Category: simonblack

Jamie Dimon, the CEO of JP Morgan Chase, did not open his annual shareholder letter with rosy language about the state of the world, or even enthusiasm about his bank’s record profits.

Instead, he describes “yet another year of significant challenges” including the war in Ukraine, war in the Middle East, extreme tensions with China, higher food and energy prices, turmoil in the banking sector, outrageous government deficits, and even major risks with the Federal Reserve’s monetary policy.

Dimon writes that “America’s global leadership role is being challenged outside by other nations and inside by our polarized electorate,” and that this is a “time of great crises”.

He went on with a few charts and thoughts about the bank’s business and financial performance over the last year… and then dedicated most of the remaining 57 pages of his letter to the serious problems which face the world.

His observations are wide-reaching– from the decay of social cohesion to the prospect of war and higher inflation, to the serious potential for a reset of the Bretton Woods system (which made the US dollar the world’s reserve currency.)

Frankly the letter almost reads as a manifesto written by someone who is completely fed up with government incompetence and positioning himself to run for office. I can’t agree with everything he says, but it’s obvious that his ideas are balanced and well thought out.

There are a few points in particular worth repeating.

1.Keep it in perspective; the world is not coming to an end

“If you read he newspaper from virtually any day of any year since World War II,” Dimon writes, “there is abundant coverage on wars — hot and cold — inflation, recession, polarized politics, terrorist attacks, migration and starvation. As appalling as these events have been, the world was generally on a path to becoming stronger and safer.”

This is absolutely a true statement. It’s easy to get caught up in the negativity while missing the abundance of growth and opportunity.

In the year 1918, most people probably thought that the world was coming to an end. The Great War was at its peak, economies were faltering, inflation was surging, rationing and shortages were everywhere… and then the Spanish flu popped up and killed tens of millions of people.

Bleak times indeed. And yet the next century was the most prosperous in human history… despite a very bumpy path along the way.

This is similar to where we are today. Yes, Inspired Idiots have caused a gigantic mess. But the general trajectory of the human species is still improving.

2.That said, long-term risks should not be underestimated. Especially for the West.

Dimon finds that there is “too much emphasis on short-term, monthly data and too little on long-term trends”, and he talks about inflation as a great example.

Economists and investors tend to be almost singularly focused on monthly inflation reports in an effort to divine if and when the Federal Reserve will cut interest rates.

They’re entirely missing the point, Dimon writes. Month by month, and even year by year, inflation numbers could vary wildly. But if you look at the big picture, you’ll see substantial evidence for future inflation.

We’ve been writing about this for a long time. In fact, since inception we’ve only been focused on long-term trends… and we see these as highly inflationary.

Similar to our view, Dimon understands how “ongoing fiscal [deficit] spending, remilitarization of the world, restructuring of global trade, capital needs of the new green economy, and possibly higher energy costs in the future” are all inflationary in the long run.

The inflation might not show up next month or next quarter, but he believes (as do we) that the coming years are full of “persistent inflationary pressures”.

There are also significant risks to the current US-led global order; America’s influence is waning, and Dimon writes that the “international rules-based order established by the Western world after World War II is clearly under attack by outside forces, somewhat weakened by its own failures [and] confusing and overlapping regime of policies.”

As part of this, he talks about the distinct possibility for a reset of the post-WW2  financial system (known as Bretton Woods) that anointed the US dollar as the global reserve currency. He puts it succinctly: “we may need a new Bretton Woods.”

We’ve been writing about this for years; the dollar’s decline is a long-term trend, but for us, it’s an obvious one. You cannot run multi-trillion dollar deficits each year and still expect to be the world’s economic superpower.

It’s notable that even someone like Dimon can see this coming.

3.These problems are still solvable.

We’ve written extensively that the problems facing the US and the West are still solvable. For now. But every year that the problems continue to be ignored brings the country closer to a point of no return… where there is no way out but default.

Dimon is not shy about offering up suggestions, many of which we have written about in the past. He talks about border security, streamlining sensible regulations, and economic policies which prioritize growth.

“Unfortunately,” Dimon writes, “the message America hears is that the federal government does not value business — that business is the problem and not part of the solution.”

“There are fewer individuals in government who have any significant experience in starting or running a company, which is apparent every day in the political rhetoric that demonizes businesses and free enterprise and that damages confidence in American’s institutions.”

He says he finds it “astounding that many in Congress know what to do and want to do it but are simply unable to pass legislation because of partisan politics”.

He goes on to list a multitude of government failures and the “staggering number of policies, systems, and operations that are underperforming”, including pitiful public schools, broken healthcare, infrastructure woes (especially the energy grid), terrible immigration policy, Social Security’s looming insolvency, and more.

Dimon states very clearly that the federal government “needs to earn back trust through competence and effective policymaking.”

True statement. But I’m not holding my breath. Because in related news, the White House just announced that Joe Biden is working on yet another way to forgive student debt for 30 million Americans.

He doesn’t seem to care that the Supreme Court already rejected his previous effort to forgive student debt, saying he did not have the legal authority.

It’s pathetic that the cost of university education is so high… especially given how many degrees in an AI-world are useless. Plus many universities these days are just hotbeds of radicalization. It hardly seems worth taking on $80,000 of debt for such a dubious outcome.

But nevertheless, taxpayers have footed the bill for college and loaned out over $1 trillion to students across the country.

This is a basic tenet of capitalism (which Mr. Biden claims to embrace): debts have to be paid.

But because this guy’s poll numbers are so pathetic– especially with young people– he’s trying to score points by canceling their debts.

Well, canceling student debt means that taxpayers will lose hundreds of billions in loans that they made. So rather than taking steps to strengthen America’s balance sheet, the President is once again violating the law to make the balance sheet worse… all to improve his image among young voters.

This is hardly a way to restore trust in government. So again, I’m not holding my breath.

Dimon’s letter is worth the read if you have the time. You might not agree with everything he says, but it is rather telling that the CEO of the country’s largest bank is speaking so plainly about obvious risks.

It’s another reminder of why it makes so much sense to have a Plan B.

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Did you hear about the newest vehicle safety feature that Congress wants to mandate?

It’s not some AI sensor system, or even a newfangled airbag.

Nope. In the minds of literally several hundred lawmakers (from both parties!) the most essential safety feature that should be in your vehicle is… AM RADIO!

The “technology” behind AM radio is so old it even predates Joe Biden. In fact it almost predates the automobile itself.

But while the automobile has undergone tremendous evolution over the past 100+ years, AM radio is still essentially the same as it was back during the first broadcast on Christmas Eve, 1906: fuzzy and low quality.

Perhaps that’s why most consumers abandoned AM radio long ago, ditching it for FM, then satellite, and now streaming.

So few consumers listen to AM radio that many cars don’t even come equipped with it anymore; for manufacturers, it’s not worth spending on a part that consumers don’t want.

And for some cars— specifically electric vehicles— AM radios can cause dangerous interference with sensitive electronic components… so some EV manufacturers have removed analogue AM receivers to make their vehicles safer.

Of course, consumers who really want to listen to AM radio programs can always subscribe to digital AM streaming services.

But that’s not good enough for politicians who have a history of ignoring what US consumers want. If you’re not interested in AM Radio, well too bad. AOC and Joe Biden are going to decide for you.

The “AM Radio for Every Vehicle Act” was first introduced in Congress last May to force every vehicle manufacturer to include an analog AM radio receiver.

Their entire reasoning was captured in just a single line:

“AM broadcast stations are often used to deliver emergency alerts and news and entertainment programming; some newer vehicles do not include AM equipment”

Is it 1955? When was the last time that anyone received an emergency alert on AM radio? Totally nuts.

Fortunately the bill went absolutely nowhere at first.

But bad legislative ideas are like cockroaches. They never actually die. They linger forever and multiply until they eventually take over the House.

Fast forward nearly a year later, and it turns out that 47 Senators and 237 Representatives have signed on in support of the deal.

And Joe Biden (probably the only guy in America who still listens to AM radio) is ready to sign it. It’s almost assured to become law.

Now, this is not the most destructive legislation in US history. In fact the main consequence of the AM radio mandate is that vehicles will cost a bit more.

But it does provide hilarious insight into their short-sighted thinking… if they’re even capable of thinking at all.

Remember, about a week ago, the Biden administration decreed that 50% of all new cars sold in the US by 2030 will have to be electric vehicles (even though only 8% of consumers choose to buy them today).

But wait— AM radio produces dangerous interference for in sensitive EV components, making electrical vehicles LESS SAFE.

So this AM radio bill, which aims to make people more safe, will actually make Electric Vehicles less safe. And Mr. Biden has decreed that at least half of Americans will be driving these less safe EVs in six years.

You just can’t make up this level of stupidity.

There’s a common line of thinking these days that the people in charge are deliberately trying to destroy America.

Well, with such idiotic and conflicting mandates, it’s getting harder to ignore that conclusion.

Politicians are forging ahead with idiotic priorities as if the country isn’t barreling towards the edge of a cliff.

They’re doing nothing about the border. Nothing about the budget deficit. Nothing about Social Security. Nothing about decline of America’s military power. Nothing about the dollar’s rapid loss of credibility. Nothing about the mountain of regulations that debilitate economy productivity. Nothing about preventing World War III.

But hey, when it comes to the REALLY important issues like AM radio, these ‘leaders’ really get down to business.

And by the way, the AM mandate is a bipartisan bill.

Republicans are in favor because there are plenty of conservative talk shows on AM radio.

Democrats are in favor because they use AM radio to reach Spanish speaking voters.

Never mind what’s good for the country, or good for producers, or good for consumers. Congress has its own agenda.

This should come at no surprise; with an abysmal 12% approval rating, everyone seems to know how terrible Congress is.

Yet, quite bizarrely, 96% of incumbents were reelected to Congress in 2020. So voters seem to agree that Congress is terrible. But it’s apparently all the other Congressmen who are incompetent. Their guys is doing a great job.

This is why I have such little confidence that politicians will turn this ship around; voters keep sending the same people to Washington… who have once again proven that they are totally out of touch with America’s priorities.

This is the most critical point to understand: politicians are most likely not going to solve the problems that they themselves have created.

And yet there are solutions that each of us, as individuals, can use.

If the Inspired Idiots are bent on engineering higher energy prices and higher inflation, there are ways we can reduce those consequences and even benefit financially.

If the Inspired Idiots are going to raise taxes through the roof, there are completely legitimate ways to reduce those as well.

If the Inspired Idiots are going to bankrupt Social Security (which the program itself anticipates within a decade), there are ways to structure a robust retirement account to offset the impact.

Whatever destruction they come up with, there are ways around it. It just takes a little bit of education and the will to take action.

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Did you hear about the new streamlined tourist visa to Saudi Arabia? I’m sure you’re standing in line for it already.

No? Me neither.

I was actually stationed in Saudi Arabia for a while when I was in the Army… and, the most unique ‘tourist’ attraction, at least for non-Muslims, is a place we used to call “Chop Chop Square” where they would do the public beheadings and dismemberments of convicted criminals.

Aside from that, Saudi has virtually nothing to offer tourists. At least for now.

But over the past few years the government has set itself on a path to building massive futuristic cities and giant resorts in an effort to bring tourists and diversify its economy– including a recently streamlined visa process.

But to me, this screams of desperation… because it means that Saudi Arabia’s oil industry is in serious trouble.

As recently as just a century ago, what we know as ‘Saudi Arabia’ today was just a bunch of nomadic tribes roaming the desert who were constantly at war with one another.

Then one day a tribal leader named Abdulaziz Ibn Saud rose to power, a bit like Genghis Khan, and conquered everyone else. And in 1932, he declared himself sole ruler of the newly established Kingdom of Saudi Arabia.

Initially he wasn’t King of much at all; Saudi Arabia was mostly just a desert backwater in the early 1930s.

But things began to change quickly when a major oil discovery was made in early March of 1938. And over the years, Saudi Arabia’s prominence in the world grew dramatically.

By 1970, Saudi Arabia had overtaken the United States as the world’s #1 oil producer, with daily output more than tripling over the course of that decade to roughly 10 million barrels per day.

Ever since then there has been almost a Homeric mythology that Saudi Arabia has a sort of inexhaustible ocean of oil, and they could just turn on a spigot and fill up millions of barrels.

But that’s simply not true.

In fact, more than 40 years later, Saudi Arabia today produces less oil today than they did in 1980. And there has long been speculation that Saudi oil reserves might actually be running low.

Not long ago, in fact, the Saudi government announced that they would make investments in their oil infrastructure to increase their maximum production capacity to 13 million barrels per day… but nothing further.

In other words, they set a hard ceiling for how much oil they were capable of producing, essentially shattering the mythology of their infinite oil capacity.

Then, just two months ago, they reversed their plans, and announced that their maximum drilling capacity would be 12 million barrels, and not 13 million.

Both of these should have been taken as obvious indicators that Saudi Arabia’s oil reserves are well past their peak… and that they know it.

But there is perhaps no greater indicator than the Saudi government’s desperate attempt to give  its economy a gigantic sexy makeover.

For example, Saudi Arabia is building a ski resort in the desert mountains… where it occasionally dips below freezing in the winter. Then there’s Neom, the futuristic megapolis planned for the coast of the Red Sea featuring flying cabs and an artificial moon.

Then there’s The Line, a city stretching for 170 kilometers across the desert. And of course there’s the Red Sea Project, a luxurious resort the size of Belgium.

The more Saudi Arabia launches these sorts of projects, the more obvious it becomes that they are running out of oil and are desperately trying to diversify their economy while they still have time.

The fact that Saudi Arabia even started selling off small pieces of its state-owned oil company, Saudi Aramco, back in late 2019 is another indicator.

They could have IPO’d in 1988… or 2005… or any other time. But they didn’t. It seems like they know they’re in decline, and they’re trying to monetize the mythology of their oil reserves while they still can.

Now, Saudi Arabia isn’t going to run out of oil anytime soon; rather, the larger point is that supply and demand fundamentals will likely lead to much higher oil prices in the future.

And this is very inflationary.

Oil is the most important energy commodity in the world, and so its price influences the price of just about everything. If oil price spike, then it’s not just the price of gasoline that goes up.

The cost of operating data centers with racks of servers and GPUs will increase. Food costs will increase. Manufacturing costs will increase. Virtually everything will increase in price.

Energy prices, like just about all prices, are ultimately about supply and demand. And the demand side is pretty easy to see— it will most likely continue increasing as emerging economies and global population grow.

Yes, there may be a time off in the future where oil is no longer necessary. But that’s still a long way out. Because guess what critical commodity you need to produce solar panels and wind turbines? Oil.

Meanwhile, on the supply side, it’s clear that one of the world’s biggest oil producers is in decline. At a minimum, they won’t be able to increase production commensurate with the increase in demand. And they’ve flat out admitted to that.

Meanwhile, another of the world’s biggest oil producers, the United States, is going out of its way to obstruct oil companies.

They create special taxes to penalize them. They refuse to follow the law and auction off concessions. They never miss an opportunity to demonize them.

Even in the financial industry, bankers and investors deprive the industry of the funds necessary for exploration. Hedge funds have taken over the Boards of major oil companies and forced them into inefficient green energy projects.

The United Nations hosts entire summits about phasing out oil production.

And let’s not forget about the fanatics who vandalize art museums and glitter bomb public sporting events to demand that the world “just stop” producing oil.

So, we have rising demand coupled with policies that restrict supply. The end result, predictably, has been rising oil prices, which are now hovering around $85-$90.

This is one of the reasons why the inflation numbers remain high; again, expensive energy impacts core inflation.

I write a lot about why we think the future is inflationary, and a lot of it has to do with the tidal wave of debt and government spending.

But that’s just one source of inflation. Higher energy prices are another.

Like the debt problem, however, the energy problem is also solvable. There’s plenty of oil in the world– the issue is just misguided policy. There are also other technologies (like nuclear) which can provide abundant, cheap, clean energy.

There doesn’t seem to be much appetite among the environmental fanatics who enjoy complaining, but not actually solving any problems.

Now, one way to offset this oil cost inflation is to own shares of the oil companies themselves; and right now, several of them that are very cheap since it’s apparently not socially acceptable to own them.

In our investment research newsletter the 4th Pillar, we highlighted a highly profitable oil producer that is practically debt-free, and trading at a very attractive Price/Earnings ratio of just 3.4.

The company was able to turn a strong profit when oil prices were low, and they’re positioned to do extremely well as oil prices go higher.

Of course, no one can be happy about the prospect of future inflation.

But there are solutions. And if you understand what’s likely coming, you can take steps now to reduce the impact or even potentially benefit from inflation.

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You probably heard the news: the Environmental Protection Agency (EPA) recently finalized new vehicle emissions regulations that essentially force Americans into buying electric vehicles.

The actual published regulation is 1,181 pages long… because, that’s what the US economy needs– a thousand more pages added to the 200,000+ existing pages in the Code of Federal Regulations.

But essentially the EPA is forcing vehicle manufacturers to adhere to extremely strict emissions requirements that will be virtually impossible to meet given that over 90% of consumers currently purchase gasoline-powered vehicles.

The only solution for automakers to meet these new standards will be to simply stop producing many of their gasoline-powered models and ramp up production of electric vehicles… even though consumers clearly don’t want this to happen.

Electric vehicles are already more expensive. And deliberately reducing the supply of gasoline-powered vehicles will obviously make those more expensive as well.

So, in either scenario, consumers will have to pay a lot more money to buy a car.

But this new EPA rule is especially idiotic because the current US electrical grid cannot support 50% of cars being electric. And there is no plan to get it there.

According to the Wall Street Journal, there are currently upwards of 80 million distribution transformers— the cylindrical metal boxes— on utility poles across the US.

To reach the EPA’s goal, essentially ALL of these would need to be replaced to have a higher capacity.

Currently only about 660,000 transformers are replaced each year. So, at this rate, America should be ready for the EPA’s by the year 2145, i.e. more than a century behind schedule.

To acquire the massive amounts of copper needed for even larger transformers, public utilities will be competing for materials with electric vehicle, solar panel, and wind turbine producers.

This will drive up the cost of each transformer, which have already risen by 70% since 2018.

They will also have to source a special kind of steel that exactly one producer in the US makes; the company is called Cleveland Cliffs… remember them?

Recently, we discussed how Cleveland Cliffs appealed to the Biden administration, including to the President himself, to kill a deal in which Japanese-based Nippon Steel was going to buy US Steel.

The deal with the Japanese would have made US Steel more competitive. Cleveland Cliffs (and more specifically, the steel union) didn’t want that to happen. So, Team Biden wrecked it.

Now Cleveland Cliffs plans to buy up US Steel’s assets for pennies on the dollar. It must be nice to place a phone call to the President and have him destroy your competition.

So yeah, this is the steel company that has the monopoly on replacing the 80 million transformers required to achieve the EPA’s electric vehicle fantasy.

Moreover, virtually every home will also need some sort of electrical upgrade in order to have a charging port in their garage. So, get ready to fork over more money for that too.

And for people who don’t have garages, consider that it currently takes 195,000 gas stations to fuel up cars across the US. So, there would likely need to be at least 100,000 or more new electric charging stations built.

In total the Journal estimates a roughly $1 trillion price tag to upgrade America’s electrical infrastructure in time for the EV mandate… most of which will be debt-financed, of course.

Money aside, there is the even more pressing issue of insufficient power generation.

US electricity production is already in a precarious condition thanks to idiotic political decisions which have shut down nuclear plants and pushed producers into inefficient renewables like wind and solar.

Let’s just pretend for a minute that wind and solar are great for the environment (even though they’re not when you consider the full supply chain, like batteries and cobalt mining that are required.)

The reality is that wind and solar are very inefficient and require a lot more resources and time to build than conventional sources.

So, if a utility company shuts down a coal-fired power plant, it takes a lot more time and money to replace that capacity with wind and solar.

This is why the North American Electric Reliability Corporation is already forecasting electricity shortages by the year 2032. And that’s without including this EV mandate.

If you then add in all the new electric vehicles, power outages will become a regular thing in the US.

Either that, or electric producers will have to go back to gas and coal-fired power plants… which sort of defeats the EPA’s purpose to begin with.

In short, the EPA will force you to swap out your car that runs on oil, for a car that runs on coal.

Now, depending on what happens in the 2024 election, this EPA mandate could die later this year.

But if it doesn’t, there is at least a silver lining… not to mention copper, lithium, and cobalt linings too.

In 2023, the US sold about 2.4 million electric and hybrid vehicles, requiring substantial quantities of lithium and cobalt for their batteries.

If car sales remain steady, the EPA’s mandate will make sure that demand for these materials surges by over 300% in six years… and that’s just for electric vehicles in the US.

On top of that, however, there will likely be more demand for these resources in the US for wind and solar plants, plus increased global demand as well.

Yet simultaneously there is already a lack of investment in resource markets which produce these critical metals for batteries and electricity transfer.

Part of that lack of investment is because environmental fanatics also hate the mining industry, even though mining is essential to their green energy dreams.

But the Inspired Idiots have ensured that hardly anyone is investing in new lithium and cobalt mines– which are among the most critical resources for electric vehicles.

You can probably see the result of this folly: flat (or declining) supply coupled with surging demand suggests dramatically higher prices for these key minerals over the next several years… and record profits for the companies that produce them.

We’ve highlighted a number of these real asset producing businesses in our investment newsletter, the 4th Pillar. You can learn more about it here.

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Rejoice, America, the federal government is FINALLY going to step in and fix the biggest problem of our time.

Naturally I’m not talking about the border. Or inflation. Or the national debt. Or America’s waning geopolitical power. Or the looming insolvency of Social Security. Or rising crime. Or the broken education system. Or the country’s vast social divisions.

No, those problems are nothing compared to the horrendous crisis that has swept the nation.

But fortunately, our saviors in government are going to do something about it.

I’m talking, of course, about the iPhone crisis. Yes, I’m sure it was on the tip of your tongue.

Last week the Justice Department announced the decision to charge Apple with antitrust violations, saying it has illegally monopolized the smartphone market.

Now, all kidding aside, there are so many things that are utterly stupid about this case, it’s hard to even know where to begin.

First, should this really be the priority for the Justice Department right now? There is so much brazen lawlessness in the country being committed by, you know, actual criminals.

But apparently the Justice Department thinks that Apple’s success is the biggest problem of all.

I suppose we shouldn’t be surprised given that this is the same Department that started investigating angry parents at school board meetings.

Naturally if Americans don’t like Apple products, people could simply stop using them. But the government thinks everyone is just a stupid peasant incapable of making such decisions. So, the Justice Department will decide for us. Hallelujah.

This leads me to the second point– how is it that Apple has a monopoly? Have these people never heard of a little company called GOOGLE and its Android mobile operating system?

Of course, people have a choice.

It’s really, really hard to not laugh out loud when you read the Justice Department’s legal complaint against Apple. They start by dredging up the ghost of Steve Jobs– a guy who’s been dead for more than 12 years– and accusing him of trying to “force” developers and users to use their products.

(Apparently Steve Jobs was holding a gun to your head while he was dying of cancer…)

They go on to claim that Apple unfairly created a proverbial ‘walled garden’, i.e. a closed-off iOS ecosystem where they famously control the end-to-end experience for its users.

Apple’s approach is not unique. Plenty of companies create proprietary systems that lock their users in.

Nvidia has a software system called CUDA which similarly chains users and developers. Video game consoles (Xbox, PlayStation, Nintendo) all have different standards, so the same game cannot be played on multiple systems. And each aggressively recruits game studios to develop content exclusively for their consoles.

Streaming services like Netflix and Amazon Prime develop content that can only be accessed exclusively through their platform.

Printer manufacturers have developed proprietary technology to prevent their customers from using third-party ink cartridges.

The list goes on and on and on. Companies routinely create incentives to keep customers using their products… and disincentives to prevent customers from going over to the competition.

But apparently the most senior officials at the Justice Department don’t realize that this is a completely normal business practice– one that Apple happens to have mastered.

Another hilarious point is how the Justice Department aims to prove its case:

Apple’s iMessage platform isn’t designed to communicate with Android devices. And Justice cites a 2022 exchange between Apple CEO Tim Cook and a reporter, in which the reporter said,

“It’s tough. Not to make it personal, but I can’t send my mom certain videos” because of the lack of iMessage and Android integration.

Tim Cook quipped back, “Buy your mom has an iPhone.”

This is seriously considered ‘evidence’ in the Justice Department’s case against Apple. Their logic is so flimsy that it literally hinges on a joke made by the CEO two years ago. Cook said, “Buy your mom an iPhone”, therefore Apple has an illegal monopoly. Totally bizarre.

Another absurd point is that these Inspire Idiots cannot even apply their own logic evenly.

I wrote recently about how the Biden Administration is currently intervening in the steel industry in a way that will actually create a monopoly.

The President personally intervened to stop Japan-based Nippon Steel from buying the company US Steel.

On top of its acquisition bid (which would have rewarded shareholders handsomely), Nippon Steel promised to invest $1.4 billion into American factories.

But the US government rejected the deal (as if it were their business to begin with), and instead insisted that US Steel should be sold off for parts to competitor Cleveland Cliffs.

It’s obviously pathetic that the government is forcing US Steel shareholders to take an inferior bid. But even more, by forcing the sale to Cleveland Cliffs, the government is essentially creating a monopoly for that company, which will produce up to 90% of American steel used in vehicles.

But according to the government, Cleveland Cliffs’ new monopoly will be good because the union bosses are in favor of it.

Yet two weeks earlier, the government opposed merger between grocery store chains Kroger and Albertsons, because they said it would create an unfair monopoly that the unions opposed.

The lesson here is pretty obvious: if the union bosses like your deal, then it’s not an unfair monopoly. If the union bosses oppose you, then the government will sue the crap out of you.

Apparently, Apple’s biggest mistake was not groveling to union bosses.

The irony is that even if Apple does have a monopoly, it only got that way by attracting customers.

I’m personally not an Apple guy. I use Linux on my computer and a unique mobile operating system called GrapheneOS.

But Apple’s share of smartphone sales in the US is 60%. The market has spoken. It approves of the company and its products.

What’s the government’s approval rating?

Congress is at 12%. Not a single federal political leader has higher than a 48% approval rating in a recent Gallup poll.

The government sucks so much at just about everything that it does, that it often seems they are actively trying to destroy America.

There are so many things wrong in this country that need fixing, and what does the government decide is the biggest evil we face as a nation?

Not the national debt. Not the potential for World War III. Not Social Security going bankrupt, inflation, the border crisis, or soaring crime rates.

They’re going to waste taxpayer resources to save people from iPhones.

They’ve already spent years building their case… which all hinges on a joke that CEO Tim Cook made about buying your mom an iPhone.

The real joke is that these Inspired Idiots are running the show. And it’s a joke on taxpayers and voters everywhere.

Now, who wants to bet that Nancy Pelosi’s husband shorted Apple stock a day before the case was announced?

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On June 5, 1947, US Secretary of State George Marshall gave the commencement speech at Harvard University.

This was just two years after the end of World War II, and in this speech, he first proposed giving $12 billion (approximately $170 billion in 2024 dollars) in economic assistance to help rebuild Western European economies ravaged by the war.

But it was about more than just throwing money at the problem.

What became known as the Marshall Plan was also meant to remove trade barriers, increase economic cooperation between countries, and prevent the spread of communism.

Remember, this was at a time when people still widely understood that capitalism was a win/win system where people take risks and work hard to create value and mutual prosperity.

By the 1950s, it was obvious that the Marshall Plan was playing a key role in the recovery of Europe’s economy and laying the foundations for the post-war boom.

It was in this spirit of cooperation— and gratitude for the US— that the US and the Netherlands got together in 1956 to sign the Dutch American Friendship Treaty (DAFT). Yes, I chuckled at the acronym too.

The point was to make it easier for Americans to live and invest in the Netherlands, and vice-versa, and it’s still in force today.

The treaty allows US entrepreneurs and freelancers to obtain legal residency in the Netherlands for the purpose of starting a business, with an initial requirement of depositing approximately EUR 4,500 (about $4,900) in a Dutch bank.

In the digital age, this allows a wide range of self-employed professionals, like IT consultants and freelance writers, to easily benefit from DAFT without needing to establish a traditional brick-and-mortar business.

And after five years of total residency, you can apply for Dutch citizenship.

Now, nothing against the Netherlands, but you may not want to live in a place where it rains about half the year. Or a 6+ hour time zone difference from the US might not work for you.

But the same treaty offers an even better deal in the six Dutch territories of the Caribbean— Aruba, Bonaire, Curaçao, Saba, Saint Maarten, and Saint Eustatius.

Under the treaty, US citizens are entitled to obtain legal residency in one of these islands without even having to start a local company or invest money.

To maintain your residency, you need to keep closer connections to the island, and cannot leave the country for longer than 12 consecutive months unless it’s for medical reasons.

Plus, this one strategy may allow them to accomplish several goals.

For example, some of the most basic elements of a Plan B include gaining foreign residency and cutting your tax rate.

By gaining this easy residency and moving outside of the US, you could also use the Foreign Earned Income Exclusion to earn $126,500 tax free in 2024. Double that for married couples, and add the Foreign Housing Exclusion, and you’re talking about well over a quarter million dollars each year you can earn tax free.

And because of the tax rules on these islands, in most cases, you should be able to minimize or even eliminate your taxation there entirely (although you should definitely consult a tax professional who understands your particular situation).

Finally, this strategy puts you on a five year path to be able to naturalize in the Netherlands, which comes with the sixth best passport in the world. That’s an amazing passport to pass down to future generations.

There is a downside however… in order to become a Dutch citizen, you generally must renounce your other citizenships. (They do. However, make exceptions if giving up your original citizenship would create a serious hardship or disadvantage.)

But that’s under current Dutch law. That could change in five years; after all, Germany recently did away with this requirement.

Now, DAFT is obviously not for everyone. But the larger point is that it’s a good way to think about implementing a Plan B to combine multiple benefits of a single strategy.

For a remote worker who wants to move to a warmer climate, obtain a foreign residency, cut their taxes, and gain a second passport, this ticks a lot of boxes.

You may have entirely different goals.

But chances are, you can find ways to craft your own Plan B in a similar manner that allows you to gain multiple benefits from a single action.

For example, we recently wrote about the Greek Golden Visa, which allows you to gain a foreign residency by buying property. It’s a great “back up residency,” since there are minimal requirements to spend time within Greece.

It’s also a way to gain some investment return from your Plan B, by renting out the property when you’re not there. Plus, Greece offers great tax incentives to retirees who move there.

So you could gain a foreign residency now, and use the rental income to pay for the home you plan to retire in.

Even something as simple as contributing to a tax-advantaged retirement account can allow you to employ multiple strategies to not just cut your taxable income, but also save for retirement.

Depending on the structure, you could also gain more control and options over where your retirement money is invested or capitalize a new business from your retirement account without penalties.

There are a lot of tools out there to take back so much of your freedom and prosperity. It makes sense to use them to their full potential.

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I’m on my way back home from Mexico City after an incredible weekend event here with more than 100 of our Total Access members.

First things first, if you’ve never been to Mexico City, I highly recommend it. A lot of people have a misconception that the city is some kind third world dump. It’s not. And most first-time visitors are stunned by the vast green areas, expansive parks, tree-lined streets, museums, architecture, and modern lifestyle.

In my opinion it also has some of the best restaurants in the western hemisphere. You can eat extremely well in Mexico City, but you don’t pay very much for it.

The event we held for our Schiff Sovereign Total Access members was also pretty great.

I started off the conference explaining why we should expect higher inflation in the future– and I’ve written about this extensively. The US government’s own projections call for $20 trillion in additional debt over the next decade. And frankly we think they’re woefully underestimating the problem.

But even $20 trillion will likely prove catastrophic. That would mean the US national debt will reach $55 trillion.

If yields remain at today’s levels (roughly 4.5%), then the government will have to spend nearly $2.5 trillion per year, just to pay interest on the debt. That would make interest on the debt the #1 expense of the federal government, triggering a vicious cycle in which the Treasury Department would have to borrow more and more each year just to be able to pay interest on the money they’ve already borrowed.

To say this is unsustainable would be a massive understatement. And we believe that the Federal Reserve will step in to bail out the government by slashing interest rates to zero (or even negative levels).

Think about it– if the national debt is $55 trillion, but the interest rate on that debt is literally 0%, then the government’s annual interest bill is zero… essentially saving them $2.5 trillion per year.

Sounds great. But it would come at substantial cost.

For the Federal Reserve to lower rates, it would require them to dramatically increase the money supply, what we typically refer to as ‘printing money’. They’re not actually printing physical currency– it all happens electronically. But the effect is the same: it’s highly inflationary.

When the Fed ‘printed’ $5 trillion during the pandemic, the US economy saw 9% inflation. So, if the Fed prints $20 trillion or more to push interest rates down to zero, how much inflation will be see then?

No one knows. But it probably won’t be their magical 2% target.

My partner Peter Schiff came on the stage later and made similar comments. And with this inflationary scenario in mind, we sketched out a number of strategies, both personal and financial, that would make sense in the coming years.

It would be easy to study this problem and come away with a sense of dread. After all, a $55+ trillion national debt and $2.5 trillion in annual interest expense looks pretty scary. (Remember, these are based on the government’s own forecasts.)

But if you can understand the trend and its consequences, then you can also take completely rational steps to reduce their impact. That’s the entire concept behind a Plan B.

Peter and I both see overwhelming evidence of substantial inflation in the future. But this means we can prepare for it now, rationally. And we outlined a number of strategies to do so.

One rather obvious one is gold. And we talked about why gold will likely become very important in the future. My personal view is that gold will eventually displace the dollar as the global reserve standard, i.e. how foreign governments and central banks settle their accounts.

With a $55+ trillion projected national debt, and $2.5 trillion in annual interest expense, it’s hard to imagine the rest of the world continuing to allow the US dollar to remain the dominant reserve currency.

And it would be a similar outcome if the Fed ‘prints’ tens of trillions of dollars.

Either way, we see the dollar’s reign as the dominant reserve currency coming to an end over the next decade.

But since no one trusts the Chinese government, or some new ‘BRICS dollar’, gold is the most likely candidate to replace the US dollar since every government and central bank on the planet already owns it… and has confidence in it.

Gold has the added benefit that no single government controls it. And so single country dominates gold production; China, Russia, the United States, Canada, etc. all produce substantial quantities each year.

We later heard from a colleague of mine who runs one of the largest precious metals storage facilities in the world, based in Singapore. He gave me an insider’s view of the gold and silver markets, and sketched out why there may be a shortage coming, especially in silver.

He explained how many of the world’s largest commodities and metals exchanges have seen dwindling stockpiles… while many mines are doing direct ‘offtake’ agreements with large industrial consumers (like electronics companies).

The end result has been a trend of declining physical silver availability, and he believes this will ultimately drive the silver price much higher.

He added that silver is currently quite cheap compared to gold, with the silver/gold ratio currently at about 90:1, versus its historic average over the past several years of roughly 70.

We also had a presentation from a venture capital firm that talked about buying shares of prominent startups (Airbnb, SpaceX, etc.) in the secondary market, i.e. from employees or early-stage investors seeking liquidity. It’s an interesting way to take a discounted position in a high growth business whose value could explode in an inflationary environment.

As one could expect right now, there was also ample discussion about cryptocurrency, including a mini-debate between Peter and our guest Mark Moss, who also spoke at the event. More on that another time.

Perhaps my favorite part was hearing from the former President of Mexico, Vicente Fox. He spoke in the morning about how many short-sighted and dangerous leaders are ruining the world… and I couldn’t agree more.

During a Q&A session later, he told the crowd about the time that George W. Bush came down to Mexico to convince him to support the war in Iraq.

Former President Fox told us that Bush’s team rolled out maps of Iraq onto his desk and pointed at a tiny speck, saying, “There are the weapons of mass destruction.”

Fox stared closely at the table and brought his face closer to where they were pointing, and said, “It looks like mierda de mosca to me…” That’s Spanish for ‘fly shit’.

I want to extend my sincerest thanks to all the members who joined us for a wonderful weekend in Mexico City. The event, the restaurants, the personal discussions with each of you, and the camaraderie were all unforgettable.

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On March 2, 1901, a group of prominent American businessmen, including J.P. Morgan, Charles Schwab and Andrew Carnegie, came together to form the largest business enterprise the world had ever seen.

Through the consolidation of Carnegie Steel Company along with several other steel and iron businesses, they formed US Steel.

And it was immediately the world’s first billion-dollar corporation.

But that was just the beginning. US Steel quickly became a symbol of American industrial might.

It played a crucial role in building the infrastructure of the United States, supplying steel for skyscrapers, bridges, automobiles, and railroads. During both World Wars, US Steel’s production capacities were pivotal in supporting the Allied military efforts.

By the 1940s, there was hardly a more fitting icon of American prosperity.

But things slowly started to change.

After World War II, the economy globalized and trade flourished. US Steel suffered from increased competition from foreign steel producers, and then, in later years, a decline in the American manufacturing sector.

Slowly the company diminished to just a shadow of what it used to be.

The decline of US Steel culminated in a bidding war last year by larger rivals who were eager to absorb the company.

Another American steel producer named Cleveland-Cliffs offered to buy US Steel for roughly $7 billion.

But Japan-based Nippon Steel offered double the amount— $14.1 billion— and also promised to inject $1.4 billion in capital to upgrade US factories. Somewhat poetically, $1.4 billion was the exact original capitalization of US Steel back in 1901.

Naturally, US Steel accepted the higher offer. $1.4 billion in foreign investment would do a lot of good for the company, for the steel industry, and for the US economy.

You know how the people in charge always love to talk about manufacturing jobs? Well, a $1.4 billion foreign investment gets you a LOT of manufacturing jobs.

Case closed, right? Of course not!

Cleveland-Cliffs (the company that lost the bid to Nippon Steel) was bitter that they didn’t win, fair and square, in a free market. So they decided to play dirty.

The CEO called-in his friends in the Biden Administration. And sure enough, Joe Biden personally came out, guns blazing, to slam the Nippon Steel acquisition.

Team Biden has now pushed the deal over to the US Committee on Foreign Investment, which has been tasked with investigating “national-security concerns”.

Come again? US Steel is a has-been company in decline that’s supposed to be acquired by a US ally. To pretend that this is a national security concern is a complete joke.

Cleveland-Cliffs then rallied the United Steelworkers union, whose president vocally asserted that  “the only buyer the union accepts for the [sale of US Steel] is Cleveland-Cliffs.”

Wait a minute— who exactly is the owner of US Steel? Call me naive, but I thought it was the shareholders.

Yet apparently the basic fundamentals of capitalism don’t matter to Joe Biden, or to the United Steelworkers union.

In their view, the union is in control, and the union gets to decide who the new owner will be… even if the purchase price is vastly inferior.

Nothing official has been announced. But the Cleveland-Cliffs CEO is already bragging about how he killed Nippon Steel’s acquisition:

“We have been in total contact with the [Biden] administration, so I know what’s going on… This deal is dead… There is no more lobbying, there’s no more negotiation. It’s over.”

And like a vulture circling overhead, Cleveland-Cliffs indicated that they intend to scoop up US Steel’s assets for a bargain… potentially even less than their original bid.

And once Cleveland-Cliffs absorbs US Steel, it will control ALL US blast furnace production, and up to 90% of American steel used in vehicles, according to the Wall Street Journal.

That’s a virtual American steel monopoly.

The reason I raise this issue is because, just a few weeks ago, the Federal Trade Commission (FTC) sued to stop a merger between two grocery store chains (Kroger and Albertsons), claiming that the deal would create a monopoly and hence harm consumers.

Wait a minute— if a potential monopoly of grocery store chains is bad, then why isn’t a clear monopoly in the steel industry equally bad?

You’d think the FTC would apply the same logic to US Steel. But they’re not. The FTC has been completely silent on the matter. And the reason is obvious: the United Steelworkers union wants the Cleveland-Cliffs merger to happen, so the FTC won’t stand in its way.

If there has ever been any question about who has the power in this administration, the answer should now be plain as day: this government will do whatever the unions want.

Forget the voters, consumers, or shareholders— unions have the most sway, the most money to put into political campaigns, the most voters to drive to the polls.

And of course, forget what’s actually good for the country and the economy. The Inspired Idiots in charge are completely beholden to union bosses.

That’s a pretty bad sign if you expect things in this country to turn around anytime soon.

A roaring economy is exactly what the US needs to claw its way out of its massive national debt, and restore faith in the US dollar.

Instead, it’s doing everything possible to kill competition and productivity.

And that’s a good reason to have a Plan B.

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Located in Mediterranean Sea about halfway between Greece and Turkey is the island of Crete… which has attracted human civilization for more than 100,000 years.

Today roughly 600,000 people call the island home. But millions of tourists also visit the popular vacation spot each year. It’s known for it’s beaches, wine, and olive groves.

And at the moment, real estate is fairly reasonably priced.

It’s certainly not rock bottom cheap, but for such a popular destination, home prices could hardly be called expensive.

For example, a modest two bedroom stone villa next to a manicured olive grove with gorgeous views of the sea is listed for around €275,000, or USD $300,000.

 

A place like this on Airbnb could easily fetch $125 to $150 per night and would be fully booked for much of the year.

Now, I’m not here to encourage anyone to buy investment property in Greece. Personally I think there are much better investments right now. But buying property in Greece does have something special going for it that most traditional investments don’t have:

You can become a Greek, i.e. European resident, if you buy property.

Having residency in a foreign country is a completely sensible thing to do. It means that, in almost every case imaginable, you’ll have another place to go if you ever need it.

There are a number of places in the world that allow you to buy property in exchange for legal residency; often these programs are called “Golden Visas.”

But you would only want to go down that path if you actually enjoy spending time in the country.

And for some people, Greece is paradise. The weather, culture, ruins, history, food, etc. appeal to plenty of people who want to spend time or even retire there.

Portugal was the first of several countries in Europe to launch a Golden Visa back in 2012.

But as usual, the deal was too good to last. Swarms of foreigners came in, property prices went through the roof, and locals complained that housing was unaffordable.

So last year, the government of Portugal made their Golden Visa program much, much less attractive, and for the most part, property purchases no longer qualify.

Greece is the best game in town right now as far as European Golden Visa programs are concerned. 98% of the country’s territory, including hundreds of its idyllic islands, remains eligible for a Golden Visa in exchange for a property purchase of just €250,000.

But last year, the government raised the minimum investment threshold to €500,000 in the country’s most sought-after regions, including parts of Athens, Thessaloniki, and the islands of Mykonos and Santorini.

And we wouldn’t be surprised if they restricted the program further— after all, that is what tends to happen to these programs. So if you like the program, it’s better act soon.

Again, buying property under a Golden Visa program doesn’t make sense if you don’t enjoy spending time in the country.

But when it’s possible to get residency (which is a solid step in your Plan B) while generating positive cashflow from your rental income when you’re not using the place, that’s a pretty good deal.

Of course, Greece isn’t the only place in the world you can do this.

Panama still offers residency in exchange for a roughly $300,000 property investment— an amount which still goes a long way in Panama.

Panama’s program has also changed over time, so it also probably won’t last forever.

Then there are places like Mexico where you don’t even have to purchase a property to obtain legal residency; you just need to prove that your income or savings meets a modest threshold.

If someone asked where is the easiest place to gain residency in the Western Hemisphere, I think Mexico ticks that box. Almost anyone qualifies, and it is easy to maintain.

The larger point is that these aren’t radical steps. But they do give you another option.

And in a world full of Inspired Idiots, with so much looming risk and uncertainty, having additional options just makes sense.

But great options don’t last.

We go through periods where one residency may be easy and simple to obtain, and over time those rules change and become more difficult and cumbersome.

So when you find something that works for you, take action and make it happen.

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[Editor’s Note: Today’s article was written by a colleague who recently traveled to Russia. These are his observations about the current situation on the ground.]

Today in Russia, there is unmistakable tension in the air.

You definitely don’t want to speak out against the war or the current regime— it’s almost guaranteed way to lose your job or end up in a prison.

That’s why everyone is so careful about what they say, and to whom they say it. Unless you know someone really, really well, you have to avoid any potentially controversial topics.

The TV blasts propaganda on a daily basis, effectively brainwashing millions of people. It’s surprising how many Russians seems to believe the news… or at least pretend to believe it.

The national elections took place this past weekend. Despite the official numbers reporting 77% voter turnout, most people I spoke to didn’t plan on voting since, “the result will be the same anyway.”

This is all eerily reminiscent of the Soviet Union.

Yet at the same time— and completely unlike the days of the Soviet Union— the Russian economy is doing surprisingly well.

Western nations thought that their sanctions would cripple Russia. But that hasn’t happened. Russia’s unemployment rate currently stands at a historically low 3%— less than even the United States.

A friend in the tourism business has been very busy selling tour packages to a luxury hotel in the UAE in the past couple of years.

And a business person who imports and resells industrial equipment told me business is very good for him now, because sanctions have forced his foreign competitors to exit the Russian market.

In this way, sanctions have actually benefited many sectors of the economy since Russia is no longer able to import products from Europe and the US. So many Russian businesses have created new products to replace these imports.

To give you an example, European cheeses and meats are very popular in Russia. But now, rather than be imported from France and Italy, they are produced by local Russian companies.

Large auto brands like Toyota and Volkswagen have been replaced— either by significantly cheaper Chinese brands (which offer decent quality at a much lower price), or by Russia’s own automotive brand, Lada.

 

For workers, salaries have also gone up— in large part because of labor shortages.

Roughly one million Russians have reportedly left the country since the start of the war— and most of these people are in their prime working years.

The government is also paying quite handsomely to recruit people into the military; contract soldiers earn the equivalent of $2,200 per month— which is a fairly hefty salary in Russia, especially someone of limited education.

The government seems to be trying to balance economic needs with the war effort. And as a result, almost anyone with a stable job (and who pays taxes) has been able to easily avoid the military draft.

You might be also surprised to learn, in fact, that draft evasion is just an administrative offense in Russia, as opposed to a criminal offense.

It’s usually naturalized foreigners, i.e. people who originally come from former Soviet republics like Tajikistan, Kyrgyzstan, and Azerbaijan, who don’t know the rules about the military draft. Consequently, these foreigners are on the front lines in substantial numbers.

Criminals also make up a significant percentage of contract soldiers. And due to lack of proper training and equipment, many of them will not come back. A lot of people here think this is a deliberate ‘social cleansing’.

It’s also one of the reasons why Moscow is now one of the safest cities in the world.

The city was incredibly safe even before the war. But it’s on a whole different level now.

While vehicle theft and break-in are somewhat of an epidemic in places like San Francisco, such crimes are simply unheard of now in Moscow.

If you go to any random cafe in the city, you’ll find most people don’t even bother watching their bags or laptops. Delivery guys will leave their expensive electric bikes unlocked while they go upstairs to people’s apartments to drop off food.

I should also point out how incredibly cheap Russia is.

Moscow is one of the largest, most advanced and cosmopolitan cities in the world. The standard of living is extremely high.

Yet life in the city is now objectively cheaper than every other major city in the world. And I’m not just talking about Tokyo, New York, London, and Sydney.

Moscow is even cheaper than Sao Paolo. Mumbai. Johannesburg. Bangkok. Even  Tbilisi, Georgia. And that’s especially true if you’re spending dollars or euros.

A 2-hour 80 km taxi ride from one of Moscow’s several airports (again, it’s a huge city) cost me just $26. Lunch in a mid-level restaurant with wine was about $15 per person.

Sure, you might pay similar prices in a tier-2 or tier-3 town somewhere in Latin America, but, again, in terms of standard of living, Moscow is on the same level as London.

So at this point I believe it is the most undervalued city in the world.

Perhaps most surprising is that Russia’s bureaucracy has been completely overhauled.

I was shocked to learn that government employees now work for 12 hours a day, six days a week. And they actually strive to be efficient and helpful.

When you renew your passport or drivers license, for example, you’re invited to leave a review about the service you received. Government workers’ salaries actually depend on these reviews… so they have a financial incentive to provide good service.

It’s similar with public works projects— they strive to be fast and efficient. And there have been a great number of those lately.

Infrastructure in Moscow and elsewhere seems to be improving by the day. New metro lines and roads are everywhere. Airports are modernizing, even despite the war.

And given the backlash that Russian citizens have faced around the world, the government has encouraged domestic tourism, with several mega-projects under development in resort towns on the Black Sea.

Overall Russia (and Moscow in particular) is a veritable tale of two cities. On one hand, there is palpable tension in this country, and the constant risk that if you slip up and say the wrong thing to the wrong person, then you could easily wind up in prison.

Suffice it to say that the Russian state has little tolerance for dissent.

Yet on the other hand, Moscow is one of the nicest, safest, most advanced, yet simultaneously cheapest of tier-1 global cities.

The Russian economy has proven robust. Income taxes remain low (the top rate is just 15%). The government is shockingly efficient.

Western leaders continue to believe that their “devastating” sanctions will cripple the Russian economy, and that the Kremlin will soon be on its knees begging for peace.

They are sorely mistaken.

After this trip it’s clear to me that Russia has the capability to continue this war for a long, long time.

 

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