Category: simonblack

November 7, 2014
Santiago, Chile

As we talked about yesterday, moving abroad isn’t as difficult as you think.

Sure, it’s not always cookies and cupcakes, but the benefits and opportunities of living abroad are often unparalleled.

Only by moving abroad can you truly curtail how much you contribute to your corrupt, bankrupt home government.

And you just might find that in many cases you can live better, cheaper, and enjoy a far greater quality of life than what you could achieve back home.

It’s also important to recognize that there’s very little in this world that’s forever.

So even if it doesn’t work out, you can always head back home later— this time with some overseas experience under your belt, and perhaps even some new language skills.

But it begs the question—where to go? There’s literally an entire world of opportunity out there, but here are a few suggestions to get you looking:

Ireland

For English speakers, moving to Ireland gives you all the thrills of living in a foreign country without the stress of having to learn a foreign language.

The Irish are some of the warmest and friendliest people you’ll ever meet, with a vibrant and upbeat culture. Plus the country itself is really gorgeous. You’ll never look at the color green the same ever again.

Ireland also ranks 9^th on the Economic Freedom Index, making it a great place to set up your business in. Doing that can also qualify you for a residency visa itself. [Note to Premium Members: More on this in an upcoming Alert.]

Thailand

With its very laid-back and welcoming culture, as well as all the conveniences of modern life, Thailand is a very easy transition abroad, while at the same time being exotic and otherworldly.

If you’re into tropical beach lifestyle, you’ll love Phuket, which is very popular with expats and offers all sorts of amenities you’d require—excellent health care, international schools, modern shopping malls, a well-connected airport, first class dining etc.

Chiang Mai in the north offers a serene and even cheaper lifestyle amid burgeoning and lush nature and Thailand’s highest mountains. It’s a laid back city that is a major hub for young digital entrepreneurs, as well as retirees.

Estonia

This is an often-overlooked Baltic gem. With a high degree of economic freedom, quaint architecture and culture, low living costs, cheap real estate, great summer weather and ubiquitous knowledge of English, Estonia should be on your radar.

Estonia offers an attractive business residency visa, enabling you to live and move freely throughout much of the European continent (and escape the Estonian winters for a more pleasant Mediterranean climate).

Like its Baltic neighbors Latvia and Lithuania, Estonia is safe, modern, and technically advanced. And it doesn’t hurt that the people seem to all be exceptionally attractive.

Chile

If you’re looking for all the conveniences that you’re used to back home, Chile is a very easy transition. Familiar North American restaurant chains abound, as do huge and modern shopping malls.

Santiago offers all of the first world amenities that you’d expect, such as high quality medical care, private education, and privatized infrastructure.

The weather is excellent and the business climate is refreshingly less burdensome than in the West, yet replete with opportunity.

You also have the advantage of being in the center of South America’s burgeoning tech scene. Who knows, if your idea is good enough you might even get paid $40,000 to move here.

Ecuador

In a recent survey by InterNations, Ecuador turned out to be the top expat destination in 2014.

In particular it’s an increasingly popular retirement destination because of its high quality yet very affordable cost of living, cheap real estate prices, vibrant culture and good weather.

The official currency is the US dollar, which is a comfort to many people.

It’s also an incredibly diverse country, with beaches, mountains, big cities, rainforest and everything in between for you to choose from.

The world is a big place and these are just a few suggestions to get you started.

While it’s important to do your own due diligence based on your personal preferences, this process shouldn’t hinder you in any way in your desire to look for greener pastures.

Go and see for yourself and find out that the transition abroad really isn’t all that difficult.

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November 6, 2014
Santiago, Chile

For most it was their first time on a ship. And now they were trapped on board for weeks to endure storms and seasickness on the high seas.

Packed together like sardines in tiny, rat-infested cargo holds with unappetizing provisions and a constant stench of human waste, early settlers (expatriates) had every reason to not be on those ships.

But there was something far more important than their comfort on board, something which superseded all the risks and uncertainties they were taking: the freedom and opportunity that awaited on the other side of the ocean.

In leaving for the New World, people hoped to escape a system back home that was completely rigged against them.

They had little freedom, few prospects, and a future with almost no security.

And in order to get away from this, a handful of courageous settlers were willing to risk everything… from the known perilous journey to the unknown risks of what awaited them on the other side.

It took weeks on a treacherous voyage across the ocean. And even once they reached new shores, only then did the hard work of establishing shelter and building up a supply of food really begin.

Then there was all the uncertainty. Would they be safe? Would they be alone? Would they be able to find everything they needed?

For at least a handful of people (many of our ancestors), it was worth plunging into the unknown to have a fresh start and the ability to truly live free on their own terms.

Today many folks are faced with a similar quandary. They can’t stand what’s happening in a country that increasingly looks like an alien planet. And they yearn for a freer life on greener pastures abroad.

But fear of the unknown is an incredibly powerful force.

It creates inertia. It’s what makes people stay in bad (or even abusive) relationships. It’s what keeps people working unfulfilling jobs for bosses they despise in environments that suffocate them.

So many people have a voice deep down calling out for them to make a change. But we’re held back by this inertia, fear of the unknown… and more often than not, all the risks we’ve heard about our entire lives.

It’s amazing how much ignorance and misinformation there is out there about the rest of the world.

Mainstream TV makes it look like every country outside of the US, Canada, and Western Europe is the backdrop for a Feed the Children commercial, devoid of basic necessities like running water.

Then, of course, there are legions of citizens, many of whom don’t even have a passport, who wax philosophically about dangerous places overseas that they’ve never been to.

All of this builds the inertia and keeps us rooted.

But the reality is that picking up and leaving is really not so scary. Everything pales in comparison to what our ancestors had to deal with.

Today, we can fly across the globe in a matter of hours. We can do substantial research online and get to know people in far away places before we even arrive.

Once you get in on the ground, you realize that they too have running water and electricity. Surprise, surprise. You realize that these places overseas can be safe, civilized, and exciting.

Sure, there’s still plenty of unknown. You don’t know how to get your mobile phone turned on, or where the best deal on discount tires is, or who brews the best pot of coffee in town.

But all that comes in time. And not that much time, to be honest.

Soon, many new expats quickly find that their lifestyle is far more fulfilling than they ever had back home.

They have a closer, tighter network of like-minded friends. They’re more active, more involved. They feel healthier and spend time in a much more suitable climate.

No, life is not perfect. It’s not all cookies and unicorns. But most of all folks often feel happier and more free.

It’s incredibly liberating to discover that you’re no longer a tax slave whose sole purpose is to feed the Beast, or that the news back in your home country no longer impacts you.

Suddenly you become an amused and disinterested spectator instead of an unwilling participant.

Plunging into a new life abroad shouldn’t be a scary proposition anymore. There’s a world of opportunity out there.

It’s almost 2015. You no longer have to enslave yourself to geography to make a living. It’s possible to earn income far away from your job, your employees, and even your customers.

And you just might find rather interesting entrepreneurial opportunities in your new home.

(Fast-growing markets are often teeming with compelling business opportunities—things that are second nature to you, but still very foreign to your new neighbors.)

There is life out there. And all of the obstacles are in our minds.

So the next time you find yourself disgusted by the system you live in and you’re concerned about your family’s future, remember: our options are far greater and far easier than our ancestors’.

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November 5, 2014 (Remember, Remember)
Santiago, Chile

Long ago when I was a fresh young Army lieutenant straight out of the academy, I spent six months at Fort Huachuca, Arizona, learning how to be an intelligence officer.

Fort Huachuca (pronounced wah-CHOO-kuh) is nestled snugly on the Mexican border, so there were a lot of other government outfits in the area like US border patrol and the Drug Enforcement Agency.

Military intelligence officers routinely do stints in drug interdiction, so the relationship among all the agencies was quite chummy. And one day we had an agent from the local DEA office talk to our group about his agency’s local activities.

He was passionate, and went on about the scourge of drugs and all the statistics about how many plants they seize. At one point the lead instructor asked him what would finally solve this problem.

The agent didn’t skip a beat. “Declare war on drugs,” he said.

In his view, only if the US government declared all out war on drugs would they finally have the resources and wherewithal to win, whatever ‘winning’ actually meant.

Now, that was a long time ago… back before I began my own journey into personal and economic liberty. But even then I remember thinking, “That’s the most ridiculous thing I’ve ever heard.”

Seriously, how does one wage war against a noun? It’s not even possible. Declaring war on drugs is like declaring war on humor. There’s no enemy to fight, no objective criteria for victory. It’s absurd.

And yet the US government routinely does this– from drugs to poverty to terrorism.

I think about this from time to time whenever I hear people say how they’re going to ‘stay and fight’.

A lot of people realize at this point that things are different. No matter where they’re from, people all over the world wake up every day and realize, “this is NOT the country I grew up in.”

Freedom has been squashed– there’s very little of it remaining in the world. Privacy has been destroyed.

Regulators and bureaucrats tell us what we can/cannot put in our bodies and how we’re allowed to educate our own children.

Police and government agencies confiscate our assets at gunpoint. Politicians tax our hard-earned incomes and spend it all on bombs, drones, and welfare programs that keep them in power.

Unelected central bankers conjure trillions out of thin air, decimating responsible savers and retirees in order to benefit indebted governments, banks, and the ultra-wealthy.

People get it. They don’t like what’s happening. And for many, their solution is to ‘stay and fight’. Fight for freedom.

This is clearly a noble, respectable idea. But in fairness, fighting FOR a noun is just as futile as fighting AGAINST a noun. It’s not possible.

In the ‘fight’ for freedom, there is no real enemy. There’s no evil villain twirling his mustache. The enemy is the system itself.

[SPOILER ALERT]

In the climactic ending to V for Vendetta, the entire country goes into the streets to do battle with the police on (remember, remember) the 5th of November, the anniversary of the Gunpowder Treason Plot of 1605.

I think this is a lot of folks’ idea… that there’s going to be some climactic battle between imperial storm troops and armed, angry citizens, and that afterwards, balance will be restored to the Force.

I would suggest that life is much more complicated than this.

If Michelle Obama’s Fried Chicken appeal is any indicator (not to mention government statistics on taxes and benefits), there are still tens of millions of your fellow citizens who have a strong, vested interest in the status quo.

More importantly, why wait around for such carnage? Especially when there are far more effective tactics.

Human beings are thinking creatures. Our best and highest use is not to stand in the street like neanderthals and beat each other to a pulp.

Consider that this system depends on paper currency, taxes, and debt to sustain itself.

Governments need tax revenue to pay their goons and regulate the citizens. They need central bankers to print money and buy debt.

This addiction to debt, paper money, reckless spending is their major weakness. Thus, a far more effective approach is to disconnect from this system as much as possible. Stop participating. All of the tools and resources to do so already exist.

Think about it– with a simple table top aquaponics system (or some productive land), you can completely eliminate their ability to regulate what you can/cannot put in your body.

3D printing technology means there is effectively nothing they can ban (including firearms) which you cannot create for yourself.

You can also render unto Caesar that which is Caesar’s; consider trading at least a portion of your fiat money for alternatives like precious metals or digital currencies, and stop using their corrupt paper. This substantially reduces their power over you.

And, yes, you can also move out of the country and legitimately reduce your tax burden, depriving them of much needed revenue.

This is a radical option for many folks. Yet it’s important to understand that by moving abroad you are no longer directly funding their bombs, drones, and wars of terror.

And by starving the beast, you do more damage to the system than any level of violence can possibly achieve.

If you really want to fight for freedom, these are not options to ignore.

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November 4, 2014
Santiago, Chile

Don Quixote is easily one of the most entertaining books of the Renaissance, if not all-time. And almost everyone’s heard of it, even if they haven’t read it.

You know the basic plot line- Alonso Quixano becomes fixated with the idea of chivalry and sets out to single-handedly resurrect knighthood.

His wanderings take him far across the land where he gets involved in comic adventures that are terribly inconvenient for the other characters.

He famously assaults a group of windmills, believing that they are cruel giants. He attacks a group of clergy, believing that they are holding an innocent woman captive.

All of this is based on Don Quixote’s completely delusional view of the world. And everyone else pays the price for it.

Miguel de Cervantes’ novel is brilliantly entertaining. But the modern-day monetary equivalent is not so much.

Central bankers today have an equally delusional view of the world. Just three months ago, Mario Draghi (President of the European Central Bank) embarked on his own Quixotic folly by taking certain interest rates into NEGATIVE territory.

Draghi convinced himself that he was saving Europe from disaster. And like Don Quixote, everyone else has had to pay the price for his delusions.

On November 1st, the first European bank has passed along these negative interest rates to its retail customers.

So if you maintain a balance of more than 500,000 euros at Deutsche Skatbank of Germany, you now have the privilege of paying 0.25% per year… to the bank.

We’ve already seen this at the institutional level: commercial banks in Europe are paying the ECB negative interest on certain balances.

And large investors are paying European governments negative interest on certain bonds.

Now we’re seeing this effect bleed over into retail banking.

It’s starting with higher net worth individuals (the average guy doesn’t have half a million euros laying around in the bank). But the trend here is pretty clear– financial repression is coming soon to a bank near you.

It almost seems like an episode from the Twilight Zone… or some bizarre parallel universe. That’s the investment environment we’re in now.

Bottom line: if you’re responsible with your money and set some aside for the future, you will be penalized. If you blow your savings and go into debt, you will be rewarded.

If we ask the question “cui bono”, the answer is pretty obvious: heavily indebted governments benefit substantially from zero (or negative) rates.

Case in point: the British government just announced that they would pay down some of their debt that they racked up nine decades ago.

In 1927, then Chancellor of the Exchequer Winston Churchill issued a series of bonds to consolidate and refinance much of the debt that Britain had racked up from World War I and before.

This debt is still outstanding to this day. And the British government is just starting to pay it down– about $350 million worth.

Think about it– $350 million was a lot of money in 1927. Thanks to decades of inflation, it’s practically a rounding error on government balance sheets today.

This is why they’re all so desperate to create inflation… and why they’ll stop at nothing to make it happen. (It remains to be seen whether they’ll be successful, but they are willing to go down swinging…)

What’s even more extraordinary is how they’re trying to convince everyone why inflation is necessary… and why negative rates are a good thing.

On the ECB’s own website, they say that negative interest rates will “benefit savers in the end because they support growth and thus create a climate in which interest rates can gradually return to higher levels.”

I’m not sure a more intellectually dishonest statement could be made; they’re essentially telling people that the path to prosperity is paved in debt and consumption, as opposed to savings and production.

These people either have no idea how economies grow and prosper, they’re outright liars, or they’re completely delusional.

I’m betting on the latter. Either way, this assault on windmills has only just begun.

As Don Quixote himself said, “Thou hast seen nothing yet.”

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November 3, 2014
London, England

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

Strange things are happening in the bond market.

Few of them are stranger than the reports Jeremie Banet, a French fund management colleague of former Pimco executive Bill Gross, quit the bond business altogether to sell croques-monsieur from a food truck.

Bill Gross, whose management style has been described as “bullying”, had reportedly told in front of Pimco’s entire investment committee that, “I never understand what you’re saying. Ever.”

With those credentials, Monsieur Banet is supremely qualified to become the next chairmen of the Federal Reserve. And if so, he has his work cut out for him.

Consider the sort of volatility that the 10-year US Treasury experienced on 15th October.

Having begun the day sporting a 2.2% yield, the 10-year note experienced an extraordinary surge in price that took its yield down briefly towards 1.85%.

Later in the same session the buying abated, and the bond closed with a yield of roughly 2.14%.

During the same trading session, equity markets sold off aggressively (the UK’s FTSE 100 index, for example, closed down almost 3% on the day).

What accounts for such melodrama? Analyst Russell Napier takes up the story:

“On October 15th 2014, if only for a few short minutes, market forces broke out and the failure of central bankers was briefly evident.”

“There is a very simple lesson that when the markets finally break through the manipulation they move to price in deflation and not inflation. This is key because it means financial repression has failed.”

These days, you don’t tend to hear the words ‘failure’ and ‘central bankers’ in the same sentence (unless the topic happens to be Zimbabwe). But perhaps the omniscience and omnipotence of central bankers is somewhat overstated.

On October 29th, the US Federal Reserve followed a long-rehearsed script and announced that it had “decided to conclude its asset purchase program [also known as QE] this month.”

The Economist’s Buttonwood column described it as “Letting go of Daddy’s hand,” and cautioned, “[W]e may indeed get to see QE4 rolled out. Daddy might have let go of the market’s hand for the moment but he’s still close by.”

That coinage nicely speaks to the juvenilisation to which markets have been reduced during six long years of financial repression, interest rate manipulation, and the unprecedented expansion of central bank balance sheets.

Only the asset purchases have abated (for now): the financial repression, one way or another, will go on.

Whether the asset purchases have really disappeared or merely been suspended will be a function of how risk markets behave over the coming months and years.

And although our crystal ball is no more polished than anyone else’s, we would not be surprised to see petulant markets rewarded with yet more infusions of sweets.

Our fundamental views are clear: bonds are already grotesquely expensive, yet may become even more (we’re not investing in “the usual suspects” so we don’t much care).

Most stock markets are pricey – but in a world beset by QE (and prospects for more, in Europe and Asia) which prices can we really trust ?

By a process of logic, elimination and deduction, out of major, conventional asset classes, only quality listed businesses trading at (or ideally well below) a fair assessment of their intrinsic worth offer any semblance of value or attractiveness.

Pretty much everything else amounts to nothing more than paper, prone to arbitrary gusts from some very powerful, and very windy, bureaucrats.

We note also that former Fed chairman Alan Greenspan, no doubt looking to polish his legacy, managed to front-run the Fed’s QE announcement by pointing to the merits of gold within a government-controlled, fiat currency system.

Strange days indeed.

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October 31, 2014
Santiago, Chile

John Anderson, an American tourist from San Clemente, California, was driving down a poorly-maintained highway when he saw flashing lights in his rearview mirror.

After a brief exchange with the local police officer, Anderson was shocked when the cop started searching his vehicle.

Anderson had $25,180 in US dollar cash in the car, which by the way was not a crime according to the local laws.

When the cop saw it, he told Anderson that we would take it and threatened him with arrest if he protested.

Anderson couldn’t believe it. This is the sort of stuff you always hear about in these third world countries—corrupt cops and state robbery.

Ultimately Anderson gave in; the cop let him go and did not charge him with a crime, but took every last penny in the vehicle.

And for the last two years, Anderson has been trying to unsuccessfully fight it in the country’s Kangaroo court system.

Clearly we should all avoid going to such dangerously corrupt third world countries.

Except in this case, Anderson was in the United States of America. And he is far from being the only victim of this highway robbery known as Civil Asset Forfeiture.

Since 9/11, police forces in the Land of the Free made over 62,000 seizures without charging anyone with any crime, stealing $2.5 billion in cash alone.

The cost of taking legal action against the government is so high, that only about 17% of the victims actually challenged the seizures.

And even then, only 41% of those that challenged have been able to get their money back.

This means that the government has a better than 93% success rate in outright theft.

This is worse than mafia—it’s blatant theft with impunity from the people that are sworn to protect and serve. It’s the kind of thing that is thought to only occur in heinously corrupt countries.

Here’s the good news: many people are waking up to the reality that they’re not living in a free country.

They are starting to understand what I call ‘the criminalization of existence.’

Every last detail of our lives is regulated—what we can/cannot put in our bodies, whether we can collect rainwater or unplug from the grid, how we are allowed to educate our own children, etc.

Driving this point home, a Tennessee woman was actually thrown in jail earlier this month for ignoring a city citation to trim some overgrown bushes in her yard.

This isn’t freedom.

The irony is that, even though many people are starting to realize this, they’re looking to the very institution that has enslaved them to solve the problem.

It is their own government that has created this system.

It is the government that passed US Code section 983 (Rules for Civil Forfeiture), allowing the police to commit highway robbery.

It is the government that continues to arrogantly, brazenly spy on every citizen despite overwhelming public outcry.

It is the government that continues to bring forth new regulation at an absolutely astounding rate.

Just today (this is 100% true), the US federal government published an eye-popping 490 pages of new rules, proposals, and regulatory notices.

(http://ift.tt/1zmweJ6)

To give you a little taste, today’s regulations include:

• Stringent requirements for properly handling spearmint oil;

• New tolerance specifications for a-alkyl-w-hydroxypoly sulfate

• Additional powers awarded to the Department of Education to decide “whether certain postsecondary educational programs prepare students for gainful employment.”

• A decision to centrally manage the 2014 ‘total allowable catch of Pacific Cod’ in the Bering Sea.

There’s even a new rule upholding fines for unauthorized playing of digital recordings.

You can’t make this stuff up—they are regulating nearly everything.

It’s government that does this. They are the problem, not the solution.

Looking to government to solve the problem that they themselves created is completely irrational. They are incapable of righting themselves.

The solution – the power – is with the individual.

All the tools and all the resources to distance yourself from this system already exist.

On one hand, there’s always the possibility of leaving. The American Dream is still alive and well… it’s just no longer in the United States. Not to mention all the financial, business, investment, and lifestyle opportunities for the taking.

But even if you stay, there are dozens of ways to take back your freedom.

For example, why hold 100% of your savings and assets in that jurisdiction when they could easily confiscate everything?

There are so many great, safe jurisdictions in the world to bank, to invest, to own property, and to store assets. And you can set all of this up without leaving town.

The solutions are out there. It’s time to consider them before becoming a statistic.

P.S. Here’s more proof that the official inflation numbers are completely phony… yet another market that has reached an all time high.

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October 31, 2014
Santiago, Chile

The new NBA season started this week. And with it the new salary cap for 2014-15 entered into force. It increased by 7.5% and is now at a record high of $63 million.

Yet another “all time high” in a world where everything seems to be hitting the moon.

NBA’s salary cap increased only marginally in the previous seven years. It went from $55.6 million per team in the 2007-08 season to $58.7 million for 2013-14, an increase of 5.6%.

Now it more than made up for it. Similar increases have been happening across the board in sports. Let’s look at the most popular sport around the world, soccer (or as it’s know in most places, football), as a credible example.

Transfer and wage amounts in soccer have risen markedly especially since the European Central Bank President Mario Draghi vowed to do “whatever it takes” to save the euro two years ago and since the Bank of England has been flooding the market with pounds at an annualized growth rate of more than 20% in recent years.

Everyone expected that it was a giant aberration when Real Madrid paid 94 million euros for Manchester United’s Portuguese star Cristiano Ronaldo in 2009 and that the record will hold for years to come.

Yet it was swiftly broken last year when Real spent 100 million euros on Gareth Bale from Tottenham. Of the ten highest transfers in soccer of all time, seven happened since last year’s summer.

20 clubs in the English Premier League spent a record $1.3 billion on transfers during the latest transfer window in July and August. That blew away the previous high of just over $1 billion set a year earlier.

What’s especially striking is how amounts in the tens of millions have spiraled and are now easily spent on players considered nowhere near the top of the game, such as the combined 100 million euros spent by Zenit Saint Petersburg on Axel Witsel and Hulk from Porto.

Or 32 million euros spent by Real Madrid on a virtually unknown Asier Illaramendi last year, and 40 million euros spent by Manchester United this summer on 19-year old Luke Shaw, making him the most expensive teenager in world soccer, who’s now earning about $200,000 a week at United.

Rapidly increasing sport salaries and transfer fees are just another indication of how much money has been injected into circulation by the world’s central banks in recent years.

According to the Bureau of Labor Statistic’s Consumer Price Index, inflation in the US is at 1.7%.

Instinctively you know that’s nowhere near the truth. The price of everything is going up. Food. Tuition. Health Care. Movie tickets.

Curiously, wage growth hasn’t kept up (unless you’re a pro-athlete). Adjusted for inflation, the average guy is worse off than he was 14 years ago.

And that’s using the official rate of inflation. If inflation rates were still tracked the same way they were until the 1980s, then the actual number today would be closer to 9.4%.

The government has changed the way they track inflation twice since then because a number of government programs include automatic payment adjustments for rises in inflation.

They’re deliberately keeping people misinformed and screwing them over.

And the biggest losers are those that actually, you know, save and produce more than they consume, as well as those on fixed incomes—they get hit the hardest as the purchasing power of their dollars constantly declines.

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October 30, 2014
Santiago, Chile

Do you remember all the great economic forecasts that ever came out of the Fed? I don’t either.

My favorite one was when 9 months before the Great Recession kicked off, the Fed Chairman, Ben Bernanke, remarked: “The Federal Reserve is currently not forecasting a recession.”

We all know of course what happened next. These people have a horrible track record. This is not a dig at anyone personally, it’s just simply a fact of how the system works.

So yesterday the Fed, under Chairwoman Janet Yellen, announced that they’re bullish on the economy. That the economy is doing well, so they’re going to stop their asset purchase program a.k.a. Quantitative Easing.

First of all, QE should never have happened. It was the single worst policy decision for the US dollar. The Fed expanded its balance sheet by more than a factor of five using QE in only a few years.

What effect has it really had? The whole world is starting to ditch the dollar, banks have been recording record profits, US and worldwide debt has surged to astronomical figures, and asset prices across the board have reached record highs.

Everything, from house prices, stocks, bond prices and collectibles is simultaneously at all time highs. This is NOT normal.

It has enormously benefited those at the very top. Yet for the average people it has largely been destructive by ruining the purchasing power of their dollars.

So while it’s good that the Fed is ending its destructive program, the reasons behind it are completely screwed up. Their analysis whether the economy is healthy starts from a wrong premise.

We discuss this in today’s podcast.

How wealth can’t be conjured out of thin air. How GDP growth figures aren’t important at all. The three factors that really matter to measure wealth on an individual and macro level. And what you can own that will do well in an inflationary OR deflationary environment.

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October 29, 2014
Region VII, Chile

Among the masterpieces of the Italian Renaissance, Leonardo da Vinci’s “La Scapigliata” stands out distinctly from the rest.

The unfinished painting is of a common woman with disheveled hair. It’s remarkable particularly for depicting not the exceptional, but the real.

Part of da Vinci’s genius was the way he was able to capture life—genuine, unaffected reality, often intense detail. His notebooks reflect the same.

Leonardo, in fact, passed on to posterity great details of his finances. We know, for example, that around the time he painted La Scapigliata in the early 1500s, the great master was living in Milan and earning a salary directly from the king.

Leonardo’s journals state that in a ten-month period, he was paid a total of 240 scudi and 200 florins from the king.

The Italian gold scodo at the time was 3.42 grams of gold, and the florin was 3.54 grams. As of today’s gold price, that adds up to an annualized salary of $72,153.24.

Bear in mind, this was Leonardo’s ‘take home pay’ as there was no income tax, meaning his gross salary in today’s world would be just over $100,000 to account for income tax and FICA.

If we were to extend this analogy even further, given that Leonardo was on the government payroll back then as an artist/engineer, we can look up the US government employee pay scale today.

Da Vinci was an accomplished professional to say the least. His age, experience, and job title in the early 1500s would make him the equivalent of a GS-13 rank today (based on current US government pay scale).

And today’s salary for a GS-13 government worker? You guessed it. Right around $100,000.

It’s incredible how effective precious metals are as a long-term store of value. Even going back over 500 years, we can match up Leonardo da Vinci’s salary as being similar to what he might receive today.

Imagine for a moment that time travel were possible, and Leonardo could transport himself to today’s time—he would still be able to spend those coins. Or at least trade them for currency at the same purchasing power.

Now that is a store of a value. This is the real stuff.

Could you imagine the same if you were transported 500 years into the future? Imagine taking your pieces of paper to people of the future and trying to trade for goods and services.

Our paper today would mean nothing to them.

Today’s currency relies on everyone in the system having confidence in it. Or at least being fooled into having it.

But confidence in fiat money is ebbing away with each passing day.

If you want your money to be worth anything at all for your kids and even for yourself later in life, you’ll want to own real assets—productive businesses, land, and yes, precious metals.

As Leonardo’s story shows, these asset classes have been proven to maintain their value over the centuries.

from SOVEREIGN MAN http://www.sovereignman.com/trends/historical-figures-salaries-in-gold-leonardo-da-vinci-15485/
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October 28, 2014
Region VII, Chile 

The killer lurked outside in the rainstorm, his axe still dripping with the blood of his last victim.

Inside, the sorority girls gossiped about their missing sisters who had mysteriously disappeared the week before.

–Stop me when this sounds familiar… it’s the standard plot of hundreds of b-rated horror movies–

Suddenly one of them hears a noise. It’s the killer, lying in wait to chop her up into kibbles n’ bits. The music heightens, and the audience shouts ‘Don’t go out there!’

We all know what’s about to happen. It’s so obvious.

The girl on screen senses that something’s wrong but she goes anyway, by herself, to ‘investigate’ the noise… and ends up face-first into the killer’s blade.

Ugh. It’s unbearable to watch… not necessarily for the cinematic gore, but for the sheer stupidity of the soon-to-be-victim falling into the killer’s trap, completely oblivious of the warning signs.

Yet as insufferable as much of the genre may be, perhaps it’s true that art is a reflection of life. Just look around—the alarm bells are sounding for anyone paying attention.

Entire nations are insolvent, including many of the bedrocks of Western Civilization itself. Many police forces have turned into violent, abusive paramilitaries. And with civil asset forfeiture on the rise once again, bankrupt government agencies are sinking their teeth into taxpayers’ flesh in record amounts.

Then there’s the banking system, another ticking time bomb in many jurisdictions.

Just like a bad horror movie, there’s no real mystery in how this is going to play out, regardless of whether it happens tomorrow or years from now. The information is out there as plain as day.

In Europe, the ECB just wrapped up its asset quality review (AQR) of eurozone banks, so the data is very fresh.

As you can imagine, there’s a lot of carnage. Some of the largest banks in Europe are in major distress.

Italy’s largest bank (Unicredit) is bleeding cash, having lost roughly 14 billion euros last year. Most of the other large banks in Italy, along with Unicredit, are posting serious capital deficits.

In other words, the banks don’t have strong enough balance sheets to be able to repay depositors’ funds and weather a financial storm.

In Ireland it’s even worse, with some banks there (like Ulster Bank) having a non-performing exposure (NPE) up to 40%. This means that a substantial portion of the bank’s loans aren’t paying up.

The situation is similar in Cyprus where, despite having frozen depositors’ funds last March and establishing capital controls for a year, the banking system there is still pitifully capitalized.

Bank of Cyprus has a whopping 45% NPE ratio and lost 2.1 billion euros last year. Other Cypriot banks aren’t doing much better.

Greece, Slovenia, Portugal, etc. All the usual suspects are there, still posting substantial capital deficits. There are even banks in Germany that are in trouble.

This situation isn’t exclusive to Europe. Across the water there are a number of cracks in the system.

Just last Friday, the Office of the Comptroller of the Currency shut down National Republic Bank of Chicago, costing the FDIC insurance fund $111 million.

And there are a number of banks in the US (including Bank of America) that didn’t fare well in the Fed’s recent stress tests.

Of course, these stress tests are a total farce. Banks get to count US Treasuries as ‘risk-free’ assets even under the most adverse scenarios.

Nothing could be further from the truth. It’s a total absurdity to view the greatest debtor that has ever existed in the history of the world as risk-free.

In fact, given that US Treasury yields are well below the rate of inflation, holding these bonds is actually destructive to bank balance sheets.

Whether you realize it or not, you’re taking a significant risk holding US dollars in a poorly capitalized US bank, or holding euros in a poorly capitalized European bank, and these hazards should not be underestimated.

There are places in the world where extremely well capitalized banks are backed by governments with zero net debt. Some of them actually pay a reasonable rate of return, or allow you to hold stronger currencies.

It makes sense to consider these options soon. Why wait until your bank ends up on some list of failed institutions? Why take the chance when there are so many better options out there?

from SOVEREIGN MAN http://ift.tt/133tUsZ
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