Simon Black Explains How To Diversify Sovereign Risk
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.
Managing Editor, The Daily Crux
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.
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