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The first time I ever visited Zimbabwe in late 2010, the country was barely one year removed from the end of its legendary hyperinflation.

Hyperinflation in Zimbabwe had become so extreme– roughly 90 billion trillion percent (that’s not a misprint)– that the government finally capitulated in 2009 and simply abandoned the currency altogether.

And when I first landed in the capital of Harare, the infamous Zimbabwe dollar had become so worthless that many people were using it for wallpaper.

Zimbabwe had once been a vibrant, highly productive economy based on valuable mineral and agricultural exports. Even by the early 2000s, after two decades of independence under Robert Mugabe, inflation was still ‘only’ around 20%.

But inflation began to spiral out of control.

There was no end to Mugabe’s bad policy ideas, ranging from price fixing to land reform. And after confiscating assets from citizens in the late 90s and early 2000s, Zimbabwe’s economy contracted viciously.

If that weren’t enough, Mugabe also ballooned government spending. He borrowed heavily and increased Zimbabwe’s national debt. So naturally, the central bank began printing vast quantities of money.

We all know what happened next; Zimbabwe’s economy was in the dumps, so fewer goods and services were being produced. Yet the central bank created substantially more paper money. So inflation soared.

By 2003 it reached nearly 600%. By 2006, over 1,000%. And yes, by November 2008, 90 billion trillion percent.

Most of us from developed countries can’t imagine the living conditions of a collapsed economy. And the locals I met in Harare told me incredible stories of food shortages and endless lines at banks, grocery stores, and pharmacies.

If you were lucky enough to be inside of a store where there was actually food on the shelves, workers were constantly putting new price tags on products. And while you were shopping, a voice would come over the loudspeaker and announce the new price of soup, bananas, and rice.

Everything was a constant rush. You had to race through the aisles to grab whatever you could, and check out before the prices went up.

It was the same at restaurants; several times during a meal, a waiter would come out and inform you about the new price of the beer you were drinking.

I remember one person told me that he used to buy two loaves of bread every morning on his way to work. He would eat one of the loaves during the day, and then sell the second loaf in the evening at a significantly higher price.

He realized that bread, bizarrely enough, held its value– at least for the day. It was also a highly ‘liquid’ asset; he would always able to quickly find a buyer and sell his extra loaf at market value.

It’s not hard to understand why: bread has a real use in that it provides critical nourishment. And in a time of economic chaos and shortages, this is far more valuable than rapidly deteriorating paper currency.

The same logic applies to “real assets”, i.e. they hold their value during inflationary times because they provide something vital. And this is a key point to understand.

Think about consumer behavior: during economic boom periods, inflation is low. Unemployment is low. Interest rates are low. People have confidence and optimism about the future, so we tend to borrow more and spend more freely.

And the best performing assets during these boom periods mirror that sentiment.

Just think about the economic boom period from, say, 2016 through 2021. Unemployment, inflation, and interest rates were all at historic lows. Consumer spending soared.

And the most valuable companies in the world were the so-called “FAANG” stocks:
– Facebook, which just enables people to waste time swiping and scrolling
– Apple, which makes the devices for people to swipe and scroll
– Amazon, which makes it easy to shop and spend money
– Netflix, which is basically just an entertainment business
– Google, whose YouTube division is another entertainment business

In other words, the world’s most valuable companies were all consumer-oriented… and even more specifically, oriented towards shopping, recreation, and entertainment.

Over the same period, companies who produced some of the world’s most essential products were ignored.

Facebook stock soared nearly 500% between 2014 and 2019. Yet shares of Exxon Mobil lost about 10%. Netflix stock exploded more than 1,000%, while an ETF of gold miners lost 21%.

But today’s harder economic times are forcing changes in people’s focus and behavior. It’s only natural.

Most people have started paying a lot more attention to their expenditures. Spending $2,000 on a new iPhone suddenly doesn’t seem like such a great idea when oil is approaching $100/barrel.

And this is what leads me back to real assets. But first let’s define what that actually means–

“Real Assets” are defined in a variety of different ways. Sometimes people define real assets by citing specific asset classes, i.e. commodities and real estate. ChatGPT tells me that a real asset “is a tangible physical asset that has intrinsic value due to its substance and properties.”

I think these definitions miss the point. To me, a real asset is something that provides a critical need, like food, energy, economic productivity, or a store of value.

This could be a tangible, physical asset, like a barrel of oil or bushel of corn. But not necessarily.

Productive technology that makes the world better, faster, cheaper, etc. is considered intangible intellectual property. But it provides a critical need, which makes it a real asset.

Conversely, Mark Zuckerberg’s new “Threads” app is also technology. But given that it makes the world less productive, it is not a real asset. It’s just another recreation asset.

Similarly, 500 acres of prized, high-quality farmland provides critical value. But a Class C office building in a declining tier-3 city does not.

Viewed through this lens of “critical need”, it’s a lot easier to understand what is/isn’t a real asset… and why they can hold their value during inflationary times: it’s all about shifting priorities.

Real assets (including real asset businesses) have been largely ignored for more than a decade, in favor of ‘recreation assets’ focused on shopping and consumption.

Consider that, in 2019, a ripe banana that was duct-taped to the wall sold for $120,000 at an art exhibition. Critical need? Hardly.

Meanwhile, that same year, the high priests of climate change (like Blackrock’s Larry Fink) were working diligently to cut-off funding for vital industries like oil, coal, and natural gas.

And this bizarre mismatch of priorities continued for years, through at least the first half of 2022;

But priorities are finally starting to shift. And this means that the ‘real assets’ which are critical to solving the world’s challenges will become much more important than ‘recreation assets’. And that’s what makes them such a great hedge against inflation.

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In a world full of unimaginable absurdity, we spend a lot of time thinking about the future… and to where all of this insanity leads.

“Future Headline Friday” is our satirical take of where the world is going if it remains on its current path. While our satire may be humorous and exaggerated, rest assured that everything we write is based on actual events, news stories, personalities, and pending legislation.

September 22, 2028: Federal Reserve Announces Latest Rate Cut to Minus 4%

On the heels of the labor department’s latest inflation report, which shows an annual rate of 4.99%, the Federal Reserve has announced at its latest policy meeting it is slashing rates down to minus 4%.

The most updated inflation target, of course, is now 5%, up from last year’s target of 4%, which is up from the 2026 target of 3%, and the previous longstanding target of 2%.

The Labor Department, for its part, has also changed the way it calculates inflation four times in the last three years. And its most recent methodology, which takes into account community adjusted equity in calculating inflation, puts the inflation rate just a hair below the Federal Reserve’s official target.

With the mission accomplished, the Fed can abandon its fight against inflation.

“Now that inflation is officially below our target rate,” Fed Chair Alexandria Ocasio-Cortez said with a wink to the Labor Secretary, “We’re able to sound the all clear, and cut rates again.”

With President Biden remaining in a medically induced comma for the second year, the responsibility has fallen on acting-President Harris to manage the economy.

She has personally fired eight Federal Reserve branch Presidents in that time, and hand selected their replacements, leaving many critics to suggest that she is politicizing the organization and elevating appointees who would do her bidding rather than exercise independence.

This carousel at the Fed is among the multitude of reasons the US dollar has lost significant market share as the global reserve currency, and foreign purchases of treasuries have dried up dramatically.

This puts the onus of financing all new government debt— and refinancing old debt being rolled over— squarely on the shoulders of the Federal Reserve, which according to its most recent financial statements, has a negative equity position of over negative $10 trillion.

This led the Harris Administration to champion the Retirement Obligation to Buy Bonds, or ROBB Act.

The Act has now been in force for two years, requiring at least 50% of managed retirement funds to be allocated to US treasuries.

The Harris Administration, of course, is also nearing a major funding crisis, with more than $20 trillion of US government debt set to mature this year.

That’s why acting-President Harris expressed delight at the Fed’s latest move, saying, “My administration has been one of the most conservative financial stewards in American history. For example, in my first year as acting-President, we cut the deficit in half, and it now stands at just $4.5 trillion annually.”

“These negative interest rates will make it more efficient to refinance that debt and engage in the bold new spending priorities of my administration. This includes funding for critical emergency budgetary support for states like California and New York, and cities such as Chicago and San Francisco, which through no fault of their own, have fallen on tough times and are facing the prospect of bankruptcy.”

“This will also include an additional $600 billion initiative to expand gender identity education into pre-K through second grade. Experts believe this is crucial to cut the exploding youth suicide rate, which they believe is being caused by hateful right-wing extremists forcing gender assigned at birth on vulnerable children.”

“And of course, we will be able to double our investment in combating climate change, by deploying sun blocking technology and expanding use of solar panels.”

Fed Chair AOC, raising a fist in solidarity, stated that, “Interest rates are one of the last remaining vestiges of the toxic misogynistic patriarchy running the capitalistic system designed to benefit white males. What better way to dismantle their stolen power than by implementing negative interest rates, and recovering their plundered wealth for the people.”

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In 1958, Leonard E. Read wrote the book I, Pencil.

As the book’s title suggests, this is the story about a pencil, told from the pencil’s perspective.

The pencil traces his beginnings – from the cedar forests of Northern California and Oregon – to the mill in San Leandro, California, where specialized equipment cuts the logs into pencil-length slats.

Next, the newly-cut slats move to the pencil factory, where machinery cuts eight grooves into each slat and inserts graphite.

Read goes on to further describe each part of the pencil manufacturing process.

His point: Even something as simple as manufacturing a pencil is a highly complex process. Yet left to the free market, profit incentives allow individuals and companies to efficiently combine raw materials and produce any in-demand product.

No committee of central planners is required anytime during the manufacturing process.      

So, if central planning cannot produce something as simple as a pencil, how can governments expect to coordinate and control a product as critical and vital as energy – whose production is exponentially more complex than a pencil?

They can’t. But they’ll still try.

To be fair, although the current administration in Washington has enacted plenty of anti-energy policies, they aren’t solely responsible for the world’s dire energy predicament. In fact there’s plenty of blame to go around.

In recent years, “woke capitalism” has gained a serious foothold in western financial markets.

Led by the movement’s high priests, like Larry Fink (who manages $10 TRILLION at Blackrock), and Klaus Schwab of the World Economic Forum, one of their key tenets is replacing fossil fuels with green energy solutions.

Sadly, many of the world’s largest energy companies have bent the knee to the Holy Climate Warriors. Now, at Sovereign Man, we like a clean and pristine environment as much as anyone, and we have a strong desire to leave a better world for our children.

But inefficient green energy solutions like solar and wind simply aren’t the way forward. Here’s why:

Let’s suspend reality for a moment and pretend that Klaus Schwab and Greta Thunberg are right… and that global energy should be 100% renewable.

What would it actually take to do this? Remember, solar panels, wind turbines, and batteries require lots of raw materials.

According to estimates by Professor Simon Michaux of the Geological Survey of Finland, achieving the Schwab-Thunberg-Fink dream world require:

•  218 million tons of cobalt
•  899 million tons of lithium
• 4.3 billion tons of copper.

Let’s tackle copper first.

In 2019, the world produced 22 million tons of copper. So, a full transition to renewable energy would require 100% of the world’s annual copper production for the next 195 years.

That means that, for the next two centuries, there would be ZERO copper left over for anything else. Only renewable energy. Also bear in mind that solar panels wear out after a few decades… So, after 195 years, the world will have had to replace all of its panels at least 5 times.

Now, if you think that’s a daunting challenge, lithium and cobalt are even more interesting…

Global lithium and cobalt production in 2022 were approximately 130,000 tons each. Therefore, based on Prof. Michaux’s estimates, the transition to renewable energy requires 1,676 years of annual cobalt production, and a whopping 6,915 years of lithium production.

No, those are not misprints.

In short, the climate fanatics don’t realize that their renewable energy dream requires so many raw materials that it would take nearly 7,000 years to mine all the necessary resources.

But reality has never been their area of expertise. Instead, they fly around on their private jets to luxurious climate conferences, to complain about fossil fuel companies. They pass legislation and resolutions. They put out hit jobs in the media.

But just like the humble pencil at the beginning of this article, the fanatics and central planners don’t contribute a single thing. They don’t mine an ounce of lithium, manufacture any solar panels, nor produce even 1 kilowatt-hour of electricity.

Does this sound a bit ridiculous? We think so too. And this is why, no matter how fanatical the climate cult becomes, fossil fuels aren’t going anywhere for a long, long time… not without most of the world’s population sitting in the dark. And we don’t think people will stand for that.

From an investor perspective, this is a critical point to understand, because fossil fuel companies have become some of the most hated in the world.

Large funds and woke investors have sold their shares of fossil fuel businesses, pushing valuations down to absurd levels. We’ve written about this before – highly profitable oil and gas companies sell for as little as TWO times earnings… simply because no one wants to own them.

We think that sentiment will eventually change… and even Team Green Dream will realize that oil and gas companies are vital to the global economy, and even vital to a green transition.

(They’ll also eventually realize that nuclear power absolutely MUST be part of the solution, hence why we think uranium has such substantial upside potential.)

When that day comes, and the renewable energy fantasy starts to collapse, many of today’s most hated energy companies will soar in value. And investors who are savvy enough to buy shares today, while they’re still absurdly cheap, stand to do extremely well.

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By the time an army of 80,000 Russian troops invaded Ottoman territory in June 1853 at the outbreak of the Crimean War, the imperial finances of the Ottoman Empire were already a complete disaster.

The Ottoman Empire had once been the most dominant superpower in the world. But that had been centuries prior in the 1400s. By the mid-1800s, the Ottoman Empire had fallen far behind European powers like Britain and Prussia, and its economy was in such bad shape that it became known as the “Sick Man of Europe”.

Then the Crimean War broke out– one of the most pointless and easily avoidable conflicts in history– and suddenly the Ottoman Empire found itself with no money to fight.

That’s when British bankers entered the scene… led by Baron Lionel de Rothschild, who orchestrated a £3 million sovereign bond for the Ottoman Empire.

The bonds yielded 7.5% initially… which was considered a fairly high rate of interest. But it wouldn’t be long before the Ottoman government had spent all the money and needed to borrow more funds.

Even when the Crimean War finally came to an end in 1856 with Russia’s defeat, the Ottoman government kept borrowing. They had become addicted to debt, and fresh bond offerings were announced in 1858, 1860, 1862, 1863, and 1865.

By 1875, the Ottoman public debt was so large that debt service consumed two-thirds of tax revenue. A few years later, they had their own version of a government shutdown… because the Ottoman Empire had no money to pay the salaries of its soldiers and bureaucrats.

Finally, in 1881, the Ottoman government capitulated. They signed a treaty known as the Muharrem Decree which established the “Ottoman Public Debt Agency” (OPDA), an organization controlled by the Empire’s foreign lenders that would have supreme executive control of imperial assets and taxes.

The agency hired thousands of tax collectors who shook down Ottoman businesses and citizens… then turned over all the money to European creditors.

This is an all-too familiar tale that has been retold in different flavors throughout human history: a once dominant superpower spends irresponsibly and eventually becomes trapped under the burden of excessive debt.

With a $33 trillion national debt and $50+ trillion more in unfunded Social Security obligations, the United States is on a collision course with this same destiny.

I’ve written before that this fate is avoidable. It is technically possible for the United States to grow its way out of debt– if the federal government would only get its outrageous spending habit under control, and then prioritize economic productivity above all else.

The Treasury Department estimates that, when the current fiscal year closes at the end of this month, they will end up with a $2 trillion annual deficit. And they’re already projecting another $2 trillion deficit for the next fiscal year.

And those deficits are despite a record $4.5 trillion in projected tax revenue!

Bear in mind that, as recently as 2019, just four years ago, $4.5 trillion would have been more than enough to fund 100% of government expenditures… and even leave a bit of money left over to pay down some of the national debt.

And it’s not like the federal government was skimping four year ago. There was still plenty of room to make budget cuts.

Yet they’ve managed to expand the bureaucracy so much that, today, $4.5 trillion is nowhere near enough money to fund government operations. Not even close.

All they have to do to solve this deficit problem is go back to the level of government spending from four years ago. It shouldn’t be that hard.

Second, they have to prioritize economic productivity. This is critical. If the economy were to grow by 3% each year (after adjusting for inflation) instead of 1% to 2% each year, then the national debt would easily melt away over the next 20 years.

Today the national debt is more than 120% of US GDP– the highest level EVER, including during World War 2 when America was fighting Nazi Germany.

But if spending were to get under control, and economic growth average 3% again (similar to the 1980s and 1990s), America’s debt-to-GDP ratio would fall to less than 50% over the next two decades. The national debt would be a non-issue.

Again, this shouldn’t be that hard. Stop passing idiotic regulations. Stop punishing critical businesses. Stop undermining capitalism.

But this is not the sensible trajectory that America is presently on. Instead, the people in charge seem to be accelerating to the bottom as quickly as they can.

Even when the credit rating agency Fitch issued a dire warning about deteriorating US government finances, the White House responded with genuine confusion. They simply couldn’t understand why anyone would think there’s a problem.

These people are clueless. So it’s naive to assume that they’re going to fix anything.

I recently wrote about former Texas governor John Connally (who was in the vehicle next to John F. Kennedy when the President was assassinated in 1963).

Connally eventually became Treasury Secretary under Richard Nixon just as the US dollar was taken off the gold standard. And I wrote about how, with the dollar plummeting in value, Connally famously told European finance ministers that “the dollar is our currency, but it’s your problem.”

Frankly, the same could be said about the US national debt right now.

Back when the Ottoman Empire defaulted in the late 1800s, its imperial debt was huge relative to Ottoman tax revenue and the Ottoman economy. But it was actually quite small relative to global GDP at the time– less than 1%.

So even when the Ottoman Empire defaulted, it didn’t cause a global crisis.

That’s not the case with the United States. At $33 trillion, the national debt is nearly a THIRD of global GDP. Plus, the dollar is still the world’s most dominant reserve currency. This means that nearly every sovereign government and central bank on the planet has exposure to the US dollar and US government debt.

A default on the national debt, therefore, would be catastrophic to the global economy and financial system.

In a weird way, America has a unique opportunity to tell the world right now, “It’s our debt, but it’s your problem.”

On its current trajectory, a US government default is inevitable… whether that means defaulting on foreign creditors, defaulting on promises to taxpayers (like Social Security), or defaulting on the obligation to maintain a sound currency– inflation.

(Remember that Social Security will need a multi-trillion bailout within the next 10 years, so that’s probably the upper time limit.)

If US leadership ignores this obvious fate, the rest of the world will spend the next decade devising an alternative financial system and reducing their exposure to US dollars.

In fact, this is already happening. And in ten years’ time, America could be left powerless, much like the Ottoman Empire in the late 1800s.

So if they were really clever, the US government could use the threat of default to call for a reset of the global financial system, now, while America is still relatively strong and in a position to demand favorable terms.

Unfortunately these people are not clever. They’re not forward thinking. And they’re not sensible.

So, most likely, we should probably expect them to continue driving the national debt higher until it becomes a global crisis over the next 5-10 years.

This is reason enough to have a Plan B.

Remember, we’re not talking about theoretical risks or hypothetical problems. We’re talking about major issues that exist right now. And the government makes them worse by the day.

The primary long-term risk over the next decade is the US dollar. Chances are very strong that there could be a debt default, sustained inflation, and/or a loss of reserve status.

Diversification is key. And that includes personal diversification (like having a second residency or passport), as well as financial diversification– especially high quality real assets.

More on this soon.

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In a world full of unimaginable absurdity, we spend a lot of time thinking about the future… and to where all of this insanity leads.

“Future Headline Friday” is our satirical take of where the world is going if it remains on its current path. While our satire may be humorous and exaggerated, rest assured that everything we write is based on actual events, news stories, personalities, and pending legislation.

September 15, 2027: Government Regulators Ensure AI Algorithms are Anti-Racist

Four years ago in September 2023, Elon Musk participated in a closed door Senate hearing in which he called for the government to form a new agency to regulate Artificial Intelligence.

Several other tech titans such as Mark Zuckerberg, Bill Gates, and OpenAI’s Sam Altman each joined him and agreed that the federal government should regulate AI.

Four years later, those same men attended the ribbon cutting ceremony this morning at the recently constructed office campus which will house the new AI regulatory agency that they asked for; it’s called the Federal Artificial Intelligence Legislative Supervisors, or FAILS.

Before he fell into his latest coma, President Biden nominated his former press secretary, Karine Jean-Pierre, to be the new Chief of FAILS due to her extensive qualifications as an LGBTQ immigrant woman of color.

Ms. Jean-Pierre spoke at this morning’s ribbon-cutting ceremony and said, “As the government’s newest regulator, we hope to achieve the same amazing successes of the other watchdog agencies that have come before us.”

“Just think about how extraordinary the Justice Department has been in evenly applying the rule of law to all Americans. Or consider the flawless work of the CDC’s senior leadership during the pandemic. And we can only marvel at how effectively the Federal Reserve and FDIC have been in ensuring the safety of the banking system.”

“We hope that FAILS can regulate AI with the same effectiveness as the rest of the government regulates everything else in our lives.”

The new Chief of FAILS then went on to outline the three pillars of her new agency’s regulatory mission.

“First and foremost,” she said, “FAILS will eradicate hate speech from all AI output. It’s not enough for AI to not be racist… it has to be actively anti-racist.”

After the smattering of applause and standing ovation from the press corps quieted, Ms. Jean-Pierre continued.

“In order to achieve this, FAILS will decide what data-sets are allowed to train AI, and which are strictly forbidden.”

“For example, AI will be prohibited from being trained on outdated, misogynistic, racist works by dead white men such as Shakespeare and Mark Twain, while important works that help people think critically about race and appreciate LGBTQ culture will be required— such as Gender Queer by Maia Kobabe and Anti-Racist Baby by Ibram X. Kendi.”

Jean-Pierre said that ChatGPT was, “too neutral when it came to discussing politics, and should have made clear that Nazi viewpoints such as the two-gender conspiracy theory or white supremacist talking points about ignoring race in hiring are unacceptable in a civilized society.”

“The second pillar of FAILS regulation will be to ensure that AI does not cause the loss of a single union jobs. Unions are some of the biggest donors to our political party, so we need to protect them at all costs. If you’re non-union, you’re on your own. Join a union.”

“The third pillar of our new regulatory framework is to protect our children from the harmful effects of AI. And for that reason I’ve enlisted the President of the American Federation of Teachers, Randi Weingarten, to be my special adviser.”

“Under Randi’s courageous leadership during the pandemic in which she championed the continued closure of public schools, the childhood suicide rate only rose by 45%, while standardized test scores only fell by 34%. What better ally could I have in safeguarding the well being of America’s children?”

FAILS has been given a generous inaugural budget of $300 billion— which due to the importance of the issue at hand, is larger than the State Department, Veteran Affairs, and the Department of Education.

However, even on opening day, the agency is already running over-budget and will incur a small deficit this year.

That is mainly due to cost overruns from the new FAILS headquarters, complete with an AI powered water fountain in the lobby.

Visitors can interact with the water feature, by tossing coins into it and making a wish. The fountain then tells them how they should alter their wish to be a better, less selfish, more carbon neutral citizen.

Some users are shocked by how personalized the advice appears— until they learn that their ChatGPT histories have been shared with the fountain.

It looks like FAILS-regulated AI might just be intended to regulate us as well.

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Italy is a fabulous destination, offering stunning, varied landscapes, sumptuous cuisine, great weather, and attractive tax incentives. Unlike rivals Portugal and Spain, however, the country’sbut the country’s residency options have historically left much to be desired. But for the right person, however, Italy’s relatively unknown Representative Office Visa could be an excellent option.

Let’s get into the details below…

The Italian company formation residency you’ve never heard of…

The team at Sovereign Man continually scour the globe to unearth the most attractive alternative residency options for our readers and members. And if these programs can be situated in highly livable countries – so much the better.

Italy is one of our favorite destinations in continental Europe. But compared to Greece, Portugal and Spain, Italy’s residency options tend to be less accessible:

• The Elective Residency option – Italy’s answer to Portugal’s D7 Visa for retirees and passive income earners, and Spain’s Non-Lucrative Residency – requires applicants to show substantially more passive income. And in addition, we’ve received various reports of applicants being declined because they weren’t of retirement age.Plus, based on member and service provider feedback, it seems that the process and requirements can vary quite widely based on where you’re applying from, and where in the country you’ll be attending your biometrics appointment…

  So while this option exists, it’s by no means an easy residency option…

• The Italian Golden Visa Program has several disadvantages: First, the country doesn’t allow you to invest in real estate to get this visa. And second, the cheapest option – being a €250,000 investment in a tech startup – is so risky as to all but guarantee a total loss of capital.(Hence most applicants go for the €500,000 option, which involves investing in a larger, established business. But the program hasn’t gained much traction to date.)

Moreover, especially if you’re in the market for a flexible, Plan B type residency based on property investment, countries like Greece and Spain will likely make more sense.

So given the above challenges, we were pleased, recently, to uncover a relatively obscure Italian business formation residency known as the Italian Representative Office Visa…

Now whilst this program certainly won’t work for everyone, it could be a slam dunk, provided that you can tick a number of business-related boxes…

Introducing the Italian Representative Office Visa…

The Italian Representative Office Visa enables foreign companies to establish offices in Italy.
(A representative office is generally a foreign company’s non-commercial branch in a country, formed for marketing and promotional activities, market research, etc.)

Do note that the sponsoring foreign company must be an active trading company located in one of the World Trade Organization countries. It must also have limited liability status.

Once established, the representative office can then appoint a representative (e.g. a manager). This person would then be able to apply for Italian residency and move to Italy to perform the functions required of them.

In addition, the representative’s spouse and children can also join them in Italy under the same visa category.

But the deal gets even better…

There is no need to invest in Italy, and, importantly, the foreign company is exempt from Italian taxation.

All of the above-mentioned conditions are exceptionally favorable for a country known for its limited residency options (and restrictive residency requirements).

How does this program compare to Italy’s Golden Visa?

Additionally, some online resources we found mention that no physical presence requirements apply for the manager of the representative office to maintain their Italian residency.

This pretty much equates the Rep Office Visa category to the Italian Golden Visa (aka Investor Visa) which requires you to invest at least €250,000 in the country.

(All other Italian residency paths generally mandate you to spend at least some time on the ground.)
The same online resources also claim that this visa category is exempt from the annual quota limitations that apply to certain professional visas in Italy.

However, when something seems too good to be true, we seek expert confirmation.

According to our trusted legal service providers on the ground, there are essential conditions for someone to successfully qualify under the Representative Office Visa path.

For starters, managers of the representative office can apply for two distinct visa types.

First, they can apply for a “special” self-employed visa as per article 40/22 of Decree 394/1999.

This type of visa is indeed not subject to a quota. But to qualify for it, applicants must secure authorization from the Italian Labor office by doing the following:

• Proving that they are indeed employed by the foreign company, AND
• Proving that the company that hires them is affiliated with the company that registered the representative office in Italy, AND
• Submitting the foreign company’s financials.

This visa category is very beneficial, but as you can see, it involves a fair amount of paperwork. And importantly, you need to be hired by a foreign company with an appropriate work contract, etc.

The second visa type available to managers is the “ordinary” self-employment visa. While this option doesn’t require you to meet the three conditions above, it is subject to issuance quotas.

In 2023, only 500 permits for self-employed individuals can be issued, and these have to be distributed among entrepreneurs, startup founders, professionals, renowned artists, chairmen, CEOs, and several other categories.

In other words, the ordinary self-employed visa category is in high demand, and you’d be lucky to obtain one.

And importantly, any self-employed residency permit is subject to the physical presence requirement.

So does qualifying for the “special” self-employment track give you the same flexibility as with the Golden Visa?

According to our legal providers, the answer is no; only the Italian Investor Visa (aka their Golden Visa) is exempt from this requirement.

So while individual applicants’ experiences may differ from what the law states, you should work on the assumption that you cannot stay outside of Italy, consecutively, for more than half of the duration of your residency permit.

E.g.: On a one-year permit, you cannot stay outside of Italy for more than six consecutive months at a time – which would generally also see you becoming a tax resident there (and why it’s highly advisable to seek professional tax advice).

The bottomline…

In summary, the Italian Representative Office Visa is not as much of a silver bullet as it might initially appear. But for the right individual, it can still be an excellent option for gaining Italian residency.

So if Italy interests you, we highly recommend consulting a professional to evaluate your eligibility for the various residency options and to guide you through the application process.

Sovereign Confidential members, feel free to reach out to us if you’d like our trust provider’s details.

Yours in Freedom.

Team Sovereign Man

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The top two headlines in today’s Wall Street Journal say it all:

The first one is “US Inflation Accelerated in August as Gasoline Prices Jumped”

And the second explains that “Exploding Budget Deficits” are here to stay.

These are technically two different stories about to separate issues. But I’ll show you how they’re related, and how they point to the same conclusion: higher inflation is not going away.

The first story talks about the latest inflation numbers. No one who has visited a grocery store or gas pump over the past few months should be surprised– fuel prices are higher, and inflation has risen.

And ultimately this is a story about the rising cost of energy.

Remember that energy is one of the most important commodities in the world. Full stop. Every single activity in our modern world– driving to work, browsing the Internet, heating a home, manufacturing new iPhones, mining copper, farming soybeans, etc. requires energy in some form– gasoline, electricity, propane, etc.

And this means that cheap energy is critical to keeping inflation low.

Yet energy demand increases every year, for two key reasons:

First, there are obviously more people in the world each year. And rising global population means more energy demand.

Second, per-capita energy demand is also on the rise; in other words, the average individual around the world consumes more and more energy each year.

It’s pretty easy to understand why. In the US, for example, primary energy consumption is about 88.2 MWh per person per year. (A MegaWatt-hour, or Mwh, is a unit of measurement for energy).

That’s about 5x more than the global average, according to the US government’s Energy Information Administration.

So as lesser developed economies (like India) grow and become more advanced, their per-capita energy consumption rises dramatically.

And this is what’s actually happening; per-capita energy consumption rose more than 7% in India last year. In Indonesia it rose nearly 20%.

So global energy demand is clearly on the rise. And with very few exceptions, this trend has been very steady for the past several decades.

Energy supply, on the other hand, is a troubling story.

The #1 source of new energy supply growth over the past ~15 years has been shale oil in the United States. Shale created an American energy bonanza, propelling the US to triple its oil production in less than a decade and surpass Saudi Arabia as the #1 oil producer in the world. It’s all thanks to shale.

But those shale fields are quickly becoming depleted. This isn’t some crazy conspiracy theory or hidden secret– the shale oil CEOs have been very public about their peak production.

Given that US shale oil accounted for virtually ALL the growth in energy supply over the past ~15 years, the depletion of these shale fields means there could be quite a bit of stagnation in oil supply.

It doesn’t help that other major producers like Saudi Arabia have also reached peak production. Again, this isn’t a conspiracy theory; Saudi Arabia’s Crown Prince “MBS” stunned the world last year when he said that his country didn’t have the capacity to increase its oil output.

The result of these future supply and demand imbalances issues should be pretty clear: higher energy prices.

And, again, since energy is a major factor in nearly everything– food, fuel, manufacturing, etc., higher energy prices will cause higher inflation.

In theory this is an easily fixable problem. It’s not like energy companies don’t know how to explore, drill, and produce. And there are still places in the world (like Venezuela) that have vast, untapped oil reserves.

Unfortunately there’s an army of fanatics who are doing everything they can to block energy companies from producing more… including idiot protesters who literally glue themselves to the pavement or interrupt sporting events with glitter bombs.

The US government never misses an opportunity to frustrate and obstruct oil companies. They deny permits, they pass costly regulations, they impose punitive taxes, and they regularly demonize the industry.

Moreover, powerful investors like Larry Fink have forced banks and funds to deny much-needed capital to the energy sector, which reduces new discoveries and future production.

These same fanatics also willfully reject other obvious energy solutions like nuclear power, while clinging to the mythology that inefficient solar technology– which requires a 9-year old child in the Congo to mine cobalt with his bare hands in toxic conditions– will save the world.

Nothing goes up or down in a straight line, and gasoline prices will certainly go through periods where they rise and fall. But over the next several years, the current trajectory is pretty clear: energy will remain expensive. And that means higher inflation.

The second story in the Wall Street Journal this morning was about government spending.

And while there are some states in the US which routinely achieve exemplary fiscal results, politicians at the national level have absolutely no clue how to live within their means.

The federal budget deficit for Fiscal Year 2023 (which closes in 17 days on September 30^th) will reach approximately $2 trillion. And as the Journal points out, there is no end in sight.

Annual spending on mandatory entitlement programs like Social Security and Medicare will reach a whopping $3 trillion over the next several years. And yet politicians from both parties insist that those programs will not be cut.

Simultaneously, gross interest on the debt could rise to $2 trillion annually within the next five years if interest rates remain at current levels.

This means that annual deficits will keep rising… and this is highly inflationary. Everyone alive has experienced first hand how excessive government spending over the past couple of years has contributed to a nasty, stubborn inflation problems.

But it’s even more important to understand that the US government NEEDS inflation to stay alive. At $33 trillion (and rising), the US national debt is simply too large at this point. And their only realistic option is to keep inflation in the 5-6% range, and repay the debt with increasingly worthless dollars.

These two points together– energy and government spending– paint a very clear picture of why inflation will likely remain higher for a long time.

And there are other forces as well which will contribute to higher inflation– geopolitical conflict, rising taxes, anti-capitalist “Bidenomics”, etc.

Again, these are all fixable problems. But the people in charge seem to have neither the competence nor desire to fix problems. They usually just make things worse.

Even when someone slaps them in the face with an obvious warning, they ignore it. When Fitch downgraded the US government’s credit rating last month, for example, the President and Treasury Secretary were genuinely bewildered; they found it incomprehensible that analysts wouldn’t have 100% confidence in their administration.

These people have a dangerous reality distortion field, and they’re clearly blind to the glaring dangers on the horizon.

Ever since I launched Sovereign Man back in 2009, I’ve been writing about the need to have a Plan B, just in case some of these risks come to fruition.

Yet when the risks are this obvious, and the people in charge so incompetent, it’s time to think about Plan B becoming Plan A.

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By the late 1800s, the South Pacific island chain of Samoa faced an existential crisis.

After squabbles between German, British, and American forces over the previous decades, Germany had taken the western islands of Samoa, and asserted its unpopular control over the people.

The eastern islands, however, were controlled by the United States with a lighter touch. And these Samoans had a good relationship with US merchants involved in the island’s coconut trade.

But rival Samoan factions still fought amongst each other.

High Chief Mauga was a prominent leader on the island of Tutuila which included the Pago Pago harbor— a site that was strategically important to the US Navy.

High Chief Mauga calculated that by aligning with the United States, his island would be protected from German aggression and internal strife.

And that’s why he was among the chiefs who signed The Deed of Cession of Tutuila, on April 17, 1900.

Importantly, this agreement protected Samoan autonomy and property. And it specifically made American Samoans US “nationals”— a status later solidified by the passage of the Samoa Act of 1929.

Now, there is a bizarre legal distinction between being a US citizen and being a US “national”.

To this day, as US nationals, Samoans are issued US passports and can travel globally just like any US citizen. Samoans can also visit, live, and work within the United States. They cannot, however, vote in federal elections or hold certain public offices.

This makes American Samoans distinct among the inhabitants of other American territories such as Guam and Puerto Rico who are born US citizens.

To clarify, all US citizens are also considered nationals. But not all US nationals are US citizens. Strange, right?

Today, between 50,000 to 100,000 American Samoans globally enjoy this unique status today. And I say “enjoy” because being a US national and not a US citizen comes with a huge benefit:

US nationals are NOT subject to the United States’ policy of taxing citizens on their worldwide income, no matter where in the world they live or earn money.

It’s true that other US territories can set their own tax policy for bona fide residents to follow. That is why living in Puerto Rico is such a great option for Americans to legally reduce their tax rate.

But if Puerto Rican born citizens move off the island, whether to the United States mainland or overseas, they will owe taxes to the IRS because they are still US citizens.

But this is not the case for American Samoans. As US nationals, they are not subject to worldwide taxation while living in American Samoa, or anywhere else.

Sure, if an American Samoan as a US national lives in, say, California, he or she will pay all the applicable federal and state taxes, just like any other US resident.

However, if they leave the United States, they stop being subject to IRS jurisdiction altogether. That means US nationals (who are not citizens) can have a tax-free and reporting-free life if they move to one of the many countries with no income tax, or a territorial tax.

And again, that’s a critical distinction from US citizens, who remain under Uncle Sam’s tax jurisdiction no matter where they live.

Now, I’d love to tell you that there’s an easy way you could swap your US citizenship for US nationality. So far we haven’t found one… but we’re still looking.

There is, however, a way for some people to create this benefit and set their future children up to be US nationals.

Most people won’t qualify; if you’re a US citizen and have lived in the United States for at least one continuous year at any time during your life, then even if you have children born in American Samoa, they would inherit your US citizenship.

If, however, you are one of the approximately 9 million “accidental Americans” globally who were born with US citizenship but have never actually lived in the US, then technically you could have a child in American Samoa… and that child would become a US national (NOT a citizen).

In addition, non-Americans could also make this work.

Children born in American Samoa to non-American citizens also become US nationals but not citizens.

There are still challenges…

For example, American Samoa only allows non-Americans to visit for 30 days at a time. It is possible, however, to extend this another 30-days with a local sponsor, or up to a year if you enroll in the local community college, or get a job on the island— they are somewhat desperate for certain qualified professionals.

Naturally we realize that this is a unique situation that will apply to only a handful of people.

But this is just one of many obscure legal quirks that we routinely uncover in our research that can be used to reduce taxes, expand your living options, or pursue other global opportunities.

The point is that having a broad understanding of these sorts of policies can open up doors all throughout the world.

And when you’re forming a strategy to live your life by your own design, it pays to be armed with this sort of knowledge.

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[Editor’s note: Today we’re providing a preview of the most recent edition of the 4th Pillar – our premium investment research service which focuses on the most critical ‘real asset’ businesses.]

Before oil, there was coal. It was coal that powered the industrial revolution in the UK and then across the world. And it is coal that even today continues to power the world, accounting for fully 36% of global electricity generation.

Even in the US, among the countries where coal is theoretically being phased out, it accounts for 20% of electricity generation, a number that spikes to 57% in China.
When we refer to coal, we must clarify that there are two types of coal:

• Thermal coal – which is used for power generation, and;
• Met/coking coal – which is used in the production of steel. (And as of today, met coal is effectively an irreplaceable ingredient in the steelmaking process.)

So whatever else coal may be, it is certainly not a relic of a bygone era. Rather, it is the single most important source of power in the world today.

And it will continue to be vital for the global economy for decades to come. Yet the perception is that coal is not an industry with a future, making it one of the most misunderstood parts of the commodity markets.

And that is exactly where our opportunity lies…

Alexa – What is the most hated, anti-ESG company in the world?

The company which is the subject of our research today is a Southern African thermal coal miner. And in early 2021, it was certainly in the running for the dubious title of ‘most hated company’ in the world.

At the time, there were a lot of these mega-investors around who weren’t interested in doing their primary job: that of making money for their clients.

Instead, they were focused on ensuring that their investments were as “ESG compliant” as possible. (ESG is short for Environmental, Social and Governance principles – which is what Woke Inc Global were screaming about very loudly at the time).

Moreover, with the leverage they held, these investors were exerting considerable pressure on companies to comply.

And not even the biggest, market-leading mining companies in the world were immune to this pressure…

One such group made the concession to spin off their Southern African thermal coal operations in mid-2021. The business unit comprised just 4% of their revenues in 2020, and it was attracting a disproportionate amount of negative attention.

So in June 2021, the company completed the spinoff, and a new thermal coal company was born.

And unlike the rest of the coal industry that had been struggling with low prices, increasing decommissioning liabilities, the supposed phasing out of coal, as well as investor activism for years, this new company was set up to succeed…

It had no debt, $170 million in cash on the balance sheet, an agreement that their previous parent company would continue to market their coal for the next three years, plus a further guarantee to provide more capital if coal prices fell below a certain level.

So, what do you think investors valued this company at?

At the close of the first day of trading, the market cap of the company was just $210 million.

That is to say, a company with $170 million of cash, no debt, and the ability to produce millions of tons of coal a year, with complete protection from a decrease in coal prices by their earlier parent company, had an EV (Enterprise Value) of just $40 million.

Perhaps they should rename it the inefficient market hypothesis!

But here’s why this happened…

All the shareholders in its previous parent, who wanted nothing to do with the business, had received shares in the new company as part of the spinoff. And they sold as soon as they could, on day one of trading – hence the price tanking.

But just over a year later, the stock price was over 15x higher than where it closed on its first day of trading.

The company was certainly helped by a spike in coal prices in the aftermath of Russia’s invasion of Ukraine in early 2022. But their business operations have continued to provide strong results over the past year, and the future looks very bright.

OPERATIONS

In concept, the company’s business is fairly simple to understand. They produce thermal coal across seven sites through a combination of open pit and underground mining.

The company delivers its coal primarily via rail to the nearest harbor, where it is exported to Asia. Export quality production in 2021 was 14 million tons, however, the guidance for this year is 12 million, similar to their export levels in 2022.

The reason for this slight decline in production is transportation challenges via rail. However local transport authorities have recently secured an international loan to upgrade rail capacity, which should significantly increase the company’s ability to export more coal.

Moreover, the company has diversified internationally (something we like to see at Sovereign Man); they’ve just completed the acquisition of a majority stake in an existing thermal coal operation in Australia.

And since that acquisition was done at an extremely attractive price, the investment should produce very high returns for shareholders.

FINANCIALS

As always, we need to look at the financial state of the company, evaluating both the balance sheet and income generation.

The market cap of the company is around $1 billion. As of June 30, 2023, the company had $730 million of net cash, meaning the “Enterprise Value” (EV), or value of the core business, is just $310 million.

Here’s what’s incredible: in 2022, the company generated Free Cash Flow of $980 million – so nearly 100% of its current market cap. And they paid out 76% of that as a dividend!

(Free Cash Flow is a better measure of profitability because it shows how much money can be paid to shareholders as dividends.)

Now, $980 million in Free Cash Flow was due to record high coal prices, which have come down since then. But as coal prices have fallen, the company is still doing very well. The first half of 2023 showed results of $230 million in Free Cash Flow.

On an annualized basis ($460 million for the full year), this means that the company is trading for an “Enterprise Value to Free Cash Flow ratio” of less than 1.

In other words, the company should earn more than what it’s currently worth… in less than a year.

That’s a pretty good deal considering that coal prices have fallen 75% from their peak, combined with the company’s challenges surrounding the railroad infrastructure.

Conclusion

In this company we were able to find the criteria that we value highly in an investment: low production costs, in a vital commodity, that is highly profitable even when prices are low. The balance sheet is strong, the company pays healthy dividends, and the price is cheap.

Like what you’re seeing thus far?

Learn more about this and other inflation-beating real asset opportunities in The 4th Pillar, our premium investment newsletter.

Enjoyed this market analysis and investment research summary? Find out how real assets can help you fight inflation and preserve your buying power… And discover scores of other compelling opportunities inside The 4th Pillar, our real asset focussed premium investment letter.

Recent winners featured in the real asset sector included agricultural companies, and companies servicing the mining industry as well as.

To find out more, click here.

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In a world full of unimaginable absurdity, we spend a lot of time thinking about the future… and to where all of this insanity leads.

“Future Headline Friday” is our satirical take of where the world is going if it remains on its current path. While our satire may be humorous and exaggerated, rest assured that everything we write is based on actual events, news stories, personalities, and pending legislation.

September 8, 2024: Fauci Face Condom Sales Fall Flat in First Week

In early 2023, a leading British medical research non-profit called the Cochrane Collaboration published a comprehensive analysis of 78 different studies which looked at whether or not face masks were effective in controlling the spread of COVID-19.

Cochrane is a non-partisan organization which focuses purely on data, and they’re funded by national governments, including Britain’s National Institute for Health and Care Research, Germany’s Ministry of Health, and the US National Institutes of Health.

The results of the Cochrane study were clear; the Oxford epidemiologist who led the analysis stated unequivocally, “There is just no evidence that [masks] make any difference. Full stop.”

Yet as COVID-19 cases started to rise in September of 2023, Dr. Anthony Fauci— who was no longer part of the federal government— still appeared on national television to recommend that Americans mask up… despite the total lack of evidence that masks worked.

Then the so-called “election strain” of COVID-19 continued to spread across the world throughout late 2023 and into 2024, leading many to fear new government mandates for public masking.

President Biden is still reportedly masked up and camped out in the White House basement, more than 12 months after his wife Jill came down with the election strain in September of 2023.

The CDC, however, has been surprisingly candid in admitting that a new approach to masking is needed.

CDC Director Mandy Cohen said this morning that “The Cochrane study may show that masking doesn’t provide any benefit. But it doesn’t prove that masking hurts. So still we think people should do it.”

“The one risk we have to balance, of course,” the director continued, “is the learning development of small children. Masking prevents them from seeing faces of their peers and adult caregivers.”

“So today I am excited to announce a new partnership with our old friend Dr. Anthony Fauci. The CDC will be recommending his new product called Fauci’s Face Condoms!”

According to product details, Fauci Face Condoms provide a clear latex barrier which fits snugly over the head and neck so that facial features and lips can still be seen clearly, while the air reservoir tip above the head contains a filtration system.

And while the CDC says it hasn’t yet had any time to study the effectiveness of the new Face Condoms, they point to the company’s slogan: Hey, it couldn’t hurt!

Fauci’s Face Condoms are available at Target, CVS, and Walmart and come in a variety of activism branding, including Pride, Support Ukraine, and Black Lives Matter.

But just one week after launch, stores report underwhelming sales of the Face Condoms. Target has even moved the product to its Halloween costume section after some customer backlash.

Dr. Fauci commented, “Obviously some right-wing extremists and anti-science cave-men will be adamantly against anything that might help put this pandemic behind us. After all, an attack on my face condoms is an attack on science itself.”

Fauci continued, “But I’m sure the majority of Americans will be happy to follow the science once they are educated on the benefits of my Face Condoms.”

When questioned on the lack of scientific proof that the Face Condoms work, Fauci responded with the company slogan, “Hey, it couldn’t hurt,” and winked.

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