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On Friday March 15, 2013–just over three years ago–people across the entire nation of Cyprus went to bed believing that everything was OK.

The next morning they woke up to a different reality.

It turned out that their banking system was totally broke. After suffering enormous losses, banks no longer had sufficient liquidity or capital to maintain customer account balances.

People realized immediately that just because you can log in to a bank’s website and see an account balance printed on the screen that doesn’t actually mean that the money is there.

To make matters worse for depositors, the government was insolvent and unable to lift a finger to support the banks.

Plus the deposit guarantee from Cyprus’s central bank wasn’t worth the paper it was printed on.

So in order to save the banking system, Cypriot politicians resorted to the unthinkable– freezing every bank account in the country. It all happened overnight.

This is precisely the sort of thing that happens when a poorly structured banking system meets an insolvent government.

And we should expect more of it. Because three years later, much of the West looks like Cyprus did back then.

Western banking systems are extremely illiquid, and many banks are very thinly capitalized with minimal reserves.

Deposit insurance funds are woefully undercapitalized and lack the financial capacity to guarantee the system.

And the governments who stand behind it all are themselves completely insolvent.

Bear in mind, all of these assertions are backed by publicly available data.

It’s not some wild conspiracy theory to suggest that the governments of the United States, Japan, and most of Western Europe are totally bankrupt.

These are facts. And each government publishes its own financial statements attesting to its insolvency.

It’s not crazy to say that the FDIC is undercapitalized and fails to maintain the amount of reserves that are required by law, let alone “the minimum level [of capital] needed to withstand future crises of the magnitude of past crises.”

This information is published in the FDIC’s own annual report.

And you don’t have to be a radical to review your bank’s financial statements and find, for example, that US Bank maintains cash reserves amounting to just 3.5% of its customer deposits.

Or that Italy’s Unicredit Bank holds cash reserves of just 1.7% of its customer deposits.

These numbers are not even remotely conservative. And they’re all available in the banks’ most recent reports.

Looking at the big picture, when it’s clear that your government is broke, your deposit insurance fund is undercapitalized, and your bank is hazardously illiquid, it seems obvious that you shouldn’t hold 100% of your savings in that banking system.

There are a multitude of solutions to reduce this risk.

One option that we have discussed is opening an account at a liquid, well-capitalized foreign bank located in a jurisdiction with no debt.

Banks in Asia tend to have extremely high levels of liquidity and hold generous, conservative reserves to safeguard their customer deposits.

An even easier option is to hold physical cash; buy a safe and start making withdrawals from your bank account.

Even if you’re completely skeptical about everything you’ve just read, you won’t be worse off for having cash instead of bank deposits.

There’s very little consequence to taking action. But the consequences of NOT taking action can be substantial.

Learn from Cyprus. Don’t take it for granted that you’ll go to bed tonight and everything in the financial system will be fine tomorrow morning.

When the data and risks are this obvious, everything can change very quickly.

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[Editor’s note: This letter was penned by Tim Price, London-based wealth manager and author of Price Value International.]

“It is because the public are a mass – inert, obtuse and passive – that they need to be shaken up from time to time so that we can tell from their bear-like grunts where they are – and also where they stand. They are pretty harmless, in spite of their numbers, because they are fighting against intelligence.”
– Alfred Jarry, ‘La Revue Blanche’, 1897.

What – if anything – can we conclude from the latest Bank of America Merrill Lynch Global Fund Manager Survey ? The survey was conducted between March 4th and March 10th among 209 panellists managing an aggregate $591 billion in assets. Most types of investment life forms participated, including pension funds, insurers, hedge funds and mutual funds. (Somewhat disconcertingly, the single largest cohort of investment managers described their investment time horizon as “3 months or less”. That sounds less like disciplined fund management and more like speculative trading.)

Among the highlights:

• Cash levels were down from their recent high of 5.6% in February. This, with hindsight, was an “unambiguous buy signal”, since which point stock markets have risen by 11%, high yield by 7%, and oil by 31%. But cash, at 5.1%, is still a shade above its 3-year average of 4.8%.
• The monthly jump in allocation to commodities was the biggest on record.
• March also saw a big jump in fund managers’ exposure to industrials, resources and
  emerging markets.
• Managers now have their second highest allocation to real estate and REITS in
  history.
• High yield markets are now expected to outperform investment grade credit.
• The biggest perceived “tail risks” are in the failure of quantitative easing, a US
  recession, and a renminbi devaluation.
• Only 15% of managers expect a recession, but 59% of those surveyed said that the
  economy was now in a “late-cycle” phase.
• The euro is seen as at its cheapest since April 2003.

Surveyed managers “remain structurally long US consumption plays and short China production plays” but investor conviction is low.

It would be dangerous to infer too much from the survey. Do the surveyed managers represent “smart money” or merely the consensus ? If the former, it might make sense to piggy-back off them. If the latter, it would make more sense to treat them as contrarian indicators and do precisely the reverse. That apparent concentration on the short term is certainly a concern.

One is partly conditioned by the cynicism that permeates the money management industry. Given that the survey is of its nature less than all-embracing in its scope, drawing conclusions from only partial evidence comes with risk. More to the point, can we trust that every surveyed manager is being honest and impartial with their responses, or is there the risk that some are being “economical with the actualité” in order to throw their competitors off the scent ?

Our default position is probably to treat the results with a mild scepticism. Let’s assume the respondents are broadly representative of the asset management industry, warts and all. (They clearly can’t be unless they include the thoughts of all those R2D2s and C3POs and assorted algorithmic hot money software scampering through the stock exchange circuitry.) So we’ll treat the survey as an indicative but soft contrarian indicator.

With those caveats behind us, we note that managers’ relative positioning of equities versus other asset classes (bonds, commodities, cash and REITS) remains near multi-year lows – i.e. the equity rally may still have legs.

Within our global value fund our single biggest allocation is to Japan. So, once again mindful of the caveats, we’re heartened to see that surveyed managers have reduced their weightings to that market – per the chart below. (Which clearly leaves the potential for more capital to enter it over time.)

We were particularly struck by managers’ attitudes to “financial engineering” – a net 16% of investors considered (US) corporate payout ratios – dividends and buybacks – too high. The current reading for this view is at its highest since March 2009.

Whereas corporate payout ratios are at roughly 60% in the UK and closer to 80% in the US (many US companies are borrowing money in order to pay dividends or to buy back stock, which is ultimately unsustainable) the corporate payout ratio in Japan is at roughly 30%. That figure is almost certainly going to rise, at least in part courtesy of Abenomics’ third arrow, namely structural reform, and a renewed focus on corporate governance and shareholder returns. Japanese companies now have the strongest balance sheets in the world, and corporate Japan is sitting on nearly $2 trillion of undeployed cash. In fact, with Japanese interest rates now negative, we can confidently expect the corporate payout ratio there to rise. The opposite trend may be more likely in the Anglo-Saxon equity markets – especially if a US recession happens to be en route.

Surveyed managers are now a net 13% overweight equities versus a net 5% overweight last month. This is less obviously bullish – but of course it depends what equities we’re talking about. Institutional investors in the survey are probably reflecting the composition of major benchmarks like the MSCI Global Equity Index. We don’t have that self-imposed constraint, so we can go exclusively to where we see only the most compelling value (hint: not in the US).

A net 37% of respondents are underweight bonds. For all the laughable value on offer in the bond market, this may argue for the extension of the bond market rally.

And a net 41% of respondents are overweight euro zone equities. They may be seeing hidden value that we’ve yet to uncover. More likely, they are simply seeing things.

But as we’ve already alluded, not every fund manager is playing the same game by the same rules. Benchmarking, and a slavish attendance to the tyranny of indices, are one thing, and investing without any constraints other than a commitment to compelling and defensive bottom-up value quite another.

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Last year, amid all the madness in financial markets, financial historian and strategist Russell Napier joked about creating a “European high-yield capital guarantee fund.”

His “high-yield” fund was nothing more than a secure room filled with physical cash, and a guy standing outside with a gun to guard it.

As jokes tend to be, this was a sad reflection on reality.

Though physical cash bears no interest, it is considered “high yield” compared to bank balances and government bonds that carry negative rates.

Napier’s joke is now coming true.

Earlier this week, the CEO of Munich Re, the largest reinsurance company in the world, announced that they would start holding 8-digit sums of physical cash and gold in their vaults.

Insurance companies tend to be boring, staid institutions that follow the rules and play the game along with the rest of the financial establishment.

But this move from Munich Re is an all-out rebellion against the central banks who are destroying the financial system with negative interest rates.

A few months ago I wrote to you about the different forms of money in our financial system.

Physical cash, which each of knows and understands well, is one form of money.

Bank deposits are another form of money, and one that is almost exclusively digital. The days where banks held customer deposits in cash inside their vaults are long gone.

Instead, the vast majority of the consumer financial system today is electronic. Credit card payments, bank transfers, etc. all take place in the cloud.

In reality your savings account balance is nothing more than an entry in a bank’s database, stored on a server somewhere in a building with no windows.

So while cash exists in the physical world, bank balances exist only in the digital world.

These are two fundamentally different forms of money. And at the moment they have a 1:1 exchange rate.

You see this every time you go to the ATM machine or make a cash deposit at your local bank. $1 in cash is the same as $1 in your savings account.

But that 1:1 exchange rate is not set in stone. It absolutely can break down.

Think about it—back in 2013 when the government of Cyprus froze ALL of its citizens’ bank accounts, bank balances became instantly worthless.

It didn’t matter how much money you have in your account. If you can’t access, it isn’t worth squat.

Cash became enormously valuable; having the money in your hand was worth far more than a frozen bank account, and demand for physical cash soared.

This is what we’re seeing now.

Negative interest rates are pushing people out of the financial system. Munich Re is only the latest example.

A few weeks ago, I told you about the German Savings Bank Association advising its member banks to hold physical cash in their vaults, instead of paying negative interest to the European Central Bank.

Demand for cash is increasing. More importantly, the rebellion against negative interest rates and central bank madness is increasing.

And this trend has the clear potential to break that 1:1 exchange rate between physical cash and bank balances.

But by the time it happens, it will be too late to get your hands on cash. That’s why holding some now is an absolute no-brainer.

Bear in mind, there are still risks, so holding cash not a 100% solution.

Civil Asset Forfeiture is on the rise and the calls to ban cash are growing louder all the time.

But in conjunction with precious metals and an account at a highly liquid, well-capitalized foreign bank, you can radically reduce the risks that this insane financial system poses to your savings and livelihood.

PS-

Find out more about how to create this Plan B in this week’s video podcast.

Be sure to stick to the end to get access to some special bonus reports and even a chance to win a pile of silver coins.

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Watch this free presentation to discover:

• Shocking comparison of 2008 vs. 2016 financial data, and why we are much closer to another meltdown than anyone realizes.
• Simon Black’s personal Plan B solutions (passports, bank accounts, investments, etc) and how you can start building your own Plan B.
• Watch ’til the end to win free silver and get complimentary special reports to help you get started.

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[Editor’s note: Sovereign Man’s Chief Investment Strategist, Tim Staermose, is filling in for Simon today.]

One of the wealthiest countries in the world– the place where there are more millionaires per capita than anywhere else on the planet– now has a dirt cheap stock market.

It’s Singapore.

And right now, the total market value of all stocks traded in Singapore amounts to about 107% of the country’s GDP.

The historical range for this number over the past few decades has as high as 418% during the bubble years in the 1990s, and as low as 92% at the height of the 2008 financial crisis.

This ‘stock market to GDP’ ratio is a hugely important valuation.

Warren Buffett considers it “probably the best single measure of where valuations stand at any given moment.”

But it’s more than that. Because right now, the Singapore stock market barely trades above book value.

If you’re not familiar with the term, a company’s book value is akin to its ‘net worth’.

In other words, if you added up all of a company’s assets (cash, real estate, business inventory, etc.) and subtract its liabilities (debt, taxes owed, etc.), you end up with its book value.

It’s typical for companies listed on a stock exchange to trade for several times their book value.

Facebook’s stock sells for SEVEN times book value. Boeing’s is at THIRTEEN. McDonald’s is nearly SIXTEEN.

In Singapore, it’s ONE. This makes Singaporean stocks a much greater bargain than those in the West.

As an example, the iShares MSCI Singapore ETF (EWS on the New York Stock Exchange) is an ETF that tracks the Singapore stock market.

It has book value of $10.59 but opened this morning at $10.53; so it’s actually selling for LESS than its book value.

Plus it pays a dividend amounting to 4.4%.

Now, these compelling figures apply to the entire Singapore market. But if you start cherry-picking individual companies, it’s possible to find even better deals.

There are companies in Singapore now selling for well below book value, and paying dividend yields as high as 10%.

And if stocks are too risky for you, bonds issued by the Singapore government (which has ZERO net debt) yield 2.75%.

That’s pretty spectacular compared to bankrupt western governments (especially in Europe and Japan) which have negative rates.

Compared to Western markets, Singapore is a fantastic opportunity right now… especially if you have US dollars to spend. The Singapore dollar is near a multi-year low, so this is an excellent time to get in.

Sure, both the stock market and the currency may stay cheap for a while. They might even get cheaper.

But given these low valuations, you’d be buying with a significant margin of safety and much of the downside risk already covered.

In exchange, you have an opportunity to make significant profits in a highly advanced economy.

If the company share prices increase from these lows, you’ll make money. If the currency appreciates, you’ll make even more money.

And while you wait, you’ll receive a solid dividend yield that puts regular cashflow in your pocket.

This is definitely an opportunity worth considering.

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“Prosperity is like a Jenga tower. Take one piece out and the whole thing can fall.”

That’s a direct quote from John Williams, the President of the San Francisco Federal Reserve Bank in a speech he gave a few weeks ago.

He could have just as easily been talking about propaganda. The Fed, the White House, Wall Street, the media have a vested interest in peddling a certain narrative about the economy.

The narrative goes something like this: “Everything’s awesome. Stop asking questions”.

But if you look at their own data, the numbers tell a different story.

My team and I were recently studying US manufacturing indices, something that has traditionally been a strong indicator of recession.

This is data collected by the Federal Reserve; they survey manufacturing businesses and ask if factory orders are growing, shrinking, or relatively unchanged.

You’d think that based on this “everything is awesome” narrative that all the numbers would be growing.

And yet, much of the data show that manufacturing is shrinking. Or to be even more clear, that the US is in a manufacturing recession.

In Texas, for example, just 4% of businesses report that they are growing. 38% are shrinking.

The Philadelphia Fed’s Manufacturing Index has been in recession since September of last year.

The San Francisco Fed’s Total Factor Productivity is also reporting negative growth.

The New York Fed’s Empire State Manufacturing Index was at minus 16.6 for February. In fact, the last time the index was below -15 was in October 2008, ten months into the Great Recession.

The numbers are all pretty clear: there’s an obvious industrial and manufacturing downturn.

But that shouldn’t matter because Fox News, CNN, CNBC, and the White House tell us that consumer spending drives the US economy; industrial production is irrelevant.

They run headlines like “RETAIL SALES RISE MORE THAN EXPECTED” as part of the good news narrative.

This sounds mysteriously like “FEWER PEOPLE KILLED BY POLICE THAN EXPECTED” or “FEWER AIRLINES DECLARE BANKRUPTCY THAN EXPECTED”.

But the reality is that prosperity isn’t a Jenga puzzle. It’s quite simple. You have to produce more than you consume.

Strangely, though, the financial establishment cheers when consumption is up. And they totally ignore the data when production is down.

This is the exact opposite of prosperity.

And no surprise, if you look at the long-term data you’ll see that a manufacturing downturn (i.e. less production) almost invariably precedes a recession.

There were large downturns in manufacturing and industrial production in 2008, 2001, 1990, 1980-81, 1974, 1970… and every other recession since the Great Depression.

More importantly, out of the 17 recessions over the last century, the longest period between them was about 10 years.

The average time between recessions at just about 68 months.

Bottom line– the economy is due for a recession. And the indicators suggest that one may already be in the works.

The bigger challenge is that both the Federal Reserve and the Federal Government are out of ammo.

The US government spent trillions fighting the last recession back in 2008.

But back then the US government debt level was “only” $9.5 trillion, so they could theoretically afford the bailouts.

Today government debt exceeds $19 trillion, well in excess of 100% of GDP. They don’t have the ability to bail anyone out, including themselves.

The Fed doesn’t have any room either. On average, the Fed cuts interest rates by 3.5% in a recession. And the smallest interest rate cut in any recession during the last 60 years was 2%.

Today, interest rates are at 0.25%… next to nothing. They’ve been at near-zero levels since the last recession.

That means that even if the next (i.e. current) recession is extremely mild and the Fed cuts by only 2%, interest rates are practically guaranteed to go below zero.

And from there, it’s a very short road to capital controls.

Capital controls are a policy tool used by desperate governments to keep money trapped in a failing financial system.

Think about it—when rates turn negative, who in his/her right mind would keep money in a savings account that’s going to charge YOU interest for the privilege of letting a banker gamble your funds away on the latest investment fad?

A rational person would close his/her account. Or at least maintain a minimal balance and hold cash.

But if too many people take their money out of the banks, then the entire system collapses.

And governments have shown they will do whatever it takes to prevent this from happening… even if it means restricting what you can/cannot do with your own savings.

We’re already seeing bank withdrawal restrictions in Europe, as well as loud calls to ban cash on both sides of the Atlantic.

These things are happening. And with the recession data in particular, we’re not talking about “what if”. We’re talking about “what is”.

Even if all the data is wrong and there’s never another recession again until the end of time, you won’t be worse off for having a Plan B that protects your family, your savings, and your livelihood from such obvious risks.

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Maybe it’s greed. Or fear. Or blatant irrationality. But there’s something inside human nature that makes us think unsustainable situations can last forever.

One of those has been the meteoric rise of the US dollar, particularly over the last year. The dollar became king once again in 2015, towering over oil prices, gold prices, and just about every other currency on the planet.

The South African rand, the Colombian peso, the Canadian dollar, the Australian dollar, the Singapore dollar, the euro, the pound. Each of these has reached a multi-year, multi-decade, or even all-time low against the US dollar within the last several months.

This, clearly, is not sustainable.

As I’ve written several times in this letter, the dollar has become the most overvalued currency in the world.

I gave an example last summer of a round-the-world airline ticket, which when priced in US dollars cost about $14,164.60.

The exact same ticket, when priced in South African rand was 81,395 rand, which back then was just barely over $6,000.

It’s such an amazing difference—the exact same ticket costs over twice as much when priced in US dollars… an obvious sign that the dollar is overvalued.

I also noticed this as I traveled where countries like Australia, Canada, Singapore, and the UK were suddenly “cheap”.

None of this made any sense.

It’s completely absurd that the currency issued by the greatest debtor to have ever existed in the history of the world would enjoy such unsustainably false strength.

For anyone with a global view, however, this has been an amazing opportunity to buy high quality foreign assets at a steep discount.

We’ve talked about places like Colombia for years, where beautiful properties can be picked up for far less than the cost of construction.

With the US dollar’s dramatic overvaluation against the Colombian peso, these properties are even cheaper.

We’re seeing similar phenomenon all over the world in stocks, property, and private businesses.

But looking at the data, it appears that this dollar bubble may have started to burst, or at least peaked, in January. I’ve noticed four clear signs that indicate this.

Over the last 60 days, most currencies around the world, from the Chilean peso to the Singapore dollar, to the Australian dollar have surged against the US dollar.

Oil prices are up, and gold is having its best year since 1980.

Emerging markets, which have been in the dumps for more than a year, have roared back; the MSCI Emerging Market Index is up roughly 15% since January.

No one has a crystal ball, and it’s certainly possible that there will be another surge back in to the US dollar for a short time.

But this recent dollar weakness is a clear reminder that what goes up must come down.

Don’t be too concerned if you missed the top. There’s still an incredible amount of opportunity out there to buy cheap, high quality foreign assets.

I just acquired a business in Australia in a deal that took way too long to complete; over the last few months the Australian dollar climbed from 70 cents to 75 cents.

This cost me an extra $300,000.

But even at 75 cents, the business was still a huge bargain in US dollar terms; plus it’s still well-below the long-term average for the Australian dollar.

(I’m still quite optimistic about other opportunities in Australia.)

It’s the same all over the world; currencies everywhere are starting to appreciate, particularly in rapidly developing countries.

Don’t miss it this time. There’s still a tremendous opportunity to make money.

Even with a smaller amount of savings, you can use this dollar bubble to your advantage by investing in corners of the world where there’s pockets of extraordinary value.

More to follow.

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[Editor’s note: This letter was penned by Tim Price, London-based wealth manager and author of Price Value International.]

“Simple but not easy”
– The title of Richard Oldfield’s book about value investing.

It has a young, highly educated population. 60% of its people are under the age of 35. It has a literacy rate of over 85%. Almost a quarter of a million new engineers graduate from its universities every year. And its stock market trades on a price/earnings multiple of just 5.5 times, with a dividend yield of 13%. Welcome to Iran.

Is this one of the investment world’s big opportunities, asks Merryn Somerset-Webb in her FT column this weekend? It very well might be. The question for foreign investors is whether those attractive valuations offer sufficient compensation for the clear geo-political and resource-related risks that come with investing today in the Middle East. Nobody knows the answer to that question. But purely from a valuation perspective, Iran certainly looks interesting, albeit with the inevitable caveats that come with frontier market investing.

And not just frontier investing. It is a characteristic of true value investing that any manager genuinely practising it encounters scepticism or outright hostility on the basis of what often appears to be either a contrarian streak or outright madness. Although there is a growing body of statistical evidence that value investing is one of the most successful long term investment strategies (last week we cited James O’Shaughnessy’s 52 year study from the US stock market, which saw a $10,000 portfolio of 50 stocks with the lowest price/book ratios, for example, compound to over $22 million), it remains on the fringes of acceptable investment practice, because it’s emotionally difficult to pursue – both for investment manager and investing client.

Richard Oldfield, presenting at the Ben Graham Centre for Value Investing at the Ivey Business School in January, mentions three attributes often associated with value as an investment strategy: patience; a tolerance for pain; and a margin of safety. Any value investor who remembers the first dotcom boom will relate to the first and second attributes. Any value investor who held the course into 2000 and subsequent years will appreciate the third. True value investing ensures that you never consciously overpay for high quality assets – but you may need to wait for the market to wake up to the inherent value you’ve found.

There’s certainly no need to rush into bonds. The rolling black comedy that is the bond market lurches ever further into the mire of absurdity. Italy, for example, has the second highest public debt burden in Europe after Greece, and yet last week its three year bonds joined those of other countries trading at a negative yield. Investors are paying to own debt issued by an insolvent government. In what universe does that even make sense? $5.5 trillion of debt now offers the prospect of a guaranteed loss to those “investors” electing to hold it to maturity. Last week Mario Draghi took the ECB and euro zone interest rates even further into the Twilight Zone. Will negative interest rates improve prospects for the banking sector or trigger economic growth? We think the answer is definitively No. But they do reinforce the case for bonds now being an uninvestible asset class.

Which leaves equities as the logical ‘default’ option for investors looking for either income or growth. But the problem of valuation then arises. Which equities offer the likelihood of meaningful capital growth without their valuations having already been dangerously distorted by over-generous monetary stimulus?

Stock markets generally seem to have recovered their poise. Strategist Jonathan Allum of SMBC Nikko writes,

“I have no desire to tempt fate but it does seem increasingly clear to me that in the first six weeks of the year, global financial markets lost their collective marbles, jumping nervously at shadows that were largely of their own creation. Since the middle of February (the MSCI Global Index bottomed on the 11th February), the markets have, a little shamefacedly, been pulling themselves together and both equities and commodities have rallied rather impressively.”

That applies, perhaps even more strongly, to emerging markets too. MoneyWeek points out that both pricing in, and sentiment towards, emerging markets may also have turned. They cite Robert Arnott and Christopher Brightman of Research Affiliates who suggest that emerging markets “appear to have bottomed”. The MSCI Emerging Market index has risen by roughly 15% from its post-crisis low in January.

Here’s a developing market we think is more equal than most. It has a population of 94 million, 50% of whom are under the age of 30. It enjoys a 93% literacy rate. It has average wage costs less than a half those of China, and as a result is the most popular destination for foreign direct investment in Asia. It will benefit from the implementation of a free trade agreement with the EU this year. A Trans-Pacific trade partnership was signed in October 2015, which gives this country preferential access to the US and Japan. These markets already account for 29% of this country’s exports and it already runs trade surpluses with both of them. Foreign ownership limits were lifted in this stock market in June 2015. This is currently a ‘frontier’ market but MSCI is widely expected to redesignate it an ‘emerging’ market within the next 12 to 18 months. That redesignation, as and when it comes, will open the floodgates to billions in foreign investment capital.

And it’s an inexpensive market. Over 50% of the market trades on a price/earnings ratio of less than 10 times. Over 50% of this market trades on a price/book ratio of less than 1. Welcome to Vietnam.

You can perhaps see why our global value fund has a 15% exposure to this market. But it’s not on an indexed basis. Much of it is with a manager whose existing value fund has delivered returns of 297% over 4 years while the index has returned 16% over the same period. (The balance is with a top-performing pan-Asian value fund which is now closed to new investors.)

All of which suggests, to us, that there is genuine value out there, but much of it is concentrated in pots of gold hidden along “the road less travelled”. As Warren Buffett said, it is difficult to buy what is popular and do well. As the ad says: Think Different.

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I’m looking for motivated, ambitious, talented people who know deep down that they can do amazing things in this world if they have the right mentorship.

If that sounds like you, you need to know about our annual Liberty and Entrepreneurship camps.

Each summer we gather top business and financial mentors, along with a hand-picked group of talented individuals who aspire to change the world, for five life-changing days at a lovely lakeside resort in Europe.

Our instructors are like-minded, seasoned entrepreneurs who share the most valuable lessons they’ve learned in becoming truly free, and successful.

This isn’t business school theory, or financial lessons that only work inside a textbook. We talk about how it really works in life, and in business.

Many of our students have gone on to start successful businesses based on the inspiration, actionable lessons, and practical advice they took away from the camp.

But it’s not just about business. We’ve had artists and activists. Investors and engineers. Doctors. Dentists. Attorneys. Teachers. And unemployed dreamers.

It’s a hell of a group.

In fact, in addition to the incredible mentors, each summer we have students representing dozens of countries– places like Mongolia, Zimbabwe, Bulgaria, Argentina, Australia, Bangladesh, and Japan.

It’s a chance to build an incredible network with like-minded people from all over the world. Many of our alumni have even gone on to become business partners.

Our Liberty and Entrepreneurship is a non-profit program. I sponsor the entire event through our foundation, Sovereign Academy.

We cover all the costs for our students while they at the camp, including food, accommodation (it’s a wonderful resort), and transport around Lithuania.

The only financial cost to the students is their flights to/from Lithuania.

I say ‘financial cost’ because the greater cost I expect from students is their commitment to follow through.

Make no mistake, this is an investment. I do this to invest in people. And I choose carefully because I don’t want to waste that investment on someone that isn’t going to build on what they learn.

Application Process

Here’s the bottom line: we can only accept 50 people. And each year we receive so many applications that our Liberty & Entrepreneurship Camp is starting to rival Harvard in its acceptance rate.

We require each applicant to submit a video. Just like life and business, there are no instructions.

All I can tell you is that I watch every application video personally. It’s one of the most important things I do each year.

You can read more about the camp and application process by clicking here.

Don’t delay. The application deadline is March 31st.

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The 12.5 hours spent crossing the Pacific on Qantas flight 27 feels like going through a wormhole.

The flight departs Sydney, Australia at 12:50pm and arrives to Santiago, Chile the same day at 11:20am. In other words, the plane lands 90 minutes before it departs.

When I landed yesterday, the captain came on the P.A. and said, “Ladies and Gentlemen, I have good news; if you enjoyed Wednesday March 9th, it’s still Wednesday March 9th!”

It really does feel like going back in time.

This feeling was only reinforced when I whipped out my phone and saw that German bank Berlin Hyp had just issued 500 million euros worth of debt… at negative interest.

I wondered if I really did go through a time warp, because this is exactly the same madness we saw ten years ago during the housing bubble and the subsequent financial crisis.

To explain the deal, Berlin Hyp issued bonds that yield negative 0.162% and pay no coupon.

This means that if you buy €1,000 worth of bonds, you will receive €998.38 when they mature in three years.

Granted this is a fairly small loss, but it is still a loss. And a guaranteed one.

This is supposed to be an investment… an investment, by-the-way, with a bank that almost went under in the last financial crisis.

It took a €500 billion bail-out by the German government to save its banking system.

Eight years later, people are buying this “investment” that guarantees that they will lose money.

The bank is now effectively being paid to borrow money.

We saw the consequences of this back in 2008.

During the housing bubble, banking lending standards got completely out of control to the point that they were paying people to borrow money.

At the height of the housing bubble, you could not only get a no-money down loan, but many banks would actually finance 105% of the home’s purchase price.

They were effectively making sure that not only did you not have to invest a penny of your own money, but that you had a little bit of extra cash in your pocket after you bought the house.

Paying people to borrow money is just crazy, whether it’s homebuyers, bankrupt governments, or banks.

Global insurance giant Swiss Re calculated that roughly 20% of all government bonds worldwide now have negative yields. And over 35% of Eurozone government bonds have negative yields.

(They would know—along with pension funds and banks, insurance companies are some of the largest buyers of bonds.)

With this deal, Berlin Hyp becomes the first non-state owned company to issue euro-denominated debt at a negative yield.

They won’t be the last.

We’re repeating the same crazy thing that nearly brought down the system back in 2008—paying people to borrow money.

The primary difference is that, this time around, the bubble is much bigger.

Back then, the subprime bubble was “only” $1.3 trillion.

Today, conservative estimates show that there’s over $7 trillion in negative rate bonds.

What could possibly go wrong?

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