Robert Kiyosaki Blog

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Simon Black – 078: Eating used coffee grounds for breakfast and black-market cash deals with taxi drivers

Podcast Episode #78 Eating used coffee grounds for breakfast and black-market cash deals with taxi drivers Today’s Notes is a bit different… I recorded a conversation I had with my colleague Sean Goldsmith about my recent travels to Venezuela. I explain how I exchanged my US dollars on the black market for Bolivar (with a taxi driver I’d never met before)… and how the situation in Venezuela will get worse before it gets better. Plus, I share observations and stories of things I saw on the ground in one of the world’s poorest and most dangerous countries. Then we discuss the tragedy in Puerto Rico… and why I think Puerto Rico is still one of the greatest opportunities in the world today. They’ve run the numbers, and their tax incentives like Act 20 and Act 22 are helping the island. I expect the amazing incentives will stay in place. And, although the hurricane was devastating, the financial aid that comes along with the storm is a catalyst to get Puerto Rico back on its feet. You can listen to our conversation below. Podcast Episode #78 Eating used coffee grounds for breakfast and black-market cash deals with taxi drivers About the Author Simon Black is an international investor, entrepreneur, and founder of Sovereign Man. His free daily e-letter Notes from the Field is about using the experiences from his life and travels to help you achieve more freedom, make more money, keep more of it, and protect it all from bankrupt governments. 078: Eating used coffee grounds for breakfast and black-market cash deals with taxi...

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Simon Black – Cyprus STILL has “an emergency situation”. And capital controls

April 9, 2014 Santiago, Chile Imagine that your country and banking system are so broke that you have to receive approval from a special committee just to send your own money to your kids who are away at university… Crazy, right? But that’s exactly what’s going on in Cyprus. And it all happened overnight. Just over a year ago, people across Cyprus went to bed thinking everything was just fine. They woke up the next morning to a brand new reality: their government AND their banking system were flat broke. In collusion with other European powers, the Cypriot government FROZE bank accounts across the country. Suddenly an entire nation had no access to their savings. The government spent weeks bickering about whose funds they were going to confiscate in order to bail out the banks… all the while maintaining the freeze. Finally they made a decision: wealthy people would have their funds seized. But this wasn’t a victory for everyone else… because simultaneously the government announced a flurry of severe financial restrictions. Sure, people could log on to a bank website and see an account balance. But it was nothing more than a number on a screen. It didn’t mean the banks actually had the money. Nor did it mean they were free to access their own funds. Cash withdrawal limits were imposed. Funds transfers were curtailed. Cypriots were even forbidden from doing something as simple as cashing a check. Peoples’ savings were essentially trapped inside of a highly insolvent financial system. These destructive tactics are called capital controls. And one year later they’re still in place. Some are being relaxed. Others are being maintained. But by its own admission, the Ministry of Finance still believes there is a “lack of substantial liquidity and risk of deposits outflow. . . that could lead to instability of the financial system and have destabilizing consequences on the economy and society of the country as a whole.” Naturally, since this is an “emergency situation” in their view, they have to impose these “restrictive measures” in order to safeguard “public order and public security”. In other words, capital controls are for your own good. This is exactly the sort of thing that happens when governments and banking systems go bankrupt. And every shred of objective evidence suggests that many of the ‘rich’ nations of the West are in a similar position. Some of the largest banks in the US (like Citigroup) have failed their stress tests; this means they are inadequately capitalized to withstand any major financial shock. Then there’s the FDIC, which is supposed to insure deposits in the Land of the...

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Simon Black – I’m amazed more people aren’t doing this. But soon, they will be.

April 11, 2014 En Route to Buenos Aires Every now and again, the universe presents us with opportunities that are so obvious we have to wonder why everyone else isn’t doing it too. This is how I felt yesterday while attending an invitation-only “Demo Day” for startup companies based in Chile. As we’ve discussed before, Chile is a top-20 Startup ecosystem worldwide. Entrepreneurs from all over the planet come to Chile to start their businesses, grow, and thrive. And there are a lot of reasons for this. First, the Startup Chile program provides $ 40,000 in equity-free seed capital to roughly 300 select entrepreneurs each year who make the cut. Plus Chile’s incredibly flexible immigration laws make it possible for business owners to import talent from just about anywhere in the world. This is an incredibly unique aspect of doing business in Chile that you’ll hardly find anywhere else. There’s no H-1B visa hassle here, no xenophobia accusing foreigners of stealing jobs. In Chile, small businesses are able to hire the right person for the job, no matter where he or she comes from. Just to give you an example, one of the companies I run here employs people from the US, Canada, Argentina, Slovenia, Lithuania, Ukraine, New Zealand, and Thailand. And obtaining residency for them was a very straightforward process. Not to mention, there’s quite a bit of wealth in Chile, especially in Santiago. So the potential in the consumer market is vast. Yet at the same time, there’s very little competition in the marketplace. This makes Chile ideal for startups, especially for disruptive businesses looking for a great test market. There are so many companies here doing some really, really exciting things. This became completely obvious watching presentation after presentation. I’m embarrassed to say that before I showed up, I had set my expectations very low. I was expecting a bunch of kids designing apps which make fart sounds. But I was blown away by the quality. These weren’t kids. Most were seasoned entrepreneurs in their 30s and 40s who were working on cutting edge stuff. One group was revolutionizing the already revolutionary 3D printing space. Another group had a medical device so advanced I joked with some friends later that it would replace the tricorder. Another group had developed software which I have no doubt will be acquired by Google at a hefty premium. Another by Microsoft or Apple. Cleantech. Robotics. Sustainable energy. There were so many great businesses there. Moreover, these weren’t just crazy dreamers with no hope of ever generating a profit. Many of them were already quite profitable; one entrepreneur told me they...

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Jim Rickards & Mike Maloney: Gold Revaluation & THE DEATH OF MONEY

Get Jim’s new book here: Jim Rickards has been featured in 4 out of the 5 episodes that we have released so far in the ‘Hidden Secrets Of Money’ series – and for good reason. Jim is one of the most articulate thinkers and teachers in the world when it comes to explaining what is really happening in the world of economics today, especially when it comes to gold and silver. Jim’s first book ‘Currency Wars’ was a bestseller and is highly recommended reading for anyone who wants to get an understanding of economics from ‘the inside’. As you’ll learn in this video, James G Rickards has a massive amount of experience in both the private and public sectors. Watch the video to learn why he thinks that we shouldn’t be surprised that at some point gold is quickly valued at $5000 per...

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It’s Official: The Chinese Are Selling U.S. Debt… and Buying Gold

The latest news is in… The Chinese are selling U.S. government debt… and they’re buying gold. So let me ask you… In your opinion, what will the signs be that the U.S. dollar’s heyday is ending? What will the signs be that China is giving up on the U.S. dollar as the world’s reserve currency? Specifically, we learned this week that the Chinese government shrank its holdings of U.S. government debt by $ 47.8 billion in December 2013, the most in two years. One message from this is that the Chinese government doesn’t want to hold any more dollars than it has to. In separate news, China imported, consumed, and produced more gold than any other country in 2013. China overtook India to become the world’s largest importer and consumer of gold, importing over 1,000 metric tons of gold that year (a truly massive amount). China is also the world’s largest producer of gold… nobody else comes close. Amazingly, China’s gold production is still increasing… while the countries in the next three places (Australia, Russia, and the U.S.) are comparatively stagnant in their production. So what does all this mean? Here’s what it means to me:  •   The data shows more and more that the Chinese prefer gold to U.S. dollars. Chinese buying like this could help create a new price floor for the price of gold.      •   It’s time to diversify some of your savings OUTSIDE the dollar and into China’s currency.      •   It’s time to add to your gold holdings now – and hold for the long run. I hope you don’t take this advice as extreme. I’m simply describing prudent (and potentially very profitable) actions… based on the latest facts. The new facts are important. And true. It is finally time to acknowledge these facts and prudently position yourself. You could potentially make a heck of a lot of money along the way… So don’t wait. Take action. Get some money out of the U.S. dollar and into gold and China’s currency… today. Good investing, Steve It’s Official: The Chinese Are Selling U.S. Debt… and Buying...

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Simon Black – The one investment you want to avoid at all costs

February 20, 2014 Sovereign Valley Farm, Chile 4.1%. I read it twice to make sure my brain had processed the number correctly. Yep, 4.1%. This was the annual yield promised on a new 5-year bond investment that a private banker colleague had sent to me. I couldn’t believe it. The bond issuance was by a state-owned company in India. And despite the Indian government having a -very- recent history of capital controls, price fixing, and asset confiscation, and despite the company being rated near JUNK status, the bond only carried a yield of 4.1%. This is really amazing when you think about it. Central bankers have destroyed money and interest rates to the point that near-bankrupt companies in shaky jurisdictions can borrow money for practically nothing. It’s an utter farce. The rate of inflation is -at least- 3% in many developed countries. Central bankers will even say they are targeting 3% inflation. This means that if investors simply want to generate enough income so that their after-tax yield keeps pace with inflation, they have to assume a ridiculous amount of risk. This is a really important point to understand given that the global bond market is so massive– roughly $ 100 trillion, with nearly $ 1 trillion traded each day in the US alone. This is almost twice the size of the global stock market. And even if people never invest in a bond themselves, they’re directly connected to the bond market. Your pension fund owns bonds. The bank that is holding on to your money owns bonds. The companies listed on the stock market that you invest in own bonds. Yet bonds are some of the worst investments out there right now. And that’s saying a lot given how overvalued stock markets are. Here’s the bottom line: adjusting for both taxes and inflation, bondholders are losing money, even on risky issuances. Think about it– if you make a 4% return and pay 25% in taxes, your net yield is 3%. If inflation is 3%, your entire gain is wiped out… so you have taken that risk for nothing. If inflation rises just a bit then you are in negative territory. There are those who suggest that deflation is a much greater risk right now than inflation… and that bonds are great investments to own in the event of deflation. But here’s the thing– even if deflation takes hold and prices fall, anyone who is deeply in debt is going to feel LOTS of pain. Instead of their debt burden inflating away, now they’ll be scrambling to make interest payments. So while bonds are a sensible deflationary investment in...

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NIA: Proof Gold Stocks Most Undervalued in History

On Sunday when NIA suggested January 2015 GDX $25 call options, we showed you a chart of the HUI/Gold ratio. The HUI index for the most part tracks the same exact stocks owned by GDX. The HUI/Gold ratio shows how undervalued gold stocks are vs. the price of gold. The HUI/Gold ratio has a 17 year average of 0.37 and currently is down to 0.164, the lowest it has been since 2001, at the very beginning of gold’s secular bull market.   However, this doesn’t tell the complete story. Gold miners have seen their expenses go through the roof – a fact that proves there is massive price inflation, despite what the gold bears say. A big portion of a gold miner’s expenses are related to energy. Therefore, the Gold/Oil ratio is another important chart to look at. In June/July of 2008, when oil soared to well over $130 per barrel, the Gold/Oil ratio declined to below 7. From year 1970 through today, the Gold/Oil ratio has averaged 15.19. Currently, we have a Gold/Oil ratio of 12.22.   A low Gold/Oil ratio is bad for gold miners, because their expenses are high relative to the gold they produce. The current Gold/Oil ratio, although below the long-term average, is not at an extreme level like in June/July of 2008. Oil prices, although expensive, are not high enough to severely hurt gold miners in a way that justifies a HUI/Gold ratio of less than half its long-term average. If we currently had a Gold/Oil ratio of 7, a HUI/Gold ratio of 0.164 would be justified, but right now there is no justification to the current artificially low HUI/Gold ratio.   Below, we are once again going to provide you with the HUI/Gold ratio chart we showed you on Sunday. After that we will show you a chart of the Gold/Oil ratio. Following those two charts is a chart of a new ratio that NIA has invented – the Gold/Oil to HUI/Gold ratio. NIA’s Gold/Oil to HUI/Gold ratio has a 14-year average of 37.68. A high Gold/Oil to HUI/Gold ratio of well above its long-term average indicates that gold stocks are undervalued relative to their potential profitability.   Historically, any extreme highs in the Gold/Oil to HUI/Gold ratio were an excellent time to buy gold stocks. In December of 2000, when it spiked up to above 60, the HUI was priced at 177.61. When the Gold/Oil to HUI/Gold ratio returned to a more normal level of 39.63 in June of 2001, the HUI was up to 276.24 for a gain of 56% in six months. In December of 2001, when it spiked up to...

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The Fed Can’t Print a Brighter Future

Stock indexes are making new highs. With share prices surging the collective mood must be ebullient. After all, stock prices are the collective present value calculations of investors’ guesses as to future earning streams. Future profits and prosperity equalcurrent high stock prices. But this isn’t your ordinary market. While stock prices portray exuberance, at no time in history have American adults feared more for the futures of their children. Americans answering a survey from Pew Research aren’t wild about the present economy and see trouble ahead. Only 33% think the economy is good now. More importantly, the very same percentage (only 33%) of respondents believe their children will be better off than their parents. …two experts said the Fed is now primarily in the business of increasing stock prices. The numbers from Rasmussen Reports are even more negative — only 15% of American adults believe their children will be better off. The overwhelming majority, 61%, disagree, and 24% don’t know. There is no more negative indicator of the public’s collective mood than that. It’s one thing to believe things are tough at the moment. However, giving up on the future is drastic. The mood is even worse in Europe. Only 9% of those polled in France believe kids will be better off than their parents. In Italy, that percentage is 14%, and in Britain, 17%, while the rest of Europe this percentage is in the 21-28% range. Forty percent of Russians believe children will be better off than parents. Meanwhile, stock markets in these countries have been up, up and away the same as the U.S. markets. So what accounts for high flying stocks? It’s not their optimism about the future. But maybe the Fed has something to do with it. Bob Pisani, CNBC’s roving reporter on the NYSE floor, told viewers recently the common answer he gets when he asks what the Fed’s quantitative easing has done for the market. It’s usually something around 1,000-2,000 points on the Dow Jones Industrial Average. For the Fed’s 100th birthday, PBS promised a debate about the merits of the central bank on Consuelo Mack’s Wealthtrack program. What happened was two experts said the Fed is now primarily in the business of increasing stock prices. “New thing — it is in the business of talking up the stock market… The Fed is manipulating prices, especially on Wall Street,” said Jim Grant of Grant’s Interest Rate Observer. To another question from Mack, Grant says: “The Fed has presided over the decay of finance.” Grant’s “opponent,” Richard Sylla, the Henry Kaufman Professor of the History of Financial Institutions and Markets at NYU’s Stern School...

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Simon Black – The easiest place in the world to establish second residency

Recently, we’ve discussed several different economic citizenship programs around the world. And while these programs are not for everyone due to their higher costs, they have all surfaced at the same time, and I would be derelict in my duties to not to inform you about these options. Bottom line—it’s all good news. The supply of potential second citizenships is increasing. And I’m certain it’s going to continue to in crease, even despite the occasional grumblings and misgivings. Malta is an interesting example; after passing their new economic citizenship program, the European parliament is scheduled to have a ‘debate’ in January to discuss the program. It clearly makes a lot of politicians uncomfortable. I shared the stage with a minister from the Maltese government at a citizenship conference in Miami a few weeks ago. It was nice to be around someone who actually ‘gets it’. We discussed how economic citizenship can be a huge benefit to the country. And in times when so many nations are broke, it’s quickly becoming a necessity. Rather than treat people like milk cows, nations are going to have to compete with one another for the most productive citizens and residents. That includes rolling out attractive economic citizenship programs like Malta has done. As one would expect, as the supply of these citizenship programs increases, the prices will fall… so they’ll become more affordable to the average guy. But that’s down the road. What we’re talking about today is something that just about everyone can do and afford today. We’ve discussed this several times before over the last year, but on the heels of so many alerts about economic citizenship opportunities, this one bears repeating. Since last year, Panama has become the easiest and cheapest option to establish second residency. And in a thriving economy to boot. The new residency visa category is called Permanent Residents Visa for Citizens of Friendly Nations. 45 countries are currently on the list of eligible nationalities for this program, from Australia to the United States. This immigration program is unique in the world. It was established by presidential decree, essentially because the Panamanian economy is growing so quickly and the labor pool began to dry up. There are simply not enough people in Panama for the number of jobs that the economy is creating. And they are in need of attracting foreign talent. This program definitely won’t be around forever. As soon as the economy cools off, the government will most likely do away with this incredible immigration opportunity. It’s also possible that the next President of Panama (the current President Martinelli leaves office next summer) will close the window for new enrollment....

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Simon Black – This pretty much tells you everything you need to know about money and banking

December 31, 2013 Sovereign Valley Farm, Chile The other night I played my first game of Monopoly in probably 20 years. One of my friends gave me the infamous board game for Christmas, and as I’ve had a lot of guests down here over the last few days, we all thought we’d give it a go. Guess who won? Nope. Not me. And not any of my friends either. The bank won. The bank actually wins every game of Monopoly. Think about it. All of the properties are initially purchased from the bank. You mortgage them back at half the market value. Plus the bank has its own Monopoly on lending… the official rules state that only the bank can loan money to players. Most importantly, though, the bank never goes bankrupt. Ever. If the bank runs out of that Monopoly funny money, the bank can merely create more money using anything (other paper) it sees fit. Just like real life. And this tells you pretty much everything you need to know about money and banking. This pretty much tells you everything you need to know about money and...

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