Category: simonblack

December 4, 2014
Santiago, Chile

One of the great myths about investing that we’re told by the mainstream investment education is that we should “buy and hold” for the long term.

I remember being taught in a personal finance class long ago that I should just buy the S&P 500 index, walk away, and that years later I will have achieved huge gains.

The premise is that over a long period of time, it doesn’t really matter at what point you get in and out. The long-term trend of the stock market portends that you will make money.

It’s those kinds of investing myths that become axiomatic through repetition. You keep hearing the same thing over and over again and pretty soon people believe it.

Let’s look at the data.

It’s true that stock markets have plenty of peaks and troughs. Going back to the last relative peak, the Dow Jones Industrial Average (DJIA) hit just over 14,000 in October 2007; back then this was an all-time high.

If you had bought the DJIA back then, your return on the increase in share prices through today would work out to be a measly 3.5% on an annualized basis.

If you adjust that for taxes and inflation (even using the government’s own monkey numbers for inflation), you’re looking at a real rate of just 1.2%.

Now just think about everything that you saw in the last 7 years. The volatility. The risk. The turmoil.

Was it worth it? Probably not.

But if we go back further and hold an even longer-term view, the picture must brighten, right?

Let’s go to the peak before that. In early 2000, stocks once again reached what back then was an all-time high.

If you had bought the S&P 500 index back then (which is exactly what I was told at precisely the time that I was told), your annualized rate of return through today would be just 2.17%.

If you adjust that number for taxes and inflation, your real rate of return would be a big fat 0.14%… as in less than 1%. It’s practically ZERO.

Think about what you saw over the last 15 years in the markets—the collapse after 9/11, interest rates cut to zero, interest rates ratchet up again, huge swoons in markets, the credit crunch, Lehman’s collapse, the debt ceiling debacle, etc.

Is all that really worth a return of 0.14% per year? (i.e. 14 cents on every $100 invested)

It makes absolutely zero sense to do this with our money. But that’s what we’re forced into right now with most conventional investments at their all-time highs.

Bottom line—you don’t HAVE to be invested in the market. Sometimes the best investment you make is the investment you don’t make.

The challenge is, of course, that if you’re not invested in the market, your money is just sitting at the bank, earning less than the rate of inflation.

Welcome to the world of mainstream financial options. You’re damned if you do and damned if you don’t.

The conclusion here is very simple. It’s time to move on from the mainstream. There’s too much technology and too many global options now to be lulled into conventional investments that are born to lose.

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See also why Singapore is the best place in the world to store gold.

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December 4, 2014
Santiago, Chile

On May 15, 1855 one of the greatest gold robberies in history occurred.

Three British firms had arranged for some of their gold to be sent from London to Paris by ferry and train. The gold was stored in solidly built boxes secured within iron safes with two locks.

When the boxes were opened in Paris most of the gold was missing, having been replaced by lead shot.

A grand total of 200 pounds of gold were stolen, worth £12,000 or about $3.7 million in today’s money.

In the investigations that followed, police in Britain and France made extensive searches and arrested hundreds of suspects for questioning but ultimately were unable to find any clues to lead them to the perpetrators.

The case was eventually solved a year later when one of the thieves turned in his co-conspirators after an inner dispute.

Arrests were made and in the end police were only able to recover £2,000 of the stolen gold.

The days of armed bandits robbing banks and riding off on horses has long passed but there are still threats to your savings that exist today.

Of course the biggest criminal gang you have to worry about is your own government.

When governments go bankrupt they often look for creative ways to raise revenue, and they’re getting more desperate by the minute.

At the height of the depression in 1933 Franklin Roosevelt banned private ownership of gold, forcing Americans to sell their gold at $20 an ounce and revaluing it at $35 a few weeks later, creating a nice profit for the government.

There’s little stopping the government from performing a similar act, as much of the public considers gold to be an archaic money instrument.

If you want to keep your gold safe it’s worth looking into other jurisdictions where the risk of gold confiscation is much lower.

Hands down the best country in the world to store your gold is Singapore.

Singapore is rapidly becoming THE place to invest and do business in Asia. Everything is just so much easier there. Regulation is minimal, corruption is among the lowest in the world, and the tax structure is very friendly to businesses and investors.

Prices for gold storage are incredibly competitive, and with recent legislation that eliminated import duties and taxes on investment-grade gold, premiums are dropping.

Gold throughout Asia is still highly valued at a cultural level and not seen as some archaic monetary instrument like it is by many in the West.

It’s quite common for people all across the region to store some of their savings in precious metals. Many people from countries like Vietnam, China, India, Malaysia, and Indonesia use storage facilities in Singapore.

Singapore is well connected, with cheap flights to other countries in the region and direct flights to many places in the world.

Singapore is also home to The Safe House (www.thesafehouse.sg), hands down one of the most advanced precious metals storage facilities in the world.

(Note: I am a director of The Safe House’s parent company, though I have no share ownership.)

Getting your gold in and out of the country is easy to do as well. Gold and silver are viewed as commodities by the authorities, which means there are no reporting requirements.

While the idea of storing your gold thousands of miles away may seem strange, all the evidence shows that it’s a bad idea to store gold in your home country.

If your bankrupt Western government slides into insolvency and begins seizing assets or imposing capital controls, you’ll be the smartest guy the room for having physical gold and silver in Singapore.

Yet if nothing happens for now, you won’t be worse off for holding precious metals abroad.

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December 3, 2014
Santiago, Chile

When Francisco Pizarro returned to Spain from the New World in 1528, he told King Charles I of the vast material riches that were found in abundance on Peru’s shores.

He petitioned for permission to conquer the new lands in the name of the crown, and was granted governorship over a vast amount of territory as long as he succeeded in conquering it.

Hungry to get their hands on Incan gold, some 168 Spaniards joined him on the conquest.

In the first battle, the Incans lost 2,000 men while the Spanish lost only 5.

In subsequent battles against the Spaniards, Incan troops were massacred in horrific numbers due in large part to Spain’s technological superiority.

(It also didn’t hurt that the Incan empire was undergoing a civil war at the time.)

The Spaniards would go on to conquer the rest of Incan lands over the next 40 years, which included parts of modern day Argentina, Bolivia, Chile, Colombia, Ecuador and Peru.

And over the next few centuries the Spanish empire would grow to encompass a significant portion of the Americas, some parts of Africa and the East Indies.

Spain was, in fact, the greatest power in Europe during a significant chunk of the renaissance, and she had her overseas dominions to prove it.

How times have changed. Today Spain is in financial straits, and most of her former colonies are in far better economic shape.

And as the gloomy economic landscape in Europe has dried up opportunities for young Spaniards, many have started to look to South America to start new careers.

Between 2008 and 2012 an estimated 700,000 Spaniards have left home in search of greener pastures, choosing to go to places like Colombia, Peru, and Chile.

Unencumbered by a language barrier and without much culture shock, they’re finding that they’re able to rise up the career ladder much more quickly than they could back home.

The shortage of skilled labor and advanced training in these countries means that foreigners are able to obtain higher paying jobs than they could back home.

Some recent college grads find themselves occupying senior level positions after just a few years because there is no one else around qualified for the job.

Even folks who are not with a large corporation or hold an advanced technical degree still have valuable skills.

Just by virtue of being a consumer in the West, for example, you know much more about proper customer service than people in countries that aren’t constantly exposed to such high standards.

I see the same situation in dozens of countries all over the world as I travel. There are many places where local talent and skills simply aren’t catching up fast enough with economic growth.

They are hungry for skilled labor and the entrepreneurially-minded.

This bespeaks a greater trend of our times: some of the best opportunities are abroad. And in uncertain times, you have to carve an independent path to achieve success.

I was always told growing up that if I studied hard and worked my way up the corporate food chain that I’d become successful. Did they tell you that lie too?

That entire premise is fundamentally broken.

But the good news is that it’s never been easier to venture abroad in search of some of the most enticing opportunities out there.

And the transition is not nearly as treacherous as it might seem.

Our ancestors spent months on a boat with a good chance of never coming back. Today we can hop on an airplane and wake up on the other side of the planet.

We can communicate with friends and family with a mouse click. And we can even meet people and conduct research before we arrive.

All the tools and technology exist to make the transition abroad extremely smooth.

It just takes independence of mind to break out of the current mold and embrace the tremendous opportunity you can find overseas.

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December 2, 2014
Santiago, Chile

On October 22, 1981, the government of the United States of America accumulated an astounding $1 TRILLION in debt.

At that point, it had taken the country 74,984 days (more than 205 years) to accumulate its first trillion in debt.

It would take less than five years to accumulate its second trillion.

And as the US government just hit $18 trillion in debt on Friday afternoon, it has taken a measly 403 days to accumulate its most recent trillion.

There’s so much misinformation and propaganda about this; let’s examine some of the biggest lies out there about the US debt:

1) “They can get it under control.”

What a massive lie. Politicians have been saying for decades that they’re going to cut spending and get the debt under control.

FACT: The last time the US debt actually decreased from one fiscal year to the next was back in 1957 during the EISENHOWER administration.

FACT: For the last several years, the US government has been spending roughly 90% of its ENTIRE tax revenue just to pay for mandatory entitlement programs and interest on the debt.

This leaves almost nothing for practically everything else we think of as government.

2) “The debt doesn’t matter because we owe it to ourselves.”

This is probably the biggest lie of all. Two of the Social Security trust funds alone (OASI and DI) own $2.72 trillion of US debt.

The federal government owes this money to current and future beneficiaries of those trust funds, i.e. EVERY SINGLE US CITIZEN ALIVE.

I fail to see the silver lining here. How is it somehow ‘better’ if the government defaults on its citizens as opposed to, say, banks?

3) “They can always ‘selectively default’ on the debt”

Another lie. People think that the US government can pick and choose who it pays.

They could make a bing stink about China, for example, and then choose to default on the $2 trillion in debt that’s owed to the Chinese.

Nice try. But this would rock global financial markets and destroy whatever tiny shred of credibility the US still has.

Others have suggested that the government could selectively default on the Federal Reserve (which owns $2.46 trillion of US debt).

Again, possible. But given that the Fed (the issuer of the US dollar) would become immediately insolvent, the resulting currency crisis would be completely disastrous.

4) “It’s the NET debt that’s important”

Analysts often pay attention to a country’s “net debt” instead of its gross debt. If you have a million bucks in debt, and a million bucks in cash, then your ‘net debt’ is zero. It washes out.

Problem is, the US government doesn’t have any cash. The Treasury Department opened its business day on Friday morning with just $71.9 billion in cash, or just 0.39% of its total debt level.

Apple has more money than that.

5) “They can fix it by raising taxes”

No they can’t. Just look at the numbers. Since the end of World War II, US government tax revenue has consistently been roughly 17% of GDP.

They can raise tax rates, but it doesn’t move the needle in terms of revenue as a percentage of GDP.

In other words, the government’s ‘slice of the pie’ is pretty consistent.

You’d think with this obvious data that, rather than try to increase tax rates (ineffective), they’d do everything they can to help make a bigger pie.

Or better yet, just leave everyone the hell alone so we’re free to bake as much as we can.

But no. They have to regulate every aspect of people’s existence: How you are allowed to educate your children. What you can/cannot put in your body. How much interest you are entitled to receive on your savings.

All of this costs time, money, and efficiency. So do never-ending wars. The bombs. The drones. The airstrikes.

This isn’t about any single person or President. The problem is with the system itself.

History shows that every leading superpower from the past almost invariably fell to the same fate.

Great powers often feel that their wealth and success entitles them to spend recklessly and wage endless, arrogant wars. The Romans. The Ottoman Empire. The British.

History may not repeat but it certainly rhymes. And the lesson here is very clear: debt weakens a nation. It weakens a society.

Generations that will not even be born for decades will inherit these debts by complete accident of birth.

And the people in charge of the system have backed themselves into a corner where there is no way out other than to default– either on their creditors (creating a global financial crisis), the central bank (creating a currency crisis), or on the citizens themselves (creating an epic social crisis).

Bottom line: this is not a consequence-free environment. And while you can’t fix the debt problem, you can certainly reduce your own exposure to what happens next.

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December 1, 2014
Santiago, Chile

Over four centuries ago, the Dutch East India Company made history as the world’s first IPO.

Known as VOC in the Netherlands, the company was one of the most successful ventures in the last several hundred years.

When adjusted for inflation, its highest market capitalization would be worth over $7 TRILLION today (i.e. ten times the size of Apple).

More importantly, it completely dominated the Asian trade in the 17thand 18th centuries.

While the British East India Company is usually more famous nowadays, VOC had almost twice as many ships and moved five times more cargo than its British rivals.

The company was so successful over the long-term that it paid an astonishing 18% annual dividend to its shareholders for almost 200 years.

Given their long tradition of being financially savvy, when the Dutch do something dramatic in the financial markets, it’s important to take notice.

Which is why when the Dutch Central Bank recently announced they had just moved 122.5 tons of gold, worth $5 billion, from storage in New York back to Amsterdam everyone’s alarm bells should be ringing.

The Central Bank’s official statement itself said “this may also contribute to a positive confidence effect with the public.”

Translation: The US is not to be trusted anymore with the custody of our gold.

It’s becoming so obvious where things are headed.

It’s easy to dismiss gold repatriation when “foes” like Venezuela were doing it.

But when your own allies think you’re not to be trusted as a custodian of their gold—that’s the end of your credibility.

What does this mean to you?

The whole system that’s based on the dominance of the US dollar and the US financial institutions is in clear decline.

Governments and businesses are screaming for alternatives and some are actively pursuing them.

The US has spent the last several years debasing its currency. The Fed’s balance sheet has exploded by 529% since 2008.

The US federal government is now just hours away from hitting $18 trillion in debt.

Yet they continue to run up huge deficits, blowing their tax revenue on more bombs, drones, wars, and body scanners.

They slam foreign businesses with enormous fines (up to $9 billion) for doing business in countries the US doesn’t like.

Meanwhile they brazenly and arrogantly spy on their ‘allies’, let alone their own citizens.

Is it any wonder they have lost credibility?

Bear in mind that the US government’s power – and the dollar’s prominence – are based almost exclusively on US credibility.

Where do you think the trend for the dollar is headed when America’s own allies no longer trust the government?

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December 1, 2014
London, England

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

So the Swiss have decided not to force their central bank into underpinning its reserves with harder assets than increasingly worthless euros.

At least they had the chance to vote.

But in the bigger picture, the rejection of the “Save Our Swiss Gold” initiative flies in the face of a broader trend towards repatriation and consolidation of sovereign bullion holdings – following on the heels of similar attempts by the Bundesbank, the Dutch central bank, for example, recently announced that it had moved a fifth of its total gold reserves from New York to Amsterdam.

And the physical metal continues its inexorable exodus eastwards, into stronger hands that are unlikely to relinquish it any time soon.

The Swiss vote was preceded by some fairly extraordinary black propaganda, most notoriously by Willem Buiter of the banking organisation that now styles itself ‘Citi’.

Once again we were treated to the intriguing claim that gold is nothing more than “a six thousand year-old bubble”, and a “fiat commodity currency” (whatever that might mean) that has “insignificant intrinsic value”.

Izabella Kaminska for the FT’s Alphaville republished much of Buiter’s ‘research’; the resultant to-and-fro between FT readers on the paper’s website makes for a fascinating scrap between goldbugs and paperbugs.

Among the highlights was Vlady, who wrote:

“When a social construct (gold as money) survives for 6,000 years I would expect curious people to inquire as to whether it is tied to some immutable underlying law, or otherwise investigate if there is something more here than meets the eye.  Not so curiously inclined, our court economists prefer to write this off as a 6,000 year old delusion. That says a lot about the sorry state of the economics discipline today.”

Another was the artfully named ‘Financially Repressed by Central Banks’, who wrote:

“I am not a gold bug, but I am a hard working taxpayer who is getting pretty fed up with having my savings earning no interest and possibly being devalued (see Japan) and of not being able to find any sensible place to invest my hard earned due to central bank policies making it impossible to make any return anywhere without taking crazy risks.”

The financial markets feel increasingly unhinged. All-time low bond yields co-exist with all-time high stock markets.

Oil has collapsed along with much of the commodities complex. Emerging market currencies have been hit for six. China threatens the West with another strong deflationary impulse.

Gold is difficult to value at the best of times, in large part because it’s not a productive asset, and partly because it’s conventionally priced in a currency (the dollar) that, like all others, is destined to lose its purchasing power over time.

Viewed purely through the prism of price, gold increasingly feels like something close to a ‘value’ investment, given that ‘value’ investing is essentially about picking up dollar bills for something closer to fifty cents.

We’re currently reading Christopher Risso-Gill’s biography of the legendary ‘value’ investor Peter Cundill, and some of Cundill’s diary entries seem to be peculiarly relevant to this strange, dysfunctional environment in which we are all trapped.

One in particular stands out, which Cundill himself wrote in upper case to make his point:

“THE MOST IMPORTANT ATTRIBUTE FOR SUCCESS IN VALUE INVESTING IS PATIENCE, PATIENCE, AND MORE PATIENCE. THE MAJORITY OF INVESTORS DO NOT POSSESS THIS CHARACTERISTIC.”

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November 28, 2014
Santiago, Chile

Walking down the streets of Constantinople in the early Middle Ages, you would have immediately felt the energy and prosperity.

Constantinople was one of the wealthiest, most advanced cities in the world, and some historians estimate its population could have been as high as 500,000 people.

Byzantine architecture in Constantinople was world famous, and local artists were producing mosaics that are still regarded as some of the finest ever made.

At this point in history, wealth and power in the world was clearly concentrated in the East.

Europe was nothing more than a plague-infested backwater. Constantinople flourished. And even further to the east, China was sporting some of the most advanced technology in the world.

But times changed.

By the 13th century, the Byzantine Empire was in clear decline. Its borders were shrinking and the empire was at the center of almost constant warfare.

And more importantly, they had begun to debase their currency. Again.

For centuries, the Byzantine gold solidus had acted as sort of de-facto international reserve currency. It contained roughly 4.5 grams of pure gold and was used in trade and commerce around the world for nearly seven centuries.

(Modern archaeologists have unearthed medieval gold solidus coins as far east as Inner Mongolia!)

Problem is– war is terribly expensive. And they paid for it by debasing by their currency. By the 11th century, the gold content in the solidus had been debased to the point that it was no longer worth anything.

So they gave it another try. Fool me once. Shame on you.

The successor to the solidus was called the hyperon; it was initially struck at 20.5 carats of gold (roughly 85% purity). But this was quickly reduced to 18 carats, then 15, then 12.

Fool me twice. Shame on me.

Enough was enough, and the rising powers in Europe demanded an alternative.

It was the Italians (the most advanced power in Europe at the time) who solved the problem.

Florence, Genoa, and Venice were all minting their own gold coins by the 13th century, and the 3.5g Florentine florin soon became the new international reserve standard used across Europe.

In many ways, this marks the beginning of the West’s rise to dominance: it all started with declaring their monetary independence from a declining power and a currency they could no longer trust.

Fast forward several centuries and we can see that the tables have clearly turned.

The West has been the dominant superpower for centuries. Yet like the Byzantines before, the West is in obvious decline.

At this point insurmountable debts and deficits plague nearly all Western governments. And they make up the difference by debasing their currencies.

This has created massive distrust, especially in the world’s most dominant reserve currency today, the US dollar.

Like the Venetians and Florentines before them, rising powers in Asia are starting to take matters into their own hands.

The Chinese renminbi (though surely not a one-way bet) is rising in international prominence. And China is at the center of a new emerging global financial system being set up in partnership with Russia, India, Brazil, etc.

Western dominance was born from a distrust in the dominant reserve currency at the time. Its decline will be because they followed the same route.

And the canary in the coal mine is what’s happening in Switzerland this weekend.

On Sunday, the people of Switzerland are going to the polls to vote on a return to the gold standard.

It was only 14 years ago that the Swiss franc, traditionally seen as a safe haven currency due to Switzerland’s reputation for stability, was still on a gold standard.

In fact, of all the major currencies, the Swiss franc was the last to abandon prudent monetary standards.

Ever since then, the Swiss National Bank’s balance sheet has absolutely exploded.

Now there’s a national election to return to a gold standard and conservative monetary policy.

Right now the polls suggest that the Swiss are leaning towards ‘NO’, i.e. they want to continue to abandon prudent practices and hand over total control of the money supply to unelected central bankers.

And if the country that has the world’s strongest traditions for financial stability chooses to turn its back on sound money, what hope is there for the rest of the West?

If the Swiss vote NO this weekend, I view that as a major watershed moment in signaling the beginning of the end of Western monetary dominance.

We can already see the signs everywhere.

Across Europe, government bond yields are NEGATIVE, i.e. you have to PAY these bankrupt governments for the privilege of loaning them money.

And as IMF director Christine Lagarde said last week that a diet of high debt, low growth and high unemployment may yet become “the new normal in Europe”.

Each of these data points signals an obvious long-term trend. We can see where this is going.

But here’s the good news: none of this need affect you. The power is in your hands.

Even if the Swiss divorce themselves from prudent policy, and even if your government refuses to maintain sound money, you still have options.

You can choose to maintain a portion of your savings at a well-capitalized bank abroad in stronger currencies.

You can choose to hold some physical precious metals (or even cryptocurrency) overseas at a secure location where it can’t be confiscated by a bankrupt government.

You can choose to own productive assets abroad or collectibles that cannot be conjured out of thin air by central bankers.

All of these tools and resources already exist today. And for now, they’re available for anyone to take advantage of.

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November 28, 2014
Bali, Indonesia

[Editor’s Note: This missive was penned by Sovereign Man’s Chief Investment Strategist Tim Staermose]

I spent two days in China earlier this week. Among other things, I wanted to get a feel for where people on the ground see the currency heading.

My personal view is that, as the US dollar keeps strengthening against the euro, yen, etc. China will find it increasingly difficult to bear the burden of having the only major alternative currency that’s appreciating versus the US dollar.

It’s killing China’s price competitiveness in export markets and contributing to the slowdown in the Chinese economy.

At some point, I believe the pain will become too much to bear, and the Chinese government will devalue. Remember, their hold on power depends almost entirely on keeping people working, and increasing living standards in China.

Indeed, after a surprise interest rate cut by the Chinese authorities last Friday afternoon, word on the street was that the Chinese government may be trying to encourage a weaker RMB.

Speaking with one Zhuhai-based friend who’s in the shoe export business, he confirmed that many Chinese manufacturers are currently surviving as best they can on wafer-thin profit margins.

Personally he was keeping his fingers crossed that the line of $19.95-a-pair high heeled winter boots for women that he had supplied to US retailers for the Black Friday retail sales were going to fly off the shelves.

Talking to the black market foreign exchange dealers near the border crossing from Shenzhen to Hong Kong, the consensus was also that the RMB may have seen its highs in the near term.

If you ask me, it makes perfect sense for the Chinese to let the currency depreciate. By doing so:

1. They’d boost the export price competitiveness of Chinese exports, especially in Europe and Japan where the local currencies have fallen off a cliff. But, also in the US.
2. The value of the Chinese government’s vast hoard of foreign exchange reserves would appreciate measurably in RMB terms, giving them more fire power to launch further economic stimulus.
3. They’d smoke the “carry trade” speculators currently pouring hot money into China — often using illegal workarounds — to benefit from the interest rate spreads available between Chinese yuan deposits or bonds, and near-free US dollar, Hong Kong dollar, or yen funding costs.

However, the consensus view among most non-Chinese investors still appears to be that the RMB is a sure thing to keep gradually appreciating.

This bias is so heavy that a unique contrarian opportunity has presented itself.

Because the USDRMB exchange rate has been trending down in a steady, predictable, un-volatile pattern for most of the year, many people have been lulled into a false sense of security.

With such limited volatility, options prices for trades which short the renminbi are super cheap.

I’ve just put a trade on for an investment management client, using call options on the USDCNY exchange rate.

We are risking RMB70,000 for a chance to make RMB2.5 million or more, on a 20% +/- depreciation in the RMB sometime over the next 12 months.

It’s an aggressive trade. But with 3,400%+ profit potential, we like the risk/reward ratio.

Even if speculating is not your thing, if you currently hold any RMB-denominated deposits or investments, at the very least I recommend you buy some “insurance” against a sudden RMB devaluation.

This is something that is entirely possible within the next 12 months.

From China’s point of view, joining the currency war that’s raging around the world, to stem the pain from a strong currency that’s choking off its competiveness, and stoking unwanted hot money inflows, might just be a temptation that’s too great to resist.

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November 26, 2014
Sovereign Valley Farm, Chile

I can’t say I’ve known too many guys in my life named ‘Boris’ who were shy about standing up for themselves.

The name itself means ‘wolf’ in an extinct Turkic language.

And if the current mayor of London Boris Johnson is going go to toe to toe with the IRS as he has stated, I certainly hope the translation is accurate.

Mayor Johnson is what we call an ‘accidental American.’

Even though he’s British and grew up in England, he just happened to be born in New York.

Whether his parents realized it or not, and whether they wanted it or not, that instantly made baby Boris a citizen of the United States.

Fast forward a few decades, and Mr. Johnson had pretty nasty taste of life as an accidental American.

It was 2006. The then 42-year old Johnson was leaving England with his family for a summer holiday in Mexico, when they had a flight connection in Houston.

Upon arrival, he stood in the line for ‘non-citizens’ with his family, and when it was their turn, the immigration officer said, “[Y]ou have to travel on an American passport if you want to enter the United States.”

Problem #1: he didn’t have a valid US passport. So Boris Johnson was refused entry to the country of his birth due to this administrative technicality.

His wife was sent on to her connecting flight, but Boris had to buy a brand new ticket, fly to Madrid, and finally connect again from there to Mexico.

After this absurd affair, Mr. Johnson posted a very public (and hilarious) note on his website to renounce his US citizenship, in which he said, “I make this formal, public, and, I hope, legally valid renunciation. . .”

Problem #2: this renunciation wasn’t legally valid.

In order to renounce your citizenship, you have to jump through a bunch of hoops and actually get the government’s consent to do so. You cannot do this of your own volition.

Think about that for a moment: in the Land of the Free, you cannot freely renounce what you never signed up for to begin with. Bazinga.

Problem #3: Fast forward a few more years– Mr. Johnson sells some real estate in London.

And even though he had publicly renounced his US citizenship, and even though the profit isn’t subject to any local tax in the UK, the IRS still wants its fair share.

In other words, this person who had not lived in the US and just happened to be born in New York, who had already made good faith efforts to renounce his citizenship, was now being charged tax from the sale of a piece of property located IN ENGLAND.

Enough was enough, and Johnson went ballistic.

He now claims that he will REFUSE to pay, denouncing the Land of the Free’s “incredible doctrine of global taxation.”

It is incredible. The US is one of the only nations on the planet which taxes its citizens on their worldwide income, even if they live overseas.

This is a dubious honor that America shares with the likes of… Eritrea.

What’s even more incredible is that if Mr. Johnson wants to go through the legal process of renouncing his citizenship at this point, it still won’t get him off the hook with the IRS.

And according to US immigration law, anyone who renounces US citizenship to avoid tax (which Mr. Johnson is clearly griping about) will be legally BARRED from entering the US ever again.

This is a completely absurd way to treat people… but one that has become the norm in the Land of the Free.

For most people, renouncing citizenship is a pretty extreme idea. But as we’ve written before, there are other options out there to legitimately reduce your tax bill.

We’ve discussed moving abroad– where between the housing deduction/exclusion, the foreign earned income exclusion, and SEP contributions, you can take in roughly $200,000 annually with minimal income tax.

The foreign earned income exclusion doesn’t generally apply to most investment gains, though.

In this case, Puerto Rico presents a unique option.

Because Puerto Rico is a US commonwealth, it has its own local tax system. And US citizens who obtain legal residency in Puerto Rico and fall under the local tax jurisdiction are NO LONGER required to pay US Federal Income tax in most cases.

The reason this is interesting is because recent legislation in Puerto Rico provides a lot of MAJOR incentives for new residents, including a 4% corporate tax in certain cases, and TAX FREE capital gains.

In other words, you can legally dodge most US Federal Income tax, capital gains tax, corporate tax, etc. by going through this process.

You can read more about it in this free report.

It’s a scaled down version of a more actionable ‘black paper’ that was sent to members of Sovereign Man: Confidential a few months ago; hopefully it gives you a small taste of our premium service.

PS- watch out for our Black Friday/Cyber Monday promotion coming later this week. You won’t want to miss the incredible savings.

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November 24, 2014
Santiago, Chile

Science is about truth. It’s about fact.

It’s about forming hypothesis and either proving or disproving that hypothesis through what we can observe, test, and measure.

For thousands of years it’s been through this method that humanity has progressed. And history shows that every time “authorities” get involved, it invariably arrests this process.

Human civilization lost centuries of progress in the “Dark Ages” (a bit of a misnomer, given that societies were flourishing in Asia at the same time).

European governments would burn anyone at the stake who dared to write that the Earth wasn’t the center of the universe.

We’d like to think we’ve come a long way since then. But have we really?

It was just a few years ago that the EPA was slammed in a scandal for putting political pressure on scientists to influence their work.

And just last week, the United States House of Representatives passed a bill that effectively kicks the scientists out of the EPA’s Scientific Advisory Board, and makes room for industry insiders.

What’s curious is that this bill specifically allows for industry representatives to serve on the advisory board even when they have a direct conflict of interest with the board’s advisory activities.

This makes it yet even easier for a handful of big companies to influence public policy and force everyone else to do their bidding.

By themselves, companies would never be able to set policy. But when you put them in bed with government, they can do so at the point of a gun.

To give you an analogy, this would be the same thing as commercial banks like Citi or JP Morgan getting to choose the representatives that set monetary policy at the Federal Reserve.

—Oh wait, they’re already doing that.

Or it would be like the Department of Homeland Security buying completely useless body scanners from a company linked to the former head of DHS.

—Oh wait, they already did that too.

Or it would be like the FDA selecting some of its top executives from big agriculture companies like Monsanto.

—Oh wait, they already do that too.

Abraham Lincoln famously said at Gettysburg in 1863 that a government of the people, by the people, for the people, shall not perish from the earth.

The system we have today is none of those things.

The EPA is not there to protect the environment.

Homeland Security is not there to secure the homeland.

The FDA is not there for the health and safety of Americans.

And you’re far more likely to get shot by a police officer now in the Land of the Free than you are to ever even see a terrorist.

This system isn’t there to support you or protect you. It’s there to extract as much as possible from you through taxes and inflation at the point of a gun, and then force you to follow the rules that they create which benefit themselves the most.

That’s what passes as a free society today.

And it’s the biggest threat to our liberty, the biggest threat to our livelihood, and the biggest threat to future generations that won’t even be born for decades.

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