Simon Black Explains How To Diversify Sovereign Risk

Tyler Durden's picture

Simon Black, aka Sovereign Man, who recently has been a frequent guest on the pages of Zero Hedge, was interviewed by The Daily Crux, and explains why in a world of relentless printing of credit money, and thus a surge in global sovereign debt, sovereign risk is rapidly becoming the first and foremost risk factor for investors. Courtesy of his extended travel experience, Black, who visits 50 countries each year and actually performs due diligence, summarizes his thoughts on all those pundits who base their macro views on a tourism brochure: "I spend my life trying to put my boots on the ground in as many places as possible to really see with my own eyes what's going on in the world and what the opportunities are, rather than take some idiot's recommendation on Fox Business News who doesn't know his ass from his elbow." In addition to getting some more background on Black, who is oddly low-profile in a world filled with media whores, here is one chance to evaluate key risks vicariously courtesy of a man who actually has "been there, done that."

Below is the introduction from Daily Crux editor Justin Brill:

As you take time to relax and reflect this holiday season, we hope you'll also take a moment to think about the coming year.

With America's ballooning debt, the Federal Reserve's reckless "money-printing," and our government's increasing intrusiveness into our daily lives, the risks to you, your family, and your wealth have never been greater.

So this week we sat down with Simon Black of Sovereign Man. Simon and his team specialize in asset protection strategies and global financial intelligence.

Read on to learn why asset protection is no longer just for the very wealthy, but something everyone needs to seriously consider.

Good investing,

Justin Brill
Managing Editor, The Daily Crux
www.thedailycrux.com

 

Full Daily Crux Sunday Interview: You're ignoring one of the biggest risks in the world right now

The Daily Crux: Simon, longtime readers of The Crux have seen a lot of information from folks like yourself, Casey Research, and even our colleague Porter Stansberry, about the importance of asset protection.

Yet many still haven't taken steps to protect themselves and their families. Can you explain why this is something that everyone should consider right now?

Simon Black: The way I always explain it to people is... let's say you're an American. You're a U.S. citizen, you're a U.S. taxpayer, you live in the United States, you work in the United States, and you own your property in the United States. Your savings are in the United States. If you own gold, you hold it in the United States.  You have investments in the United States. You structure your company or your business through a corporation registered in the United States. 

Now imagine just one little thing goes wrong. Maybe some bureaucrat who works for a three-letter agency decides that you violated some obscure law. Or maybe your neighbor's knucklehead kid falls into your swimming pool. There's a whole host of things, big or small, that can happen.

If you have all of those assets and interests tied up in the United States, you're in big trouble. Any one of these people, whether it's a judge or a bureaucrat, can just click a couple keys on their keyboard to freeze your accounts and confiscate your assets.

In a lot of these cases, particularly when they're administrative cases, it's a "guilty until proven innocent" system.  What they do is basically assume you're guilty, take away all your assets with which you could prove your innocence, and say, "Well now that we think you're guilty, it's up to you to prove that you're innocent." It's a really scary proposition.

This is what we call sovereign risk. Sovereign risk is when you have all of your assets and interests in one basket, in one country. And as you can see, it's not just a concern for the very wealthy, like many people assume. Nor is it only a concern for criminals, "gold bugs," or those who think America is headed for a dollar crisis... though that's a serious concern as well.

This is something everyone needs to consider... Ask yourself, "What would I do if this happened to me? How would I put food on the table for my family?"

The simple solution to this problem is to diversify... to just spread that risk around a little bit. Fortunately, there are many legitimate options out there, and that's what we focus on at Sovereign Man.

So if you look at the same scenario again, where your neighbor's knucklehead kid falls into your swimming pool and somebody wants to sue you and take your money, take over your business, and take your assets... what happens if your money is in Hong Kong? What happens if your business is structured in Nieves? What happens if you own foreign property instead of U.S. property, and it's owned through a trust in the Cook Islands?

With these types of things, nobody can come after you anymore.

And I'll tell you, in an environment like this – where society is increasingly litigious, and government and individuals alike are increasingly going after people that have any assets whatsoever – you'll sleep a lot better at night knowing those assets and interests are diversified... knowing they're spread across different geographies where nobody can really touch them anymore.

Crux: For readers who may not be familiar with your work, can you give us a little background on yourself and your expertise in this area?

Black: Honestly, I don't like to talk about my background very much. I went to West Point and I used to be an intelligence officer in the army and all that kind of thing, so people try to associate me with some spooky CIA guy, which isn't the case at all.

I guess the easiest way to put it is I'm an international investor and entrepreneur.  I'm what some people would consider a permanent traveler. 

I have no fixed home, I speak multiple languages, and I travel all over the world. I've been to hundreds of countries. I probably go to 50 countries each year. Just this year I've been to six continents. 

I do business all over the world.  I buy property, I invest in things, and I start businesses...  The more interesting and more exotic, the better.

Basically, I spend my life trying to put my boots on the ground in as many places as possible to really see with my own eyes what's going on in the world and what the opportunities are, rather than take some idiot's recommendation on Fox Business News who doesn't know his ass from his elbow.

That's been my life now for the last many years, so I've developed real world expertise in this area. And I've seen that while things in the West are really difficult, there's literally a world of opportunity out there.

Crux: If there are some readers out there who have decided to take action and protect their assets, how should they begin? Can you give us a couple simple first steps that people can take to get started?

Black: Well, first – and I just told my readers this the other day – I think your colleague Porter Stansberry has put together a very good overview of the importance of asset protection today – along with the basic steps everyone needs to take – in his "End of America" video. I thought he captured it really well, so I've been recommending everyone watch it. [Editor's Note: If you haven't seen the video, you can view it here.]

Now assuming you've taken care of those basics – and I'm sure many of your readers already have – you can begin to focus on sovereign risk. After all, what's the point of making all this money in the stock market or having a bunch of gold and silver, if your government increases tax rates exponentially, starts seizing assets, or decides to make gold illegal again?

To me, that sovereign risk is the biggest risk you face, and so the thing to do is to start diversifying those assets and interests overseas. And I think the best and easiest way for everybody to start doing that is with a foreign bank account.

There are three big reasons why you want to do this. The first is that you instantly get more control over your own money. You can free yourself from the risk of confiscation or having all your assets frozen, because now some of your accounts are overseas.  If the United States, for example, imposes capital controls, you won't be subject to those.

The second reason is that many foreign banks are actually much safer.  Many banks in the United States are still technically insolvent, but you have banks in places like Singapore, for example, which has never had a bank failure, and doesn't have to pump up its banks with funny money. These are banks with very strong and healthy balance sheets, where you're much better off banking than you are in the United States.

And the third reason is you get a lot of exposure to things outside of the U.S. dollar, which – as most of your readers probably understand – is not exactly a sound currency these days.  When you bank overseas, you get into some other currencies that have better fundamentals, so it's an easy way to diversify your assets from the U.S. dollar. 

Best of all, it's surprisingly easy to do. It does take a little bit of legwork to track down and contact  various banks, but almost anyone can do it. We talk about this sort of thing all the time in our letter. And of course, for anyone who wants to keep things as simple and easy as possible, we teamed up with Casey Research to create our Going Global report, that details which banks to call and exactly what to do.

Crux: Sounds good. Any parting thoughts?

Black: Well, the biggest thing I try to get people to understand is much of the western world – and the United States in particular – tends to be a very insular place... sort of inward looking. So it's easy to be influenced by reports from the media and government and think there's doom and gloom all over the world.

But the fact of the matter is, one of the biggest "big picture" things that I would encourage people to understand is the world is a huge place, and there's actually a ton of opportunity out there. I would encourage people to open their minds to the opportunities that are overseas, and not just for asset protection or diversification.

People that are unemployed, for example, and can't find a job... they should realize that there are many places in the world where they could go and find a job right now, whether it's Singapore, Hong Kong, Mainland China, or Chile. There are just so many places where professional, talented people can go and find a job. 

If you're looking for really fantastic investment opportunities, or you're an entrepreneur looking for great business opportunities, why not take a look at one of the thriving economies overseas? Places where the governments make it really easy for you to do business, and they don't tax and regulate you like crazy... There are several of them around the world. 

So I'd really encourage people to just start looking at opportunities overseas. The things they've heard on television and in the newspapers, most of that stuff's not true.

When you actually go and travel overseas, and see with your own eyes, you find out most places are not anything like what you expected, and most of the time it's a fantastic awakening.

Crux: Thanks for talking with us, Simon.

Black: Thank you. Good talking with you.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
lynnybee's picture

I like this Simon Black / Sovereign Man !!  ..... what a life to be able to visit 50 countries a year .......

Quixotic_Not's picture

"Against the insidious wiles of foreign influence, the jealousy of a free people ought to be constantly awake; since history and experience prove that foreign influence is one of the most baneful foes of Republican Government...Tis our true policy to steer clear of permanent Alliances, with any portion of the foreign world." ~ George Washington

"Bad men cannot make good citizens. A vitiated state of morals, a corrupted public conscience are incompatible with freedom." ~ Patrick Henry

"Americans [have] the right and advantage of being armed, unlike the citizens of other countries whose governments are afraid to trust their people with arms." ~ James Madison

DosZap's picture

Quix,

All truisms in their day, now we are the melting pot of Pussydom, and fascist lovers.

jimgcpa's picture

This guy's a blowhard.  If he goes to 50 countries per year, he can only spend an average 7 days per country.  Chances are he doesn't travel every single day of the year so his avg. is probably more like 2 or 3 days in each country.  And he claims to know everything that is happening in those countries by a 2 day visit?  LMFAO!!!!!!

Bearster's picture

Anyone who can say in one breath "paper money is worthless" and "sign up for my premium service" (which is paid for in paper money is a blowhard, or a hypocrite.

If Black manages to convince anyone that "investing" is a matter of breezing into a new country, drinking for a few days, giving money to someone, and blowing out on the next flight, then he has done that person a grave disservice.

I should say that agree 100% with his assessment that everyone should diversify their sovereign risk.  There was an old parable about putting your eggs into different baskets.

But I think he is way too US-centric in his assessment of the coming disaster.  Every paper money system including Singapore is going up in smoke.  The world's reserve currency will burn down last.  Short the USD (or not!) accordingly.

virgule's picture

I like his writings, but I tend to concur with you on that one. You haven't even counted the jet-lag between these 50 countries. I travel to 10-12 countries per year, and I can assure you, it's quickly tiring.

How much real business can you get done in a 3-day visit anywhere? You can do some fact finding, but you're not going to build a solid business foundation.

Maybe he's a financial advisor - tons of those traveling around the world trying to pick some crumbs from your pocket ;-)

pazmaker's picture

Although, I don't agree with some of your comments I have seen on other threads, you are spot on here.

I don't know know why you were junked, maybe people have a hard time with the math?    365 days/50 countries = 7.3 days per country  plus travel time.... means this guy spends at maximum 4-5 days per country and he has businesses in how many countries?

If these businesses are going so well why are you trying to sell me your newsletter Mr Black?

lynnybee's picture

! Porter Stansberry, End of America video ...... I clicked on the link in the posting & get nothing !   also, I googled it & when I click on that link get nothing !   DID THE U.S. GOVERNMENT CENSOR THIS VIDEO ? or, am I not knowing where on the net to find this ?

Bananamerican's picture

i'm as gloom/doomy as the next but my B.S. detector went off listening to Porter's presentation. He "padded" things...Is that really even necessary in 2010/11?

centerline's picture

When the SHTF, I am not sure very many places won't be hit hard.  The last place I would want to be is in a major population center - Singapore or Hong Kong would scare me in this regard.  Got a feeling that China is going to get pounded straight back to the stone age too.  South America?  Hmmm.  Maybe...

BorisTheBlade's picture

Shit has already hit the fan and being distributed in slow motion all over the place. The safest place is behind the fan, not in front of it, thus going with the flow isn't a good idea either - think of places very few think of, quiet, outside of mainstream attention and limelights. Comfortable to park some money, relatively hard to get in and relatively easy to get out. Not sure if usual tax-friendly jurisdictions would do the job this time - government is too hungry for taxes.

lynnybee's picture

thank you dear friends .... believe it; i'm not that computer savy & am still learning / love ZEROHEDGE ... I learn so much.  Holiday regards !!

French Frog's picture

Pleasure;

We're all friends in here

;-)

sabra1's picture

being canadian, i will gladly allow all of you to place your money into my bank account! yours truly, M. Bezler.

DosZap's picture

sabra,

Your not foreign, your part of the beast as you will soon see.

Not a nickels diff between the two.

Amish Hacker's picture

Canadian accounts (not your personal account, sabra) seem like a good idea, but I wonder... It's not against the law to open a foreign bank account, though it's illegal not to report it on your 1040. In other words, your assets won't really be hidden from the US government's grasping claws when the shtf. And I'm not sure it's even possible for Americans to open a brokerage account in Canada (this is based on what I was told a couple of years ago, though, please, someone correct me if I'm wrong).

If you're going to try to stash assets abroad, be sure it's in a country that won't just roll over and cooperate with the IRS. "Neutral" Switzerland? Don't make me laugh.

ZeroPower's picture

You need a Canadian address to be able to do so. Doesnt matter if its a vacation home up North or your aunt's place...

Azannoth's picture

The only sure way of escaping the IRS is to stop being a US citizen

Blano's picture

Canada is the 51st state.  Sorry.

woolybear1's picture

yes, a blowhard. if things get that bad there will be no place to run. the usa will probably remain the best horse...at the glue factory.

dizzyfingers's picture

Not making a pun...but if the like-minded stick together we'll all be better off.

Glasgow Gary's picture

Black, who visits 50 countries each year and actually performs due diligence, summarizes his thoughts on all those pundits who base their macro views on a tourism brochure.

I'm sorry but do people not spot the trademark newsletter techniques that Black uses to attract subscribers? I think what you mean is: Black writes about visiting other countries and peppers his essays with standard fare such as "visiting friends in Buenos Aires, doing some business, and oops I'd write more but I have a plane to catch." C'mon. Who are we kidding? And besides, Black's take on the current macro situation and developments in opther countries is hardly unique. We all agree the USA is in deep trouble. But so are most of the other big regions in the world. Post-collapse (if that's your thing) the natural resources of North America are actually huge. What's the relationship, btw, between these newsletter writers and ZH?

GG

Motorhead's picture

Black claims he as a graduate from West Point and a former MI officer.  The fact that he's not still in the US Army shows that he didn't totally "drink the Kool-aid", so I guess that should count for something.

malikai's picture

I saw things as getting bad in the states in 01 and by 04 I had decided it was time to go. At the first opportunity I elected to transfer to the London office of the company I worked for. I've never looked back, but I do miss the states from time to time.

1. Sovereign risk is a big deal. Will all of you shoot your way out of the FBI raiding your houses for gold when the next gold standard is set and your gold is confiscated "to save the nation"?

2. Being tied fully to the US makes you part of the system. If you disagree with the politics and there is a drastic shift to the political right (under whatever guise), everyone on this board is likely to be considered a "domestic extremist" or some other machination of political enemy, and may find themselves in a camp somewhere some day. Being able leave on the outset of troubles may just save your neck. And don't count on Canada and Mexico being suitable refuge, especially if you haven't already made arrangements. Being financially prepared and having a plan ahead of time, combined with recognizing when to go may be the best thing you can do for your family.

3.  How would you really deal with the bands of gangs running around robbing and killing if TSHTF? The police won't last very long and even the army will be powerless when they suffer desertions due to clearly immoral orders, famine, and worst of all, having no value in their pay or benefits.

4. Do you want your children to grow up in 1920s Germany? Do you like the prospects of your children coming of drafting age just as the next world war may begin? We all know that war and Keynesian economics go so well together.

I personally would rather give my children more choices. In the worst case scenario, they may be part of the survivors, if we are lucky. In the best case scenario, they may have an order of magnitude of the opportunities than I have had and will be able to fully see themselves as citizens of Earth, rather than some single country which may at any time, turn against them. They may in fact be truly free.

banksterhater's picture

The UK has been the best US military partner in crime, not a record to be proud of, continuing to this day. If there are bank runs, they will shut all access to accounts in other countries for Americans. I have a friend in Costa Rica, they impounded his account to pay US taxes, froze it last year, imagine if you're in any international bank, you are screwed, and the UK will be first to comply, Blair is just as guilty of War Crimes and the US, now he's fixing mideast peace LOL! fool asshole.

malikai's picture

I doubt a run on treasuries would cause the US to seize foreign accounts held by overseas Americans. Such a task would be very expensive, large, and wouldn't yield very good results as there isn't that much American wealth overseas relative to the overall economy. This not to mention the fact that many of the elite themselves have put some of their own wealth overseas. If you can show me a multimillionaire who does not have a swiss or isle of man account, or gold holdings overseas, I'd eat my own tongue. Now, do you think the Rothschilds or Morgans or even Paris Hilton would quietly agree to surrendering their only remaining tangible wealth? I doubt it.

dizzyfingers's picture

I think you're overlooking the fact that you'll be alone, without funds, with no one to turn to, no money for a lawyer if any local lawyer would take your case, and don't forget much of the world operates on the legal system that presumes guilt until the person proves innocence. How do you do that if you have fled your own country?

malikai's picture

You have just described the US legal system to me.

SF beatnik's picture

No one ever mentions Pugsley's Alpha Strategy. Buy rice and beans, now, while they're cheap. Hunker in your bunker, right here in the US.

Pugsley says every American should store 20,000 rounds of ammo. And he offered much advice regarding what items can be stored for future use. Walmart is still giving stuff away virtually for free. You won't need so much cash or gold if you have all the toothpaste, underwear and socks you'll ever need.

Three months ago I bought an '07 cargo van. I could live in it if I had to.

Some of you guys at Zero are rich. But many of us can't afford to just leave for Paris, much as we might like to.

Tip of the day: buy a storage freezer and fill it with food items you like that don't require refrigeration. (They'll keep you going for three months. If the grid goes down, it might stay down. Few survivors....)

And have a sense of adventure. This could fun.  More fun that sitting in  in some crappy corpo cubicle waiting for Saturday.

 

dizzyfingers's picture

Nice reality check. I've checked around a bit, have been around a bit, and believe that the best plan is to stay here, do some of the things you mention (you didn't mention stockpiling water -- that's important) and either sitting tight or if located in a "problem" area (near big city/cities), perhaps retreating somewhere more rural, with worldly goods in tow or in van. South America, Asia, islands anywhere, Europe, Mexico, Canada? Nope; unless one has relatives, no one in any of those places gives a rat's ass about any of us and wouldn't care if we lived or died. That might be true some places in the US too so think carefully about your retreat, but at least here we are citizens together -- whatever that may come to mean -- and will not automatically be perceived as outsiders. Being locked out might not serve the purposes of those who find themselves out there needing to get back in.

Think Frances Marion and suchlike.

huggy_in_london's picture

You people have been watching too many hollywood movies.....

doolittlegeorge's picture

you can never watch too many Hollywood movies.  Wrong "lesson" from said movie could be a problemo as they say.  Still "just because you're paranoid doesn't mean they're not coming for you."  Which reminds of a movie script i've been working on...it starts with this guy who....

if's picture

Spending only a few days in each country helps him conclude that Cuba might be ideal for expats.  A country where the sovereign risk extends from your assets to your ass.  

Fake Jim Quinn's picture

If the sh*t hits the fan the USA will default on foreign debt as the initial step. If USA defaults on foreign debt, anyone worry that those governments will seize private assets of US citizens? I believe they would, with relish. But I could be wrong

banksterhater's picture

OF COURSE! Americans won't be safe anywhere, they are linking banks internationally, eventually Americans will have a target on our foreheads in any country anyway, it's almost that way already. That's what the oligarchy wants, serfs making asian wages deep in debt and agreements with countries like Canada not to harbor us.

Quixotic_Not's picture

“Whenever the legislators endeavor to take away and destroy the property of the people, or to reduce them to slavery under arbitrary power, they put themselves into a state of war with the people, who are thereupon absolved from any further obedience.” ~ John Locke

 "No free man shall ever be debarred the use of arms...The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants." ~ Thomas Jefferson

"Those who give up essential liberties for temporary safety deserve neither liberty nor safety." - Benjamin Franklin

dizzyfingers's picture

You're not wrong, and they might sieze US citizens and mistreat them in nasty ways too. Stay here; be one of the critical lovers of the USA.

malikai's picture

I'd rather take my chances in the unknown than stand in the face of clear tyranny. The Jews that survived the holocaust did so because they either left Germany before it began or they were the last in line for the furnace. I'd rather be the type that left early.

malikai's picture

You may be right. However, you could make it particularly hard for that to happen if you are smart with your asset placement. The point here is diversification. The idea being that if the US collapses, but Turkmenistan does not, then your wealth in Turkmenistan may still be there. Same vice-versa, or insert any other country or multiples of countries. The particular emphasis should be on a country /not/ closely tied with the US empire, which will likely weather the storm. There are many such countries on this wet rock.

gwar5's picture

I think everybody would carve up the "old" USA like a bigger version of the old Soviet Union, but with some caveats. Mainly, everybody else is going to be broke, too. But we are still the world's gold superpower. So, maybe we should secure it to the West Point facility to get the gold away from creditors, and away from the FRBNY, by moving it from their basement vault.

Our government can confiscate property, but it will be "legal" in the form of new taxes, fees, and taking of private pensions, ala Argentina. They might also give up our natural resources to creditors, which is what I thought these recent aggressive Federal land grabs were for -- collateral.

Our government currently uses other country's banking systems as enforcement to collect for the US IRS.  Our creditors could just do the same thing to us, using our banksters. The Fed, not congress, controls the brand new "Consumer Protection Agency" and this little agency instantly tracts all digital transactions each individual makes.

China could buy the fucking dip after the US equity bloodbath and they'd control USA, inc., courtesy of the Bernank.  We're not allowed to use our own coal, but they could ship our coal and gas over there.  They've already sold us down the river, why not go all the way?

If I was China, or another large creditor with an army, I would tell other countries globally to keep hands off American assets. I would take those assets for myself, or, use "diplomacy" to extract desired resources in exchange for the assets. The manuevering is probably going on now. This week, it was announced China doubled up the speed of their aircraft carrier construction, which is an announcement that sends a pretty powerful signal.

The other thing to consider: if (when) the dollar collapses as the world's reserve currency, China would be positioned to get the world's resources anyway, on the cheap, due to our impotency. I think they just want resources for the next century. If their domestic market develops, export prices won't matter so much.

The North Koreans will still be eating dirt in ten years but we'll think of them as middle class by then and be asking them for recipes!

 

 

trav7777's picture

riiight...the mighty chinese navy.

China's growth opportunity is in exporting cancer and pollution.

Do you idiots REALLY believe it is so difficult to set up polluting factories with old technology in order to manufacture plastic shit?  I mean, SERIOUSLY?

Any 3rd world nation will suffice for this; China has nothing special.

malikai's picture

The North Koreans will still be eating dirt in ten years but we'll think of them as middle class by then and be asking them for recipes!

Well, if you're interested. I have a wicked recipe for house cat and grass stew.

Snidley Whipsnae's picture

+1000!

The concept of diversification went so well for American buy and hold stock investors that now we are told that we should buy into foreign securities/businesses when all fiat currencies are in extremis.

I think PMs and ride it out are the best options for the vast majority of us...at least, those of us that cannot afford to do our own due diligence in the markets that we are being encouraged to invest in.

If it sounds too good to be true, it usually is.

 

gwar5's picture

We knew it already.....

"Just imagine how much lower the US stock market returns will be once Bernanke is forced to find his monetary manhood.  When that happens it is going to be a bloodbath in the US.”  --Michael Pento, Dec. 2010

 

Yikes! ... And when The Bernank finds his monetary manhood he'll no doubt Bang Dae-Ho.