – which is growing by the day.

Japan, the world’s third-largest economy, has total debt of more than ONE QUADRILLION YEN. And government debt currently sits at a whopping 224% of GDP, making it more leveraged than even Greece, whose debt-to-GDP is around 180%.

Japan spent 24.1% of TOTAL REVENUE (appx. 23.5 trillion yen) last year on servicing its debt – that includes interest and paying down principal. Those figures are right off the government’s website. And that percentage has no doubt gone higher this year.

Think about that…

Japan’s debt service eats up one-quarter of the entire budget with interest rates around 0.1%.

They cannot afford higher interest rates by even a fraction of a percent.

If interest rates in Japan went to just, say, 1%, debt service would literally exceed all of government tax revenue.

For the longest time, Japan has experienced deflation. So ultra-low rates have been palatable… if the purchasing power of your money increases every year, you’re probably willing to buy an investment that only returns 0.05% – you’re still maintaining purchasing power.

But Japan is currently seeing inflation of around 1% a year, and the BOJ’s target is 2% – given their complete commitment to the program, I’d say they achieve it eventually.

If inflation is running at 2% a year, who wants to own something paying out less than 0.1%? No rational person would take that trade because you’re guaranteed to lose money.

So you sell those bonds. Then interest rates rise (which Japan absolutely cannot afford). So the BOJ intervenes. That stokes inflation.

I think you see the cycle here…

Now the BOJ has waged war against rising interest rates three times in the past week. That’s a HUGE deal. Remember, the government already owns the majority of JGBs and TONS of Japanese equities.

But it continues to prop up the market by conjuring money out of thin air.

This is the third-largest economy in the world… and it is a complete disaster in the making.

The BOJ’s latest actions give you a sense of how close to the end we may be.

But what is the end game if Japan goes bust?

In June, I wrote about the mini-meltdown we experienced after the President of Italy opposed the nomination of a finance minister named Paolo Savona.

If that sounds boring and worthless, that’s because it is.

Still, the market freaked out because a tiny, economically inconsequential country had a small blip in its electoral process.

What do you think would happen if the world’s third-largest economy collapsed under the weight of its own debt?

Imagine the chaos and panic that would ensue.

The Japanese government is fighting for its life right now (with absolutely ZERO concern for its other financial obligations). And it’s continuing to add unlimited debt into the future.

This won’t end well.

And it’s time to start loading up on the safest assets you can find.

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