Category: simonblack

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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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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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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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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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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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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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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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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In a major victory for common sense, a group of cosmetologists defeated an insanely stupid regulation passed down by the state of Louisiana.

Louisiana, just like the other 49 states in the Land of the Free, governs licensing requirements for dozens… hundreds of professions… ranging from athletic trainers to tour guides to barbers and cosmetologists.

And most of the time the licensing requirements are just plain idiotic.

In Louisiana, for example, the State Board of Cosmetology had formerly required an unbelievable 750 hours of training (which costs thousands of dollars) simply to be able to thread eyebrows.

(If you’re like me and totally unfamiliar with eyebrow threading, check out this video. You’ll probably agree that 750 hours of training is totally ridiculous.)

And so, in conjunction with the Institute for Justice, several Louisiana-based cosmetologists filed a lawsuit against the Board.

The Board backed down… passing a new regulation exempting eyebrow threaders from such pointless licensing requirements.

One down. 2,214 to go.

That’s right. According to the Institute of Justice’s study License to Work, there are over two thousand licensing requirements across the Land of the Free… and that’s just for low income jobs like manicurists or floor sanders. We’re not even talking about doctors and dentists here.

Another study from the Brookings Institute shows that nearly 30% of US workers require some sort of state license. That’s up from just 5% in the 1950s.

Many of the licenses truly defy any logic whatsoever.

The State of Michigan, for example, sees fit to require 467 days of education and training to receive a barber’s license, but only 26 days to be a licensed Emergency Medical Technician.

The State of California requires aspiring tree trimmers to have 1,460 days of education and training. But pre-school teachers only require 365 days.

The District of Columbia requires 2,190 days of education and training to be an Interior Designer, but ZERO days to be a school bus driver.

The State of Iowa requires 1,460 days for athletic trainers, but just 370 for dental assistants.

What exactly are these people trying to tell us about their priorities? Trees and furniture are more important than children? Hair is more important than health? Abs are more important than teeth?

It’s all quite bizarre.

But there is one occupation I noticed that is conspicuously absent from this list.

And it’s a big one.

Not a single state in the union has a licensing requirement for this profession.

And that’s an incredible irony given that this occupation gets to tell the rest of the occupations how much training they require.

Did you figure it out?

It’s politicians.

Just think about it: Barbers and manicurists require hundreds of hours of training.

But the people who have the power to pass idiotic legislation, waste taxpayer funds, declare war, tell us what we can/cannot put in our own bodies, and regulate every aspect of our lives, don’t even have to be literate.

(And judging by some of the laws they pass, that may very well be the case.)

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Like a lot of major cities in the United States, the city of Philadelphia is in pretty rough financial condition.

One of the city’s biggest problems is its woefully underfunded public pension, which has a multi-billion dollar funding gap.

In 2001, Philadelphia’s pension fund was still in decent shape with a funding level of 77%, meaning that it had sufficient assets to meet 77% of its long-term obligations.

By 2017 the funding level had dropped to less than 50%.

Part of this is just blatant mismanagement; while most of the market soared in 2016, for example, Philadelphia’s pension fund lost about $150 million on its investments, roughly 3.17% of its capital.

It’s interesting that, along the way, the city has actually tried to fix the problem. Between 2001 and 2017, the amount of money that the city contributed to the pension fund actually increased by 230%.

Yet despite increasing contributions to the fund, the fund’s solvency level keeps shrinking.

Mayor Jim Kenny summed it up the grim situation in his budget address last year:

The City’s annual pension contribution has grown by over 230 percent since fiscal year 2001. . . These increasing pension costs have caused us to cut important public services while the pension fund’s health has grown weaker. In fact, our pension fund has actually dropped from 77 percent funded to less than 50 percent funded during the same time our contributions were so rapidly increasing.

So, desperate for revenue, the local government has been relying on an old tactic to get their hands on every spare penny they can.

The city of Philadelphia owns the local gas company– Philadelphia Gas Works (PGW). It’s essentially a local government monopoly.

And over the last few years, PGW developed an automated system to comb its billing records, find delinquent accounts, and file a lien on those properties.

If you’re not familiar with real estate law, a ‘lien’ is a formally-registered security interest in which your property serves as collateral for a debt.

When you borrow money from the bank to buy a home, for example, the bank registers a lien over your home for the value of the mortgage.

The lien prevents you from selling the home until you satisfy the debt. It also means that if you don’t pay the debt, the lienholder (the bank, or the gas company) can seize the property.

In PGW’s case, the gas company is filing liens over people’s properties due to unpaid gas bills as little as $300.

There is essentially zero due process here. It’s not like the gas company has to go in front a jury and prove that there’s an unsatisfied debt.

They just have their automated system file some papers, and, poof, the lien is registered.

So someone could have their home encumbered for a $300 late bill that ended up being an administrative error.

More importantly, it’s curious why the gas company is filing a lien against the property… because it’s entirely possible that the delinquent customer isn’t even the property owner.

Let’s say you’re a landlord and renting out your investment property to a tenant… and the tenant doesn’t pay his gas bill: PGW will put a lien on your property, even though it’s not your bill.

Even worse, you wouldn’t even know about it, because PGW would be sending the late notices to the tenant… not to you.

At that point it turns into a total bureaucratic nightmare.

If you’re lucky enough to even find out about it, you call PGW to try and get the lien removed.

But (according to court documents), PGW tells angry landlords that they have no control over the lien process, and tell people to file a complaint with the Pennsylvania Public Utility Commission.

But then the Pennsylvania Public Utility Commission tells you that they have no jurisdiction over liens in Philadelphia, and that you should talk to the utility company.

Classic government bureaucracy. You just get bounced around between various departments and nothing ever gets resolved from a problem that you didn’t even create.

Well, a bunch of landlords finally had enough of this nonsense, so they got together and sued the city in federal court.

It seemed like a slam dunk case. Why should property owners be held liable for the actions of their tenants?

If tenants don’t pay for their own gas, the tenants should be held responsible… not the property owners.

Common sense, right?

Wrong. The landlords lost the case.

Two weeks ago the US District Court for the Eastern District of Pennsylvania ruled that the City of Philadelphia was well within its rights to hold property owners responsible… and to file a lien on the property without even notifying the owner to begin with.

This is a pretty strong reminder of how low governments will sink when they become financially desperate.

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