WEBVTT 00:00.000 --> 00:04.580 For years investors figured the United States would be the safest place to park their money 00:04.580 --> 00:08.500 and the U.S. government would always be trust whether to pay them back. 00:08.780 --> 00:15.060 But a new report says that's changing and that U.S. treasuries are not as safe as they used to be. 00:18.560 --> 00:23.220 This is not from the Crackpot News Service or some fringe source. 00:23.800 --> 00:29.560 This is from Reuters. The headline is U.S. treasuries not the safe bet they once were 00:30.120 --> 00:35.560 research says. We're going to go through the article and I'm going to tell you why I think this is so 00:35.560 --> 00:40.640 important for you and the change that you need to make if you want to protect your wealth 00:40.640 --> 00:48.680 as the world changes. So the article begins no safer than a bund or a guilt or an oat. 00:48.880 --> 00:53.560 Long-titled is hands down the world safe haven securities. The behavior of U.S. 00:53.680 --> 00:57.900 treasuries during and after the COVID-19 pandemic calls that label into questions 00:57.900 --> 01:02.080 suggesting they are a little different from the debt issued by the likes of Germany, 01:02.400 --> 01:09.760 Britain, France or even big corporations. Now the first thing I see here is when most people in a 01:09.760 --> 01:14.340 country like the United States would hear oh okay treasuries aren't safe anymore. 01:14.600 --> 01:18.600 Well sure I'll just go to Germany or Britain or France and that's the wrong way to think. 01:18.760 --> 01:22.300 I have bank accounts for example all around the world. I do what we talk about here 01:22.300 --> 01:25.900 and I was opening one of the bank accounts through today. I'm looking at government 01:25.900 --> 01:32.680 debt they can offer me in Bahrain in Oman in Kuwait. I got some pretty high yielding debt 01:32.680 --> 01:37.060 in comparison to these countries available and I think you want to expand your horizons. 01:37.400 --> 01:42.700 Who do I trust to pay me back more? Legacy brand, high-tax France with all their financial 01:42.700 --> 01:47.540 problems or a country where they believe in hard work. Get to it. You want to come here? 01:47.660 --> 01:51.480 Yeah get to work. We're moving. We're going in the right direction. Who do I trust to pay 01:51.480 --> 01:58.400 me back more? Sure the credit rating is important. I also look at the culture rating. A culture like 01:58.400 --> 02:02.840 the US, Germany, Britain and France. The alternatives that people look at for each other 02:02.840 --> 02:08.220 because they're in the western mindset. I trust them less and increasingly others are too. 02:08.620 --> 02:11.900 That's the key finding of new research presented at the Kansas City Feds 02:11.900 --> 02:16.020 annual research conference in Jackson Hole Wyoming. This is the kind of stuff that 02:16.020 --> 02:20.960 Danielle D. Martino Booth talked about this year at Nomad Calculus Live. It's our big four-day 02:20.960 --> 02:26.600 annual event with lots of global citizenship R&D. Amazing people from all around the 02:26.600 --> 02:30.140 world and great entertainment. Get on the waiting list at nomadcalculus.com 02:30.140 --> 02:35.040 slash live. You will hear insights like what she talked about on this. It was pretty rousing. 02:35.300 --> 02:41.320 But it examines a shift in investor behavior in that period that raises questions about the 02:41.320 --> 02:46.900 exorbitant privilege the US has long enjoyed to borrow broadly on the global market even as the 02:46.900 --> 02:52.720 federal budget gaps grow even wider. Even right-wing politicians have been quoted saying, 02:52.780 --> 02:59.060 yeah deficits don't matter. Just deficit spend, deficit spend. Who cares? Just run up the debt, 02:59.240 --> 03:05.820 run it up trillions, 30 trillion, 35 trillion. Unfunded liabilities over 100 trillion when 03:05.820 --> 03:11.960 you add that in. What a great way to say it, exorbitant privilege that one country was able to 03:11.960 --> 03:15.800 take advantage of that system. And what a great way to say it, exorbitant privilege. 03:16.040 --> 03:19.360 One country took advantage. No, you can go back and you can find, you can say the historical 03:19.360 --> 03:24.160 reasons that's fine. I don't think this historical reasons apply anymore. And so it's like any 03:24.160 --> 03:27.960 great marketing campaign. I always show you Coca-Cola. Where is the Coca-Cola? We always 03:27.960 --> 03:32.840 have the Coca-Cola. You know the Coca-Cola red? You know the Coca-Cola ribbon logo? 03:32.840 --> 03:38.000 That's the brand. There's a reason we're not stocking the salt cola they have here. 03:38.180 --> 03:43.560 There's a reason we're not stocking the RC Cola. People like the brand. Maybe there's a better 03:43.560 --> 03:48.220 cola out there that people aren't discovering because Coca-Cola pushed them off the shelf. 03:48.540 --> 03:53.900 They use their enormous heft to make sure the superior cola, never saw the, I don't know, 03:53.980 --> 03:57.980 but it's quite possible. And would you buy the superior cola from a brand you've never 03:57.980 --> 04:01.820 heard of? No. And that's the exorbitant privilege that the US government used. 04:01.820 --> 04:06.260 But what do we keep seeing? Every year we see more articles of people are waking up. 04:06.440 --> 04:12.140 We're just talking about the UK and all the crazy new taxes this new government in the UK wants to have 04:12.140 --> 04:17.860 and how people are leaving. They say, oh, no one's really going to leave. People are leaving 04:17.860 --> 04:22.580 from everyday millionaires to billionaires are leaving the UK. Why? Stated reason, 04:22.820 --> 04:26.880 mainstream media news. They know they have more options than the last time the left wing 04:26.880 --> 04:32.560 was coming into power wanting to soak their wealth. And now people realize the exorbitant privilege 04:33.120 --> 04:37.400 isn't really backed up by a lot in the US anymore because they can go to a lot of places who manage 04:37.400 --> 04:42.420 their financial affairs much better than the US government. Wait a second. Why? Because something 04:42.420 --> 04:46.880 good happened in 1952. We'll be giving these guys a better deal than these guys who are doing 04:46.880 --> 04:51.220 it right today. I mean, what do they tell you in relationships? Relationships are about 04:51.700 --> 04:55.840 what's the person doing for you now. If a person is abusive to you now in your 04:55.840 --> 04:59.800 relationship, that's what's happening now and that's what it has to be dealt with. Oh, 04:59.800 --> 05:04.080 but it never happened before. You can't, you can only rely on the past so much 05:04.900 --> 05:09.020 in the US's use of this exordinate privilege. And so it's catching up exactly the kind of 05:09.020 --> 05:13.100 thing we've been talking to you about for a dozen years now. A timely question the 05:13.100 --> 05:17.900 article continues, given growing deficits are seen as a near certainty regardless of who becomes 05:17.900 --> 05:22.180 the next US president. Another thing you've heard from me and many other people. Doesn't 05:22.180 --> 05:28.240 matter who wins. We just have to stand as good gun-toting patriots and make sure we vote for 05:28.240 --> 05:34.640 Donald Trump. We have to vote for, and then don't worry everything will be solved. It'll be solved 05:34.640 --> 05:41.040 because you feel better that the person you voted for won. Listen, I don't know Trump. I don't know, 05:41.120 --> 05:46.420 I don't know Kamala. Crazy Kamala. I don't know these people. What I do know is a former US 05:46.420 --> 05:50.320 citizen, not my circus, not my monkeys anymore. I don't really care. That doesn't really 05:50.320 --> 05:55.220 bother me. They're not coming and asking me for more taxes that I can tell you. I don't understand 05:55.220 --> 05:59.640 being in my predicament looking at the US or looking at any of these high-tax countries from afar. 06:00.200 --> 06:05.260 The idea that if only the right wing gets in charge, by the way, I didn't live in the United 06:05.260 --> 06:10.040 States. The right wing is more likely in my opinion to tax people who don't live in the 06:10.040 --> 06:16.560 United States than the left wing. I genuinely believe, you can say whatever you want about 06:16.560 --> 06:23.380 the rest of our policies, Hillary Clinton would have been better for American expats with wealth 06:23.380 --> 06:27.880 than Donald Trump. Hillary Clinton is like, our country is not so great. Live somewhere else if 06:27.880 --> 06:30.840 you want. Who cares? We're not going to treat you any differently. The right wing does, 06:31.580 --> 06:35.380 not just in the US, but probably everywhere. It doesn't matter who gets elected. It certainly 06:35.380 --> 06:38.580 doesn't matter about reducing the deficit. Everybody gets in and they think they're 06:38.580 --> 06:43.300 going to change Washington or they're going to change the country. They're not. It's a 06:43.300 --> 06:48.620 naivete. The machine is built. This is why I've told you for years. The US has to turn, 06:48.720 --> 06:53.180 it cannot turn the dime. It turns extremely slowly. So once things start going in the wrong 06:53.180 --> 06:58.320 direction, it's extremely hard to turn that ship around. If something ever went poorly in Liechtenstein, 06:58.820 --> 07:02.460 you just, you turn the thing right around. That's why we've talked a lot about small 07:02.460 --> 07:07.640 countries. I think small countries, they're often forced, not all of them by any means, 07:07.900 --> 07:12.980 but there's plenty of good ones where they're forced to have fiscal discipline. Why? They 07:12.980 --> 07:17.580 don't have the exorbitant privilege. So they just run their affairs properly. They also are forced to 07:17.580 --> 07:22.600 give their citizens a greater freedom. They're also certain, you know, this is why you want to have 07:22.600 --> 07:28.220 residents and citizenship in some of these smaller countries that no one's ever heard of because 07:28.740 --> 07:33.380 they're not used to having power and privilege. And so therefore the entire ethos of how they 07:33.380 --> 07:37.080 operate is different, whether it's financial, whether it's for your personal freedoms, 07:38.500 --> 07:42.400 especially if you're an American, you will feel a difference. We host nomadic 07:42.400 --> 07:46.000 countless live in Malaysia. It's not the smallest country. It's about 35 million people. 07:46.460 --> 07:51.520 People come to Kuala Lumpur like, oh my God, I just feel more free. Oh, this feels different. 07:52.280 --> 07:56.300 You will feel the difference when you go to a country that does not have the power and the 07:56.300 --> 08:01.740 privilege. It's not giving you the boost you think it is. New York University's Roberto Gomez 08:01.740 --> 08:07.800 Cram, London Business School's Howard Kung, and Stanford's Hanu Lustig also threw in a 08:07.800 --> 08:12.740 question the assertion that the Treasury market was dysfunctional in that period as asserted by 08:12.740 --> 08:19.480 the Fed when it launched its massive bond buying or just rationally pricing the risk of a massive 08:19.480 --> 08:24.960 unfended spending shock then being prepared in response to the health emergency. The researchers 08:24.960 --> 08:28.560 looked at the behavior of the Treasury securities during the pandemic shutdown when yields shot 08:28.560 --> 08:32.160 higher, not just for U.S. debt, but for bonds issued by nations around the globe. They found 08:32.160 --> 08:38.080 investors did not as they had during previous episodes of global financial stress pile into 08:38.080 --> 08:42.760 Treasuries and drive up their value. Instead, investors marked down Treasuries much as they 08:42.760 --> 08:47.820 did for bonds from other countries. Meanwhile, the Fed responded to the spike in U.S. Treasury 08:47.820 --> 08:52.280 yields as if it were a result of market dislocation. It couldn't be anything we did. 08:52.760 --> 08:58.500 They said buying up bonds to bring back order to the world's usually most liquid 08:58.500 --> 09:04.120 debt market as they had during the global financial crisis. And so the article goes on and on and 09:04.120 --> 09:10.220 of course some folks at the U.S. Treasury disagree, et cetera, et cetera. You can find that on Reuters 09:10.220 --> 09:13.920 or on Yahoo Finance. Here's the one thing that I look at from the nomadic capitalist 09:13.920 --> 09:18.780 perspective. If you buy Treasuries, you don't get anything in return. Now, just give me a 09:18.780 --> 09:24.140 second to explain. You can go to other countries around the world. You can go to St. Lucia and 09:24.140 --> 09:28.760 you can buy government debt. They'll give you citizenship. There's a country most people don't 09:28.760 --> 09:33.220 think about a lot. I'm a St. Lucian citizen. I go places. You know what the remark is when I go 09:33.220 --> 09:37.720 to some places? I don't travel to a lot of countries with that passport when I do. Oh, wow. 09:38.560 --> 09:42.300 St. Lucia, I don't sit there very much. How are things on the island? Why did you come here? 09:42.400 --> 09:46.300 Don't you like your island? Like, ha, ha, ha, come on. It's great. Not so much when you're 09:46.300 --> 09:49.940 coming to a passport where it's like, oh yeah, you guys are a pin in the butt. Yeah, 09:49.940 --> 09:53.740 we deal with your people. We deal with your embassy. You guys are a bunch of jerks. Now, 09:53.780 --> 09:58.320 who cares to a certain extent? But I'll tell you what, when it comes to doing business 09:58.680 --> 10:02.760 in an increasingly multipolar world, I'll take being St. Lucia and over being American 10:02.760 --> 10:06.700 because the US is going to pissing people off and you're going to have fewer opportunities. 10:06.900 --> 10:09.560 You already do when it comes to banking and brokerage and investments around the 10:09.560 --> 10:13.440 world. You've got a lot fewer opportunities. Crypto too. What happens when your business 10:13.440 --> 10:17.860 has fewer opportunities? So you can go to St. Lucia. You can go to Jordan. Okay, that's 10:17.860 --> 10:21.640 not a very good passport, but you can go to plenty of countries. You can get citizenship. 10:22.240 --> 10:26.540 And if not citizenship, you can get a residence permit where you can go and live in that country. 10:27.080 --> 10:31.300 Some of those countries are tax-friendly. I bought Armenian government debt at one point. 10:31.520 --> 10:36.140 You can get a residence permit by doing that. I'll tell you what, in some ways, 10:36.240 --> 10:38.900 it has been a more open country. It's not the most tax-friendly country, 10:39.000 --> 10:44.380 but there could be a situation in the world when moving to Armenia would be the thing to do. 10:44.380 --> 10:47.420 Now, I'm not saying that's the place that you have to go, but by the way, 10:47.540 --> 10:51.620 it got paid pretty well for owning that government debt. And I did get paid. Just 10:51.620 --> 10:54.600 checked the bank statement not that long ago. Just dropped right back in there. 10:55.480 --> 10:59.240 Bonds matured. Here's your money with interest. By the way, the currency also 10:59.960 --> 11:03.420 dramatically appreciated against the US dollars that I'd converted to buy those 11:03.420 --> 11:08.340 DRAM-denominated bonds. There are countries in Asia that will give you residence permits 11:08.340 --> 11:13.240 that are tax-friendly if you buy their debt. Also, if you buy their equities. 11:13.240 --> 11:19.620 And so you buy US treasuries. You're buying the exorbitant privilege. You're buying this story from 11:19.620 --> 11:23.340 yesteryear where they're more secure. Even, again, the people criticizing them are like, 11:23.360 --> 11:26.820 oh, well, the alternative is France. No, no, no. The alternative is everything else in the world. 11:27.100 --> 11:30.280 If you're buying hundreds of millions of dollars of treasure, if you're institutional, 11:30.520 --> 11:34.300 obviously, you're not going to go and buy your little $20,000 in Armenian 11:35.340 --> 11:39.380 debt to get a residence permit. But it wouldn't be the worst thing if you have 11:39.380 --> 11:43.720 a lot of money in treasuries or money markets. And this is not financial advice by any means. 11:43.860 --> 11:48.460 But if you figure out, hey, how much of my money would I carve off and put it in some other countries, 11:48.960 --> 11:53.080 I could get residence and citizenship privileges. And hey, if stuff got bad enough here because 11:53.080 --> 11:58.440 this exorbitant privilege became unraveled and the government had less power and it was less 11:58.440 --> 12:04.560 well off and that trickled down to the people and something bad happened. Let's talk one report 12:04.560 --> 12:10.360 in Canada, civil unrest, all this stuff cascades. What would it be nice to have a place to go? 12:11.000 --> 12:15.720 What if you just peeled off some of your treasury positions, some of your bank accounts, some of 12:15.720 --> 12:19.180 your money market accounts and just put it in some debt somewhere else where you got something 12:19.180 --> 12:23.860 in exchange for it? And what I think is the other issue we've talked about for a couple years 12:23.860 --> 12:27.960 now is the US government sanctions more than half of low and middle income countries. 12:28.380 --> 12:34.020 It is becoming a growing trend in Western countries to go after people that the 12:34.020 --> 12:38.260 government doesn't agree with, go after people who aren't part of the agenda, threaten to cancel 12:38.260 --> 12:43.180 the passport, threaten to take their stuff that has happened in some legacy brand Western countries. 12:44.220 --> 12:48.880 Expropriation in a country like the United States, it's a lot higher risk than you think. 12:49.460 --> 12:53.340 Now, I get the average person thinks it's a zero risk. So I'm not saying it's 12:53.340 --> 12:57.780 the highest risk ever, but you know what's not as high a risk as you think? 12:58.460 --> 13:01.820 Expropriation in other countries. Yeah, the UAE has enough money. They don't need to take 13:01.820 --> 13:07.580 your little bonds, even like Nicaragua, for all their problems. You know the difference between 13:07.580 --> 13:15.460 Nicaragua and all the crazy stuff that happened back in the last century and what's happening now? 13:16.280 --> 13:20.620 I finally let these foreigners come buy our stuff. Now, if you're a citizen there, if you're from 13:20.620 --> 13:24.400 there, if you're in politics, always dicey. Let the foreigners come and buy our stuff. 13:24.620 --> 13:28.980 People don't want to do Turkey as a citizenship by investment program. You get a passport of a 13:28.980 --> 13:34.240 country that wants to be in bricks, of a country that is different, that has different relationships, 13:34.400 --> 13:38.120 that have different opportunities. You get a passport. All you got to do is buy an apartment. 13:38.740 --> 13:42.740 Oh, what if they come and take my apartment? Yeah, okay, Erdogan, I think he's got better 13:42.740 --> 13:46.140 things to do than come and take your little $400,000 two bedroom apartment, okay? Like with 13:46.140 --> 13:51.480 all due respect. And so I think that there's this whole thought that feeds into the privilege 13:51.480 --> 13:56.360 the US will never take your stuff and the other countries always will. That's not really 13:56.360 --> 14:01.540 the case. Maybe it's a couple of percentage point risk here and a couple of percentage point risk 14:01.540 --> 14:06.200 there. And so when Warren Buffett says, don't diversify, diversification means ignorance. 14:06.440 --> 14:12.440 You know what? Who among us knows which country is going to go out and do something stupid next, 14:12.860 --> 14:18.640 raise taxes or make redoubt? Who knows what they could do? Geographical diversification to 14:18.640 --> 14:23.680 different countries means your money benefits from different laws. And I think that what 14:23.680 --> 14:27.460 this article was saying is people are realizing they're not getting the returns for the privilege 14:27.460 --> 14:32.280 the US treasuries had because they're not performing as well as they should have and as they used to 14:32.280 --> 14:37.340 and the whole narrative is kind of coming apart. I'm not happy or unhappy about that, 14:37.420 --> 14:43.620 but the research says that's the case. And so therefore I should react because my own wealth, 14:43.800 --> 14:50.280 my own success, my own family is more important than my loyalty to a government that somehow 14:50.280 --> 14:56.180 tries to tell me they did something for me. I did things for me. You did things for yourself. 14:57.280 --> 15:01.220 Maybe you went to their schools. Maybe you drive on their roads. So does everybody else. 15:01.360 --> 15:06.480 Somehow you came out on top and now they're not giving you the deal they used to. Your 15:06.480 --> 15:12.660 investment is not as well protected. It is not as just read the research. And what I'm saying is 15:12.660 --> 15:16.200 maybe you pick a couple of different countries where you do that and while you're doing 15:16.200 --> 15:20.060 that, maybe you get a residence permit or citizenship so that one day it becomes 15:20.060 --> 15:24.080 untenuous where you live, whether it's the US or someone else, you're no longer subject 15:24.080 --> 15:28.380 to the privilege they've lost and what the aftershocks are of that.