Category: simonblack

[Editor’s Note: As we’re coming up on the end of the year, we thought it would be appropriate to republish some of our most popular articles. Today’s was originally published on December 9, 2016]

Did you know that until June 28, 2016, the song “Happy Birthday” was actually copyrighted material?

Yes, I’m serious. And I’m talking about THAT Happy Birthday, as in the song we all sing at birthday parties.

The original melody was written by two sisters, Patty and Mildred Hill, back in 1893. But instead of “Happy Birthday” they called it “Good Morning to All.”

The Happy Birthday lyrics started appearing in the early 1900s, and throughout the 20th century the song became popular to sing at birthdays.

Now, remember that a song– any song– is a form of intellectual property, just like a patent, manuscript, or software code.

And when you own intellectual property, other people have to pay you for the right to use it. These payments are typically known as royalties.

The Beatles’ song Yesterday, for example, was originally written by John Lennon and Paul McCartney in the early 1960s.

Yesterday is one of the most popular songs in history, and it’s been covered by more than 3,000 other artists, from Frank Sinatra to Daffy Duck.

But each of those 3,000+ artists had to pay a royalty to John Lennon and Paul McCartney for the rights to use the song.

Similarly, the owners of Happy Birthday were receiving royalties on their song as well.

If you ever saw Happy Birthday sung in a movie or TV show, the song’s owners got paid a royalty.

The last owner of the song, Warner/Chappell music, claims to have been receiving a whopping $2 million PER YEAR in royalties on Happy Birthday. Unbelievable.

Earlier this year a judge ruled that Happy Birthday is now officially in the ‘public domain’ and free for everyone to use.

But it’s interesting to think about an asset like that: there’s some up-front work involved in writing a song, and then you can collect royalty income for years. Decades.

That’s a hell of an asset to own.

Of course, most of us don’t have the musical talent to crank out a hit song that can produce royalties forever.

Fortunately, we don’t need to.

Artists can create intellectual property. But as investors, it’s possible for us to BUY it.

Just like Apple stock can change hands between buyers and sellers, intellectual property can also be bought and sold.

For example, big technology companies like Google, Apple, Facebook, etc. have purchased tens of thousands of patents from inventors and designers.

Songs are the same way.

Paul McCartney used to purchase the rights to other artists’ songs (including Buddy Holly).

McCartney even coached Michael Jackson about making the investments– and Jackson famously returned the favor in the 1980s by buying the rights to a number of Beatles songs.

Artists understand that a hit song, like any great intellectual property, can be a fantastic investment… a gift that keeps on giving.

But again, you don’t have to be a rock star to make an investment.

These days, a lot of artists are hesitant to sell their songwriter credits; they’ve heard too many boogeyman stories about other artists getting screwed.

But there is a unique type of investment where both the artist AND the investor get what they want.

It’s called an advance; it’s basically a loan that’s secured by the artist’s current or future royalties.

Rock stars will often get an advance when they sign a deal with a record label; it’s nothing more than a loan against the future earnings of the album.

Artists will also frequently seek an advance on their existing catalog of songs, backed by their royalty income.

So an artist that’s generating $1 million per year in royalties might get an advance for, say, $2-3 million.

The investor then receives ALL of the royalty income directly from the distributor until the loan is paid off.

Here’s the kicker– the interest rate on these loans is typically more than 25%!

Imagine getting a 25% return when your collateral is Yesterday, a song that has consistently generated millions of dollars in steady royalty income.

Unreal. The artist gets to keep the song. But investors are making out like bandits.

And it’s no wonder a handful of players in this space have been keeping the deals all to themselves.

But technology is now managing to upend this monopoly.

Some of my oldest and closest friends run an industry-leading website called RoyaltyExchange.com, which combines this royalty-backed advance loan with the Peer-to-Peer lending concept.

(Happily I became a shareholder in the business earlier this year.)

The website has brokered a number of major deals, from the Eurythmics to Barry White, in a way that allows individual investors to generate safe, substantial returns.

There’s more and more capital coming in to this type of asset, which pushes down the interest rates. But investors are still achieving yields of 9% to 13% on an annualized basis.

As with all things, this is definitely not for everyone.

But it’s a great example of the substantial investment opportunities that exist for people willing to look outside of the mainstream, made possible by industry-disrupting technology.

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[Editor’s Note: As we’re coming up on the end of the year, we thought it would be appropriate to republish some of our most popular articles. Today’s was originally published on March 13, 2017]

In the year 1517, one of the most important innovations in financial history was invented in Amsterdam: the government bond.

It was a pretty revolutionary concept.

Governments had been borrowing money for thousands of years… quite often at the point of a sword.

Italian city-states like Venice and Florence had been famously demanding “forced loans” from their wealthy citizens for centuries.

But the Dutch figured out how to turn government loans into an “investment”.

It caught on slowly. But eventually government bonds became an extremely popular asset class.

Secondary markets developed where people who owned bonds could sell them to other investors.

Even simple coffee shops turned into financial exchanges where investors and traders would buy and sell bonds.

In time, the government realized that its creditworthiness was paramount, and the Dutch developed a reputation as being a rock-solid bet.

This practice caught on across the world. International markets developed.

English investors bought French bonds. French investors bought Dutch bonds. Dutch investors bought American bonds.

(By 1803, Dutch investors owned a full 25% of US federal debt. By comparison, the Chinese own about 5.5% of US debt today.)

Throughout it all, debt levels kept rising.

The Dutch government used government bonds to live beyond its means, borrowing money to fund everything imaginable– wars, infrastructure, and ballooning deficits.

But people kept buying the bonds, convinced that the Dutch government will never default.

Everyone was brainwashed; the mere suggestion that the Dutch government would default was tantamount to blasphemy.

It didn’t matter that the debt level was so high that by the early 1800s the Dutch government was spending 68% of tax revenue just to service the debt.

Well, in 1814 the impossible happened: the Dutch government defaulted.

And the effects were devastating.

In their excellent book The First Modern Economy, financial historians Jan De Vries and Ad Van der Woude estimate that the Dutch government default wiped out between 1/3 and 1/2 of the country’s wealth.

That, of course, is just one example.

History is full of events that people thought were impossible. And yet they happened.

Looking back, they always seem so obvious.

Duh. The Dutch were spending 68% of their tax revenue just to service the debt. Of course they were going to default.

But at the time, there was always some prevailing social influence… some wisdom from the “experts” that made otherwise rational people believe in ridiculous fantasies.

Today is no different; we have our own experts who peddle ridiculous (and dangerous) fantasies.

Case in point: this week, yet another debt ceiling debacle will unfold in the Land of the Free.

You may recall the major debt ceiling crisis in 2011; the US federal government almost shut down when the debt ceiling was nearly breached.

Then it happened again in 2013, at which point the government actually DID shut down.

Then it happened again in 2015, when Congress and President Obama agreed to temporarily suspend the debt ceiling, which at the time was $18.1 trillion.

That suspension ends this week, at which point a debt ceiling of $20.1 trillion will kick in.

There’s just one problem: the US government is already about to breach that new debt limit.

The national debt in the Land of the Free now stands at just a hair under $20 trillion.

In fact the government has been extremely careful to keep the debt below $20 trillion in anticipation of another debt ceiling fiasco.

One way they’ve done that is by burning through cash.

At the start of this calendar year in January, the federal government’s cash balance was nearly $400 billion.

On the day of Donald Trump’s inauguration, the government’s cash balance was $384 billion.

Today the US government’s cash balance is just $34.0 billion.

(Google has twice as much money, with cash reserves exceeding $75 billion.)

This isn’t about Trump. Or even Obama. Or any other individual.

It’s about the inevitability that goes hand in hand with decades of bad choices that have taken place within the institution of government itself.

Public spending is now so indulgent that the government’s net loss exceeded $1 trillion in fiscal year 2016, according to the Treasury Department’s own numbers.

That’s extraordinary, especially considering that there was no major war, recession, financial crisis, or even substantial infrastructure project.

Basically, business as usual means that the government will lose $1 trillion annually.

Moreover, the national debt increased by 8.2% in fiscal year 2016 ($1.4 trillion), while the US economy expanded by just 1.6%, according to the US Department of Commerce.

Now they have plans to borrow even more money to fund multi-trillion dollar infrastructure projects.

Then there’s the multi-trillion dollar bailouts of the various Social Security and Medicare trust funds.

And none of this takes into consideration the possibility of a recession, trade war, shooting war, or any other contingency.

This isn’t a political problem. It’s an arithmetic problem. And the math just doesn’t add up.

The only question is whether the government outright defaults on its creditors, defaults on promises to its citizens, or defaults on the solemn obligation to maintain a stable currency.

But of course, just like two centuries ago with the Dutch, the mere suggestion that the US government may default is tantamount to blasphemy.

Our modern “experts” tell us that the US government will always pay and that a debt default is impossible.

Well, we’re living in a world where the “impossible” keeps happening.

So it’s hard to imagine anyone will be worse off seeking a modicum of sanity… and safety.

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[Editor’s Note: As we’re coming up on the end of the year, we thought it would be appropriate to republish some of our most popular articles. Today’s was originally published on January 2, 2017]

Last week during a long overdue vacation, a close friend of mine recommended reading the autobiography of Rich DeVos called Simply Rich.

DeVos is a billionaire entrepreneur who started countless ventures during his nine decades on this earth.

Back in the 1946, for example, DeVos started an airline… virtually overnight.

He just bought an airplane and started flying people around. No rules. No regulations.

They didn’t even have an airport. The local airfield north of Grand Rapids, Michigan, where they were based, hadn’t been completed yet.

As DeVos recounts in his book, “We put pontoon floats on our plane and took off and landed on the Grand River, which ran along the airfield.”

His first office at the airfield was an old chicken coop that he found, washed in the river, and re-painted.

The following year he and his partner opened up one of Michigan’s first “Drive Through” restaurants at the airfield, catering to passengers, workers, flight students, and spectators who came by in the evenings just to marvel at the planes.

Again, no rules. No regulations.

They just saw an opportunity and went for it.

DeVos started another business selling ice cream; another offering fishing excursions on Lake Superior; and another delivering trucks cross-country.

The truck delivery business was one of the more interesting ones; it started when he was just a kid– someone asked him to drive two pickups from Grand Rapids to Bozeman, Montana.

There were no hotels or motels… or even interstates back then.

So DeVos and his friend had to zig-zag their way across corn fields to get there, sleeping on haystacks each night along the way.

The book is a hell of an adventure– a reminder of how free and unencumbered things used to be.

Back in America’s heyday, people succeeded based on their hard work, ingenuity, and willingness to take action.

They didn’t have to spend three years filling out paperwork so that some government bureaucracy could justify its existence.

It was an environment that created unparalleled opportunity and prosperity which, candidly, have long since faded.

Today there are rules for everything; in fact, just this morning, the US federal government published an astonishing 709 pages of new regulations.

And that’s just for today. They publish new regulations every single business day. So tomorrow there will be even more.

These rules make it more difficult to produce, to start a business, to sell a product or service to a willing consumer.

And these rules carry costs, whether it’s in paying a fee, filling out paperwork, etc.

So just imagine the effect that literally decades worth of rules and regulations has had on US productivity (which is now noticeably contracting, even according to government data.)

It’s also worth noting that roughly 30% of occupations in the Land of the Free now require some sort of government license.

In its study “License to Work”, the Institute for Justice reports that 45 out of 50 of the largest cities in the United States have put up substantial obstacles to prevent budding entrepreneurs from selling food from street carts.

A manicurist in Alabama requires 163 days of training, while a shampoo specialist at a Tennessee hair salon must undergo 70 days of training, take two exams, and pay $140 in fees to obtain a license.

Hawaii requires fire alarm installers to undergo a whopping four years of training, pass two exams, and pay $380 in fees to obtain a license.

And a tree trimmer in California must also undergo four years of training, pass two exams, and pay $851 in fees to obtain a license.

It’s absurd.

Nothing that Rich DeVos his partner accomplished in their teens and 20s is even legal anymore.

It makes me think about all the people today who will never have the chance to realize their full potential thanks to the mountain of regulations blocking their way.

This is an important point to understand.

Looking at the data– the incredible overregulation, $20 trillion in debt, insolvent pension funds, etc., it’s painfully obvious that the US is past its prime and holding back millions of people from achieving greater prosperity.

Rich DeVos started so many businesses back in the 1940s because the government stayed out of the way and enabled hard-working risk takers to succeed.

Today the government spends $2 billion to build a website and churns out hundreds of pages of regulations each day.

And this trend gets worse each year.

Understanding this simple reality doesn’t mean that you’re pessimistic, unpatriotic, or expecting the end of the world.

It just makes you rational.

Things change. That’s the bottom line.

The US is still a fantastic place. But it’s no longer the same Land of Opportunity it was when Rich DeVos was getting started.

As I’ve summarized before, the US is a great place to consume… but an increasingly difficult place to PRODUCE.

That imbalance has serious long-term consequences, which we are only starting to experience.

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[Editor’s Note: As we’re coming up on the end of the year, we thought it would be appropriate to republish some of our most popular articles. Today’s was originally published on January 6, 2016]

Think of the word “money” for moment. What’s the first image that comes to mind?

Perhaps the folded paper in your wallet. Or the balance in your bank account.

Or perhaps the investments in your brokerage account.

In our modern financial system where unelected central bankers wield totalitarian control over the financial system, all three of these are forms of money.

But the relationship between them is very tenuous, and very risky. I’ll explain:

1) Physical cash

No matter where you live in the world, just about every civilized nation on the planet has some form of physical currency in various denominations. Dollars. Pounds. Euros. Yen. Renminbi.

We pass around these pieces of paper as a medium of exchange.

You can go to the grocery store, and, as long as you’re in the US, you can pay for your food with US dollar physical cash. Or if you’re in Canada, with Canadian dollar physical cash. Simple.

2) Bank balances

This is where it starts getting more complicated.

When you log in to your bank’s website, you see a balance printed on the screen. Let’s say it’s $100,000.

Don’t think for a second that there are one hundred thousand pieces of paper sitting in your bank’s vault. In fact most banks have very little cash on hand.

Your balance is nothing more than an accounting entry on your bank’s balance sheet, which is likely maintained in a computer database somewhere in a building with no windows.

There’s no physical ‘money’ backing up this bank balance. It’s an annotation in a computer. Every bank customer’s savings is part of this complex system of accounting entries.

When you transfer money to your kids, the bank doesn’t send them a FedEx full of cash.

They merely make an entry in the ledger reducing your balance and increasing your kids’.

The same thing happens when you swipe your Mastercard to pay for something; banks exchange accounting entries that credit the vendor’s account and debit your own.

Nothing physical ever changes hands, it all takes place in digital ledgers.

Given that this type of money exceeds physical cash by a factor of 10:1, you could argue that most modern currencies are digital.

3) Government bonds

Government bonds are another form of money that people often forget about.

Most people will keep the majority of their life’s savings in the second form of money– in the bank.

But big banks or companies like Google or Apple that have tens of billions don’t keep such vast sums sitting in the bank. Certainly not all of it.

Banks only have a certain limit on deposit insurance. In the US right now it’s $250,000… which doesn’t quite cover Google’s $70 billion savings.

These companies and institutions need a ‘safe’, highly liquid alternative to banking (i.e. they can quickly buy and sell the investment).

And that’s why they turn to government bonds.

In finance, government bonds are typically considered ‘cash equivalents’. Especially in the United States.

US government bonds, in fact, are the most popular, most liquid investment in the world. You can buy and sell them in an instant.

Companies, institutions, banks, and even foreign governments around the globe buy US government bonds precisely because of this ‘cash equivalent’ status.

This means that if the Chinese government is doing a deal with an African government for $1 billion, they can conduct the transaction using US government bonds as the currency.

Here’s the problem…

Right now, each of these is basically considered the same thing. It’s just different versions of the same money, i.e. $1 million in government bonds equals a $1 million bank balance equals one million pieces of paper with George Washington’s face.

But in actuality they are three entirely separate currencies: Physical cash, digital cash, and government IOUs.

AT the moment they just happen to have a 1:1:1 exchange rate, i.e. they’re freely interchangeable at parity.

But that 1:1:1 exchange rate depends on financial stability. And when there are serious problems, the exchange rate breaks down rapidly.

Think back to 2013 when the government of Cyprus froze bank accounts across the entire country. For weeks no one could access their bank balances.

Clearly in an instance like this, the value of a bank balance becomes worthless. The only way to conduct a transaction was with physical cash.

So in the event of a banking crisis, the exchange rate quickly changes. Physical cash becomes much more valuable.

It’s the same thing in a government debt crisis.

It’s bizarre to think that the bonds of a bankrupt government are a widely accepted form of ‘risk-free’ savings among institutions.

But what happens when that bankrupt government defaults, or has to restructure its debt?

The entire system breaks down. Suddenly the bonds are no longer ‘cash equivalents’, and there’s a scramble to dump them and find another safe, reliable investment.

Similarly, the 1:1:1 exchange rate quickly breaks down, just like it did recently in Greece.

This is ultimately why it makes sense to hold some physical cash.

You certainly won’t be worse off for holding some physical cash savings in a safe at home, especially since interest rates on bank balances are essentially zero.

Physical cash is by no means a panacea; it’s nothing more than a piece of paper printed by a government agency at the behest of unelected central bank committee.

Fundamentally it has zero intrinsic value other than the heat it generates in BTUs.

And in the long run all paper currencies will reach this intrinsic value, with future historians wondering with utter incredulity how we could be so silly to assign any value to paper.

But in the short term, holding at least some physical cash makes sense as a hedge against financial calamity.

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[Editor’s Note: As we’re coming up on the end of the year, we thought it would be appropriate to republish some of our most popular articles from 2017. Today’s was originally published on May 18]

On September 17, 1787 on the final day of the Constitutional Convention in Philadelphia, Benjamin Franklin was approached by a woman as he walked out of Independence Hall.

“Well Doctor, what have we got– a republic, or a monarchy?” she asked.

It was a burning question on everyone’s mind: what form of government would the Constitutional delegates establish for the new country?

Franklin didn’t hesitate. “A republic– if you can keep it.”

(The exchange was noted by Maryland delegate James McHenry and included in the Records of the Federal Convention of 1787.)

Franklin’s answer spoke volumes.

The Constitutional Convention had just ended, and it had been a bitter four months as the delegates fought and argued over every single word in the draft.

Factions had developed. Some delegates wanted a federal government with absolute power. Others wanted fewer guaranteed liberties for individuals.

Franklin knew that the representative government he had worked so hard to establish was incredibly fragile, and that it could easily slip away.

It was the same fight two years later when the 1st United States Congress fought over whether or not to establish a Bill of Rights.

As one delegate wrote, “Bill of Rights– useful, but not essential.”

Once again, after months of bitter arguments, Congress finally reached a compromise in September 1789, approving ten Constitutional amendments that guaranteed certain freedoms for the people.

More than two centuries later it’s clear that most of what they worked to achieve has completely changed.

The First Amendment, which ensures that Congress can make no law restricting freedom of speech, press, religion, and peaceable assembly, has become almost a punch line.

Ironically the greatest assault on Free Speech today doesn’t even come from government, but from university students who protest against any ideas they find offensive.

Violence on university campuses is now common as students come out of their Safe Spaces to physically obstruct and violently impede controversial speakers.

Any statement that doesn’t conform to their very narrow agenda is now considered hate speech.

And it’s the students themselves who want any sign of dissent banned, and more mandatory indoctrination of their newspeak ideology.

Then there’s the Second Amendment, which guarantees “the right of the people to keep and bear arms, shall not be infringed.”

This one seems to be under fire on a regular basis, with mainstream media from Rolling Stone to Vanity Fair calling for its outright repeal.

The Third Amendment guarantees that no soldier shall be quartered in any home without the consent of the owner.

This seems almost a quaint, obsolete historical reference at this point given that the US military hasn’t had to be housed among the civilian population… ever.

So, OK, great. The Third Amendment is still in-tact.

Then there’s the Fourth Amendment, which ensures “the Right of the People to be secure in their houses, papers, and effects, against unreasonable searches and seizures, shall not be violated.”

Forget it. The federal government spends tens of billions of dollars each year to illegally spy on EVERYONE, including Americans and American allies. This one is a total joke.

The Fifth Amendment is a big one.

It ensures that no one can be held to answer for a crime, including a felony, without grand jury indictment.

This protection died a few years ago when Barack Obama signed the National Defense Authorization Act for Fiscal Year 2012, which authorized the military detention of US citizens on US soil, no due process required.

The Fifth Amendment also famously protects against self-incrimination, ensuring that an individual cannot be called as a witness against himself.

This provision is also gone, considering that legal precedent now exists for police to force you to give up your mobile phone or computer password.

The Sixth Amendment guarantees due process, that in a criminal trial, “the accused shall enjoy the right to a speedy and public trial, by an impartial jury. . .”

This is now a complete farce given the widespread use of top-secret FISA courts, military detention facilities, and drone-strike assassinations.

The Seventh Amendment guarantees the right to a jury trial if there’s a dispute over property that exceeds $20.

Now, the $20 threshold might be a little bit outdated (not that there’s any inflation!)

But considering that the government has stolen billions of dollars worth property from Americans through Civil Asset Forfeiture in recent years, all without a trial, it seems the Seventh Amendment isn’t worth the paper it’s printed on.

Then there’s the Eight Amendment, which protects against “cruel and unusual punishment.”

I thought about this one the other day when I was walking through the terminal at DFW International Airport.

A sign caught my eye that as prominent displayed on an emergency exit door, warning passers-by that opening the door was a violation of the law and subject to up to one year in prison.

I was dumbfounded. A year in prison for opening a door?

People go to jail and do hard time for smoking certain plants (but not others), failing to file tax forms, and a number of completely obscure and innocuous crimes.

There were four federal crimes when the Constitution was ratified. Today there are thousands. On any given day you and I probably commit several of them without even knowing. And each comes with absolutely insane penalties.

The reality is that you cannot even apply for a passport anymore in the Land of the Free without being threatened with fines and imprisonment.

Last were the Ninth and Tenth Amendments, which were supposed to limit the power of the federal government in favor of the states and the people.

Those went out the window a LONG time ago, especially after 9/11.

Look, don’t get me wrong: I’m not suggesting that America is some vicious, brutal dictatorship. It’s not.

But anyone who has the courage to be honest and objective can see the obvious decay.

Benjamin Franklin’s warning is coming true. And the trend is accelerating.

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[Editor’s Note: As we’re coming up on the end of the year, we thought it would be appropriate to republish some of our most popular articles from 2017. Today’s was originally published on March 28]

A few weeks ago I caught wind of a guy who has citizenships from eight different countries.

This “octa-citizen” has passports from Canada, UK, Ireland, Belize, Grenada, Dominica, St. Kitts, and Cape Verde.

Let’s be honest– that’s probably way too many. But the concept of acquiring multiple nationalities is completely sound.

If you have one nationality, it means that a single government has total control over your life, your finances, your business, and your personal affairs.

It means that you’re chained to the consequences of that single government’s decisions, no matter how destructive, no matter whether or not your agree.

If they decide to provoke another shooting war and impose a draft… or levy debilitating taxes… or print so much money that the consequent inflation causes social unrest… then you have little recourse.

A second passport is like an insurance policy.

Sure, hopefully you never need it. And hopefully you never need the fire insurance policy that protects your home either.

But if that day ever comes when you smell smoke, you’ll thank your lucky stars that you’re covered.

Having another citizenship means that if the worst ever happens in your home country, you’ll always have a place to go where you and your family are welcome to live, work, study, invest, and do business in peace and safety.

Again, maybe that never happens. HOPEFULLY that never happens.

But it seems risky to bet everything on hope, especially when there are so many substantial risks looming.

We often discuss the pending insolvency of some of the world’s most important central banks, as well as the outright bankruptcy of nearly every major western government.

History shows that countries in this position almost invariably experience severe problems as a result of their excessive debts and irresponsibility.

And it would be terribly foolish to simply ‘hope’ that repeating these same mistakes will somehow result in zero consequences.

Having a second passport doesn’t mean that you’re crazy, pessimistic, or even unpatriotic.

It’s just a sensible thing to do.

Worst case, even if you never actually need the ‘insurance policy’ of having another nationality, a second passport will provide additional options for visa-free travel and international business.

For example, US citizens who want to travel to Brazil need to obtain a visa in advance.

But citizens from dozens of other countries, from Argentina to Belgium, do not.

Being a citizen of certain countries (like Mexico, for example) entitles you to own certain property or start special businesses.

Again, maybe you wouldn’t ever use these benefits. But it’s hard to imagine you’ll be worse off for having additional options.

More importantly, remember that a second passport can often extend to your family as well.

So even if you don’t see yourself traveling or doing business or buying property abroad, your children and grandchildren might want to do so.

Obtaining a second passport will provide those same options and benefits to them. It’s a perpetual gift that you can give to future generations of your family.

So how does one actually obtain a second passport?

Well, you can pay for one.

St. Kitts, Dominica, Antigua, Cyprus, Malta, Grenada, etc. all have formal programs which grant citizenship to foreigners in exchange for a large investment or donation.

These can cost anywhere from $100,000+ to more than $2 million… which is a LOT to spend on an insurance policy for most people.

Fortunately there are easier (and cheaper) ways.

The simplest and most cost effective way to obtain another passport, by far, is to go back to your family tree.

If you have parents or even grandparents from places like Ireland, Poland, Italy, Lithuania, and literally dozens of other places around the world, you may be able to apply for citizenship.

If you think you might qualify, the best place to start is with the local consulate nearest you.

Call and ask them– they’ll be able to walk you through the process and documentation requirements.

If you’re not part of the lucky bloodline club, no worries, there are still other options.

Plenty of countries around the world allow foreigners to become naturalized citizens after a certain period of time as a legal resident in the country.

Panama is a great example; after five years of legal residency, foreigners qualify to apply for naturalization and citizenship.

This doesn’t mean you actually need to move overseas (but trust me, it can be an amazing experience if you do.)

Many countries, including Panama, have favorable legislation where you can still be considered a legal resident and eventually qualify to apply for naturalized citizenship without actually living there.

This is an incredibly easy option– all it takes is time and patience.

As a final option, if you’re planning on having children, you might consider heading overseas for the birth.

Most countries in the Western Hemisphere award instant citizenship to any child born in their territory.

This includes the United States, Canada, Mexico, and just about every country in Latin America.

I flew some of my relatives to Chile a few years ago for this reason– their child was born in Santiago and will be able to enjoy the additional options and benefits of Chilean nationality for life.

This is literally a life-long gift you can give to your child; and it will likely pass on to their children, and their children’s children, all because of actions that you take.

There are very few things within our power that have such a lasting, multi-generational impact.

Citizenship is one of the most important.

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[Editor’s Note: As we’re coming up on the end of the year, we thought it would be appropriate to republish some of our most popular articles from 2017. Today’s was originally published on April 24]

In a poll conducted a few days ago by NBC News / Wall Street Journal, a record 57% of Americans responded that they want MORE government in their lives, and that the government should be doing more to solve people’s problems.

That’s the highest percentage since they started asking this question in 1995.

In fact, 57% is nearly double what people responded in the mid-90s.

Furthermore, the number of Americans who feel the opposite, i.e. responded that the government is doing too many things that should be left to private businesses and individuals, fell to a near record-low 39%.

Bottom line: people want more government.

It’s hard to even know where to begin with this.

First- more government is nearly an impossibility.

As I’ve written several times in the past, the US federal government already spends almost all of its tax revenue on mandatory entitlements like Social Security, and interest on the debt.

They could literally cut nearly everything we think of as government– national parks, Homeland Security, even the IRS– and still not make a dent in paying down the national debt.

According to the US government’s own financial statements, their net operating loss in 2016 was an unbelievable $1.05 TRILLION.

Think about that– they lost more than a trillion dollars in a completely unremarkable year.

They weren’t waging world war, funding a major infrastructure project, or dealing with an economic crisis.

It was just business as usual. And they STILL lost over a trillion dollars.

More government is going to cost even more money that they don’t have… which means even more debt and even more pain in the future.

The usual refrain is to pay for more government programs by raising taxes on the rich, or big corporations, or whoever the evil villain du jour is.

Anyone who thinks this actually works needs to study history.

Simply put, RAISING TAXES DOES NOT RAISE TAX REVENUE.

I wish every Bernie Sanders voter could understand this very simple fact:

Since the end of World War II, US federal government tax revenue as a percentage of GDP has been nearly constant at 17%.

In other words, while the actual dollar amount of tax revenue goes up every year due to inflation and economic expansion, the government’s slice of the total economic pie is 17%.

Yet during the previous eight decades, actual -tax rates- have been all over the board– sometimes rates were higher, sometimes rates were lower.

Back in 1963, for example, the highest marginal tax rate on individuals exceeded an unbelievable 90%.

I’m sure there are plenty of Americans who would love to see the wealthiest citizens paying 90% again.

Yet in 1963, even with rates that high, the total amount of tax revenue that the US government collected was 16.7% of GDP.

In 1988 when the highest tax rate was slashed to just 28% under Ronald Reagan, total tax revenue 17.3% of GDP.

It doesn’t matter if tax rates were high or low– the actual tax revenue that the government collects stays constant at around 17% of GDP.

This raises a point that these socialists never seem to understand:

If the government’s slice of the pie never seems to change no matter how high or how low tax rates are, shouldn’t they focus on making the pie bigger?

Duh.

And it seems intuitive that higher taxes obstruct economic growth (i.e. make the pie smaller) because there’s less money in people’s pockets to spend and invest.

Then, of course, we have to touch on the issue of competence.

It’s absurd to want a government that has a nearly interminable track record of overreach, waste, and failure, to be even MORE involved in people’s lives.

We’re talking about the same institution that wastes taxpayer money to study monkeys on treadmills…

… or spent $1 billion to destroy $16 billion worth of perfectly good ammunition…

… or $2 billion to build a website.

It’s extraordinary that these people are already in charge of educating our children, regulating our savings, and now our medical care.

It’s even more appalling that given such dismal performance people want more.

As the old saying goes, the classic definition of insanity is trying the same thing over and over again and expecting a different result.

A final point I’ll mention is that it’s concerning to see people in the Land of the Free and Home of the Brave expect the government to solve their problems.

What ever happened to self-reliance? The pioneering spirit? Good ole’ American can-do ingenuity?

In truth there are countless ways for a motivated person to solve problems. Or at least to make forward progress.

For example, to all these kids that have their hands out demanding free university education, I always ask the same questions:

How many books did you read in the last twelve months?

How many FREE online courses from Harvard and MIT did you take?

Are you actually doing anything to help yourself? Or are you just whining on social media about how no one is giving you anything for free?

America was founded as a place where people take responsibility for themselves.

But this now seems to be an outdated, minority view.

The Land of the Free is truly becoming the Land of Getting Free Stuff.

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It happened again. Last week, hackers stole 4,700 Bitcoins (over $80 million at today’s price) from mining marketplace NiceHash.

(The company pairs up people with spare computing power with others who are willing to pay to use that capacity to mine Bitcoin– and then announced they would reimburse users who lost money from the hack.)

On top of that, last month hackers stole $31 million of another cryptocurrency called Tether.

But those are only two recent attacks.

Remember Mt. Gox?

The Bitcoin exchange was founded 2010. By 2013, it was handling around 80% of all Bitcoin transactions.

Then the company halted all trading after “technical issues” caused 850,000 Bitcoins to go missing.

Those missing coins are worth over $15 billion at today’s price.

All of the crypto theft making people question the security of Bitcoin and other digital currencies.

But it’s important to remember, in these cases, “Bitcoin” didn’t get hacked… it was the exchanges or marketplaces that got hacked.

This happens almost every day; people unwittingly get their phones and emails hacked and end up losing their cryptocurrency in the process.

It reminds me of the early days of the Internet, back when WiFi was still a new thing and banks were just starting to provide online account access.

Back then, hacks were commonplace. Users didn’t know enough about wireless network security, and banks didn’t have SSL enabled… so hackers could easily ‘sniff’ data packets and steal bank login details.

Fast forward 10-15 years and all of that’s changed.

Most people at this point (hopefully) know how to secure their WiFi networks with WPA2 security or better, and banks employ much better security and encryption standards.

But with cryptocurrencies it’s still very Wild West out there, vastly increasing the chances of hacks, cracks, and theft.

You’d be amazed, for example, how many people use a ridiculously unsecure password like “123456” for a website login that stores their Bitcoin secret key.

And even if hackers don’t steal your crypto, there’s still a chance you’ll lose it.

A friend of mine bought some Bitcoin in 2010 and stored it on a laptop. Then he threw the laptop away… along with all the Bitcoin. And there’s no way to get it back.

Like just about anything, all it takes is a little bit of education to prevent a major disaster from occurring.

One approach I encourage you to learn about for storing crypto is called “cold storage.”

Before I define cold storage, a bit of background if you’re unfamiliar with how the public key/private key system works.

A public key is a code available to anyone who trades cryptocurrency with you. A private key is a secret, alphanumeric number never to share with anyone.

Imagine a cryptocurrency public key is your home address. That address is in just about every public database imaginable, from the county clerk’s property registry to the local phone book.

And if you want someone to send you mail, you give them your address. Easy.

But the simple fact that someone has your home address doesn’t give them access to the inside of your house, and the contents within it.

No, for that, they’ll need your house key. And that’s essentially what your crypto private key is: something that allows only you to access the property.

So: public key = home mailing address, private key = house key.

Clearly it makes sense to safeguard your house key. You wouldn’t make copies and distribute them in public to everyone who walks by.

Similarly it makes sense to safeguard your private key (sometimes called secret key).

When you store your cryptocurrency with an exchange, or even in a web or mobile wallet, it means that some other service or application has control of your private key.

If they get hacked, you’ll lose everything. If they go rogue, you’ll lose everything.

I’m always amazed that so many people store crypto in this way.

Part of the benefit of holding crypto is that you can essentially be your own banker, i.e. there is no middle man between you and your savings.

Bottom line, you don’t need some website storing your key online for you. With a bit of education, it’s possible to create your own wallet and store the private key -offline-.

This is what’s known as cold storage.

Bear in mind that a private key is nothing more than a string of digits, something like

5Kb8kLf9zgWQnogidRq76MzPL6TsZZY36hWXMssSzNydYXYB9KF

If you really wanted you could simply write this down on a piece of paper, or even memorize it if you’re so inclined (though those methods are prone to errors).

But one safer option is to go to a site like bitaddress.org, which is a client-side application to create a public/private key pair.

This is important, because once you load the page you can actually disconnect your computer from the Internet entirely, ensuring that no one is spying or sniffing on your activity.

(There are other steps you can take to be even more secure, like setting up a stand-alone virtual machine solely for creating a wallet– but we’ll save those for another time.)

The page will go through a process to generate a key, and when prompted, you can choose the “paper wallet” option.

At that point you can simply print your paper wallet, put it in your home safe (or wherever you store your other valuables), and never give it to anyone.

Once you’ve secured your paper wallet in your safe, the bulk of your crypto wealth is offline and safe from computer glitches or hacks.

And the next time some poor soul loses his hard drive… or another major Bitcoin exchange gets hacked… you can rest assured that your crypto wealth is safe.

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In a move almost destined to prove that laws and policies have absolutely zero meaning, the European Union released a list of “tax havens” last week… with a massive, giant, highly conspicuous omission.

The blacklist contains the names of the usual suspects– Panama, United Arab Emirates, etc., along with a few additions like Mongolia and Marshall Islands.

But, again, conspicuously missing from this list is far and away the biggest tax haven in the world– none other than the United States of America.

It’s hard for US taxpayers to imagine the Land of the Free being a tax haven.

Americans are taxed heavily on ALL of their income, no matter where in the world they live.

Americans are taxed when they earn, when they save, when they spend and when they die.

And yet, for non-Americans, the US is a treasure trove of tax-free anonymity.

Non-Americans can register completely anonymous corporations and LLCs in nearly every state in the US, with some of the stronger jurisdictions being Delaware, Nevada, Wyoming, New Mexico and South Dakota.

And their name need never appear, ever, on any of the documents.

They can establish bank accounts and brokerage accounts with those anonymous corporations. They can purchase real estate with those anonymous corporations.

Moreover, non-Americans can easily establish bank and brokerage accounts overseas, and use their anonymous US companies to engage in business all over the world.

And in many cases, non-Americans can generate unlimited capital gains on their stock and bond investments and pay absolutely zero tax to Uncle Sam.

It’s a hell of a deal, far better than what the countries on the EU blacklist offer.

The EU’s list is supposed to call out a handful of nations for refusing to comply with international tax reporting and information sharing agreements– most notably the worldwide “Common Reporting Standards” (CRS) that came into effect last year.

CRS is basically a worldwide information-sharing agreement about taxes, banking transactions, and business activity.

Dozens of countries have signed up for it.

What’s totally bizarre is that a number of jurisdictions on the EU’s blacklist are already reporting, or scheduled to begin reporting, in accordance with CRS.

Panama and Marshall Islands, for example, will begin reporting in 2018. South Korea, which also made the EU blacklist, has already started reporting.

The United States, on the other hand, is not signatory to CRS, and the US government has stated it has zero intention of joining CRS.

And yet South Korea is on the blacklist and the US is not.

These lists are completely meaningless… the whole exercise is a wasteful farce.

Even the premise is deeply flawed. These EU bureaucrats are so terrified that an individual somewhere in the world might actually be able to exercise some financial privacy.

But they can’t handle that. They turn apoplectic at the thought of not being able to know everything you’ve ever done with your money.

They’re also hell bent on taking as much of it for themselves as possible.

Rather than trying to attract talented entrepreneurs, investors, businesses, and workers with low taxes and friendly government regimes, they terrorize everyone with higher taxes and increasingly socialist policies.

It’s not working.

Nearly a decade after the financial crisis, Europe still has appallingly high youth unemployment rates (roughly 40% in Greece, Italy, Spain) and banking systems that teeter on failure.

But a clear track record of failure has never stopped self-aggrandizing politicians from trying the same thing and expecting different results.

The end game of this insanity is that the EU now blames other countries for the failures of its own idiotic policies.

It’s all quite pathetic.

The good news here is that very little will really change.

Some of the countries on the black list may modify their tax codes to appease EU bureaucrats.

But some of the best tax strategies in the world won’t change in the slightest.

Bear in mind, there’s absolutely nothing wrong with taking legal steps to reduce the amount of tax that you owe. On the contrary, it’s just good sense.

US judge and legal philosopher Billings Learned Hand summed it up best when he wrote,

“Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.”

And regardless of the EU’s temper tantrum, there are still countless ways for businesses in the 21st century to slash their tax bills.

One of them is Puerto Rico’s Export Services Act, also known as Act 20.

I’ve written about this a number of times– it’s an incredibly attractive law that allows all sorts of businesses to domicile in Puerto Rico with a corporate tax rate of just 4%.

This applies to industries ranging from various online businesses to consulting services, financial services, marketing services, and much more.

And ANYONE can realize these benefits, regardless of whether or not you’re a US citizen.

As a US territory, Puerto Rico isn’t on anyone’s blacklist.

And even despite all the misfortune the island has endured over the past year, the government there is doubling down on the tax incentives… and recently expanded a number of programs to make them even more attractive.

Puerto Rico may prove to be a fantastic option for your existing or prospective business; I’ve even structured one of my businesses there, and we’re looking at setting up another one there too.

These tax incentives are real… and could legally save you tens of thousands… hundreds of thousands… even millions per year.

That level of savings can have an enormous impact on your life, and it’s worth considering.

If you’re interested in learning more about it, we’ve created a report that explains the tax incentives in greater detail and tells you how to get started reducing taxes in Puerto Rico.

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Recently a group of archaeologists and anthropologists published a really interesting, comprehensive study of prehistoric civilizations and their sources in wealth.

It turns out that the most prosperous people and civilizations across ancient history– and I’m talking 10,000+ years ago before any recorded history– were those who harnessed new technologies to become more productive.

Back then it was all about agriculture.

And while it all seems so simple and obvious to us now, the use of large animals like horses and oxen to plow fields was considered game-changing technology for these prehistoric tribes.

The researchers surveyed data across a number of civilizations and found a much higher level of prosperity in places that used animals, versus places where farmers plowed their fields by hand.

The use of animals was a huge multiple of human labor, so farmers could extend their fields far beyond what was ever thought possible… and hence produce a massive surplus of food.

Moreover, they soon discovered that animal manure was an effective fertilizer that only enhanced crop yields.

More volume, more efficiency, higher yields… precisely the results that great technology produces.

Quite simply, the people and civilizations which embraced and used the technology prospered. Those who didn’t got left behind.

We’ve seen this over and over again throughout history. The printing press. The advent of machinery in the Industrial Revolution. The emergence of the microchip. The Internet.

Now it’s the technology behind cryptofinance which absolutely has revolutionary power to disrupt the existing financial system.

Think about it– every single financial function that banks currently monopolize, from deposits to lending to money transfers and currency exchange, can already be done better, faster, and cheaper outside of the banking system.

Banks take days to transfer funds. Blockchain transactions take an hour, maybe minutes… sometimes seconds.

Banks charge exorbitant fees to change from one currency into another, as if they have to put a ton of work into finding a buyer for their customers’ euros and US dollars. Give me a break.

Online platforms can do it at practically no cost.

Banks also charge exorbitant fees to make loans; it’s pretty standard for borrowers to pay at least a 1% to 3% origination fee up front, before you start paying interest.

Yet Peer-to-Peer sites squash these costs down to almost nothing.

Banks no longer have a competitive advantage in finance, and it’s only going to get worse for them.

The technology is powerful and game-changing. And again, those who don’t adapt will be left behind.

On the flip side, it’s obvious that a lot of people have made a lot of money in cryptocurrency.

And that’s great. Plenty of money has been made… and there may likely be plenty more money to be made speculating in the cryptocurrencies themselves.

But the big money has always been made by the folks who were on the forefront of developing the technology and applying it to bigger and bolder uses… NOT speculating on price volatility.

Back in ancient times, once people discovered that horses and oxen could multiply the labor of human beings, there were probably plenty of traders who made money speculating in animal prices.

But the real wealth was made by people who applied that new ‘technology’ to bigger problems and fundamentally changed the way their societies did business.

This will very much be the case with crypofinance.

The real prosperity isn’t in chasing the Bitcoin price higher, and certainly not in the latest ICO craze.

The real prosperity will be for the visionaries, entrepreneurs, and investors who back them– those who develop this technology and apply it in ways that fundamentally change the way we engage in finance and commerce.

So if you feel like you ‘missed’ Bitcoin, don’t worry: we’re just at the beginning of this phase… you haven’t missed anything.

In fact we haven’t even begun to scratch the surface of those application opportunities.

And the wealth and value that will be created from them will absolutely dwarf all the gains made in crypto so far. We haven’t seen anything yet.

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