Sovereign Man, Notes from the Field Date: May 7, 2012 Reporting From: Asuncion, Paraguay

Notes from the Field

Date: May 7, 2012
Reporting From: Asuncion, Paraguay

Long-time readers know that I’m unabashedly bullish on agriculture. The supply and demand fundamentals for food speak for themselves, but let’s briefly review:

On the demand side:

1) World population isn’t getting any smaller for now. Even some of the most Malthusian models show a continued rise in global population for the next few decades until peak resources and economic conditions begin to thin the herd. In the meantime, demand for basic sustenance will continue to rise.

2) More importantly, millions of people in the developing world are being lifted from poverty into the middle class. More wealth means demand for more Calories. Not only does this increase general food demand, but often specific demand for things like beef which require far greater resources to produce.

On the supply side:

1) While industrial farming techniques and genetic modification have dramatically increased productive yield, cultivated land is on the decline. The UN Food and Agriculture Organization estimates that, over the last several decades, cultivated land per capita has declined by 43% worldwide.

2) Topsoil erosion, anomalous weather, and lack of water availability are becoming especially problematic in certain countries, further reducing the supply of arable land.

3) Rising input costs (particularly oil prices) have pushed many farmers out of business in recent years, reducing the already low number of people who dedicate their lives and land to feeding everyone else.

And of course, there’s the monetary side… arguably the most important factor:

1) Central bankers continue to expand their balance sheets and create more money at an alarming rate. This pushes up the price of real assets like agricultural commodities as there is simply too much paper chasing to scarce resources.

2) Meanwhile, politicians have enacted completely idiotic policies to subsidize and encourage inefficient biofuels, further reducing food output.

It’s true that technology may very well save the world from its agricultural woes one day, but this is unlikely to take place over the next few years.

As such, the above points suggest that, at a minimum, food prices are bound to keep rising.

I see this over and over again throughout the world as I travel, particularly in developing countries where food purchases often comprise more than half of a typical household budget.

Rising food prices mean that people are forced into making very difficult choices. And history teaches us that, while people generally put up with a lot of BS from their governments, all bets are off if a food crisis strikes.

From the French Revolution (Let them eat cake!) to the Arab Spring, messing with someone’s ability to put food on the table for his family has almost always caused a restructuring of the social contract.

Politicians understand this. It’s why some governments (Saudi Arabia, Kuwait) provide retail food subsidies, and why others (Russia, Argentina) foolishly mandate food export bans… or even try price fixing.

Between the obvious supply and demand challenges, the political and monetary idiocy that exacerbates the problems, and the potential revolutionary spark, it makes sense to have a position in agriculture.

The most comprehensive way to do this, by far, is to own agricultural property. Sure you could buy ETFs and futures contracts, but just like in the gold market, such instruments are full of counterparty risk and exposed to a manipulated financial system.

Owning a farm or ranch is like owning physical gold. Instead of trading one kind of paper (fiat currency) for another (ETFs), buying agricultural property or physical gold is essentially trading paper for a real asset.

Regionally, the best deal in the world right now on a risk-adjusted basis for farmland or grazing land is definitely Latin America, specifically Chile, Uruguay, and here in Paraguay.

Paraguay is, in fact, still the cheapest place in the world I’ve seen for agricultural property… particularly in the dry Chaco area where you can pick up an acre of land for the price of a couple of pizzas.

To give you an example, a friend of mine is looking at a 5,000-acre plot in the central Chaco for less than $300,000.

On the other side of the country near the quaint town of Paraguari, I’ve seen a small 50-acre, fully planted personal farm with a spacious home for just over $100,000. Based on my math, they’re selling the house for the cost of construction and giving away the land for free. Not a bad deal…

The carrying capacity, growing conditions, and soil quality in Paraguay are lower than in most of Uruguay and central Chile, but the net yields (particularly for cattle, soy, corn, and stevia) are still strong.

The dark side to Paraguayan agriculture is that ultra-cheap prices have attracted the likes of Monsanto, which is using some of Paraguay’s countryside as proving grounds for its genetically modified seeds.

Overall, though, Paraguay is definitely worth the trip if you’re interested in foreign agricultural property. The barrier to entry is quite low given the ridiculously cheap prices and reasonable foreign asset ownership rules, while the potential for both yield and speculative upside are quite high.

Until tomorrow,

Simon Black
Senior Editor, SovereignMan.com 

This article appears courtesy of SovereignMan.com: Notes From The
Field, a free newsletter dedicated to individual freedom,
internationalization, asset protection and global finance. For a
complimentary subscription, visit http://www.SovereignMan.com

Sovereign Man, Notes from the Field Date: April 20, 2012 Reporting From: [Undisclosed location]

Notes from the Field

Date: April 20, 2012
Reporting From: [Undisclosed location]Here’s a fun way to cap off your week.The Congressional Budget Office has just released three very telling infographics which, unintentionally, spell out a pretty dreary picture of US government finances.

The first graphic shows US federal revenue, both in raw numbers ($2.3 trillion in 2011) and expressed as a percentage of GDP (15.4%).

There are a lot of interesting things about this graphic. Check out the massive downward swing of payroll tax receipts starting in 2009… coinciding not only with the dismal rate of employment in the country, but also the demographic trend of having fewer and fewer baby boomers paying in to the system.

It’s also interesting to note that, by comparison, 2011 US tax revenue is roughly twice what is was 20-years prior. Yet over the same period, the federal debt has ballooned nearly five-fold.

The next graphic is mandatory spending– essentially Social Security, Medicare, federal unemployment, and federal retirement programs. Note: this doesn’t include things like defense, interest on the debt, etc.

At $2.0 trillion, these mandatory entitlements comprise a massive 87% of all taxes collected. Put another way, they constitute 13.6% of America’s 2011 GDP. Incredible.

The last graphic shows ‘discretionary’ spending– another $1.3 trillion. The bulk of this is defense ($699 billion), itself nearly 5% of GDP. The rest of it goes to child molesting TSA agents, government-administered education, and all the legions of three letter agencies.

At the very bottom corner is a most disingenuous statement that says “Net Interest not included.”  In other words, they didn’t bother to include the $454,393,280,417.03 (nearly half a trillion dollars) that the US government spent on interest last year.

To put this number in perspective, the US paid more in interest last year than the entire GDP of Saudi Arabia, or the combined GDPs of the smallest 82 economies in the world. Not exactly a trivial number… unless you’re Tim Geithner.

A few days ago, Geithner quipped on NBC’s Meet the Press that there is “no risk” of the US turning into Greece over the next few years due to such extraordinary fiscal imbalances.

This is the same guy who said there was no risk of the US losing its AAA credit rating, and that inflation on a global level is “not high on the list of concerns…”

Whether it’s lies, ignorance, or arrogance is irrelevant at this point. The situation is what it is. It’s not going to go away just because the political leadership denies it.

Each one of us has a choice. We can either bury our heads in the sand, just like they’re doing… or embrace reality and take control of our own financial futures.

Until tomorrow,

Simon Black
Senior Editor, SovereignMan.com 

This article appears courtesy of SovereignMan.com: Notes From The
Field, a free newsletter dedicated to individual freedom,
internationalization, asset protection and global finance. For a
complimentary subscription, visit http://www.SovereignMan.com

Sovereign Man, Notes from the Field Date: April 5, 2012 Reporting From: Hanoi, Vietnam

Notes from the Field

Date: April 5, 2012
Reporting From: Hanoi, Vietnam

[Editor's note: Sovereign Man Chief Investment Strategist Tim Staermose is filling in for Simon today.]

For the past eight days I’ve been spending time with friends in Vietnam; I’ll be leaving in a few days to link up with Simon in Thailand, but for now, I’m really impressed by Vietnam. The country has a great deal going for it.

In the ancient town of Hoi An and the capital city Hanoi, the lifestyle is generally very laid back and relaxed.  Excellent cafes and restaurants, offering both local fair and foreign food, are everywhere. Nearly all offer free, reliable WIFI connections.

Prices are very reasonable even in the fancier western-style places, and they border on ridiculously cheap in the local ones.  For a great lunch today of grilled pork and rice noodle soup accompanied by a huge plate heaped high with fresh local herbs to accent the flavors, friend and I paid $3. Total. For TWO.

In Hoi An, a popular tourist town about thirty minutes’ drive south of Da Nang, at the northern end of what was once South Vietnam, our group of five adults and five children dined out in style each evening. We always ordered multiple courses, and several rounds of drinks. Yet the bill seldom exceeded $100.

A fifteen-minute taxi ride to the beach from our hotel in town cost $3.75.  In Hanoi, the metered taxi rate works out to about $0.85 per mile.  And the drivers I’ve dealt with have all been scrupulously honest.

Another thing that’s very noticeable here is that no one expects tips. I suppose it may have been different if the Americans had won the war.

Taxis may be plentiful and cheap, but in order to really explore any city, I prefer walking. And though the weather here can be hot and humid, Hanoi has many lakes and is actually very pleasant to explore on foot.

It also feels extremely safe. My friends here have three young daughters aged from two to six. When I went out with them, the two older ones were able to ride their bikes around their neighborhood without a care in the world.

My friends rent a 3-story, 4-bedroom, 2-bathroom house with a courtyard and several balconies for just $1,150 a month– HALF what I pay for a tiny 2BR apartment in Hong Kong.  And that’s in the up-market Tay Ho (West Lake) district popular with wealthy locals and expats.

Looking around Vietnam today, it’s hard to fathom that forty years ago the United States was still fighting an incredibly costly ideological war over what was then a communist backwater. Thankfully, Hanoi was left largely intact. The Americans never mounted wholesale bombing campaigns over the Vietnamese capital.

Of course, before the “American War,” as they call it here, Vietnam was a colony of France. And while many ordinary Vietnamese suffered under the colonial regime, French colonial influence undeniably left some positives behind.

The wide tree-lined boulevards, lakes, and magnificent colonial architecture, as well as the vibrant cafe society which define present-day Hanoi, are largely a product of the French colonial legacy.

Bottom line…  Hanoi has a lot to offer if you have the ability to live the PT lifestyle, either because your job is location-independent, or because you have the financial means to support yourself from passive income.

And that applies whether you’re carefree and single, or you have a young family like my friends who are based here. For the right person, the quality of life you can enjoy here for the small amount of money you have to pay is really very difficult to beat.

Until next time,

Tim Staermose, Chief Investment Strategist
Sovereign Man

This article appears courtesy of SovereignMan.com: Notes From The
Field, a free newsletter dedicated to individual freedom,
internationalization, asset protection and global finance. For a
complimentary subscription, visit http://www.SovereignMan.com

HOPE & CHANGE….Here you are..is it what you were looking for????

After three years of Obama … Here’s your change! January 2009 TODAY % chg Source Avg. Retail price/gallon gas in U.S. $1.83 $3.44 84% 1 Crude oil, European Brent (barrel) $43..48 $99..02 127.7% 2 Crude oil, West TX Inter. (barrel) $38..74 $91..38 135.9% 2 Corn, No.2 yellow, Central IL $3.56 $6.33 78.1% 2 Soybeans, No. 1 yellow, IL $9.66 $13..75 42.3% 2 Sugar, cane, raw, world, lb. $13..37 $35..39 164.7% 2 Unemployment rate, non-farm, overall 7.6% 9.4% 23.7% 3 Unemployment rate, blacks 12.6% 15.8% 25.4% 3 Number of unemployed 11,616,000 14,485,000 24.7% 3 Number of fed. Employees 2,779,000 2,840,000 2.2% 3 Real median household income $50,112 $49,777 -0.7% 4 Number of food stamp recipients 31,983,716 43,200,878 35.1% 5 Number of unemployment benefit recipients 7,526,598 9,193,838 22.2% 6 Number of long-term unemployed 2,600,000 6,400,000 146.2% 3 Poverty rate, individuals 13.2% 14.3% 8.3% 4 People in poverty in U.S. 39,800,000 43,600,000 9.5% 4 U.S. Rank in Economic Freedom World Rankings 5 9 n/a 10 Present Situation Index 29.9 23.5 -21.4% 11 Failed banks 140 164 17.1% 12 U.S. Dollar versus Japanese yen exchange rate 89.76 82.03 -8.6% 2 U.S. Money supply, M1, in billions 1,575.1 1,865.7 18.4% 13 U.S. Money supply, M2, in billions 8,310.9 8,852.3 6.5% 13 National debt, in trillions $10..627 $14..052 32.2% 14 Just take this last item: In the last two years we have accumulated national debt at a rate more than 27 times as fast as during the rest of our entire nation’s history. Over 27 times as fast. Metaphorically speaking, if you are driving in the right lane doing 65 MPH and a car rockets past you in the left lane. 27 times faster, it would be doing 7,555 MPH! Sources: (1) U.S. Energy Information Administration; (2) Wall Street Journal; (3) Bureau of Labor Statistics; (4) Census Bureau; (5) USDA; (6) U.S. Dept. Of Labor; (7) FHFA; (8) Standard & Poor’s/Case-Shiller; (9) RealtyTrac; (10) Heritage Foundation and WSJ; (11) The Conference Board; (12) FDIC; (13) Federal Reserve; (14) U.S. Treasury So, tell me again, what is it about Obama that makes him so brilliant and impressive? Can’t think of anything? Don’t worry. He’s done all this in 29 months — so you’ll have about 11 months to come up with an answer. Every statement in this email is factual and directly attributable to Barrack Hussein Obama. Every bumble is a matter of record and completely verifiable. I WONDER HOW MANY WILL FORWARD THIS?    “You can’t fix stupid, but you can vote it out.”

Sovereign Man,Notes from the Field Date: February 21, 2012 Reporting From: London, England

Date: February 21, 2012

Reporting From: London, England

[Editor's note: Professional money manager Tim Price is filling in for Simon today from London. His thoughts below on gold, bonds, and the false pretext of investing in equities is delightfully insightful.] 

“No government has ever commanded the resources at the disposal of our ungodly Leviathan, which consumes about 25% of the product of the world’s richest country. It is driven by a voracious alliance of government’s own employees, and those who receive benefits from the state. At least 90 million Americans either depend directly on government handouts or jobs, and each private worker must support not only himself and his family, but also carry a government worker on his shoulders.”-Tom Bethel, “Freedom and its Enemies,” June 1999.Financial markets don’t really do the long term anymore, but if they did, they might spend less time drooling at the prospect of more monetary crack, and more time wondering who will be funding all the government debt that now towers above everyone further than the eye can see. CLSA’s Russell Napier (hat tip to Macro Advisors’ Filip Ruszkowski) recently pointed to an ominous development from the summer of 2011:”..a terrible burden fell upon the people of the USA. For the first time in 15 years, those who had money (savers) began to fund their government, rather than the printers of money (central banks). This shift has already hurt private-sector growth and asset prices, and as federal debt to GDP reaches 100%, it will squeeze out private-sector activity. Structural moves to coerce markets into funding government have begun in Europe and will come to the USA too..”The chart above confirms that US corporate profits have now reached record levels as a
percentage of GDP. They are unlikely to stay there. Napier suggests, perfectly logically, that when the government needs money to fund itself, it will target those constituents that actually have some. That is, in other words, wealthy individuals and corporations.What will be awkward about this financial repression of the moneyed classes, if it comes (which it surely will), is the timing. Well, not just the timing, but the yields on offer consistent with that timing. With the benefit of hindsight it would have been no bad thing to be coerced into buying US Treasuries when they yielded, say, 16% (the chart below shows generic 10 year yields going back to 1979; source: Bloomberg). But now that they yield 2% or so (a negative real yield of 1% or so using official inflation data), well, who wants that? Answer: not foreign central banks, many of whom have stopped buying this yieldless junk.

But somebody will have to buy it. As bank-robbers and their public sector rivals, governments, know, if you need money, go where the money is. Napier points out that previous peaks in the corporate profit-to-GDP ratio were 1966, 1997 and 2006. Subsequent long-term returns from equities were uniformly poor. As he makes clear, there is a difference between central banks and the private sector when it comes to buying government debt.

Central banks can print money to finance their purchases, which makes them more or less wholly price-insensitive. But the private sector cannot print money – it will be forced to sell other assets to pay for the government debt it will soon be coerced into buying.

Perhaps some of those other assets will be stocks. Stocks will get smashed in any case, because the private sector will also have to get used to paying more tax. (The government will get its money one way or another.) More tax = lower net profits,
obviously. Tax paid by corporations is close to its average level of the past 30 years. More awkwardly, the federal debt to GDP ratio over the same period, Napier observes, has risen from 32% to 100%.

The UK faces a similar problem, which makes the current euphoria in FTSE-land just as difficult to rationalise. Absent QE, and given the potential for a rather messy bang emanating from Greece over the coming months, and accepting an economy facing dollops of austerity well into the future, should UK stock markets really be as euphoric as they currently are?

UK government bonds are comparably unattractive to their American cousins. The chart below (source: Bloomberg) shows generic 10 year Gilt yields over the past 20 years. Being forced to buy them at 10% might not have been so bad. Being bludgeoned into buying them at 2% will be a little more painful.

So how precisely will governments go about stealing savers’ money? The Dutch pensions regulator gave an indication of one possible wheeze back in February 2011 when it ordered the Stichting Pensioenfonds Vereenigde Glasfabrieken (bless you!) pension fund to sell its gold holdings (13% of the fund) on the premise that it was too risky.

In an NBER paper last year, Carmen Reinhart and M. Belen Sbrancia pointed the way. As their abstract states,

“Historically, periods of high indebtedness have been associated with a rising incidence of default or restructuring of public and private debts. A subtle type of debt restructuring takes the form of “financial repression”. Financial repression includes directed lending to government by captive domestic audiences (such as pension funds), explicit or implicit caps on interest rates, regulation of cross-border capital movements, and (generally) a tighter connection between governments and banks..

Low nominal interest rates help reduce debt servicing costs while a high incidence of
negative real interest rates liquidates or erodes the real value of government debt. Thus, financial repression is most successful in liquidating debts when accompanied by a steady dose of inflation.”

The UK government has already achieved partial control of directed lending given that it owns half of our banking system. (Not that it seems to know how to control its remuneration. But then it is practically a binding characteristic of governments to be half-assed about virtually everything.) Both of the Anglo-Saxon economies have also achieved saver theft status by the manipulation of interest rates. Next on the list will be a creeping abuse of those captive domestic audiences and, perhaps, regulation on capital controls.

Very few of these will actually be novelties. The US previously had Regulation Q, for example, which put a government-sanctioned limit on the interest rates available for savings deposits.

Indeed Reinhart and Sbrancia point out that the widespread use of such policies between 1945 and 1980 has been “collectively forgotten”. We have had half a century of increasingly free markets. In the official governmental version of reality, those markets became too free, and now require the firm hand of the state. Governments are unlikely to acknowledge the extent to which their own untenable borrowings laid the groundwork for the financial crisis.

Highly paid shills for the status quo on Wall Street have recently been wheeled out to observe the fundamental ugliness of western government bonds. They are correct. This is an asset class that has managed to defy the laws of economics in becoming ever more expensive even as its supply swells.

Their response has been to recommend piling into stocks instead. The logic here is not so
pristine. If Napier’s thesis is correct, the West faces a period of outright deflation, which will be deeply traumatic for exactly the sort of speculative stocks that have lately done so well.

Admittedly, the picture is confused, and prone to all sorts of political horseplay, as observers of the long-running euro zone farce can attest. Nevertheless, when faced with a) huge underlying uncertainties; b) structurally unsound banking and government finances; and c) central banks determinedly priming the monetary pumps, we conclude that the last free lunch in investment markets remains diversification.

G7 government bond markets are a waste of time (though you may end up being cattle-prodded into them regardless). But there are still investment grade sovereign markets offering positive real yields. Stock markets are partying like 1999. Which, in
many cases, it probably is. We would normally advise to enjoy the party but dance near the door.

This time round, we weren’t invited to the party – and we don’t mind in the slightest.

Tim Price
Director of Investment
PFP Wealth Management

This article appears courtesy of SovereignMan.com: Notes From The
Field, a free newsletter dedicated to individual freedom,
internationalization, asset protection and global finance. For a
complimentary subscription, visit http://www.SovereignMan.com

Sovereign Man Notes from the Field Date: February 10, 2012 Reporting From: Santiago, Chile

Sovereign Man

Notes from the Field

Date: February 10, 2012
Reporting From: Santiago, Chile

One of the greatest thinkers of all time was Austrian economic Friedrich Hayek, and his work The Road to Serfdomis an absolute must-read.Hayek’s writings are incredibly powerful in these times. In light of the countless recent examples of governments changing the rules whenever/wherever it suits them (from the Troika nonsense in Europe to the Fraudclosure settlement in the US), I’d like to share a few key passages with you today.On the sanctity of the Rule of Law in a free society, Hayek says:

“Nothing distinguishes more clearly conditions in a free country from those in a country under arbitrary government than the observance in the former of the great principles known as the Rule of Law.“

“[U]nder the Rule of Law the government is prevented from stultifying individual efforts by ad hoc action. Within the known rules of the game the individual is free to pursue his personal ends and desires, certain that the powers of government will not be used to deliberately frustrate his efforts.“

“The important question is whether the individual can foresee the action of the state [based on the government following its own rules] and make use of this knowledge as a datum in forming his own plans…”

On the nature of legislative or judicial favoritism, Hayek says:

“It is the Rule of Law… the absence of legal privileges [or favoritism] of particular people designated by authority, which safeguards that equality before the law which is the opposite of arbitrary government.”

“[A]ny policy aiming directly at a substantive ideal of distributive justice must lead to the destruction of the Rule of Law.“

There is a “belief that, so long as all actions of the state are duly authorized by legislation, the Rule of Law will be preserved… [But just because] someone has full legal authority to act in the way he does gives no answer to the question whether the law gives him power to act arbitrarily.”

“It may well be that Hitler has obtained unlimited powers in a strictly constitutional manner and that whatever he does is therefore legal in the juridical sense. But who would suggest for that reason that the Rule of Law still prevails in Germany?”

“The Rule of Law thus implies limits to the scope of legislation: it restricts it to the kind of general rules known as formal law and excludes legislation either directly aimed at particular people or at enabling anybody to use the coercive power of the state for the purpose of such discrimination.“

On the consequences of the decline in the Rule of Law in a free society, Hayek says:

“By giving the government unlimited powers, the most arbitrary rule can be made legal; and in this way a democracy may set up the most complete despotism imaginable.“

“It is important to point out once more in this connection that this process of the decline of the Rule of Law had been going on steadily in Germany for some time before Hitler came into power and that a policy well advanced toward totalitarian planning had already done a great deal of the work with Hitler completed.”

We unfortunately live in an era where the Rule of Law means nothing; where contracts are irrelevant and people can no longer make plans based on rules and agreements; where the government exists above the law; where the benefits of one group are quickly sacrificed for the benefit of another.

Writing during World War II during the fight against Nazi Germany, Hayek describes this system as a ‘dictatorship of the proletariat’. Any thinking, rational person should look around at the world today and see:

- Hundreds of thousands of mortgage contracts abrogated by the federal government;
- Suspension of gun rights by several local governments;
- The continued criminalization of protest and free assembly;
- Increased surveillance and police state tactics;
- Authorization of military force and detention against the citizens;
- Seizing and/or voiding pension systems into which workers have paid lifelong contributions;
- Rejection of long-standing senior debt positions in favor of labor unions;
- Executive and police agencies ruling by regulation and policy, not by legislative process;

It’s hard to argue that Hayek’s vision hasn’t come true.

Have a great weekend.

Simon Black
Senior Editor, SovereignMan.com 

This article appears courtesy of SovereignMan.com: Notes From The
Field, a free newsletter dedicated to individual freedom,
internationalization, asset protection and global finance. For a
complimentary subscription, visit http://www.SovereignMan.com

Sovereign Man Notes from the Field Date: February 6, 2012 Reporting From: Santiago, Chile

Sovereign Man

Notes from the Field

Date: February 6, 2012
Reporting From: Santiago, ChileIn one of the most shamefully disingenuous reports we’ve seen in years, the US Labor
Department released the latest employment figures on Friday showing that the headline
US unemployment rate had fallen to 8.3%.Champagne and sound bites were pre-positioned in Washington as the self-congratulatory
praise flowed like the bubbly. President Obama, beaming like he’d just caught the winning
touchdown pass, told the American people on Sunday that he ‘deserved’ a second term.

They call it the headline unemployment rate for a reason… it’s the only number that the
papers tend to run. All weekend long, mainstream press ran headlines like:

“Unemployment rate falls to 8.3%; fifth straight monthly decline” (LA Times)

“Jobless rate drops to lowest level in almost three years” (MSNBC.com)

“Unemployment rate drops to 8.3 percent” (Christian Science Monitor)

“Hiring surges in January; jobless rate at 8.3 pct.” (Atlanta Journal Constitution)

“Jobless Rate Falls to 8.3%, Altering Face of Campaign” (New York Times)

“Unemployment report: January job gains have economists rethinking outlooks” (Washington Post)
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Needless to say, few outlets with any meaningful reach covered the real story behind the
employment figures– the Labor Department simply took 1.2 million Americans out of the labor
force. In other words, the unemployment rate fell because the Labor Department deliberately
did not count 1.2 million unemployed people.

[Note: I highly recommend that you read ZeroHedge.com, one of the only sources of undistorted
economic reality on the Internet.]

It’s the same Orwellian style logic (WAR IS PEACE. DEBT IS WEALTH.) that prevailed during
the Soviet Union– outright lies and deceitful reports painting a rosy picture of the economy
and its glorious leaders, masking a dismal reality. It’s nothing but propagan da in the worst form.

This has been going on for years in the United States, as evidenced by the chart below:

The blue line shows the steady, upward trend  of Americans who are no longer counted in
the labor force since the onset of the financial crisis. The pink bars (and black line) show the
steady decline in the proportion of society that is included in the work force (i.e. either employed
or unemployed) .

The government’s own numbers show that, since 2008, they’ve stopped counting 9 million
Americans in the employment report– that’s over 11% of the entire work force which simply
vanished in just 4-years.

Even the most casual glance at the data shows that the employment report is a complete and total
fraud– no more relevant than Soviet statistical propaganda indicating a miraculous rise in per
capita sugar consumption… despite widespread starvation and ubiquitous bread lines.

Two months ago, President Obama sat down with Steve Kroft of 60 Minutes for a chat about
the economy. At one point, Kroft asked, “You think you might have the unemployment rate
down to 8% by the time the election rolls around?”

Obama replied: “I think it’s possible. But I’m not in the job of prognosticating on the economy.
I’m in the job of putting in place the tools that allow the economy to thrive and Americans to
succeed.”

Or if that doesn’t work, fraud and propaganda are apparently just as effective.  Have you hit
your breaking point yet?

Until tomorrow,

Simon Black
Senior Editor, SovereignMan.com

This article appears courtesy of SovereignMan.com: Notes From The
Field, a free newsletter dedicated to individual freedom,
internationalization, asset protection and global finance. For a
complimentary subscription, visit http://www.SovereignMan.com

Spending Fun, the Budget, Yours and Mine……We gotta do something about this…

 

Short Lesson on Spending…………. Why the U.S. was downgraded: • U.S. Tax revenue: $2,170,000,000,000 • Fed budget: $3,820,000,000,000 • New debt: $ 1,650,000,000,000 • National debt: $14,271,000,000,000 • Recent budget cuts: $ 38,500,000,000 Let’s now remove 8 zeros and pretend it’s a household budget: • Annual family income: $21,700 • Money the family spent: $38,200 • New debt on the credit card: $16,500 • Outstanding balance on the credit card: $142,710 • Total budget cuts: $385 Got it? OK now Lesson # 2: Here’s another way to look at the Debt Ceiling: Let’s say, You come home from work and find there has been a sewer backup in your neighborhood…. and your home has sewage all the way up to your ceilings. What do you think you should do? •Raise the Ceilings, or •Pump out the sewage Our Choice is coming November

Sovereign Man Notes from the Field Date: February 3, 2012 Reporting From: Talca, Chile

Sovereign Man

Notes from the Field

Date: February 3, 2012
Reporting From: Talca, Chile

After a week away, I’m really happy to be back down on the farm in Chile. This is one of the most peaceful places I’ve ever been on the planet… and each day, it’s becoming more and more a place where all of the fiat bubble kleptocratic nonsense doesn’t matter in the least.

Central bankers can print all they want, politicians can bicker and spend all they want… down here, it really doesn’t matter. I have more food and water than thousands of people could ever consume, and enough renewable energy resources to power a small city.

More on that soon, let’s move on to this week’s questions. First, Frank asks, “Simon, I know you gave a rare public appearance in the Bahamas earlier this week; can you tell us what your speech was about?”

Sure. BFI Capital Group held an intimate private briefing earlier this week, and they asked me to give the keynote address.  While I almost always turn down speaking requests, I’m glad I made this exception; there were a number of Sovereign Man subscribers in the room, and it was a real pleasure to meet face to face.

As for my remarks, I explained to the audience that what’s happening right now in the west is not new. This is not some apocalyptic, end of the world scenario– imperial collapse has been happening for millenia, from the Macedonians to the Mongolians to the Ming Dynasty.

Empires are born. They rise. They peak. They decline. And they collapse. Big deal. The same thing is happening in the west right now– it’s not new, and we’re not special.

The larger point, is that rational, thinking people need to acknowledge this reality and understand the lessons from history. Collapse of empire is seldom smooth or peaceful. I encouraged everyone in the room to take rational steps based on measured outcomes… and avoid emotional reactions based on fear.

Fortunately there are plenty of good news stories in the world and a multitude of really exciting opportunities. Then we walked through some of my own steps that I’m taking, or have taken… including multiple passports, foreign accounts, and the farm down here in Chile.

I’ll be putting together a video on the topic soon to explain more.

Next, Sarah asks, “Simon, I listened to your recent teleconference about Mongolia banking and brokerages… very insightful, and it seems like a land of real opportunity! My question, though, is about inflation. I’ve read that inflation in Mongolia is quite high. Doesn’t that make the local currency a poor choice to hold?”

Mongolia is definitely a land of tremendous opportunity, and in our recent teleconference, we explained to members a number of different ways to stake your claim in the country, including by opening a bank account there.

As we’ve discussed before, Mongolian bank accounts denominated in the local currency (tugrik) yield up to 14% or more for short-term deposits. In a world full of 0% yields, this is an extraordinary rate.

That being said, there is no asset class or instrument on this planet that carries zero risk and is on a one-way elevator ride up. Is it possible that the tugrik will depreciate against the US dollar?

Certainly. And in the short-term, it’s impossible to predict what will happen. But when you look at the fundamentals, the long-term picture looks very bright.

The biggest thing to keep in mind is that the Mongolian currency is in tight supply, especially compared to dollars, euros, and renminbi. The tugrik market is tiny… and that generally keep speculators away. There is no Goldman Sachs trading desk in Ulan Bator (at least, not yet) speculating writing huge contracts worth hundreds of billions of dollars.

It also means that, as a nation with unimaginable resource wealth and export potential, the relative demand for the Mongolian currency will be extremely high relative to other major currencies.

The tens of billions of dollars flowing into the country should continue to put upward pressure on the currency, and this means a lot more to the tugrik’s trajectory than how much the price of lettuce went up last year.

I have no doubt that Mongolian politicians and central bankers will play games with their money supply just like every other country in the world. But given the absurd amount of resource wealth in Mongolia, it seems implausible that they could screw the tugrik up too badly in the long run.

Ultimately, as with most things in finance these days, it will also depend on Ben Bernanke. If he keeps easing and printing, tangible assets (or paper tied to tangible assets) will likely appreciate. That includes the tugrik, which will become one of the world’s staple commodity currencies down the road.

Next, keeping in line with the currency theme, Mark asks, “Simon, what are your thoughts on the Iraqi Dinar? I have a chance to purchase $3,000,000 worth of dinar for approximately $4,000 USD. Would this be a prudent investment? Thank you for your input, and keep up the great work.”

Are they selling a bridge too?

Look, I know this is a really touchy subject for some folks… there’s a religious fascination with the Iraqi dinar these days. The prevailing rumor is that the Iraqi central bank is going to revalue the dinar 1:1 to the US dollar, making instant millionaires out of anyone holding the old currency.

This is a get rich quick scheme, nothing more. If you have any doubts, I encourage you to take a trip to rural Iraq and spend time with the locals there. They’ll happily sell you their dinars for hard currency. Are they all fools, trading in future millions for a few measly bucks? Or simply realists who recognize a good scam when they see it?

Decide for yourself. But at least do the research.

[Hypothetically, even if anyone holding dinars does become unimaginably wealthy, I should point out that US taxpayers who realize a profit on physical currency get taxed at ordinary rates, not on long-term capital gains. See IRC section 988 for more.]

Last, Chuck asks, “Simon, out of curiosity, do they show NFL games in Chile?”

You bet. In fact I had a bunch of friends over to my home in Santiago a few weeks ago to watch the NFC championship game over pizza and beer. We may do a repeat this Sunday.

Until tomorrow,

Simon Black
Senior Editor, SovereignMan.com

This article appears courtesy of SovereignMan.com: Notes From The
Field, a free newsletter dedicated to individual freedom,
internationalization, asset protection and global finance. For a
complimentary subscription, visit http://www.SovereignMan.com

Sovereign Man Notes from the Field Date: January 13, 2012 Reporting From: Manila, Philippines

Sovereign Man

Notes from the Field

Date: January 13, 2012
Reporting From: Manila, Philippines 

[Editor's note: Tim Staermose is filling in today while Simon is down on the farm in Chile.]

Amid all the doom and gloom in the world economy as insolvent western nations slowly suffocate under a mountain of debt, it’s easy to forget that there are places in the world that are still BOOMING.

I went out to dinner with a friend in Manila last night. Each of the first three restaurants we wanted to go to were completely booked. There is construction everywhere in Manila’s central business district. The roads are chock full with bumper-to-bumper traffic. Shops are full. People are spending money.

My dinner companion last night is an executive with a major international bank. He’s new to the country, and on Wednesday was given a tour of the stock exchange. As he stood on the trading floor, the Philippines’ benchmark PHISIX index hit an ALL TIME HIGH.

The government’s fiscal balance is improving, not deteriorating. 20% of the funds earmarked for “stimulus” last year are still in reserve. They simply weren’t needed.

Like in most of the world, benchmark interest rates are at an all-time low. The difference is that, unlike in the west, banks are confident to lend, and consumers are confident to borrow and spend. Commerce is still happening. This is not an isolated example.

In Thailand, my contacts tell me employment is so strong it’s hard to even find service staff for bars and restaurants. And this is in a place that was recently devastated by floods.

Simon has written about the booms in Cambodia, and Mongolia. Myanmar is slowly but surely opening up, and there are already hordes of opportunity seekers descending on Yangon.

It’s a message that we’ve stressed in our conversations with you before. But, it bears repeating. If you’re willing to look beyond your current horizons, there are alternatives out there.

And the message is getting out.

When I first moved to the Philippines 14 years ago, young expats like me were VERY thin on the ground. Sure, there was a motley assortment of non-natives living here. But they were generally older, grizzled veterans, if you know what I mean.

Nowadays, I see many younger people, including those with families. More tourists are also coming. One of the biggest new groups of visitors are the Russians.

Already a force in the Thai tourism industry, Russians appear to be checking out the Philippines as well. My wife reports that the area where she has her surf hotel is bustling with Russian kite surfers now.

Back here in Manila’s CBD where I spend most of my time, I don’t think it’s an exaggeration to say that the whole character of the place is changing. And there is lots of opportunity.

 Manila’s modern and exciting central business district

I have ideas for at least 3 businesses that could be a big success here — two in real estate, and one that would utilize the large pool of educated, English speaking labor here to provide a service that could be marketed internationally.

I don’t have the time to execute on these ideas at the present time. But, if anyone is interested in hearing about them, or willing to roll up their sleeves and help me make them a reality, I’d be interested to hear from you.

If you’re stuck in a rut back home and finding fulfillment in life hard to come by, or you just aren’t seeing any opportunities, I urge you to look internationally.

I did it. As a young graduate straight out of the Australian National University, I headed off to work in South Korea. I haven’t looked back since. I couldn’t imagine a life that wasn’t filled with new and different experiences all around the world. This is my reality.

Talking the talk is one thing. Walking the walk is something entirely different. And one of my resolutions this year is to help more people in this community actually EXECUTE on the things that we talk about.

If only 1% of the people who read this take action, it will have been well worth it. As Simon often asks, “What’s holding you back?”

Until next time,

Tim Staermose
Chief Investment Strategist

This article appears courtesy of SovereignMan.com: Notes From The
Field, a free newsletter dedicated to individual freedom,
internationalization, asset protection and global finance. For a
complimentary subscription, visit http://www.SovereignMan.com