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Total Wealth Insider

A Look Ahead to 2016

A look back at 2015’s highlights … What to expect in 2016 … A constitutional way to stop over-government…

It’s hard to believe that this is the last Sovereign Digest of 2015. It seems like only a few months ago, we gathered for our investment summit in Uruguay, even though my calendar tells me it was all the way back in March. I guess time just has a habit on sneaking up on us while we’re busy with day-to-day life, and most of us don’t have time to pause and reflect on the recent past.

That’s actually something that came up during our franchise meeting last week. We were reflecting on 2015 and starting to plan out all the new events for next year. And while we were discussing all this, I realized we’ve had a pretty exciting year.

So, as the new year, full of new opportunities, races toward us, let’s take a moment to reflect on everything we accomplished in 2015 and what we can look forward to in 2016…

I’ll let Jeff take it from here:

And so concludes another year of life as a Sovereign individual.

Out goes a tumultuous 2015, and soon enough will arrive 2016 — the Year of the Monkey, if you’re so inclined to delve into Chinese astrology.

For what it’s worth, the Year of the Monkey should bring about global economic growth — though I am not convinced “global” in this case includes the U.S. of A. We’re on the cusp of a recession, despite the glad-handing and prevarications brought to you regularly by the spin doctors in the White House, the Federal Reserve and a media pack not always mentally equipped to dig beyond the headlines.

But before the new year invades, I wanted to reflect on the past 12 months inside The Sovereign Society.

I started the year predicting, among other things, that the greatest threat to the world we know is the unchecked rise of the Islamic State. At the time, research organizations saw the greatest threats coming from income inequality and persistent joblessness. ISIS was a distraction only to the degree that it was regularly beheading Westerners in graphic video clips.

Today, it’s the No. 1 global concern — and with reason.

ISIS is mindless in its doctrinal beliefs and unbridled pursuit of a dogmatic world it thinks is moral and just, despite the inherent hypocrisy. Though it is an outgrowth of America (and a string of failed policies and tin-eared politics), America has no control over this Frankenstein monster — and a complete lack of competence in understanding that attacking ISIS the way we do only worsens the problem. It’s like trying to kill all the hornets by hitting the nest with rocks while standing directly under it: You may hurt five or 10, but hundreds are attacking you from all directions.

Until we allow the Middle East to manage its own problems — as violent as that might be — and so long as the West continues its assault on ISIS, we are playing directly into the ISIS game plan and the organization’s nihilistic belief that the “end of days” is coming and will be marked by the rise of 80 nations against Islam (for those keeping score, we’re up to 60 nations now). As I regularly counsel: Own oil stocks, such as portfolio favorite National Oilwell Varco, (NYSE: NOV), and own gold. An epic battle in the Middle East will send gold bullion and oil shares soaring to unimagined heights. Just hold them as insurance policies.

This year was also a fabulous one for those of you who subscribe to Precision Profits, my high-octane options-trading service tied to seasonal patterns. We closed 20 trades with gains of between 100% and 218%, an average of almost two a month. Yes, we recorded a few losers along the way — no trading system goes unmarred by red ink at times — but overall, Precision Profits has returned cumulatively a 63% annualized gain since August 2014. You can learn how to get in on that by clicking here.

I am at work now on a new service that will trade on the seasonality that exists within various U.S. industrial sectors. My preliminary research has shown some promising trends. But more on that coming to you soon…

I also said 2015 would be the year of Europe and that the U.S. would not be the place to invest. In the February Sovereign Investor issue, I wrote that the U.S. was exceedingly pricey as a market and would likely see average annual declines of as much as 3.1% to bring the S&P 500 back to historical norms.

Well, Europe is ending the year up about 2.5% (and it was up as much as 22% before all sorts of existential negatives invaded) while the S&P is down around 2.5% (and was never up more than about 3%). So, all in all, I will count that as a win. And I see more of the same for 2016. Because the Fed kowtowed to outside pressure in raising interest rates, the dollar will strengthen against the euro more than it already has, making European exporters so much more competitive globally and U.S. manufacturers so much less competitive. Europe’s economy will muddle through and will record positive growth, while the U.S. heads toward a recession.

European stocks will benefit from that in 2016, while U.S. stocks will continue to fall. The S&P could be down another 3% to 5% in 2016 — unless we move into a “stagflationary” scenario (the subject of the January Sovereign Investor that landed in your inbox this past week). In that case, we could see the S&P fall 15% to 20% or more.

China also lived up to at least one expectation this year: Its consumer class is now larger than America’s.

I’ve been saying for a while now that Americans have to drop the home-country bias when it comes to investing. Our consumers are certainly the wealthiest in terms of how much we spend — though, to be fair, we also have the world’s largest lump of consumer debt at more than $17 trillion. But the emerging world drowns us in sheer numbers. China’s emergence is just the elephant’s trunk in this multi-decade trend.

Finally, and along similar lines, I finished my book this year. It’s called Replay: The Second Chance to Invest in the American Dream. I traveled across large swaths of our world — Kazakhstan to Myanmar (Burma) to Colombia — to chronicle the rise of the emerging middle class … what it looks like, how and why it’s emerging, and what it’s buying.

I can assure you that our world is changing in ways that are going to upset the status quo we’ve known since the end of World War II. Anytime empires are challenged by upstarts, conflicts arise as power bases shift. That’s true in politics, society and finances. Upstarts demand more power reflective of their new standing in the world order, while those already in power seek to tamp down the upstarts. And it’s never a clean process.

We are in the midst of an epochal shift — from the West to the rest. And in that lies huge opportunities for investors who understand where we are going.

With that, I will wish you a very prosperous 2016 — despite what the Federal Reserve is doing!

As you can see, 2015 has been a busy year for us. And along with the accomplishments Jeff mentioned above, there have been a few other big events … For one, we sold out our Offshore Investment Summit in Uruguay earlier this year, a place we gather every year because it is one of the freest societies on the planet. And now we’re already planning our next one, which is set for March. You can learn more about it here.

We also held our Total Wealth Symposium in The Bahamas a couple months ago, where we were joined by more than 30 asset protection and investment experts from around the globe. Not to mention we welcomed Strategic Investment to the Sovereign team. Strategic’s editor and founder, James Dale Davidson, uses a novel research approach to the art of market forecasting, which we’re excited to bring into the fold.

Earlier this year, we also remodeled Offshore Confidential, broadening its content to focus on the best ways to achieve personal liberty anywhere, not only offshore. In light of that, we renamed the service Sovereign Confidential, and we’ve been receiving great feedback. We also launched a new service — Private Assets Report — aimed at investors interested in building a store of “quiet wealth” for when volatility hits the U.S. stock market.

For 2016, we have a number of other exciting changes in the works. We’re ironing out the details right now, but we’re looking into creating some new services that will help you safeguard your freedom and financial future as America continues down its shaky economic path. So keep an eye out!

The Sovereign Digest format will also be changing in the new year. We’ve realized the need for a weekly Sovereign Investor update, where Jeff can really drill down into the details of the research he brings to you every month — from how current events tie into his trading theses to how the portfolio is moving — so you’ll be hearing directly from Jeff in Sovereign Digest starting in January.

And don’t worry; if you missed out on the opportunities we saw in 2015, from the gains in Precision Profits to our offshore conferences, you can still take part in the new year by joining our highest level of membership. We just opened it up again for a limited time, and with it, you’ll receive every piece of research we put out there, along with anything we publish in the future.

To learn more, just click here.

After seeing how much we accomplished in 2015, and considering everything we have planned for next year, 2016 looks like it’s going to be a great one.

Before I sign off for the week, I want to take a moment to tell you about a small town that’s taking a stand against government pettiness … The people of Pagedale, Missouri, are suing their government for violating their 14th Amendment rights — specifically the right to due process — an abuse that happens more than you may think.

Essentially, due process protects us from the capriciousness of government: Laws cannot result in unfair, arbitrary or unreasonable treatment of an individual. It’s as simple as that. But in the town of Pagedale, it seems like petty laws have become the norm. In fact, 40% of the town’s tickets are for non-traffic-related offenses.

So what do some of those fines cover? Well, if you walk on the left side of the crosswalk, that’s a fine. Have a hedge more than three feet high? Fine. You’ll even be fined if the blinds in one of your street-side windows aren’t “neatly hung.”

The city is clearly using these frivolous fines to generate revenue — a result of Missouri lawmakers’ recent decision to sharply limit the income certain towns can make from traffic tickets. The city has even limited court hours to prevent people from meeting ticket stipulations, which just adds another fine to the lot.

This is upsetting all on its own, but as our asset protection expert, Ted Bauman, tells me, it’s something that city governments have tried before. In fact, Ted has had a personal run-in with that problem.

Here’s what he told me:

I fought the law, and I won. You probably can, too — on constitutional grounds. That’s why the case of Pagedale, Missouri, is so interesting.

We bought a house in 2012. It’s in a micro-municipality (a Georgia thing) with great schools. It’s hugely attractive to young families with kids and disposable income, and, therefore, with developers. For that reason, property prices have been rising fast — as have county property value assessments for tax purposes.

In 2014, we received a new assessment from the county that more than doubled our property’s value, leading to a massive tax increase. I looked carefully at the assessment and noted that the increase in the value of the house itself was far greater than for the land on which it stands. Given that the main driver of increasing property values is land, and that developers invariably tear down existing houses to build new ones, that made no sense. To make matters worse, I researched the tax register and found that our house’s value had increased by substantially more than nearby properties.

I did some further research and discovered that the county assessor’s office was short-staffed. They couldn’t afford to hire enough qualified inspectors, so they had unqualified employees drive down residential streets to take pictures and make notes. They also used aerial drones (which also upset me greatly, albeit for other reasons you can probably imagine). These methods had badly overestimated the actual square footage of our house, producing the higher valuation.

So I contested my property’s valuation, not on the grounds of fair market value — since that was unquestionably rising and was probably accurate — but on the grounds that the process of assessment was flawed. I argued that due process in property assessment required more than just a procedure approved by a democratically-elected government. It also had to be reasonable, appropriate and fair, and produce a non-arbitrary outcome. Sending untrained employees to take pictures of my house from a car was a process, but it was inappropriate and produced a patently arbitrary outcome. So I told the county tax office that they had violated my 14th Amendment rights, in terms of which I cannot be deprived of life, liberty or property without “due process of law.”

The county responded with amazing swiftness, apologizing, reversing its assessment and freezing our valuation at the 2013 level for three years.

I was surprised at the time, but I’m now wondering whether the county’s lawyers hadn’t cottoned on to the “Pagedale problem.” Did they know that their assessment process was constitutionally flawed, and rush to soothe me out of fear that this could become more widely known? I tend now to think so.

So it looks as if I stumbled upon a constitutional way to stop rampant over-government in its tracks. Look around you. I bet you can spot many examples in your town. They may just be worth pursuing.

Now I’d like to take this moment to turn to you. Considering government pettiness happens much more often than publicized, we want to hear if you’ve had your own run-in with overreaching lawmakers. Even if you haven’t, feel free to share your thoughts: Do you think over-government has been a rampant problem this year — one that more people should be worried about? Send your thoughts to

In dividend news … Bancolombia (NYSE: CIB, buy up to $50) is paying us its quarterly dividend of roughly $0.27, depending on the exchange rates, on January 4. Vanguard FTSE Europe ETF (NYSE: VGK, buy at market) is dropping its quarterly dividend of $0.202 into your account on December 28.

Hope you’re enjoying a great holiday,

Jessica Cohn-Kleinberg
Managing Editor, Premium Services
December 27, 2015