Unbelievable. 55-year old widow fights against the North Korean government

February 25, 2014
En route to Colombia

Li Mi-Yung just wanted to be free.

This 55-year old widow in North Korea had spent the last 18-months building up an off-grid residential homestead. She was, for the most part, fully independent.

She collected rain as a source of water. She had her own waste disposal. She generated her own electricity from the sun.

Sounds pretty admirable, right? Especially in a place where so few people are independent.

Unfortunately, upon finding out about Ms. Li’s living situation, the local authorities in North Korea dispatched entire teams of government workers to Ms. Li’s home, attempting to evict her and haul her in front of a tribunal.

Truly despicable. You’d think that the North Korean government would be eager to learn from her so that everyone else’s lives could be improved.

But alas, what else can one expect from the government of North Korea…?

There’s just two minor corrections I need to make to this story before I go on, though.

Li Mi-Yung is really Ms. Robin Speronis. And she does not live in North Korea. She lives in Cape Coral, Florida… in the Land of the Free. Everything else is true.

Yes, rather than try to learn from Mr. Speronis in an effort to improve the city’s public services, she was apparently branded as some kind of criminal mastermind who must be stopped at all costs.

When they heard last November that she was living off-grid, the city posted a notice of eviction, citing numerous code violations. They concluded that her dwelling (which she had been living in since January) was “unfit for human habitation.”

Furthermore, she was told that continuing to live at (or even ENTERING) the property would constitute misdemeanor trespassing and subject her to arrest.

Days ago, the case was heard in front of a special magistrate. City officials read off a seemingly endless list of code violations, and expert witnesseses were paraded into the court to confirm her nefarious deeds.

Naturally. Someone who unplugs from the system can only be trouble.

At the end of the hearing, the judge waived his hand, finding her guilty of some violations, not guilty of other violations, and then ordered her to at least partially plug back in to the grid.

I wish I could use a word like “amazing”, “unbelievable”, or “incredible” here. But I can’t. Because this is now par for the course in the Land of the Free.

Collecting rainwater now constitutes a crime. Being free and independent gets you threatened with eviction and hauled into court.

In the Land of the Free, you are unfit to decide for yourself how you want to live. And the government has all the power in the world to forcibly bend you to its will, even if it means terrorizing citizens into using public utilities.

It’s quickly getting to the point where anyone who wants to take back any personal freedom is going to have to seriously consider heading overseas to places where governments leave you the hell alone to live your life in peace.

Yes, it’s a radical thought. But so many great civilizations before were founded by intrepid free men and women who left their home countries in search of liberty and opportunity.

Why not now?

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World governments agree to automatic information sharing

February 24, 2014
Sovereign Valley Farm, Chile

It’s like 34 drunken sailors holding each other up. That’s the best way I can think of to describe the latest product from the good idea factory that is the OECD.

Over the weekend in yet another cushy five-star hotel, representatives from this unelected supranational bureaucracy announced plans for world governments to exchange all their citizens’ tax and financial data with one another.

The 34 members states of the OECD are enthusiastically supporting this measure. And it constitutes the end of whatever remains of financial privacy.

The premise behind the OECD’s destructive pipedream is, as usual, to stamp out ‘tax evasion’. But this is a misnomer to being with.

Just about every multinational company out there employs strategies to reduce their current tax liabilities that are perfectly legitimate based on existing tax laws.

This is why companies like Google and Apple famously earn billions in profits but pay almost no tax. They’re vilified. But it’s legal.

These companies have shareholders from all over the world. And their solemn responsibility is to maximize shareholder value… not maximize the amount of funds that politicians in a single jurisdiction get to blow on wars and welfare.

There are also isolated individuals who are sitting on undeclared income stashed away in an overseas bank somewhere. But the aggregate amount is tiny compared to the $60+ billion that Microsoft alone has stashed away overseas, untaxed.

You’d think they’d get at the root cause of the problem and try becoming more competitive… lowering tax rates and streamlining government operations (shocker!)

But no. Instead they resort to even more Draconian tactics to lord over private citizens’ financial records and unilaterally set aside long-standing international treaties.

It’s a pathetic display of exactly the sort of tactics that governments embrace when they go broke. And most of these OECD countries ARE broke– Italy, Japan, the US, Spain, Greece, etc.

So what we have now are a bunch of bankrupt member states who think that they are helping the other bankrupt member states raise revenue by terrorizing citizens (rather than actually fixing the problem).

It’s genius. But what else can one expect from the OECD?

This is the same organization which said, in the same meeting over the weekend, that Germany should accept higher inflation so that the rest of Europe wouldn’t suffer from deflation.

The arrogance is astounding.

This is the same logic as borrowing your way out of debt and spending your way out of recession… brought to you by the same guys who completely missed all the warning signs of the Global Financial Crisis. Along with the IMF. The Federal Reserve (and every other central bank in the world). And every government out there.

Yet these are the rocket scientists who pull the levers that control the system.

It behooves anyone who can see the big picture to distance yourself as much as possible from this system.

This means, for example, keeping a portion of your savings in real assets that they cannot control, as opposed to paper assets that they conjure and manipulate.

Most importantly, it means not having all of your eggs in one basket. Bankrupt governments will resort to any measure they feel is necessary to maintain the status quo.

And if you live, work, invest, bank, run a business, own real estate, etc. all in one of these bankrupt countries, you are really taking on tremendous risk.

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Smoking cigars by a mountain of napalm

February 21, 2014
Sovereign Valley Farm, Chile

I need to caveat this missive and highlight that I am not a pessimistic person. I’ve traveled to so many places over the years– well over 100 countries. And I typically visit 30-40 each year.

So I’ve seen first hand the tremendous opportunity that exists in the world, and the incredible way that human beings innovate to overcome challenges.

But the reality is that the world is on fire right now. In some places, like Ukraine or Thailand, quite literally.

In many others (like Japan, China, and much of southern Europe), there are heaps of smoldering embers beneath a continent-wide funeral pyre.

And in the Land of the Free, it’s as if politicians and central bankers are smoking their back-room cigars at the foot of a mountain of napalm and thermite that grows ever-higher by the day.

If you step back and look at the big picture, there is cause for concern.

For one, the tiniest elite has achieved record wealth thanks to the endless money printing of central bankers. The richest 300 people in the world alone addded $524 billion to their fortunes in 2013, while billions of other people across the planet pay higher prices for food and fuel.

This gap between rich and poor has grown to its widest since the Great Depression… and I would argue in many ways since the feudal system.

Obviously this isn’t a tirade against wealth, but rather the massively disproportionate benefits realized by a tiny elite at the expense of everyone else. And it exists because there is no separation between Bank and State. As Henry Ford said,

“It is well enough that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”

Well, it’s happening. People might not fully understand how central banking works. But they know there is something very rotten in the system.

And they’re starting to realize that it doesn’t have anything to do with a single party, or an individual. Even in the Land of the Free, more voters than ever are disgusted by both parties and identify with neither.

This is fundamentally what’s happening in Ukraine. People understand the system is rotten to its core– that a band of criminals has taken control, and that ‘elections’ will only serve to put a new band of criminals in control.

It is precisely what will likely play out in southern Europe, where unemployment among the youth (i.e. those of revolutionary age) is astoundingly high. And potentially even in the Land of the Free.

It’s an uncomfortable and contentious notion, I know. But this rotten system is fundamentally the same in the developed west. The only difference is there is even more debt underpinning it.

Every living creature has a breaking point. It is in our instincts to rise up when threatened.

And rather than watching these kinds of events unfold on TV thinking, “That could never happen here,” I would suggest looking at the situation rationally, and historically. Many great civilizations before arrogantly assumed the same thing.

So the question to ask is, “Am I prepared if this kind of turmoil ever comes to my doorstep?”

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The one investment you want to avoid at all costs

February 20, 2014
Sovereign Valley Farm, Chile


I read it twice to make sure my brain had processed the number correctly. Yep, 4.1%.

This was the annual yield promised on a new 5-year bond investment that a private banker colleague had sent to me. I couldn’t believe it.

The bond issuance was by a state-owned company in India. And despite the Indian government having a -very- recent history of capital controls, price fixing, and asset confiscation, and despite the company being rated near JUNK status, the bond only carried a yield of 4.1%.

This is really amazing when you think about it. Central bankers have destroyed money and interest rates to the point that near-bankrupt companies in shaky jurisdictions can borrow money for practically nothing.

It’s an utter farce. The rate of inflation is -at least- 3% in many developed countries. Central bankers will even say they are targeting 3% inflation.

This means that if investors simply want to generate enough income so that their after-tax yield keeps pace with inflation, they have to assume a ridiculous amount of risk.

This is a really important point to understand given that the global bond market is so massive– roughly $100 trillion, with nearly $1 trillion traded each day in the US alone.

This is almost twice the size of the global stock market. And even if people never invest in a bond themselves, they’re directly connected to the bond market.

Your pension fund owns bonds. The bank that is holding on to your money owns bonds. The companies listed on the stock market that you invest in own bonds.

Yet bonds are some of the worst investments out there right now. And that’s saying a lot given how overvalued stock markets are.

Here’s the bottom line: adjusting for both taxes and inflation, bondholders are losing money, even on risky issuances.

Think about it– if you make a 4% return and pay 25% in taxes, your net yield is 3%. If inflation is 3%, your entire gain is wiped out… so you have taken that risk for nothing.

If inflation rises just a bit then you are in negative territory.

There are those who suggest that deflation is a much greater risk right now than inflation… and that bonds are great investments to own in the event of deflation.

But here’s the thing– even if deflation takes hold and prices fall, anyone who is deeply in debt is going to feel LOTS of pain. Instead of their debt burden inflating away, now they’ll be scrambling to make interest payments.

So while bonds are a sensible deflationary investment in theory, in practice deflation will only increase the likelihood of default. This puts many bond investments at serious risk.

Last, if interest rates rise from these all-time lows, a bond’s value in the marketplace will plummet. So not only will you have made zero income, you would be looking at a steep loss if you try to sell.

Longer term, fixed rate bonds in weak currencies are almost guaranteed losers and should be avoided at all costs. You would be much better off setting your cash ablaze in a bonfire. It’s at least a better story to tell and will save you years of anguish watching your position erode.

Premium members: watch out for an alert this afternoon in which Jim Rickards (author of the acclaimed Currency Wars and one of the smartest guys in finance) gives some really great investment advice and thoughts on how to structure one’s portfolio amid all of this insanity.

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“No, sire, it is a revolution…”

February 19, 2014
Sovereign Valley Farm, Chile

It’s pretty ironic that I have two visitors right now in my home– one from Ukraine and the other from Thailand.

Both of their countries are in the midst of chaotic turmoil right now, characterized by riots and violent clashes between protestors and police.

It reminds me of the old quote from Louis XVI upon being informed in 1789 that the French people had stormed the Bastille. The King asked, “Is it a revolt?”

“No, sire,” the duke replied, “It is a revolution.”

People in both of these countries have reached their breaking points. In Ukraine especially, economic conditions have deteriorated in almost spectacular form.

History is packed with examples of how people rise up in the streets whenever economic conditions deteriorate.

The French Revolution in 1789 is one famous example; the French people finally reached their breaking points after nearly starving to death.

The 2011 Egyptian Revolution and entire Arab Spring movement is a similar example.

In fact, a 2011 study from the New England Complex Systems Institute showed a clear statistical correlation between social unrest and (specifically) food prices. The higher food prices get, the greater the chances of riots and revolution.

This is not a condition exclusive to the developing world; it is a fundamental human trait to provide for one’s family.

And while human beings will take a lot of crap from their governments– stupid regulations, higher taxes, erosion of freedom, and even inflation– the moment that a man is no longer able to put food on the table for his family, revolution foments.

Europe and the US are not immune to this. And with deteriorating wealth gaps, 50%+ youth unemployment, unchecked government power, and a system that disproportionately favors the elite, the conditions are ripe.

The main difference is that Westerners have been brainwashed into believing that the civilized people voice their grievances in a voting booth rather than doing battle in the streets.

It’s a false premise. Unfortunately, so is violent revolution.

As my dictionary so perfectly defines, “revolution” has two meanings.

First, it can denote an overthrow of a sitting government, whether violent or ‘bloodless’.

But in celestial terms, ‘revolution’ denotes a complete orbit around a fixed axis. In other words, after one revolution, you end up right back where you started.

So whether violent or non-violent, or whether in a voting booth or on the streets, revolutions put a country right back where it started.

In the French revolution, people traded an absolute monarch in Louis the XVI for a genocidal dictator in Robespierre for a military dictator in Napoleon.

In 1917, the Russians traded Tsarist autocracy for Communist autocracy.

In 2011, Egyptians traded Hosni Mubarak for Mohamad Hussein Tantawi (who subsequently suspended the Constitution), for Mohamed Morsi (who as President awarded himself unlimited powers), for yet another coup d’etat.

All of this is because of a knee-jerk reaction– ‘if our country is having major problems, we should throw the bums out and let the man on the white horse take over.’

This creates a never-ending cycle in which the fundamental problems perpetuate.

It’s not about any single person or group of people. It is the system itself that needs changing.

In our system we award a tiny elite with the power to kill, steal, wage war, educate our children, and conjure unlimited quantities of paper money out of thin air.

This is just plain silly. And antiquated. We’re not living in the Middle Ages anymore where we need kings to tell us what to do, knights to keep the peace, and serfs to do all the work (and enrich the nobles).

Yet this is not too far from the system we have today.

The real answer is within ourselves. As Ron Paul told our audience in Santiago last year, become less dependent on the government and more self-reliant:

This idea is beginning to resonate with more and more people who are increasingly disgusted with the system… and all parties.

With our modern technology, transportation, and access to information, we have all the tools available to do this.

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IMF report: ‘Debt is good’. What are these people smoking?

February 18, 2014
Sovereign Valley Farm, Chile

Probably every kid in the world has at some point dreamed of having a time machine and being able to travel back to the past… usually to see dinosaurs or something like that.

Time travel is an almost universal fantasy. And if I could snap my fingers and turn the pages of time, I’d be seriously curious to check out the thousand-year period between the decline of the Western Roman Empire and the rise of the Renaissance.

They used to refer to this period as ‘the Dark Ages’ (though historians have since given up that moniker), a time when the entire European continent was practically at an intellectual standstill.

The Church became THE authority on everything– Science. Technology. Medicine. Education. And they kept the most vital information out of the hands of the people… instead simply telling everyone what to believe.

People living in that time had to trust that the high priests were smart guys and knew what they were talking about.

Interpreting facts and observations for yourself was heresy, and anyone who formed original thought and challenged the authority of church and state was burned at the stake.

Granted, human civilization has come a long way since then. But the basic building blocks are not terribly different than before.

Anyone who challenges the state is still burned at the stake. And our entire monetary system requires that we all trust the high priests of central banking and economics. Those that stray from the state’s message and spread economic heresy are cast down and vilified.

You may recall the case of Harvard professors Ken Rogoff and Carmen Reinhart who wrote the seminal work: “This Time is Different: Eight Centuries of Financial Folly”.

The book highlighted dozens of shocking historical patterns where once powerful nations accumulated too much debt and entered into terminal decline.

Spain, for example, defaulted on its debt six times between 1500 and 1800, then another seven times in the 19th century alone.

France defaulted on its debt EIGHT times between 1500 and 1800, including on the eve of the French Revolution in 1788. And Greece has defaulted five times since 1800.

The premise of their book was very simple: debt is bad. And when nations rack up too much of it, they get into serious trouble.

This message was not terribly convenient for governments that have racked up unprecedented levels of debt. So critics found some calculation errors in their Excel formulas, and the two professors were very publicly discredited.

Afterwards, it was as if the entire idea of debt being bad simply vanished.

Not to worry, though, the IMF has now stepped up with a work of its own to fill the void.

And surprise, surprise, their new paper “[does] not identify any clear debt threshold above which medium-term growth prospects are dramatically compromised.”

Translation: Keep racking up that debt, boys and girls, it’s nothing but smooth sailing ahead.

But that’s not all. They go much further, suggesting that once a nation reaches VERY HIGH levels of debt, there is even LESS of a correlation between debt and growth.

Clearly this is the problem for Europe and the US: $17 trillion? Pish posh. The economy will really be on fire once the debt hits $20 trillion.

There’s just one minor caveat. The IMF admits that they had to invent a completely different method to arrive to their conclusions, and that “caution should be used in the interpretation of our empirical results.”

But such details are not important.

What is important is that the economic high priests have proven once and for all that there are absolutely no consequences for countries who are deeply in debt.

And rather than pontificate what these people are smoking, we should all fall in line with unquestionable belief and devotion to their supreme wisdom.

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It ripped me up inside to see this kid in jail

February 17, 2014
En route from Buenos Aires, Argentina

On the tail end of my Army career over a decade ago when I was still living in the Land of the Free, I used to be a volunteer for the Big Brothers / Big Sisters program.

If you’ve never heard of it, BBBS is a non-profit that temporarily matches up at-risk youth with responsible mentors in an effort to provide kids with positive role models.

When I first enrolled, the administrators linked me up with a kid from the inner city just hitting his ‘tween’ years. I’ll call him “DJ”.

DJ was great. Despite living in one of the most violent, crime-infested areas of Dallas, he had managed to keep a positive attitude on life. He was always smiling, and polite.

And unlike a lot of kids from his area who aspired to be either drug dealers or professional basketball players, DJ wanted to be in real estate sales.

(I used to encourage this by driving him around on the weekends looking at open houses and property listings, trying to teach him the valuation methods that I had picked up over the years.)

Eventually, life got in the way. My business interests and personal philosophy had always been pulling me overseas. And my father (the primary reason I had been living there to begin with) had passed away after a terrible bout with cancer.

DJ and I saw less and less of each other. And in our periodic phone calls, it became clear that he was changing. For the worse.

By the end of high school, DJ had hooked up with the wrong crowd. The constant influence of other youth had a powerful effect on him. And with a father in prison and his mother barely at home, he quickly got pulled into a darker world.

His entire personality was changing. It was as if he had become a completely different person. Gone was the happy kid with solid, realistic aspirations and a drive to succeed. DJ had become a thug, respecting only violence, ignorance, and wanton cruelty to other human beings.

Right after his 18th birthday he was arrested for a whole slew of felonies– and was just old enough to be tried, convicted, and sentenced as an adult.

The last time I saw him I barely recognized him. It was sad… really ripped me up inside.

This story is far too common; I’m sure many of our readers have been in similar situations, watching people they once cared about descend into a chaotic downward spiral.

I’ve been thinking about this over the past few days during my time in Argentina. Because nations, like people, can enter a downward spiral from which they become completely unrecognizeable.

The Economist recently did a great spread on Argentina, explaining how this country– this city– used to be one of the greatest in the world.

In its heydey, Buenos Aires was considered among the wealthiest, most opulent places in the western hemisphere.

A century ago in 1914, GDP per capita in Argentina was higher than in most of Europe, and its economic growth outpacing even the flourishing United States.

And while the rest of the world blew itself to smithereens in the Great War, Argentina very smartly remained neutral.

By 1918, Argentina was one of the only prosperous, debt-free nations left. And the consequent surge in exports to support all the reconstruction in Europe resulted in a heady economic boom.

But that was then. Today is a different story.

Decades of utterly destructive corruption, debt, and absurd economic centralization have taken an irreversible toll on the country and its economy.

Despite its massive potential, abundant resources, huge population, and culturally-ingrained business prowess, Argentina has become a pitiful shell that continually vaccilates into the the 3rd world.

And people here have had their liberties and livelihoods ravaged by a government that has imposed price controls, capital controls, media controls, and people controls.

They have nationalized private pensions, confiscated private assets, jailed opposition, spawned a currency crisis, and corrupted public institutions.

All of this has devastated a once rich culture. Theft, deceit, and coercion are all now unfortunately pervasive. Crime and malfeasance have become the means of survival for a substantial portion of the population.

Like DJ, this place is hardly recognizable when compared to its former greatness– the result of a long, steady decline punctuated by a sudden collapse.

Regrettably there are a number of ‘rich’ Western nations in this cycle as well. And a great many people are waking up each day with this realization thinking “This is NOT the country that I grew up in…”

But this IS what happens after decades of poor choices: Too much debt. Too much war. Too much money printing. Too much regulation.

Just as people in decline enter a vicious cycle where the consequences of their actions begin to feed on each other, nations too reach a point of no return– a bifurcation point where the decay becomes exponential.

And once they reach this point, the trend becomes a one-way decline where they must first hit rock bottom before being able to climb out.

If you’re not willing to be pulled into that spiral, I’d encourage you to consider your own situation.

If you live, work, bank, invest, own real estate, structure a business, etc. all in the same country… and that country is on an obvious decline that you can feel in your gut, then you are taking serious, serious risks with your livelihood.

The oppressive controls employed by the Argentine government provide the perfect case study of what happens to people who ignore their instincts and trust their politicians.

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This is why I am so optimistic about the future

Blacksmith2013 150x150 This is why I am so optimistic about the future

February 14, 2014
Buenos Aires, Argentina

It’s clear that in today’s world, young people are constantly getting the shaft. Everyone is, really. But in many ways, young people have it the worst.

Youth unemployment rates in ‘rich’ countries are shocking. Abysmal. Young people are the last to be hired and the first to be fired.

It’s young people who will inherit the mountains of debt that their governments have accumulated. And if they’re lucky enough to even find work, young people will spend their entire lives paying progressively higher taxes so that the politicians can make the interest payments.

They’ll also spend their lives supporting reverse demographic pyramids in pension systems around the world. But decades from now when it’s their turn to collect, those pension programs will have run dry.

It’s young people who are expected to go fight, and die if necessary, every time bloodthirsty politicians decide to go to war to protect the bankers’ interests.

It’s an unfortunate position to be in these days: more costs, fewer benefits, and almost no opportunities. The old tried and true method for success– study hard, get a good job, work your way up the ladder– simply no longer applies.

That’s why it’s more important than ever for young people to break free from this system and set their own path. And to do that, it’s imperative to be armed with valuable skills and a network of like-minded colleagues.

Long-time readers know that I sponsor and host an intensive workshop every summer in Lithuania for aspiring young entrepreneurs and freedom-seekers. And this is precisely our aim– to provide young people with valuable skills and a strong network of like-minded people from around the world.

To do this, I bring in some of the most talented and successful entrepreneurs I know. And together, the instructors imbue some of the most valuable business skills we’ve all accumulated through years of making mistakes and grinding it out in the world.

It’s the sort of stuff they just don’t teach in university or business school.

Not to mention, the network has become something truly extraordinary. Each summer we generally have upwards of 30 countries represented, places like the Philippines, Zimbabwe, Colombia, Bulgaria, and more.

For the students, this means forging strong relationships with people from all over the world. This alone is tremendously valuable.

It’s ironic that we’re discussing this today as I have just landed in Argentina– easily one of the most economically distressed places on the planet. As I’ll describe more on Monday, this country is a clear sign of things to come in the developed West.

But despite the overwhelming economic hazards created by politicians and central bankers, I remain unabashedly optimistic about the future. And it is these camps– the opportunity to spend time with so many brilliant young people– that renews my optimism each year.

This liberty and entrepreneurship camp is free to attend. Our charitable organization foots the bill for the whole thing. Students are only expected to get themselves there, and we even occasionally award travel scholarships.

There is a very competitive application process, though. Each year, the initial interest is often in the thousands. Yet we are only able to select about 60 students.

But if you are a motivated young person, or know someone who fits the description, I’d encourage you to check out this page. Learn more about what we do, and sign up to receive instructions on how to apply.

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Totalitarian government at work

February 13, 2014
Santiago, Chile

The IRS scandal caused a massive uproar last year when it was revealed that the agency was deliberately targeting non-profit political groups solely based on their names or political themes.

One of those groups was called True the Vote, a grassroots, non-partisan organization that recruits and trains volunteers to monitor elections.

The founder and president of True the Vote, Catherine Engelbrecht, recently gave testimony to the House Oversight & Government Reform Subcommittee on Regulatory Affairs in which she revealed how the US government used mafia tactics to go after her, her organization, family, and her private business.

As she explained, before founding her non-profit organization a few years ago, her life was ordinary.

Since founding it, though, she has been subjected to more than 15 instances of audit or inquiry by federal agencies ranging from the IRS, FBI, the Bureau of Tobacco, Alcohol, Firearms and Explosives, etc.

In 2012, her business was subjected to inspection by the Occupational Safety and Health Administration (OSHA). And even though the agency said it found no significant irregularities, it still issued a fine of $20,000.

The FBI even investigated her non-profit organization on SIX separate occasions in conjunction with domestic terrorism cases.

This is sickening. While her only ‘crime’ was to try to make the government more transparent, the government went out of its way to ruin her.

She tells her story in a quick seven-minute account. It’s a chilling reminder of what happens when you challenge the state.

I encourage you to watch Catherine Engelbrbecht’s brief testimony here.

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This chart will make you want to sell your stocks

February 12, 2014
Santiago, Chile

Three million percent.

That’s the investment return that Andy Bechtolsheim has made on his Google investment.

If you had parked $100,000 in Google stock when it IPO’d ten years ago, your investment would be worth $1.4 million today. Not bad.

But Andy was one of the first major investors in Google before it went public. He wrote Larry and Sergey a $100,000 check back in 1998 for an investment in Google that is worth $3 billion today.

Granted, this is the exception and not the rule. But in the world of private investments, the potential for outsized returns is very real.

Most investors stick to the mind-numbing mantra of stocks and bonds; the size of the global bond market alone is estimated to be well north of $100 trillion (roughly 140% of world GDP).

And owing to this sheer size and liquidity, big institutional investors have no choice but to own stocks and bonds.

But as we have pointed out before, world stock and bond markets are heavily manipulated, if not rigged, by central bankers who control the money supply.

Fundamentals no longer matter. If one single person (now Fed Chair Janet Yellen) says she will print, stocks go up. If she says she will taper, stocks go down.

This isn’t investing. It’s gambling. Financial analysis has been replaced by soothsaying and tasseography (reading the tea leaves), hoping to detect some hint in the direction that central bankers are leaning.

This is the chief reason why I seldom participate in public markets anymore; it seems ludicrous to pile on a giant tidal wave of paper currency and entrust central bankers with my investment returns.

Not to mention, it’s uncertain how long they can keep this party going as the following (rather scary) chart shows. There’s an eerie parallel between the market’s performance today and the runup to the crash of 1929.

MW BU310 scary  20140210132547 MG This chart will make you want to sell your stocks

It certainly begs the question, though: if you don’t have the appetite to play this rigged game, where can you invest?

This is where the little guy has a HUGE advantage. Because while institutions are chained to the bond market, individual investors literally have a world of options… like investing in private businesses.

Think about it– nearly every successful company out there, like Google, first started out as a private venture looking to raise money from investors.

And now that the rules for crowdfunding have become much less strict, there’s an inspiring amount of opportunity out there, even for small investors.

I come across these sorts of deals all the time. And there are a number of places in the world that are completely overlooked.

Everyone knows about Silicon Valley. There’s no shortage of deals to invest in there, but the region is crawling with angel investors and VC funds.

Chile presents an intriguing opportunity in this sense.

Santiago is becoming a thriving hub of entrepreneurship and has actually been named among the top 20 global startup ecosystems.

The Start-Up Chile incubator program has proved incredibly successful since its launch in 2010, and numerous energetic entrepreneurs are flocking here from all over the world to take part.

Yet Santiago’s startup scene has one major shortcoming: it lacks any significant funding outlet for entrepreneurs that want to scale their businesses.

As the Startup Ecosystem Report says: “There is an overall funding gap in Santiago. In total, Santiago startups raise 97% less capital in stage 2, 94% less in stage 3, and 90% less in stage 4 than [Silicon Valley] startups.”

For such a promising and rapidly developing startup scene, this is a major anomaly… and a big opportunity.

If you’re like me and invest in private businesses, this place is an investment paradise: plenty of great deals, and very little competition from other investors.

from SOVErEIGN MAN http://ift.tt/1m8bZcc