“This is a financial revolution. . .”

“This is a financial revolution. . .”

Notes From The Field By Simon Black

January 28, 2021  Bahia Beach, Puerto Rico

At precisely 2:32pm Eastern time on May 6, 2010, the US stock market started to drop.

The decline was sudden, and vicious. Within minutes, more than $1 trillion of market capitalization had vanished, with the Dow Jones Industrial Average losing nearly 10% of its value.

This event became known as the ‘Flash Crash’. And early explanations pointed to the big investment banks and their high-tech trading algorithms, i.e. software that could buy and sell stocks without human involvement.

When the market started its decline that day, banks’ trading algorithms went haywire and started selling everything. This caused the market to decline even further, which triggered the algorithms to sell even more.

The humans were powerless to stop it. There were stories of panicked tech teams at investment banks frantically ripping cables out of the floor trying to shut down the machines.

But the selling went on for 36 minutes… during which time the banks and big funds racked up enormous losses.

For me, however, the Flash Crash was great. I was ‘short’ the stock market at the time, meaning I had bet that the market would decline.

And when the market dropped by more than 1,000 points, I happily cashed in.

But two days later I received an email from my broker explaining that they were CANCELING my trade.

The poor little investment banks had lost money because their fancy algorithms didn’t work. So the exchange was giving them a ‘do over’ at my expense.

Incredible. It hadn’t even been two years at that point since the banks had to be bailed out at taxpayer expense during the Global Financial Crisis of 2008.

Then, 20 months later, the Flash Crash happened. And the banks were simply able to wipe all their losses away.

The lesson is obvious: when we screw up, we pay the price for our mistakes. But when the banks screw up, the whole financial system comes to their rescue.

Plenty of people have made this realization over the years.

If you’ve been following the news, you are probably aware that there are a few stocks right now-- most notably GameStop (GME), that have soared to incredible heights in a matter of days, thanks to a zealous group of individual investors on Reddit and TikTok.

These aren’t titans of finance; they’re a bunch of little guys, many of whom are also frustrated by the rigged financial system.

A bit of background-- GameStop is a company that sells video games. And, for years, almost all of their sales have been from their 5500+ stores around the world.

That business model worked really well… in 2005.

Today, most users download video games online directly from the publishers, or they stream games from Google, Amazon, Apple, or Steam. Going into a store and buying a DVD is a thing of the past, and GameStop’s sales have suffered as a result of this trend.

A handful of hedge funds have been betting that GameStop will go out of business soon, or at least that the stock price will continue to decline.

So these funds shorted the stock in a huge (and dubious) way, selling more shares of the company than were actually in existence.

And a number of small investors saw these questionable short positions and said, ‘Enough is enough. We’re tired of hedge funds exploiting the market.’ So they’ve banded together and bid up the price of GameStop’s stock to absolutely epic levels.

GME’s stock price is up from $17 earlier this month, to $347 at yesterday’s close, all from these small investors.

And as a result, the hedge funds who shorted GameStop have extreme losses.

Individual investors are angry; comments on the subreddit r/wallstreetbets really sum this up:

“Hedge Funds have literally taken lives through their greed. It’s time for some long overdue taste of their own medicine.”

and

“It’s a class war. It’s time we fought back.”

and

“[Hedge funds: ] This is personal for me, and millions of others. . . I’m making this as painful as I can for you.”

and

“There is and has been a ruling class whose sole purpose is to retain power. They gaslight us into thinking they know what is best for us. 1% knows better than 99%. This is not [about] stocks, this is a financial revolution. . .”

And they’re right. Small investors have been fleeced for years. It’s infuriating. People are angry.

And as we saw over and over again throughout 2020, when people become angry enough, they band together, often in loosely organized mobs, and take action.

Oftentimes that action is destructive (or self-destructive), and even irrational.

We watched people burn buildings in the name of combating discrimination, others descend upon the US Capitol, others destroy people’s lives via Twitter, and yet others assaulting their fellow citizens who weren’t wearing masks.

That’s human nature: we do strange things when we’re angry. But it makes us feel better.

GameStop is similar. The business loses tons of money, lost half of its equity last year, and has a net asset value of just $690 million. Yet at yesterday’s close the company was worth $20+ billion.

(So GameStop’s ‘Price/Book’ ratio was roughly 30, while the average Price/Book in the S&P500 is 4.16.)

GameStop is a completely irrational investment. And sure enough, the price has been hammered this morning after the brokerage app Robinhood suspended GME trading.

But as the Reddit users say, it’s not about the money. It’s personal. It’s emotional. They’re knowingly engaging in destructive (and self-destructive) behavior. They’re OK losing money-- because they’re angry.

This is a sign of the times.

We saw explosive mob anger last year over social issues, political issues, health issues. Now we’re seeing it in the financial system.

The obvious theme here is that people are seriously angry. And it’s not going away. It’s building.

Personally I think a better strategy is to borrow from the 1983 movie War Games: “The only winning move is not to play.”

We have an incredible amount of options at our disposal. Just like I wrote recently about divorcing oneself from Big Tech, no one has to use gmail; you don’t have to play Google’s game.

There are plenty of other secure, cloud-based email services. Same goes for Google Drive, Google search, etc.

Similarly, we have plenty of options when it comes to our investments.

If you think the stock market is rigged, you don’t have to play. Consider alternative investments instead-- gold, real estate, private companies, crypto, etc. It may be more productive to NOT play the game rather than take huge risks to fight the system.

Either way, expect the anger to continue building. (Just imagine the fury if inflation starts to rise...)

And this is reason enough to have a Plan B.

To your freedom,  Simon Black, Founder, SovereignMan.com

https://www.sovereignman.com/trends/this-is-a-financial-revolution-30629/

2021 May Be The Year That The World Loses Confidence In The Dollar

2021 May Be The Year That The World Loses Confidence In The Dollar

Notes From The Field By Simon Black January 11, 2021  Bahia Beach, Puerto Rico

Nearly 186 years ago to the day, on January 8, 1835, US President Andrew Jackson accomplished what no other American president has done before, or since: he paid off the national debt.  Jackson was a staunch fiscal conservative. He despised banks, and, according to his biographer, he considered central banking “black magic”, and the national debt a “moral failing”.

So he paid it all off-- roughly $5 million.

That was the first and only time that the US national debt was zero. By the end of 1835, the debt had increased to a trivial $33,733. Within three years it was 100x that amount at $3.3 million. And by 1847 it had increased another 10x to $33 million.  The trajectory continued; the national debt crossed $1 billion for the first time during the Civil War. Then $10 billion for the first time during World War I. Then $100 billion for the first time during World War II.

It crossed $1 trillion for the first time during the peak of the Cold War in the early 1980s.

And it crossed $10 trillion for the first time in 2008 after years of war in Iraq and Afghanistan, followed by the Global Financial Crisis.

The national debt is now nearly $28 trillion-- 40% larger than the entire US economy. And the debt will most certainly hit $30 trillion over the next several months.

Last year alone the debt grew by $4.5 trillion due to all the Covid stimulus.

This matters. Because, sooner or later, that debt is going to mature and will need to be repaid.

Now, traditionally, whenever government bonds mature, many investors simply reinvest their proceeds into a brand new bond.

In this way, the government doesn’t actually have to pay anyone back; they just keep refinancing and kicking the can down the road farther out into the future.

And the Treasury Department is praying that bondholders will continue this practice forever.

Unfortunately that’s probably not going to happen.

For starters, foreign governments like China and Japan (which are among of the biggest owners of US government debt) have already started reducing their holdings.

Back in February, just prior to Covid gripping the world, foreigners owned $7.23 trillion worth of US government bonds-- approximately 30% of the total national debt.

By October (which is the most recent data available from the Treasury Department), the total amount had fallen slightly to $7.07 trillion. But as a percentage, foreigner ownership had dropped to about 25% of the total national debt.

This isn’t a earth-shattering decline. But it shows a clear unwillingness from foreign governments to buy more US government debt; and also that some of them would like to be repaid when their existing bonds mature.

Just look at China. After years of rising tensions, China has gradually reduced its holdings of US debt, from a peak of $1.32 trillion in November 2013, to $1.07 trillion in October 2020.

And it’s unlikely that China will suddenly have a fit of generosity and choose to extend their US Treasury holdings.

Aside from foreign governments, another major holder of US government debt is the Social Security program; in other words-- US citizens.

Social Security built up enormous cash reserves over the years in its various trust funds, and those trust funds are 100% invested in US government bonds.

Traditionally, Social Security always buys new bonds whenever its existing bonds mature. So they keep refinancing the debt for the US government.

But now Social Security has a huge problem: the trust funds are rapidly running out of money. Prior to Covid, the Treasury Secretary estimated that Social Security’s trust funds would be fully depleted by 2034.

But Covid has ravaged Social Security’s finances.

Unemployment surged, countless businesses closed, and payroll taxes were suspended. In other words, there was no money being paid into the trust funds.

At the same time, Social Security payments increased; even more people have retired and started collecting benefits. So while Social Security inflows went to zero, the outflows jumped.

And some analysts (like the Bipartisan Policy Center) now estimate that the program’s trust funds could be fully depleted as early as 2029 because of the adverse Covid impact.

So, needless to say, Social Security will need to be paid back when its Treasury bonds mature in the coming years.

As it turns out (according to Bloomberg) $8 TRILLION worth of government debt in the US will mature THIS YEAR alone.

Plus, the Congressional Budget Office expects another $2+ trillion deficit this year due to more Covid stimulus.

So that’s potentially $10+ trillion worth of government debt that will need to be placed this year. That’s $300,000 per second.

The only way they’ll realistically accomplish this is if the Federal Reserve ‘prints’ trillions of dollars of new money.

The Fed did this last year; in January 2020, the Fed owned $2.3 trillion worth of US government debt. Today they own $4.7 trillion, plus trillions more in other bonds, for a total balance sheet of $7 trillion.

This is the ‘black magic’ of central banking; the Fed conjured money out of thin air and expanded the money supply by roughly 25% last year. Then they used that money to buy US government bonds.

They’ll have to do it again this year and create trillions of dollars more.

It is rather interesting that Janet Yellen is the incoming Secretary of the Treasury; she used to be Fed chair, and during her tenure she oversaw unprecedented money printing programs.

So there will likely be plenty of cooperation between the Fed and Treasury to print absurd quantities of money this year.

Certainly there will be some bondholders who extend their securities. But most likely the Fed will need to print another $3+ trillion, pushing its balance sheet beyond the $10 trillion mark.

And if they really go down this destructive path-- $30 trillion national debt, a $10 trillion Fed balance sheet-- then 2021 may be the year that the world finally loses confidence in the US dollar.

To your freedom, Simon Black, Founder, SovereignMan.com

https://www.sovereignman.com/trends/2021-may-be-the-year-that-the-world-loses-confidence-in-the-dollar-30384/

An Incredible Year For Gold

An Incredible Year For Gold

Notes From The Field By Simon Black, Sovereign Man

 December 30, 2020  Sovereign Valley Farm, Chile

Gold has been one of the world's best performing asset classes over the past few years, and it has shined this year in particular. But while the financial gains have been impressive, I've long argued that the real reason to own gold goes far beyond making money.  As I've written before, I personally don't have much interest in trading paper money for gold, only to trade the gold for more paper money in the future.

To me, gold is like an insurance policy. You can buy insurance to protect your home, your car, and your family. You can buy 'put options' to protect your stock portfolio against major declines. You can buy credit default swaps to protect your bond portfolio against bankrupt governments.

But these are all known risks... things that we know -might- happen. We know that stocks might decline, or a house might catch fire.

But gold is like an insurance policy that covers all the true unknowns... things that we never see coming. And there were certainly a lot of those this year.

Below is an article that I wrote in early January of this year-- before Covid, riots, and the rest of the fiasco of 2020 took hold.

As I wrote:

"I know this is the time of year where people make all sorts of predictions about what’s going to happen in the year ahead.

Frankly I don’t think anyone can credibly say that they have any idea what’s going to happen in the world in 2020. And that’s why I own gold."

This statement remains absolutely true. Here is the full article:

The price of gold is up nearly $100 since Christmas, reaching around $1,575 per troy ounce as I write this letter.

This most recent price bump is due to the panic over Iran. But the gold price is up nearly 20% over the last year, so there have obviously been plenty of other factors driving the price higher before the Middle East started flaring up again.

And there will be plenty more after these tensions cool down.

Trade wars, economic crisis in China, Bolshevik nonsense in the US, Brexit woes… the world is definitely not lacking in major issues that could continue to drive gold prices higher.

Throughout history there have always been periods of relative calm and stability, followed by periods of chaos and uncertainty.

The 1960s were incredibly chaotic, for example. Riots, assassinations, war, etc. were the dominant stories of the time.

By comparison, the 1990s were relatively calm. Peace and prosperity reigned. And life was so easy that the biggest problem of the decade was Bill Clinton’s love stain.

We seem to be sliding head-first into another period of turmoil (though I would argue that we’ve been there for a few years).

Stability is gone. Trade wars, shooting wars, terror attacks… pretty much everything is back on the table now.

Bolshevik politicians are taking hold all over the world, even in places like the United States, where, only a few years ago, it would have been considered preposterous for a socialist candidate to run for President.

Now there’s more than a dozen.

Most of all, the Social Contract is breaking down; people everywhere are becoming angry and unglued. We’ve seen it in the streets in places like Hong Kong, Spain, Chile, Lebanon, France, etc. And we see it every single day in social media.

People are demanding change and revolution in everything from our basic system of economics, down to the very words we can and cannot use.

This is all part of a level of conflict and turmoil we haven’t seen in decades, and it’s possible we’re just in the early stages.

I somehow doubt that all of these woke social justice warriors will suddenly capitulate their war on gender pronouns, or that Bolshevik presidential candidates will abandon their Marxist ideology and embrace the free market.

Now, don’t get me wrong… I’m not suggesting this is the winter of our discontent. I’m incredibly optimistic about the world and it’s opportunities.

But I sure am glad that I own some gold.

It’s not the fact that the gold price is up $100 in a month, or that precious metals have performed very well as an asset class. (Silver is up 21% in the last six months alone.)

The investment benefits are a nice bonus. But the real value of gold is that it’s one of the best things to own in times of turmoil and uncertainty.

Gold is a global asset with a 5,000+ year history of value and marketability. It’s a hedge… an asset you can rely on when you can rely on little else.

In many respects it’s like a life insurance policy… with the added cherry-on-top that you don’t have to be dead to benefit from it. And your gold dealer is probably not going to give you prostate exam first.

I know this is the time of year where people make all sorts of predictions about what’s going to happen in the year ahead.

Frankly I don’t think anyone can credibly say that they have any idea what’s going to happen in the world in 2020. And that’s why I own gold.

To your freedom and prosperity, Simon Black, Founder, SovereignMan.com

https://www.sovereignman.com/articles/

Another Hallmark Of The Soviet Union: Separate Rules For The Peasants

Another Hallmark Of The Soviet Union: Separate Rules For The Peasants

Team Sovereign Man November 25, 2020 San Juan, Puerto Rico

[Editor’s note: This letter was written by Viktorija, our Sovereign Woman.]

My experience with ridiculous government overreach began literally on the day I was born.  It was more than three decades ago, in the tiny Soviet Socialist Republic of Lithuania, back when the Soviet Union still existed.

As my mother tells the story, she and my father hurried to the closest hospital when her contractions started. But the hospital administration staff informed them that they were not allowed to give birth there.  Apparently we weren’t registered with that municipality. So the bureaucrats turned my parents away and ordered them to drive to the correct hospital that matched their records.

Unfortunately, my parents were nearly out of gas.

Gasoline was in very short supply at the time and considered a major luxury; the Soviet Union was near collapse, and people routinely had to wait in line for more than a day just to fill up a few liters of gas.

So, my parents were without any means to drive to the ‘correct’ hospital. And that’s when they resorted to what most people ended up doing back in Soviet times: bribery.

They went back to the hospital that turned them away, and paid off the nurses and administrators to let them give birth there.  And poof, shortly thereafter, I came into the world.

My mother is full of these stories about Soviet times; in her youth, she worked at a clothing store… and almost all of the inventory was Soviet-made garbage.

On rare occasion, though, a new dress would come in that was made in Western Europe. My mom would immediately hide it, and sell it to special customers who were willing to pay much more. That was the only way she could afford to buy enough food that month.

Anything foreign, in fact, was considered a major luxury.

Vehicles were fairly common in the Soviet Union, but they were all pitiful Soviet brands like Zaporozhet, Moskvitch, or Volga. Even just seeing a Mercedes was a dream come true.

Travel was the same. If you were lucky enough to have any money, you were allowed to travel. But only inside the Soviet Union… so you could look forward to a fancy vacation to Azerbaijan.

Only big bosses with special connections were allowed to travel outside of the Soviet Union. But for most of us in the proletariat, visiting Paris or London was an unimaginable luxury.

It’s funny how the things that we consider luxuries tend to change over time.

As children we used to get really excited about a new toy, which, in adulthood, probably seems rather trivial to us now.

And I remember the first time I saw someone with a cell phone. It was the size of a suitcase, but I thought he was the wealthiest man in the world.

Now everyone has a smartphone; it’s not even close to being a luxury anymore.

I’ve been to some of the poorest countries in the world—places like Myanmar and Eswatini (formerly known as Swaziland, in southern Africa). And even there, people have smartphones connected to the Internet.

This was inconceivable 15 years ago.

Most people still consider ‘luxuries’ to be things that require a lot of money-- private jets, fancy cars, and expensive champagne.  But as corny as it may sound, I believe one of the biggest luxuries right now is freedom.

Covid-19 lockdowns around the world have taught us how precious freedom is, and how easily simple things like going outside, breathing fresh air, and the ability to travel, can be taken away from us by people who refuse to follow their own rules.

Frankly this was another theme of the Soviet Union—the big bosses had one set of rules for themselves, and the rest of us peasants had another set of rules that we had to follow.

You see this all over the Western world now, with politicians who can’t be bothered to adhere to their own lockdowns, but require everyone else to isolate from friends and family.

It’s easy to be angry about this. But it’s more effective to do something about it.

Unlike expensive luxuries like fancy handbags and supercars, freedom doesn’t require suitcases full of cash. It requires rational thinking, the right information, and the will to take action.

You might be eligible for a second passport, practically for free, simply because you have ancestors from a certain country (including my native Lithuania!)

And having a second passport or second residency is a huge step towards being able to take back your freedom. It means that, no matter what rules are imposed, you’ll at least have another place you can go.

That optionality is now more important than ever.

To your freedom and prosperity, Viktorija   SovereignMan.com

https://www.sovereignman.com/international-diversification-strategies/another-hallmark-of-the-soviet-union-separate-rules-for-the-peasants-29513/

Didn’t We Learn This Lesson 400 Years Ago?

Didn’t We Learn This Lesson 400 Years Ago?

 Notes From The Field BY Simon Black November 24, 2020  Sovereign Valley Farm, Chile

Exactly 400 years ago, 102 Pilgrims were staring down what promised to be a brutal winter, after first coming to shore, and setting up a tiny village in Plymouth, Massachusetts.

The industrious, God-fearing Pilgrims decided to pull together and pool their resources and efforts to better survive winter. They created a commune, and elected a Governor to call the shots.

By the spring of 1621, half of the Pilgrims had died from starvation, disease, and exposure.

One of the Pilgrims, William Bradford, explained in his journal that communal living “was found to breed much confusion and discontent and retard much employment that would have been to their benefit and comfort.”

Young single men found it unjust that they had to do all the hard work, but received no more reward for it. And wives “deemed it a kind of slavery” to be forced to do chores for men besides their husbands.

Clearly, this little experiment in collectivizing society had failed. So they reversed course, and tried something new; every man for himself.  This might sound harsh, or even counterproductive. But on the contrary, Bradford explained:

This had very good success, for it made all hands very industrious, so as much more corn was planted than otherwise would have been by any means the Governor or any other could use... The women now went willingly into the field, and took their little ones with them to set corn; which before would allege weakness and inability; whom to have compelled would have been thought great tyranny and oppression.

400 years later, it seems leaders have forgotten the lesson.

We are entering winter grappling with COVID-19, a lockdown-stunted economy, and as I noted Monday, millions of hungry Americans relying on food banks to survive.

And tyrannical governments seem to be doing everything they can to stop us from responding to these problems as we see fit.  We’ve been told to abandon any sense of reason, trust the experts, and “listen to the scientists”.

But this month, New England Journal of Medicine published the results of a study to test the theory that extreme lockdowns are effective at controlling the spread of COVID-19.

The study, which enforced a strict quarantine and social distancing regimen on Marine recruits, found there is no correlation between strict lockdowns and reduced COVID-19 transmission.

In fact the control group, which went about life as normal, had a lower percentage of COVID infections (1.7%) compared to the test group under strict lockdown (2%).

So, will Governors “listen to the scientists”?

Hardly. Several states are going so far as to attempt to cancel Thanksgiving-- or at least place a strict limit on the number of family members you can invite to your own home to share a meal.

Oregon recently decriminalized hard drugs-- invite five people over to smoke crack, and you’re all good. But if you are caught sharing a Thanksgiving meal with seven family members, you could face 30 days in jail and a $1,250 fine.

California says you can host no more than two other families, but everyone must stay outside, with guests seated six feet apart, in all directions.

The state of California will graciously allow your houseguests to enter your home… but only to use the bathroom.

(Meanwhile, the Governor of California, Gavin Newsom, was caught dining out maskless with about a dozen friends for a lobbyist’s birthday party.)

But these are just the latest authoritarian escalations, which should surprise no one.

Since March, Governors have simply been ruling by decree to shut down businesses, define who is an essential employee, and stop people from earning a living, even though courts have deemed these lockdowns unconstitutional.

But governors are ignoring the courts and imposing lockdowns anyway.

And we see the results-- 11 million out of work, record consumer debt, corporate debt, and government debt, and a pandemic that has still not been controlled, despite the restrictions.

It took a 50% death rate from disease and hunger in Plymouth in the winter of 1620 to convince the Pilgrims that controlling people wasn’t saving lives, or creating prosperity.

But individual liberty accomplished what authoritarianism and communism could not.

Now more than ever people need the freedom to make their own decisions, to decide for themselves if they want to open their businesses, earn a living, and have family over to share a Thanksgiving meal.

And if those basic freedoms which we all took for granted just one year ago seem out of reach, take one more lesson from the Pilgrims.

They hopped in a tiny wooden boat, and crossed the Atlantic at great personal risk just to have a shot at building a free life by their own design.

Today, it is not nearly as dangerous or difficult to find greener pastures.

Just removing yourself from a city goes a long way, as does settling amongst neighbors who aren’t ready to turn you in to the Gestapo for celebrating Thanksgiving.

But also, don’t be afraid to look overseas.

When people think that your personal liberty is a threat to them, it makes sense to at least consider the possibility that at some point, your home country may no longer be right for you.

To your freedom and prosperity, Simon Black, Founder, SovereignMan.com

https://www.sovereignman.com/trends/didnt-we-learn-this-lesson-400-years-ago-29499/

People Going Hungry = Record High Stock Prices

 People Going Hungry = Record High Stock Prices

Notes From The Field By Simon Black  November 19, 2020  Santiago, Chile

New York City is up 33% this year. St. Louis is up 66%. In Oregon it’s up 100%.  I’m not talking about real estate prices, local budget gaps, or even property tax rates.  These are the startling increases in the number of people across the country, and the world, who are in need of food.  Food banks across the Land of the Free are experiencing an enormous surge in demand from people looking to feed their families, many of whom are experiencing such economic hardship for the first time.

The director of a local food bank in western Massachusetts, for example, recently said, “I thought I had seen the worst during the Great Recession [of 2008-2009]. But what we have experienced since March due to COVID-19 has really overwhelmed us.”

I saw a video last week showing thousands of cars “stretching as far as the eye can see” in line to receive free food from a local food bank in my hometown of Dallas, Texas. Similarly, Miami had a “massive food bank line stretched for two miles.”

You can see the same thing in big cities like New York and LA, to quieter towns like Erie, Pennsylvania, and across the world.

In the small town of Dorset in southwestern England, food banks have handed out an astonishing 1.2 million meals over the past few months, shattering all previous records. And local officials say that was just the tip of the iceberg.

It’s obvious there are millions upon millions of people who are suffering immeasurably because of Covid lockdowns.

Yet amazingly enough, the stock market is at an ALL TIME HIGH.

More than 11 million people in the US alone are still unemployed. 2.7 million homeowners are in forbearance (meaning they’re not paying their mortgages). Millions more are relying on food banks to feed their families.

Consumer spending (which makes up 70% of US GDP) is still well below where it was before the pandemic.

And according to Standard and Poors, corporate profits of the S&P 500 are down 48.96% compared to this time last year.

Plus there are entire industries-- retail, travel and tourism, commercial real estate-- which have been completely vanquished. And it’s unclear if they’ll ever fully recover.

Lockdowns have already restarted across the country, and Joe Biden’s advisors are suggesting that the entire nation should lock down for 4-6 weeks early next year.

(Ironically these same advisors are calling to #defundthepolice while simultaneously demanding the police enforce their ridiculous lockdowns. They also want to raise taxes on businesses, but that’s another story…)

Yet, again, the stock market is at an all-time high, higher than it was before the pandemic when corporate profits were at record highs and the unemployment rate was at a record low.

Somehow lower profits + lower consumer spending + higher unemployment + ravaged economy + soaring demand for food banks = record high stock prices.

I don’t think you need a PhD in finance to understand that this makes absolutely no sense-- the stock market is completely disconnected from any sort of reality.

It’s no longer about productivity, innovation, profitability, or the health of the economy.

The market has become nothing more than a casino, and investors merely gamblers, placing bets on how much government stimulus money will be sprinkled around the economy, or how much more money the central bank will print.

It’s as if as if trillions of dollars of wealth didn’t evaporate this year. Or that all of the lost value can just be conjured out of thin air by the Federal Reserve.

That isn’t even close to the same thing.

Real wealth comes from production and value creation. It doesn’t come from a central banker conjuring trillions of currency units out of thin air with the push of a button.

And wealth certainly isn’t created when governments go into debt to pay people to NOT work.

I’m not saying any of this to be pessimistic; there are obviously a lot of signs of improvement, and the economy is in better shape than it was six months ago.

But even if Covid did suddenly and miraculously disappear off the face of the Earth, there would still be the legacy of trillions upon trillions of dollars of new debt to contend with.

Consumer debt, corporate debt, and government debt have all soared to all-time highs due to Covid.

But debt is not wealth. Going into debt means borrowing from future prosperity in order to consume today. Debt has to be repaid eventually, and serviced. This is the opposite of wealth.

Yet no matter how high these debt burdens grow, the stock market keeps charging higher.

Even more bizarrely-- there’s a decent chance this trend will continue as long as the Fed keeps interest rates at record lows to fuel the stock boom (which they probably will).

And that’s the nature of asset bubbles: as long as central banks print money, asset prices have support to move higher. It’s basically free money for investors.

Now, there’s certainly nothing wrong with grabbing some of that free money that the Fed keeps pumping into the stock market.

Just make sure you’re keenly aware of the risks that you’re assuming. Because if 2020 has taught us anything, it’s that everything can change in an instant.

To your freedom, Simon Black, Founder, SovereignMan.com 

https://www.sovereignman.com/trends/people-going-hungry-record-high-stock-prices-29462/

This Secret Research Project Explains A Lot About 2020

This Secret Research Project Explains A Lot About 2020

Notes From The field By Simon Black

October 27, 2020  Bahia Beach, Puerto Rico

In early 1948, a group of US Air Force officers was working on a secret research project in the California desert codenamed MX981.  The purpose of MX981 was to test how extreme gravitational forces from fast-moving fighter jets would impact the human body.  Aviation was still pretty new; in fact, the US Air Force had only been created about six months prior, and the Defense Department wanted to find out just how much physical punishment a fighter pilot would be able to handle.

Most people have never been in a fighter jet. But I can promise you from personal experience, the gravitational force can feel absolutely crushing to the body, even causing a pilot to pass out.  At the time, it was widely believed that the maximum limit on the human body was “18 G’s”, i.e. 18 times the force of gravity. And MX981 was tasked with finding out for sure.

So the researchers built a rail-mounted, rocket-propelled sled; the idea was to get the sled moving up to 200 miles per hour, then slam the brakes so hard that the sled would come to a halt in less than a second in order to simulate extreme flight (and crash) conditions.

They nicknamed their little contraption the “Gee Whiz”. And in early 1948 they started human trials.

The guinea pig was one of the researchers-- a maverick scientist named John Paul Stapp. Stapp was able to subject himself to an astounding 35Gs, far past the theoretical limit.

And at that point another researcher, Captain Ed Murphy, was sent out to take an independent reading of the experiment.

It turns out that Murphy’s crew installed their sensors incorrectly, leading to erroneous readings… not to mention all the other mechanical failures that kept taking place.

The research team was breaking new ground; nothing they were doing had been tried before. The equipment they designed was custom-built, and things broke all the time.

Murphy was reportedly irritated about the constant failures, and at some point complained that ‘if there’s any way they can do it wrong, they will.’

Years later this observation morphed into what’s known as Murphy’s Law, often stated as “whatever can go wrong, will go wrong.”

In that context, Murphy’s Law may be the perfect summary of 2020. Riots and social unrest, political folly, Covid, brutal lockdowns, spiraling debts and deficits, etc.

Countless businesses have been closed, many forever. Even more are unemployed. And many countries are imposing fresh lockdowns after realizing that all of their measures and protections thus far haven’t done a damn bit of good because the virus is spiking once again.

At this rate it wouldn’t be unreasonable to expect an extraterrestrial invasion before the year is out.

One of the more irritating aspects of this situation is the lack of consistency. Everything changes so quickly.

Covid rules, for example, change constantly. Here in Puerto Rico where I live, the governor issues a new decree every week or two; the most recent included a total shutdown of the island’s 911 emergency call centers, though gyms were allowed to increase capacity from 25% to . . . 30%!

Travel rules change even more rapidly; our Sovereign Woman, Viktorija, has been traveling around Europe for the past few months, and her flights have been canceled more times than a Confederate monument.

Businesses are in a world of hurt. They’re one breath away from being shut down by the government.

And if they’re not shut down because of Covid, they’re at risk of being burned to the ground by peaceful protesters, or put out of business by the Twitter mob for not being woke enough.

Financial markets are no better off; many stock markets around the world are trading at dangerously high valuations, propped up solely by rumors and conjecture about more free money from the government.

It’s as if the health of the economy doesn’t matter. The fact that so many people are unemployed, or businesses closed down, doesn’t matter.

Over the past few months, markets have transformed into casinos, where investors are merely gamblers placing bets on whether politicians can agree on how much debt to pile onto future generations.

And speaking of politicians, there’s a whole tribe of card-carrying Marxists now, surging ahead in their respective polls and clamoring to take over their assemblies.

They’re threatening everything from higher taxes to confiscation of entire industries.

And it’s all happened so quickly. Murphy’s Law.

But as the story goes, there’s actually another interpretation of Murphy’s Law.

In 1948, after finally figuring out the proper results of their experiment, the MX981 research team held a press conference, and a reporter asked, “How is it that no one was severely injured during your tests”

John Stapp, the maverick who strapped himself into Gee Whiz, replied, “We do all of our work in consideration of Murphy’s Law. . .”

So you see, in Stapp’s view, the idea was to identify risks… figure out the things that could go wrong… and PLAN around them.

Murphy’s Law is often viewed through the lens of pessimism-- everything’s bad, everything’s going to fail.

But Stapp’s view was totally different; it was grounded in optimism and rationality-- we can achieve success by avoiding mistakes… by actually spending time thinking about what could go wrong and where the potential for loss and failure might be.

This is the very essence of a Plan B.

It requires foresight and flexibility. Things will change, and a good plan needs to be adaptable to what might go wrong.

But most of all, it requires the will to actually just sit down and do it. There is no substitute for execution. After all, your Plan B isn’t going to design itself.

To your freedom and prosperity Simon Black, Founder, SovereignMan.com

This secret research project explains a lot about 2020 | Sovereign Man

Another One Bites The Dust and Why So Many More Are Moving

Another One Bites The Dust and Why So Many More Are Moving

Notes From The Field By Simon Black

October 28, 2020   Bahia Beach, Puerto Rico

The Governor of New York, Comrade Andrew Cuomo recently released a book called, American Crisis: Leadership Lessons from the COVID-19 Pandemic.  It’s puzzling how he was able to find the time to write the book, given that he’s been so busy being an amazing leader. 

New Yorkers can thank Comrade Cuomo for the second highest per-capita COVID-19 death rate of any state in the Land of the Free, behind only New Jersey.  They can also thank him for an unemployment rate almost double the national average, due to New York’s strict lockdowns. 

But while Cuomo was busy patting himself on the back, New York suffered another major loss. This time it was billionaire Paul Singer, who recently decided to move his $41 billion hedge fund out of New York and relocate to Florida.

Like many office workers, most of the fund’s 500 or so employees have been working from home since March. And many of them have already left New York, likely for the same reasons we have been writing about; strict lockdowns (which still didn’t stop COVID), civil unrest, and high taxes.

But New York still taxes most people who work remotely if their employer is a New York business. So in other words, an employee of Singer’s hedge fund who is working remotely from, say, New Hampshire, still has to pay New York state taxes since the hedge fund is domiciled in New York.

But not anymore!

Now that Singer’s fund will be based in Florida (where there is no state income tax), remote workers won’t have to pay New York’s onerous state income tax. Employees will only owe taxes to the whichever state they live and work in.

For Paul Singer, his company, and his employees, getting out of New York is a win / win / win.

Florida, meanwhile, has no personal state income tax, no strict lockdowns, and a COVID death rate about half that of New York, despite the aging population. It’s sunny and warm, with a comparatively low cost of living and real estate.

And many people, of course, are willing to go just a little bit further, and move here to Puerto Rico.

Puerto Rico is a US territory, so traveling here is no different than flying from New York to Florida. In fact the flight from New York City to San Juan is under four hours.

You don’t need a passport, or any special permission, to visit, live, or work in Puerto Rico. It’s no different than moving to another state.

The big difference is that, because Puerto Rico is a US territory (and not a state), it has its own tax system.

And federal law states that US citizens with bona fide residency in Puerto Rico are NOT required to pay federal income tax, if their income is derived from Puerto Rican sources.

In fact if your income is solely from Puerto Rico, it’s possible you won’t even have to file a federal tax return anymore.

This is why so many people are moving down here. They’re relocating their businesses from the US to Puerto Rico, effectively eliminating their US federal taxes.

Again, this isn’t some obscure loophole. It’s federal law– section 933 of the US Internal Revenue Code, to be exact.

And Puerto Rico has not been shy about showering residents with incredibly lucrative tax incentives.

All the tax incentives are now organized under what’s called “Act 60”– they used to have different names like “Act 20” and “Act 22”.

But the fundamentals are still the same; you can establish a business here and apply for a multi-decade tax incentive which reduces your corporate tax rate to just 4%.

And there’s a wide range of service businesses that qualify– like telemedicine, consulting, marketing, accounting, sales, and management.

Just about any self-employment profession or business idea can find some element that would fit.

(And if you aren’t self-employed, you could ask your employer to pay you as a contractor, and provide your services to the company remotely from Puerto Rico.)

Your company pays 4% tax on its profits in Puerto Rico, and 0% tax on its profits to the federal government. Even better, all dividends you pay to yourself (as the owner of the business) are tax free as long as you live in Puerto Rico.

This is a big deal.

On the US mainland, a similar company would pay 21% corporate profits tax, and then another 20%+ dividend tax, plus the Obamacare surtax, plus state tax. So the total tax rate on your business profits is more than 30%.

In Puerto Rico, it’s just 4%.

For investors, the individual tax incentives allow you to earn unlimited capital gains (among other types of investment income) entirely tax free.

So if you trade stocks, options, commodities, or cryptocurrency for a living, your tax rate goes to zero.

So, this place is definitely worth considering. Cutting your tax rate is, without a doubt, one of the best, lowest-risk returns on investment you can ever make.

Besides– it’s pretty clear where the trend is going in the Land of the Free. A number of politicians and candidates have been very vocal about wanting to raise your taxes. And several cities and states have already done it, from California to New Jersey.

It’s a vicious cycle that will only hasten the exodus of business and talent from these high-tax cities and states.

If you think Puerto Rico might work for you, I’d encourage you to take action sooner rather than later, because I’m convinced these incentives won’t be around forever.

But even if Puerto Rico ever does get rid of its tax incentives, people who have already taken action will be grandfathered in under the old rules.

So you would still be able to enjoy the tax benefits for decades to come, even if Puerto Rico changes the law.

But people who waited too long will miss out, and the opportunity will be gone forever.

PS-  If you want to get started, and at least start thinking about whether Puerto Rico is a good fit, click here to learn more from our free, comprehensive guide to the island’s incredible tax incentives.

To your freedom and prosperity Simon Black, Founder, SovereignMan.com

https://www.sovereignman.com/trends/another-one-bites-the-dust-29178/ 

“Before The Leaves Fall From The Trees”

“Before The Leaves Fall From The Trees”

 Notes From the Field By Simon Black

October 26, 2020   Bahia Beach, Puerto Rico

The morning of June 28, 1914 began like any other normal day.

It was a Sunday, so a lot of people went to church. Others prepared large meals for family gatherings, played with their children, or thumbed through the Sunday papers. At that point, tensions had been high in Europe for several years; the continent was bitterly divided by a series of complex diplomatic and military alliances, and small wars had recently broken out. 

Italy and the Ottoman Empire went to war in 1912 in a limited, 13-month conflict. And the First Balkan War was waged in early 1913. Overall, though, the continent clung to a delicate peace. And hardly anyone expected that most of the next THREE DECADES would be filled with chaos, poverty, and destruction.

And then it happened.

That Sunday afternoon, the heir to the Austro-Hungarian Empire was assassinated during an official visit to Sarajevo. And the world changed forever.

Five weeks later the entire continent was at war with itself. But even still, most of the ‘experts’ thought it would be a simple, speedy conflict.

Germany’s emperor, Kaiser Wilhelm II, famously told his troops who were being shipped off to the front line in August 1914, “You will be home before the leaves fall from the trees. . .”

It took four years and an estimated 68 million casualties to bring the war to a close. But that was only the prelude.

Following (and even during) World War I, a series of bloody revolutionary movements took hold in Europe, including in Russia, Greece, Spain, Turkey, and Ireland.

Then came the Spanish flu, which claimed the lives of tens of millions of people. Later, Germany sunk into one of the worst episodes of hyperinflation in human history.

Communism began rapidly spreading across the world almost as quickly as the Spanish flu, often through violent fanatics who engaged in murder and arson in order to intimidate their opponents; this became known as the ‘Red Scare’ in the United States.

Of course there were some good years during the 1920s when people generally felt prosperous and happy; but it all came crashing down at the end of the decade when a severe economic depression strangled the entire world.

It lasted for more than ten years, during which time the world was once again brought to an even more destructive war that didn’t end until atomic weapons obliterated the civilian populations of two Japanese cities.

Again– go back to June 1914. Who would have thought that the next 30+ years would play out so destructively?

Even for the people who did predict that Europe would go to war in 1914, most leaders thought it would be over quickly. And almost no one expected it would spawn decades of chaos.

Today we’re obviously living in different times and under different circumstances.

But we may be standing at a similar precipice as in 1914, staring at enormous trends that could shape our lives for years to come.

Covid only scratches the surface.

We now know without a doubt, for example, how governments will respond the next time they feel there’s a threat to public health.

They’ll say, “We’re listening to the scientists.”

Really? The same scientists who tell people they can’t go to work, school, or church, but it’s perfectly fine for peaceful protesters to pack together like sardines without wearing masks because they’re apparently protected from the virus by their own righteousness?

The same scientists who want to lock everyone down to prevent Covid, but are happy to accept skyrocketing rates of cancer, depression, suicide, heart disease, and domestic abuse as a result of those very lockdowns…?

The public health consequences from this pandemic will reverberate for years to come. And that doesn’t even begin to take the economic consequences into consideration.

Western governments have taken on trillions of dollars in new debt this year as a result of the pandemic; and central banks have printed trillions more.

Even with all that stimulus, however, there are still hundreds of millions of people worldwide who lost their jobs, and countless businesses that have closed.

Future generations who haven’t even been born yet will spend their entire working lives paying interest on the debts that are being accumulated today. The long-term consequences of all this are incalculable.

And then there are the social trends– the rise of neo-Marxism that’s sweeping the world faster than Covid-19. It’s the Red Scare of the 21st century.

They despise talented, successful people. They believe it’s greedy for you to keep a healthy portion of what you earn… but it’s not greedy for them to take it from you and spend it on themselves.

Many of the people in this movement, of course, are violent fanatics who routinely engage in arson, assault, and vandalism.

Same for the social justice warriors who are just as quick to violence and intimidation; plus they’ve already commandeered the decision-making of some of the largest, most powerful companies in the world.

You can’t even watch a football game or a TV commercial anymore without some commentary on oppression and victimization.

And any intellectual dissent is met with intimidation… or censorship.

In fact the largest consumer technology companies in the world have become our censors.

We’re not allowed to share scientific information that doesn’t conform to the Chinese-controlled World Health Organization’s guidance. And news articles that don’t match their ideology are blocked.

Let’s not kid ourselves– these trends are not going away any time soon.

It’s great to be optimistic, hope for the best, and enjoy the good years as they come.

But it makes sense to at least be prepared for the possibility that we could be at the very beginning of a period of instability that may last a very long time.

On another note… We think gold could DOUBLE and silver could increase by up to 5 TIMES in the next few years.

That's why we published a new, 50-page long Ultimate Guide on Gold & Silver that you can download here.

To your freedom and prosperity   Simon Black, Founder, SovereignMan.com

https://www.sovereignman.com/trends/before-the-leaves-fall-from-the-trees-29166/

The First Law of a Plan B

The First Law of a Plan B

Notes From The Field By Simon Black

October 19, 2020   Bahia Beach, Puerto Rico

In the summer of 1687, after years of study and reflection, the legendary English scientist Isaac Newton published one of the most important works in the history of the world.  He called it Philosophiae Naturalis Principia Mathematica, and the insights Newton wrote about shaped the very world we live in today.  Literally *nothing* in modern engineering, from iPhones to skyscrapers, would exist today without Newton and his three-volume treatise.

Among the many game-changing concepts he discussed were his now famous Laws of Motion.  Newton’s first law of motion, for example, is often summarized as something like “an object at rest stays at rest, unless acted upon by an external force.”  Makes sense. A rock isn’t going anywhere unless someone picks it up and throws it.

And this is true not only of objects in our universe, but of human behavior as well.

Human beings are creatures of habit; our species resists change and succumbs to the inertia of our lives. When at rest, we tend to stay at rest.

Think about it: do you ever wonder why so many people are in unhealthy, destructive relationships? Or why they remain in jobs that they hate working for bosses they despise?

It’s because of inertia.

We know deep down when we need to make a change. And often we know what we need to do. But inertia is the reason why we don’t do what’s necessary to improve our lives.

There are countless different forms of inertia.

For example, life gets in the way, and we procrastinate. We put things off and just never get around to taking action. This is a type of inertia.

Or, our ‘normalcy bias’ makes us believe that, no matter how much chaos we see before our very eyes, everything will get better soon… so we don’t take any action.

Or, we recognize that taking action might create conflict. And since most people prefer to avoid conflict, we take the easier road, follow the crowd, and abdicate our decision-making to other people.

Or, we have a great fear of the unknown. And we’d rather suffer a known danger than accept the risk of an uncertain outcome.

Or (especially these days), more and more people are being taught to think of themselves as helpless victims who have no control over the direction of their lives. We’re rewarded for coming up with excuses rather than for taking action.

Each of these is a form of inertia, and there are many more. But they each lead to the same place: inaction.

The funny thing about inertia, though, is that it is simultaneously one of the costliest aspects of our lives, yet one of the easiest to overcome.

Inertia holds us back. It prevents us from achieving what we really want from life.

But overcoming inertia is simply a choice. There’s no special skill… no privilege required.

Anyone from any circumstance or background has the ability to choose: today I’m going to start taking action. I’ll educate myself and gather every tool or resource available to me to improve my life.

Again, this is merely a choice… and only requires summoning the willpower to follow through on that choice.

No one needs to move mountains to get started. It only takes a few baby steps.

For example, I’ve long been talking about the need to set up a Plan B. This is something that makes sense. In light of everything that’s happened in the world lately, it’s only rational to have a Plan B.

Deep down I think most folks recognize this is completely sensible.

But then inertia takes over. For whatever the reason, days, weeks, and then months go by… and we still haven’t started.

This is not uncommon. But it’s easy to fix.

Remember-- baby steps. Any time you find that you need to overcome inertia, ask yourself, “What’s the most important thing I can do right now to get moving in the right direction?”

It’s a great question to ask about your business, your relationships, and your life in general… as well as with your Plan B.

To your freedom and prosperity  Simon Black, Founder, SovereignMan.com

https://www.sovereignman.com/trends/the-first-law-of-a-plan-b-29136/

Digital Nomads Will Want To Know About These Two Countries

Digital Nomads Will Want To Know About These Two Countries

Notes From The Field By Simon Black  September 2, 2020  Sheridan, Wyoming

British Petroleum announced this week that ALL 6,500 employees in its London office will be working from home within the next two years.  BP is even going to shut down the office entirely and sell the building. They’re not the only ones.

Right now, in fact, only 13% of London office workers are back at the office. And as we’ve been saying, many likely won’t return.  When you never have to go to the office anymore, why stay in expensive London? Or New York, or San Francisco for that matter?

A lot of people are already moving.

I’ve been driving across the northern United States for the past few days-- Idaho, Montana, and Wyoming. ‘Rural’ doesn’t even begin to capture the scene here. It’s gorgeous.

And it’s been remarkable to see how many people are moving to these areas from big cities (especially from California).

Even more, as we’ve been suggesting, a lot of folks will pick up and go farther afield, leaving their home countries altogether.

That’s one of the silver linings of COVID: the work-from-home revolution allows a lot of people to go anywhere, for any reason-- perhaps to dodge the chaos, for better weather, a different lifestyle, tax savings, or all of the above.

Two places to consider are Spain and Portugal; both have very straightforward options for people who might want to live there (even just temporarily) to obtain legal residency.

In short, you’ll need to demonstrate that you have sufficient cash, liquid assets and/or monthly income so that you won’t become a burden to local welfare programs.

Portugal’s “D7” visa requirements, for example, are based on the current minimum wage.

So if you have an income or cash savings of at least €7,620 (the annual minimum wage in Portugal, roughly USD $9,000), you can receive a temporary residency permit that’s valid for 1 year.

If you bring your spouse, you’d need an additional 50% of that amount, plus 30% for each child.

So a family of four would need about $18,000.

(This is the bare minimum, and of course it’s always best to show more if possible when you submit your application.)

And to be clear, this is YOUR money. It’s not like you have to pay it to the government as a fee or anything. You keep it in your bank account, and spend it as you see fit. The Portuguese government just needs to know that you have (or earn) enough to support yourself.

Spain has a type of visa that is very similar to Portugal’s D7. It’s called “residencia no lucrativa” or “non-lucrative residency.”

Spain is more demanding when it comes to showing savings or income, but their requirements are not outrageous.

This required amount increases slightly each year, depending on the Spanish minimum wage.

As of 2020, they want to see that the primary applicant has €25,560, and an additional €6,390 for each additional family member.

So, a family of four would need to show a minimum €44,730 of savings to qualify for residency in Spain (or almost $50,000).

Spain and Portugal are just two drops in an ocean of options. Both are really nice (in fact, our own Sovereign Woman is currently in Portugal meeting with lawyers and real estate agents.)

Digital Nomads in particular may be drawn to Spain and Portugal-- especially Lisbon and Barcelona. Those cities have vibrant entrepreneur communities, high quality local workers, excellent nonstop flight networks, great weather, and cheap living costs.

There are undoubtedly millions of people around the world who are thinking about their next steps right now.

Everyone’s life has changed. And a lot of people are starting to realize that they have much more control over their own lives-- including the freedom to choose where to live-- for the first time ever.

This ought to be a deliberate decision. There are countless places around the world to choose from. And you can decide for yourself what’s important… what matters to you… and start crafting exactly the life you want to live.

To your freedom and prosperity,  Simon Black, Founder, SovereignMan.com

https://www.sovereignman.com/international-diversification-strategies/digital-nomads-will-want-to-know-about-these-two-countries-28747/