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Perfect storm sending the A$ below 85c

December 18, 2013
Hong Kong

[Editor’s Note: Tim Staermose, Sovereign Man’s Chief Investment Strategist, is filling in today while Simon is scouting new agricultural properties.]

Earlier this year I ate a $36 hamburger in Sydney.

And after the sticker shock wore off, I wrote about the Australian dollar’s massive, obvious overvaluation.

When the Aussie dollar passed A$1.04 per US dollar, I advised readers of my premium investment newsletter to protect the value of their portfolios with a trade that profits as the Australian dollar falls.

This call paid off for my readers; the Aussie dollar is now below $0.90. But I believe it has much further to fall.

For starters, Reserve Bank Governor Glenn Stevens (Australia’s equivalent of Ben Bernanke) said in a widely publicized interview last week that he wants the Australian dollar at 85c or below.

In response, global hedge funds are now selling it with abandon and helping Mr. Stevens get his wish sooner rather than later.

As with most targets, it will probably overshoot significantly, and I wouldn’t be surprised to see the Aussie fall to 80c or less over the coming year.

Simultaneously, the recently installed coalition government’s statements this week on the state of the Aussie government’s finances and economy have been almost comical.

The government has admitted that, contrary to its election promises, a budget surplus will be impossible during the course of its term.

This year’s budget deficit is expected to be A$47 billion, more than 50% higher than the A$30.1 billion predicted as recently as August. And it’s sliding even deeper into the red for the next three years.

A projected A$4.2 billion surplus in 2016-17 proved wishful thinking. The government now says it is heading for a A$17.7 billion deficit– over 4x higher.

Economic growth next year is now forecast to remain at a sluggish 2.5%, and the unemployment rate is forecast to stay at elevated.

This means that future interest rates cuts are likely.

That’s a further blow to the Aussie dollar, which has been a beneficiary of global investors seeking Australia’s higher-than-average interest rates.

On top of everything else, Australia’s reputation as an open, business-friendly economy, welcoming of foreign investment, has taken a severe beating, after the new government rejected a high-profile takeover deal last month.

Archer Daniels Midland was told it would not be allowed to invest billions of dollars in Australia’s Graincorp because it is “against [Australia’s] national interest.”

After a black eye like that, it’s highly doubtful that other US businesses will be bringing their greenbacks to invest Down Under any time soon. And that’s more bad news for the currency.

This is a major turn of events given that, over the last few years, Australia had become a ‘new Switzerland’ of sorts—a safe haven currency with a pristine government balance sheet.

Now, this isn’t the end of the world for Australia– the situation with both the money supply and national finances is still far superior than most of the West.

But there’s simply too much negative momentum right now.

And while a brief counter-trend rally is certainly possible, it’s my firm conviction that a longer-term bearish bet on the Australian dollar will prove lucrative.

from SOVErEIGN MAN http://www.sovereignman.com/expat/perfect-storm-sending-the-a-below-85c-13315/
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If you have children, you need to see these numbers

December 17, 2013
Santiago, Chile

According to a recent survey by the Pew Research Center, just 33% of Americans think their children will have a better life than they did. On the other hand, 62% believe their children will be worse off.

They’re likely to be right. The typical American family has seen its real income (adjusted for inflation) fall for 5 consecutive years now, and it earns less in real terms that it did in 1989.

According to the Census Bureau, median household income fell in 2012, and it languishes 8.3% below the pre-crisis peak in 2007.

The Brookings Institution, meanwhile, calculates that real incomes for working-age men in the US have fallen by 19 per cent since 1970.

(Of course, if you’re fortunate enough to be a member of the super-rich who, thanks in large part to central bankers driving up asset prices, saw their real incomes rocket by 20% in 2012.)

In Europe things look even more dire. Just 28% of Germans think their children will be better off than they were. In the UK it’s 17%, in Italy 14%, and in France just 9%.

In Britain, research by the Financial Times shows that those born in 1985 are the first cohort to suffer a living standard worse than those born 10 years before them.

Contrast this gloomy picture with China, where 82% think their kids will have it better than they did. In Nigeria, the number is 65%. In India, 59%.

It’s blatantly obvious that the West is in decline. And most people seem to understand this.

But this isn’t a bad news story. Wealth and power has constantly shifted throughout history. Five hundred years ago, it was the West that was rising and Asia in decline. Today it’s the exact opposite.

As Jim Rogers has said so many times before, if you were smart in the 1700s, you went to France. If you were smart in the 1800s, you went to England. And in the 1900s, you went to the US.

Today, it’s the developing world. That’s where the long-term opportunity is– Asia, Africa, and South America.

What’s happening in the developing world is nothing short of remarkable. One billion people are being pulled from the depths of poverty into the middle class… bringing with them untold possibilities for business, employment, and investment.

That’s one of the reasons why I travel so much, and why I spend so much time in Chile. I’m constantly amazed at the tremendous opportunities I come across in this country (which is still largely off the radar of most people).

It’s also what I encourage my students to do each summer at our entrepreneurship camps—seek out opportunities in countries that are rising suns, not setting suns.

If you have children, this is a great direction to influence them. Encourage them to learn another language, travel, and apply what they want to do to how the world is going to be in the future.

As Wayne Gretzky said, skate to where the puck is going to be.

from SOVErEIGN MAN http://www.sovereignman.com/trends/if-you-have-children-you-need-to-see-these-numbers-13312/
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How to open a bank account in Australia over the phone

These days it’s very difficult to find a bank that will open accounts for non-resident foreigners, and even do so remotely.

If you cannot show up in person to open an account, it is sometimes still possible to do so through an intermediary who knows exactly who to contact, in which part of the bank.

That’s why we devote so much time to cultivating the right contacts around the world that can assist you in these matters and act as intermediaries for you.

However, if you prefer to deal directly with a bank yourself, but are unable to travel abroad to open an account in person, there is at least one solid bank, in one of our preferred banking jurisdictions, Australia, that will still deal with you.

Remember, Australia is a country with an extremely robust banking system and a strong currency.

On the available evidence, Australian banks today are among the best capitalized in the West; the last bank failure in which any depositor lost any money in Australia was during the Great Depression, in 1931, when depositors in the Primary Producers Bank of Australia lost a negligible amount of their deposits.

Furthermore, in more than 100 years, not a single dollar of taxpayer money has been required to reimburse bank depositors in Australia.

And, unlike in many countries, the Australian government’s deposit guarantee (A$1 million per customer, per bank) is actually backed by a well-capitalized insurance fund backed by a solvent government.

If it were called upon, this insurance fund would actually stand a chance of paying.

Australia has one of the lowest government debt-to-GDP ratios in the West. Indeed, it stands out as being exceptionally low, even when compared to other countries with strong currencies.

The country is richly endowed with natural resources. Its top 3 exports are iron ore, coal, and gold. Moreover, it’s one of the only stable, low-inflation economies in the world where you can earn decent rates of interest on bank deposits these days. The Reserve Bank of Australia’s (the central bank) interest rates are regularly well above the official rate of inflation.

When it comes to opening accounts for non-residents, Australian banks are a mixed bag, however. Some will open, some won’t. There are even fewer banks that will open accounts for people remotely.

This is where ………………. Bank comes in.

Continue Reading and Get Full Access Here >>

from SOVErEIGN MAN http://www.sovereignman.com/alerts/how-to-open-a-bank-account-in-australia-over-the-phone-13309/
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The “other” anniversary that’s far more important

December 16, 2013
Sovereign Valley Farm, Chile

Though still a week shy of its centennial anniversary, the US Federal Reserve will hold a celebration this afternoon in Washington DC.

(They’re even live-streaming it… http://www.ustream.tv/federalreserve)

Just imagine the scene– a bunch of current and former central bankers slapping each other on the back, congratulating one another for a job well done over the last 100 years.

Of course, you and I know this is total nonsense… as is the concept of our modern monetary system in which we award total control of the money supply to a tiny central banking elite.

Human beings are fallible. We are not gods. Yet we practically deify central bankers and entrust them with the power to manipulate markets, control prices around the world, and effectively dominate the economy.

This system has proven to be foolish and destructive.

While the Fed engages in its self-aggrandizement this afternoon, there is another far more important anniversary today– the Boston Tea Party.

It was this day in 1773 that dozens of men dumped 342 chests of tea from 3 ships into the water. But what a lot of people don’t realize is that it started with bankers.

In 1771, London banker Alexander Fordyce of the banking house Neal, James, Fordyce and Down thought himself infallible too.

Fordyce had made a fortune as a speculator, and he enjoyed his opulent wealth. He held magnificent estates in Surrey, Roehampton, and Scotland, and once blew 14,000 pounds (several million dollars today) running for parliament.

There was only one problem: Fordyce began making his bets using other people’s money. And when his bet on the East India Company didn’t work out, Fordyce’s bank used customer deposits to cover their losses.

By June 1772, the bank could no longer keep up the charade. And within days their collapse caused a cascade of other bank failures as far as Edinburgh and Holland.

With a crisis unfolding, the government forced the central bank to intervene in a way that was eerily similar to the 2008 financial crisis.

Just like 2008, too-big-to-fail companies got bailed out… including the East India Company itself. The East India Company was a bit like General Motors a few years ago– it was obvious they were in financial straits.

And as part of the bailout, the British parliament soon passed the Tea Act– an attempt to flood the colonies with the East India Company’s stockpiles of excess tea.

The Tea Act had another purpose, though– to assert parliament’s right to tax the colonies. And this is what ultimately led to the Tea Party on December 16, 1773.

John Adams wrote in his diary that the destruction of the tea was ‘daring’ and ‘intrepid’, and that to ignore the Tea Act would be like submitting “to Egyptian taskmasters, to [burdens], Indignities, to Ignominy, Reproach and Contempt, to Desolation and Oppression, to Poverty and Servitude.”

Britain’s harsh reaction to the Tea Party further escalated tensions with the colonists, and it wasn’t long afterward that the first shots were fired.

Given the prominent role of bankers and bailouts in the American Revolution, it’s ironic that the Federal Reserve has chosen to hold its centennial celebration today.

And as they all slap each other on the back today extolling the Fed’s ‘successes’, one can only hope that the arrogance and pomposity of the current system will lead to a new revolution– this time a revolution of the monetary system and a return to the principles of sound money.

from SOVErEIGN MAN http://www.sovereignman.com/trends/the-other-anniversary-thats-far-more-important-13306/
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An interesting loophole for Chilean residency

I’ve been in Chile now again for the past few weeks, and I’m really glad to be back. There’s lots of exciting stuff going on here, but today I want to tell you about a new way of obtaining residency in Chile that I’ve recently discovered.

This is hot off the presses as I’ve just come back from a meeting with one of my attorneys, and I’m really intrigued by this, simply because of its simplicity.

We’ve talked on numerous occasions about different ways of obtaining residency in Chile. There are two main visa programs—the “person of means” visa and the work contract visa.

For individuals with an established independent source of income or assets, the best and easiest way to obtain residency in Chile is the so-called visa temporaria, what we often refer to as the rentista, or person of means visa.

As the name suggests, this visa category implies that you derive passive income from any type of investments, such as:

Continue Reading and Get Full Access Here >>

from SOVErEIGN MAN http://www.sovereignman.com/alerts/an-interesting-loophole-for-chilean-residency-13301/
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Truth: a great holiday gift idea

December 13, 2013
Sovereign Valley Farm, Chile

One of the things we talk about routinely in this column is the fraudulent nature of the global monetary system.

When you step back and look at the big picture, it seems ludicrous. We have essentially awarded totalitarian control of our money supply to a tiny banking elite.

And in controlling the money supply, they have the power to set or manipulate the price of just about everything on the planet.

I’m certain that at some point in the future, financial historians will look back with astonishment at how we could allow ourselves to be bamboozled like this. We have literally entrusted the entirety of our wealth, savings, and livelihoods to just a handful of people. It’s insane.

What’s even crazier is how few people really understand how this system works.

If anything, we’re told that there’s a crack squad of brilliant economists making decisions about things that are simply too complicated for us little people to understand. And we just have to trust them to be good guys.

As a regular reader of Notes from the Field, I’m guessing that you already understand that this monetary system is one of the most blatant, destructive scams in history. But chances are, you have a lot of friends and family who don’t get it.

This is always a tough nut to crack. People can be very intransigent in their ignorance. They’ve grown up for their entire lives hearing about how they live in a free country with the strongest currency and richest government in the world.

They’ve become so brainwashed that suggesting anything to the contrary is tantamount to blasphemy. And it can be very difficult to talk to them about the truth.

Fortunately the holidays are coming up. So if you’re thinking that you might want to educate some of the important people in your life, here are a few inexpensive gift ideas that might just transform someone’s entire worldview:

1) Book: The Creature from Jekyll Island.

G Edward Griffin’s investigation into the creation of the Fed really does read like a detective novel. At 600+ pages, it’s long. But it’s a real page-turner. And after finishing it, your loved ones won’t ever look at money, politics, or banking the same way ever again.

2) Book: End the Fed.

Written by none other than Dr. Ron Paul, End the Fed synthesizes historical analysis, common sense economics, and his own personal experiences from decades in Congress, all to argue one simple point– that the Fed is destructive and has utterly failed in its mission.

3) Movie: Money for Nothing.

This is my personal favorite, one I definitely recommend checking out. Even if you are up to speed on these concepts, I can almost guarantee that you’ll learn something.

Money for Nothing is a 90-minute documentary that was professionally and impeccably assembled by Jim Bruce and his all-star team.

The film is not only incredibly entertaining, their access to top former and current Fed officials was simply incredible– names like Volker, Yellen, Plosser, Fisher, Lacker, Poole, etc.

Money for Nothing is available for purchase (DVD or digital download) at www.MoneyforNothingthemovie.org

from SOVErEIGN MAN http://www.sovereignman.com/trends/truth-a-great-holiday-gift-idea-13296/
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Gold and Banking in Hong Kong

We’ve reported several times before that Hong Kong is one of the cheapest places in the world to buy gold. But the bottom line is that it’s getting a bit more difficult to do so.

At Bank, for example,they will now only sell a maximum of HK$120,000 (about US$15,400) worth ofgold coins to non-account holders. This is less than 12 ounces of gold.

Now, if you open an account at Bank, no limit applies. And, the good news is that anyone can still open a bank account with them. does not require Hong Kong residency or a Hong KongIdentity card to open a bank account.

But, you will need to show up in person to the bank with the following:

1. Passport

2. Proof of current residential address

I would also bring a driver’s license or other identity document that has your address on it, if possible.

The proof of current residential address can take the form of a utility bill – an electricity, gas, or water bill is best. But, a bank statement may also be accepted.

The utility bill or bank statement cannot be more than 3 months old. And the name on it must exactly match the name in your passport.

In terms of inventory, only has current-year Australian Kangaroo Nuggets from the Perth Mint. All sizes are available: 1 Oz, ½ Oz, ¼ Oz and 1/10^th Oz.

According to the bank, it’s possible for customers to buy up to 100 coins without any problem. But stocks are limited, so several hundred coins at one time would be problematic.

Their prices are still good – about 4% above spot gold.

from SOVErEIGN MAN http://www.sovereignman.com/alerts/gold-and-banking-in-hong-kong-13283/
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The IMF wants you to pay 71% income tax

December 12, 2013
Sovereign Valley Farm, Chile

The IMF just dropped another bombshell.

After it recently suggested a “one-off capital levy” – a one-time tax on private wealth as an exceptional measure to restore debt sustainability across insolvent countries – it has now called for “revenue-maximizing top income tax rates”.

The IMF’s team of monkeys has been working around the clock on this one, figuring that developed nations can increase their overall tax revenue by increasing tax rates.

They’ve singled out the US, suggesting that the US government could maximize its tax revenue by increasing tax brackets to as high as 71%.

Coming from one of the grand wizards of the global financial system, this might be the clearest sign yet that the whole house of cards is dangerously close to being swept away.

Think about it– solvent governments with healthy economies don’t go looking to steal 71% of people’s wealth. They’re raising this point because these governments are desperate. And flat broke.

The ratio of public debt to GDP across advanced economies will reach a historic peak of 110% next year, compared to 75% in 2007.

That’s a staggering increase. Most of the ‘wealithest’ nations in the West now have to borrow money just to pay interest on the money they’ve already borrowed.

This is why we can only expect more financial repression from desperate governments and established institutions.

This means more onerous taxation. More regulation. More controls over credit and capital flows.

And that’s only the financial aspect; the deterioration of our freedom and liberty will continue at an accelerated pace.

Can a person still be considered “free” when 71% of what s/he earns is taken away at the point of a gun by a bankrupt, bullying government? Or are you merely a serf then, existing only to feed the system?

This is why we often stress having a global outlook and considering all options that are on the table.

Because the other side of the coin is that while some countries are tightening the screws and making life more difficult, others are taking a different approach.

Whether out of necessity or because they recognize the trend, many nations around the world are launching new programs to attract international talent and capital.

I’ve mentioned a few of these already– economic citizenship programs in places like Cyprus, Malta, and Antigua (I met a lot of these programs’ principals at a recent global citizenship conference that I spoke at in Miami).

[Note to Premium Members: you’ll receive the details and contact information for the Antigua program today.]

Then there are places like Chile and Colombia which have great programs for entrepreneurs and investors. Other places like Georgia and Panama have opened their doors to nearly all foreigners for residency.

Bottom line– there are options. Some countries are really great places to hold money. Others are great to do business. Others are great places to reside.

The era we’re living in– that of global communications and modern transport– means that you can live in one place, your money can live somewhere else, and you can generate your income in a third location.

Your savings and livelihood need not be enslaved by corrupt politicians bent on stealing your wealth… all to keep their destructive party going just a little bit longer.

The world can truly be your playground. You just need to know the rules of the game.

from SOVErEIGN MAN http://www.sovereignman.com/trends/the-imf-wants-you-to-pay-71-income-tax-13285/
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Why I don’t invest in stocks (and where I do park my investment capital)

December 11, 2013
Santiago, Chile

Earlier this week, Start-Up Chile announced the next round of new businesses who have been accepted to the program.

If you’re not familiar with it, Start-Up Chile is a government program that provides $40,000 in equity-free seed capital (plus a residency visa) to entrepreneurs and their startup companies who make the cut.

Now… in my worldview, this program shouldn’t even exist. This is a government program funded by Chilean taxpayers, and I don’t agree with the idea of government stealing people’s income for any reason.

Unfortunately we don’t get to live in a world where politicians cannot plunder the wealth of citizens.

But the compromise is that we get to vote with our feet and live where we want; we can choose to thrive in a place where taxation is relatively low… and where the politicians fund startups with taxpayer money rather than drones that drop bombs on children by remote control.

Chile is one of those places. It’s far from perfect, but the fundamentals are solid. The government balance sheet is strong– Chile has ZERO net debt. Yet the level of taxation here is among the lowest in the developed world.

So far Start-Up Chile has been a great success for the country.

I know many of the alumni who have come through the program, both foreign and local; several still operate their businesses here and have become successful, creating additional wealth and jobs in the local economy.

This latest round will bring in startups from 28 countries in industries as diverse as agriculture, travel, medical care, advertising, and cryptocurrencies. (Some of my students from our summer entrepreneurship camps have been accepted as well…)

I follow this closely, mostly because I’m an avid investor in startup companies.

With global markets trading at nose-bleed valuations, and almost every possible objective metric suggesting that a crash is coming, a conventional approach to investing seems crazy.

Besides, it’s clear that fundamentals no longer matter. Central bankers are spraying so much money into the system that the only thing driving stocks and bonds is the expectation of further printing. Central bankers have completely hijacked the markets.

I’m simply not willing to take Ben Bernanke on as my silent partner. This is why I invest in real assets– primarily, high quality agricultural properties and private operating businesses.

(Note- I didn’t say precious metals because gold and silver are a form of money to me, not an investment or speculation).

Given the long-term supply, demand, and policy fundamentals of agriculture, I think this sector is exactly the right place to be for the next decade. And owning physical, productive land is as close to the source as it gets.

Private businesses also make a lot of sense, allowing you to invest on the cutting edge of emerging trends and technologies, as opposed to big behemoth corporate bureaucracies. And while the risk potential is greater, so are the potential rewards.

I think any of us would have rather invested in Apple when it was just a startup in the Jobs family garage rather than the slow-moving bureaucracy it is today.

But just like great agriculture properties, such deals and talent are hard to find; this is one of the reasons I hold my entrepreneurship camps each summer, why my team and I travel the world looking at global opportunities, and why we follow programs like Startup Chile so closely.

We’re launching a new service after the holidays for investors who agree with this premise, but need help sourcing and navigating quality deals. More to follow on that in a future letter.

from SOVErEIGN MAN http://www.sovereignman.com/finance/why-i-dont-invest-in-stocks-and-where-i-do-park-my-investment-capital-13278/
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If you have a foreign bank account, you need to know this

Here’s something that almost nobody knows about. And it’s an important topic.

If you’re a US taxpayer, you know that the Foreign Bank Account Report or FBAR is one of the numerous forms from a stack of compliance documents that the US government demands.

We’ve talked at length about it previously, not least in the June issue of SMC where we went through the form step by step. But now, filing of an FBAR is changing. Starting next year the form will have to be filed electronically.

Just recently, the Financial Crimes Enforcement Network (FinCEN) held a webinar intended to provide instructions how the new electronic filing of an FBAR will look like.

Hardly anyone else even heard about this. I know this for a fact because when I was talking to some of my professional colleagues about it, they had no clue. In fact, almost everyone in the ‘business’ is still referring to the FBAR as the paper form TDF 90-22.1. This is incorrect… and bad information now.

Fortunately, I personally sat for two hours on the FinCEN’s webinar, listening to the technical details and procedures required to be able to file the new FBAR. I must imagine I was about the only person actually tuning in.

But I do these things that few others are willing to do, or even know about, so that you don’t have to.

So, let’s review first who has to file an FBAR:

Continue Reading and Get Full Access Here >>

from SOVErEIGN MAN http://www.sovereignman.com/alerts/if-you-have-a-foreign-bank-account-you-need-to-know-this-13160/
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