Larry Summers withdraws name from Fed consideration

By Zachary A. Goldfarb, Updated: Sunday, September 15, 5:40 AM

Former Treasury secretary Lawrence H. Summers has withdrawn his name as a candidate for Federal Reserve chairman, in a startling development that raises new questions about who will lead the central bank when Chairman Ben S. Bernanke steps down in four months.
The other main candidates for the job have been Fed vice chairman Janet Yellen and former Fed vice chairman Don Kohn, though it is still possible that President Obama will seek another choice. Time is short for nominating someone for the critical post, with a confirmation process expected to last several months.
Obama had been strongly leaning toward picking Summers, who helped him navigate the depths of the financial crisis and recession at the beginning of his term, and had assurances from Democratic Senate leadership leaders that they would work to get him confirmed, according to people familiar with the matter.
But amid an intensifying uproar of liberal Democrats and left-wing groups opposed to his nomination, Summers decided to withdraw his name on Sunday, telephoning the president to tell him his decision.
“It has been a privilege to work with you since the beginning of your Administration as you led the nation through a severe recession into a sustained economic recovery,” Summers, a Harvard professor, wrote in a letter to the president. “This is a complex moment in our national life. I have reluctantly concluded that any possible confirmation process for me would be acrimonious and would not serve the interest of the Federal Reserve, the Administration, or ultimately, the interests of the nation’s ongoing economic recovery.”
(READ: The full text of Summers’s letter to Obama)
Obama accepted Summers’s decision, lauding him and saying that he planned to continue to consult his former adviser.
“Larry was a critical member of my team as we faced down the worst economic crisis since the Great Depression, and it was in no small part because of his expertise, wisdom and leadership that we wrestled the economy back to growth and made the kind of progress we are seeing today,” Obama said. “I will always be grateful to Larry for his tireless work and service on behalf of his country.”
People close to the Fed process said Summers faced not only a rebellion among liberal Democrats but also other unexpected interruptions, including the debate over whether to strike Syria, that stretched out the process and gave time for more opposition to build.
Summers’s nomination would have also collided with a tumultuous series of fall debates on the budget.
“It was just a perfect storm of bad timing,” said one person close to the White House, who requested anonymity in order to speak candidly about private deliberations. “It would have been absolute war, and the president would have had to spend all of his political capital. Larry decided not to drag him through it.”
The contest for Fed chairman had taken on the shape of a political race, with allies of both Summers and Yellen advancing their cases on the record and behind the scenes.
A wide array of current and former Obama officials backed Summers, arguing that his crisis experience and economic prowess made him an exceptional candidate. Yellen’s supporters, meanwhile, noted that she has deep Fed experience and has been an architect of the central bank’s efforts to reduce unemployment.
When word of Summers’s candidacy first circulated, liberals erupted, furious at what they said was his record of supporting deregulation in the Clinton administration. Obama took to defending him when questioned on Capitol Hill, and his supporters noted that he was an architect of the president’s regulatory response to the crisis.
In order to buy time and cool tensions, the White House announced that no decision would be made until the fall. But that only gave space for Summers’ s opponents to strengthen their protests to his candidacy, with four of the 12 Democrats on the Senate Banking Committee, which would confirm Summers, signaling opposition.
That would have meant that the president would have probably had to court Republican support for a Summers nomination, while also trying to strike deals to keep the government open and operating.
Summers’s withdrawal is a disappointing setback for a renowned economist who had climbed to the top of nearly every ladder of his profession— as Treasury secretary, Harvard president and senior White House economic adviser. The Fed chairman would have represented the peak of that ascent.
It’s also a setback for Obama, who is fiercely loyal to his aides but has now on several occasions seen his preferred candidates for jobs lose out as a result of political opposition. It’s especially painful given that it’s Obama’s own party that cost Summers the nomination.
http://www.washingtonpost.com/business/economy/larry-summers-withdraws-name-from-fed-consideration/2013/09/15/7565c888-1e44-11e3-94a2-6c66b668ea55_print.html

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3 Potential "Taper" Surprises And FOMC Sugar-Coating

As we head for the fateful FOMC announcement on September 18, US data have continued to moderate. Accordingly, the consensus seems to be converging on a $10-15 billion initial reduction in monthly purchases (mostly focused on the Treasury side and less so on MBS) with any 'tightening' talk tempered by exaggerated forward-guidance discussions and the potential to drop thresholds to appear more easy for longer, since as CS notes, assuming Fed policymakers have learned anything in the last four months, they must know that the markets view “tapering” as “tightening,” even though they themselves for the most part do not. Thus, they are going to need to sugar-coat the message of tapering somehow. But as UBS notes, political risks have grown and there is little clarity on the Fed's thinking about the housing market. This leaves 3 crucial surprise scenarios for the FOMC "Taper" outcome.

On Size & Composition (via Credit Suisse),

On the subject of size, the trajectory of mortgage and Treasury issuance and outstandings is in our view the best and least-tortured reason for tapering. Mortgages outstanding are shrinking as household deleveraging continues to outpace new housing activity, and gross MBS production is now slowing as the refinancing pulse burns out. Meanwhile, the budget deficit is expected to be sharply-reduced for the next few years from the trillion-plus annual deficits of the last few years.

From the perspective of optics, at least, and possibly market functioning as well, $85bn per month of securities disappearing into the Fed’s vaults is simply too large. Indeed, in the case of MBS purchases, the Fed risks buying so much of the supply of particular issues that large market disruptions may re-emerge, as we saw near the end of the QE1 episode and for several quarters afterwards.

Taper Surprise Scenarios (via UBS),

Political risks have grown

Key Fed players have indicated time and again that a reduction in monetary accommodation is not a done deal. In addition to economic data, the Fed may consider political risks. We have discussed these risks at length in our recent publications, so we just highlight a few key items here. The debate over the US debt ceiling is approaching, the US government needs stopgap funding, the German election could roil markets, and the situation in the Middle East is dicey at best. Each of these issues could alter the Fed’s calculus on whether/when/how much to taper.

Too little clarity on the Fed’s thinking about the housing market

It is no secret that the Fed views the housing market recovery as a key to sustaining economic growth. In that context, the 100bp jump in mortgage rates must be worrisome to policy-makers, but we do not know how worrisome. Moreover, we have noted that the traditional buyer base for MBS seems to have lost its appetite. Consequently, the MBS market could respond erratically to a taper surprise.

Surprise I: delay

We think this scenario is the most likely surprise. Bear in mind that it is still a “surprise”, so therefore unlikely in our view. The Fed decides to postpone reductions until a vague date. It reiterates the policy that tapering is not a done deal.

What may cause it: A US political impasse is the probable catalyst. We recognize that a stand-off in Washington could well lead to a Treasury rally. The Fed might, in turn, see the rally as a chance to reduce its Treasury purchases. However, we suspect that the Fed would hold off tapering if Congress and the Administration are hamstrung. The Fed would want to appear apolitical, and initiating tapering could invite a lot of criticism from Capitol Hill.

Likely market reaction: US bull flattener. Five- and ten-year Treasuries and Agencies outperform, MBS tighten, US swap spreads widen initially, USD vol sells off sharply. Treasuries outperform Bunds and Gilts.

Surprise II: aggressive tapering plan

This scenario could take two forms. The obvious one is simply to reduce purchases by more than $15 billion. Second, the Fed could use aggressive forward-looking language to describe its future tapering plans.

What may cause it: Chairman Bernanke and others may push to accelerate tapering, in advance of considerable turnover slated for the Board early next year. The FOMC may ramp up tapering to put pressure on Congress. Mr. Bernanke and other officials have argued for months that monetary policy has its limits, and fiscal policy has to help bolster the economy.

Likely market reaction: US rates jump. The 7-10y part of the curve leads the way, but 20-30y catches on shortly thereafter. Off the run issues underperform OTRs. Gamma catches a strong bid. Treasuries lag Bunds and other high quality sovereigns by a wide margin.

Surprise III: mortgages bear the brunt of the taper

The broad consensus is that Fed will “go easy” on mortgages to avoid rocking the housing market recovery. Reducing MBS purchases as much as Treasury buys would be a major surprise to most investors (note above on size and composition)

What may cause it: the Fed appears to be much less comfortable owning MBS than Treasuries. Furthermore, numerous Republicans are apoplectic at the thought of the Fed maintaining a central role in the US housing market.

Likely market reaction: sharp underperformance of MBS, wider swap spreads in 5-10y area, initial 5y/10y steepener followed by 7y/20y steepener, as mortgages extend and convexity flows materialize. US gamma catches a moderate bid. Treasuries outperform Bunds, Gilts, etc.

On Pace and Sugar-Coating (via Credit Suisse),

A spoonful of sugar may ease the commencement of QE3 tapering, especially given the generally disappointing August jobs report. Assuming Fed policymakers have learned anything in the last four months, they must know that the markets view “tapering” as “tightening,” even though they themselves for the most part do not. Thus, they are going to need to sugar-coat the message of tapering somehow. We expect FOMC participants will insist that short-term interest rates remain anchored near zero for a long time, even after tapering is completed and net asset purchases have reached zero, and that reinvestments will continue for a long time to cover maturities and amortization.

Moreover, even after the short-term interest rate eventually in the future starts to go up, the Fed will not sell assets but rather will begin to allow assets to run off in the normal course of maturities and amortizations. We think the FOMC may also suggest that the new level of asset purchases announced at the upcoming September meeting might well be adequate for a time, signaling that there is no built-in expectation for a further step in October and perhaps not even in December. This could help the market absorb the first tapering shock and the uncertainties surrounding the identity of the next chairperson.

As Exhibit 4 indicates, we expect a $20bn taper in September, evenly split between MBS and Treasury purchases. Our baseline scenario includes another couple of $20bn taper moves in early 2014, at the January and April FOMC meetings, with a final $25bn cut at the June meeting to end the program around mid-year.

If our scenario holds, QE3 will have totaled just over $1.3 trillion, more than double QE2’s $600bn and a few hundred billion short of QE1, which expanded the Fed’s balance sheet by $1.725tn. Under these assumptions, the balance sheet will be nearly 50% larger by mid-2014 than it was when QE3 commenced in September 2012.

We have drafted an imaginary press release that embodies many of the ideas discussed above. Also, in the interest of shortening and simplifying the FOMC statement, we changed some of the arguably superfluous language that has been employed by the Committee over the past few meetings. As a consequence, Exhibit 6 below is one part forecast, and one part recommendation:

http://www.zerohedge.com/news/2013-09-14/3-potential-taper-surprises-and-fomc-sugar-coating

EM currency crash ‘could hit oil demand’: IEA

The recent crash in emerging market currencies could hit global oil demand if it continues, the International Energy Agency (IEA) warned on Thursday, as it forecast an improvement in oil supply over the coming months.

Emerging markets have been pounded in 2013 amid speculation of an end to the U.S. Federal Reserve's bond-buying program, with currencies from countries including India, Turkey, Russia and Brazil coming under intense pressure. As oil is priced in dollars, depreciation in an oil-importing country's currency versus the dollar means the cost of importing oil for that country will rise – and could result in a reduction in demand.

"The rapid depreciation of many emerging market currencies since 1Q13 (first quarter of 2013), if sustained, may adversely affect oil demand," the Paris-based agency said in its September oil market report.

http://www.cnbc.com/id/101028424

US arsenal of 3000 tons of chemical weapons

WASHINGTON (AP) -- It's not easy or quick to get rid of a nation's chemical weapons. Just ask the United States.

Three decades after the U.S. started destroying its own chemical weapons, the nation's stockpile stands at more than 3,000 tons - about three times what the U.S. now says Syrian President Bashar Assad controls.

While the U.S. has made significant progress eradicating 90 percent of the 31,500 tons it once possessed, the military doesn't expect to complete destruction until 2023.

Experts say it's probably simpler to make chemical weapons than to get rid of them.

"Disposal requires such rigorous processes to ensure there is no pollution or residual agent," said Susannah Sirkin, international policy director for Physicians for Human Rights, which has been monitoring weapons of mass destruction for more than two decades. "On average it is costing about 10 times more to destroy than it did to make the munitions."

The two basic destruction methods - chemical neutralization and incineration - both require specialized facilities. Using incineration, chemicals must be heated to thousands of degrees. Decades-old storage containers can be leaky and tough to handle. And destruction produces highly hazardous waste that must be carefully stored.

http://hosted.ap.org/dynamic/stories/U/US_UNITED_STATES_SYRIA_CHEMICALS_AT_HOME?SITE=CAOAK&SECTION=HOME&TEMPLATE=DEFAULT

It's Official. America's 'Suez Moment' Has Arrived

Submitted by Simon Black of Sovereign Man blog [9],
In the summer of 1956, Egyptian president Gamal Abdel Nasser nationalized the Suez Canal, sparking a worldwide crisis.
The Suez links the Mediterranean to the rest of the world, and it’s one of the most important maritime thoroughfares in international trade. So this was a big deal.
Britain was a major stakeholder in the canal, and almost immediately, the British government put together a small coalition consisting of the UK, France, and Israel to regain Western control.
Their subsequent military action, however, greatly displeased the US government. And Uncle Sam quickly asserted its new role as the world’s superpower.
True, Britain had once been the dominant power in the world. But years of unsustainable finances and economic decline changed all of that.
By the end of World War II, Britain was nearly bankrupt. But reality hadn’t set in yet. They still saw themselves as a superpower.
British policymakers were still at the peace table. They helped set up the UN, divide up Germany, and even influence the new global financial system at Bretton Woods.
Reality finally hit during the Suez Crisis.
It became clear that the UK no longer had the economic fortitude or international standing to do as it pleased. And with the US opposed to the invasion of Egypt, the British government had no choice but to withdraw their troops.
In doing so, Britain handed the reins of world dominance over to the United States. And America held this position for decades.
But to anyone paying attention, this status has waned.
Asia is rising. Major centers of wealth and power have grown around the world. US finances are desolate. And its currency is now widely reviled by foreign governments.
But US politicians have completely ignored this trend over the last decade. They spend and act as if US global dominance is an endless river.
With Syria, though, the US may have finally reached its Suez moment.
Russia has now almost single-handedly precluded the US government from carrying out an attack in Syria.
And the Russian President has even taken his case to the American people in which he eloquently criticized both US policy as well as the notion of American exceptionalism.
Vladimir Putin is a brute. But he commands a nation that has all the power and might it needs to stand up to the United States and the rest of the West.
Just a few months ago, it was the Russians who wagged their fingers at European governments for confiscating bank accounts in Cyprus, comparing such tactics to the Soviet Union.
It’s also been the Russians who have stood up to the West and given sanctuary to Edward Snowden.
All of this would have been unthinkable ten years ago. And this may very well be the event that future historians look back on as the day America lost its global dominance.
This isn’t anything to cry about. The world isn’t coming to an end, it’s just changing. And this has been happening for thousands of years.
The Italians have been the world’s superpower at least twice in history– once during the time of ancient Rome, once during the Renaissance. The Chinese, Spanish, and Persians have all had their time atop the throne.
Power and wealth shift from time to time. And this is an important trend to embrace.
Being in front of this change could create generational prosperity. Stubbornly rejecting it could be detrimental to your savings and your liberty.
And if you’re not sure… just watch this video.


http://www.zerohedge.com/print/478803

 

EU demands answers from United States on financial spying

* EU seeks answers over SWIFT snooping leak

* EU could revoke agreement granting U.S. limited access to data

By Claire Davenport

BRUSSELS, Sept 12 (Reuters) - The European Union demanded talks with the United States on Thursday to establish whether the intelligence service of its ally had been secretly drawing information from a global financial database in Belgium.

The EU Commissioner for Home Affairs Cecilia Malmstrom said in a Twitter posting she had spoken to U.S. counterparts and expressed strong concerns about tapping of financial data by U.S. intelligence authorities.

"Following up with a letter today, requesting consultation under the TFTP agreement. We need clear, satisfactory answers," she wrote.

In the absence of such satisfactory answers, the EU could revoke an agreement that allows the United States to access information under its Terror Finance Tracking Programme (TFTP). This would be subject to approval by EU member states.

According to leaked U.S. documents aired by Globo, Brazil's biggest television network, the U.S. government has tapped into the computer networks of companies including Google Inc. , Brazilian state-run oil firm Petroleo Brasileiro SA and the Society for Worldwide Interbank Financial Telecommunication (SWIFT).

The European Union shares data from the database of SWIFT, which exchanges financial messages concerning transactions across the world, but it only does so with the United States Treasury, to help intercept possible terrorism plots.

In 2010, the EU and the United States signed a formal agreement to limit how much of that data can be retrieved.

Each side can terminate the agreement if there is a severe breach but only after mutual consultation to establish whether the terms of the agreement have been broken.

Europe has been unsettled by other revelations that the U.S. National Security Agency had been spying on European citizens by trawling vast quantities of email and telephone data of both Americans and foreigners. (Reporting By Claire Davenport; editing by Philip Blenkinsop and Ralph Boulton)

http://www.reuters.com/article/2013/09/12/usa-security-eu-idUSL5N0H739U20130912?feedType=RSS&feedName=financialsSector

Which Apple Components Were Developed By The US Government

While the investing community this morning is focused squarely on the very disappointing iPhone 5 relaunch and the lack of a cemented China Mobile deal, which has resulted in a $20 billion loss in market cap in early trading for thesecond most widely held hedge fund stock, a thing that we find more curious in the aftermath of the latest revalations of an implicit, if not explicitly voluntary, joint venture between Apple and the US government and specifically its NSA uberspies, is just how much of Apple's product suite is derived thanks to developments by the US government. As the following Goldman breakdown of various components used by Apple in its products over the ages shows, one can understand why the NSA felt it was owed a little kickback by Apple and its "zombie" clients. After all, without the US government's technological innovation, Apple as we know it, would not exist.

Is it any wonder that the NSA believes it is entitled to a little crowdfunded effort by Apple and its zombies clients when it comes to building its next generation fingerprint database?

 

http://www.zerohedge.com/news/2013-09-11/which-apple-components-were-developed-us-government

Another Swiss private bank under U.S. tax investigators' spotlight

* Rahn & Bodmer informed of U.S. investigation last week

* Bank says stopped accepting undeclared assets in 2008

(Reuters) - Private bank Rahn & Bodmer is under investigation by U.S. authorities, it said on Wednesday, following a recent deal to allow some Swiss banks to pay fines instead of facing prosecution for tax evasion by their U.S. customers.

That deal applies to about 100 second-tier Swiss banks, which may have to disclose information and face penalties of up to 50 percent of assets they manage for wealthy Americans.

A group of banks already under U.S. criminal investigation includes Credit Suisse, Julius Baer and state-backed regional bank Zuercher Kantonalbank. A second group of dozens more Swiss banks, which also helped weathy Americans hide their assets, are not yet under formal investigation.

"We knew we would have to go to U.S. authorities, so we began to prepare the documentation concerning our U.S. business some months ago, believing we would be in the second group," said Rahn & Bodmer partner Christian Rahn.

"It is difficult to evaluate whether being in the first group of banks is better for us or not," he said.

The bank was informed last week that it was under investigation, Rahn said. A spokeswoman for the U.S. Justice Department declined to comment.

The bank will not need to set aside capital to meet regulatory requirements if it has to pay a fine, as it has provisions which will cover a potential payment, Rahn said.

Credit Suisse and Julius Baer said in July they were preparing information on client withdrawals demanded by U.S. investigators to help pinpoint tax evasion, which may have pointing the finger at other banks.

However, Rahn said he did not believe his bank was being investigated as a result of data passed on by other banks as it had stopped accepting undeclared U.S. assets in 2008 and advised clients with such assets to make voluntary disclosures to the U.S. authorities.

According to its website, the Zurich-based bank managed client assets of 12.5 billion Swiss francs ($13.4 billion) at the end of 2012. It employs about 200 people.

It is the oldest bank remaining in the German-speaking part of Switzerland after St. Gallen-based Wegelin shut its doors earlier this year following an indictment and fine by U.S. authorities for conspiring to help U.S. clients evade taxes.

UBS paid a fine of $780 million in 2009 and delivered the names of more than 4,000 clients to avoid indictment, giving the U.S. authorities the information that has enabled them to pursue other Swiss banks.

http://www.reuters.com/article/2013/09/11/swiss-usa-tax-idUSL5N0H73BX20130911?feedType=RSS&feedName=financialsSector

Obama Seen Delaying Fed Choice Until After Syria Vote

“Syria right now has kind of paralyzed the town,” said David Plouffe, a former senior Obama adviser. “They’ll wait until the dust clears.”

An administration official said Obama hasn’t yet decided whom he will nominate for the Fed chairmanship. The official, who requested anonymity because the deliberations are private, declined to discuss the potential timing of an announcement.

Obama is mounting a full-court press to win support from members of Congress for authorization to attack Syria over what the administration says is the regime’s use of chemical weapons. Even as he traveled overseas to meetings with leaders in Sweden and Russia, he was making phone calls to senators and canceled a planned trip to California next week to focus on lobbying.

The Senate plans to begin debating an authorization resolution when it returns from its five-week break on Sept. 9. House leaders don’t plan to begin consideration until after a Senate vote, according to a House aide. That opens the possibility that the congressional debate on Syria will drag on until the week of Sept. 16.

http://www.bloomberg.com/news/2013-09-05/obama-seen-delaying-fed-choice-until-after-syria-vote.html

Households On Foodstamps Rise To New Record High: More Americans Live In Poverty Than The Population Of Spain

There was much discussion of Friday's "disappointing" non-farm payrolls goal-seeked, seasonally adjusted, X-13-ARIMA conceived [4] jobs "number." The conclusion was that it showed an economy which one year after the start of QEternity was growing nowhere near where the Fed has projected and hoped it would be at this time. But in addition to the BLS jobs number, there was another just as important number that was released on Friday: the monthly foodstamp (SNAP [5]) participation update. There was no discussion of this particular number and for good reason. If the NFP number was at least meant to show some economic stability, if subpar, the monthly foodstamp update shows month after month that the greatest depression is nowhere near ending for millions of American living in poverty (83% of SNAP households [6]have gross income at or below 100% of the poverty guideline ($19,530 for a family of 3 in 2013), and these households receive about 91% of all benefits. 61% of SNAP households have gross income at or below 75% of the poverty guideline or $14,648 for a family of 3 in 2013).

To wit: in June, the number of households receiving foodstamps rose to 23.117 million, an increase of 45.9k in one month, and also a new record high. As for the average monthly benefit per household: $274.55, just off record lows.

 [7]

At the individual level, in June an additional 125,059 Americans started using Foodstamps, i.e. entered poverty. However, the silver lining was that unlike at the household level, the increase to 47.8 million was not a record high. It missed that particular record, set in December 2012, by 31,771.

 [8]

And while it is understandable why the media has been obsessed with Syria: after all the administration is in dire need of distractions from so many things having gone wrong, it is also understandable why no mainstream media outlet will show the following chart: the change of Americans on foodstamps and disability vs jobs since the start of the Depression in December 2007. The reason is that while over that time period the US still needs to generate an additional 2.2 million jobs to get back to breakeven (ignoring for a minute that the jobs created are mostly part-time or low paying jobs), the number of foodstamp and disability recipients has risen by 22 million!

SNAP and Disability vs Payrolls monthly:

 [9]

And SNAP and Disability vs Payrolls cumulative:

 [10]

Finally, putting it all into perspective, there are more Americans on foodstamps than the entire population of Spain.

 [11]

Source: USDA [5]

http://www.zerohedge.com/print/478601

Syria and Second Passports

By Nick Giambruno, Editor, International Man

All of us by now have seen the latest sales pitch from the Obama administration for yet another so-called "humanitarian intervention" in the Middle East. It is not hard to see that the case for war is a bunch of rubbish and will likely end in disaster for both Syria and the US.

I am not diminishing the tragedy that is going on in Syria. The events there touch me on a personal level. I have good friends who live in Damascus and have been there myself several times when the situation wasn't so hot.

As some of you may know, I used to live in neighboring Beirut while I was cutting my teeth in finance at a regional investment bank. Due to its rich history and importance today, I have long been interested in the Middle East and sought ways to combine it with my professional background in finance.

I know it may be hard to fathom given what is put forth 24/7 on the mainstream media and if you have never been there, but Damascus is actually an amazing city on many levels—that is when it is not an active warzone of course. It is arguably the oldest continuously inhabited city in the world. The Christian quarter of the old city is one of the most enchanting places I have ever visited. And it's tough to beat the pistachio encrusted sweets from the legendary 100+ year old Bakdash ice cream parlor in the souk el Hamidiyeh.

Anyway, my purpose today is not give travel tips or to debunk the case for US intervention in Syria as hokum—David Galland did an excellent job of doing that in his latest piece here.

Instead I want to talk about Syria in terms of the lessons it provides us in internationalization.

It is human nature for people all around the world to have the "that can't happen here" mentality. And prior to the deterioration of the situation, many Syrians believed the same.

As Doug Casey has eloquently stated "The problem—your problem—is that any country can turn into a 1970s Rhodesia. Or a Russia in the '20s, Germany in the '30s, China in the '40s, Cuba in the '50s, the Congo in the '60s, Vietnam in the '70s, Afghanistan in the '80s, Bosnia in the '90s. These are just examples off the top of my head. Only a fool tries to survive by acting like a vegetable, staying rooted to one place, when the political and economic climate changes for the worse."

The uncomfortable truth is that, as history shows, no country is immune—especially one that has a deteriorating fiscal health—and internationalization is the ultimate insurance policy.

You won't be any worse off by moving some of your savings into multiple friendly jurisdictions and into things that are hard to confiscate, such as physical precious metals and foreign real estate. Obtaining a second passport is also an important ingredient in the mix.

Once you have taken these steps you will have insulated yourself and your family to a high degree from the uncertainty and sovereign risk emanating from your home country.

Developing your internationalization game plan takes time, and you must take action before it is too late. For Syrians, it would obviously have been optimal to have developed internationalization options many years ago.

Having a second passport and a financial account abroad denominated in a currency other than the Syrian pound, which has suffered from hyperinflation, would have gone a long way for the average Syrian today. The Syrian passport is not a great travel document; it requires a visa for most countries outside of the Middle East.

Having a second passport ensures that you will always have another place to potentially call home, another place where you will always have the legal right to live and work. In worst case scenarios, a second passport guarantees that once you get out of dodge, you won't have to live like a refugee.

A second passport can also come in handy when a government decides to starting treating its own citizens as beef cows instead of milking cows (i.e. when they need more soldiers for war) or if passport restrictions and other types of people controls are implemented.

The Syrian government, for example, previously refused to renew the passports of Syrians abroad it suspected of being associated with the opposition. This is not surprising and should have been completely predictable—any government could and would behave in a similar manner. Any government has the ability to revoke the citizenship and/or passport of its citizens at a moment's notice under any pretext that it finds convenient. Look at how the US cancelled Edward Snowden's passport by fiat.

It is not inconceivable that the US government would, for example, make it more difficult for Ron Paul supporters to travel internationally one day in the future. Heck, they have already taken the first step and labeled them potential domestic terrorists.

The bottom line is that if you hold political views that the establishment of your home government does not like, don't be surprised when they decide to restrict your travel options. In this case, having the political diversification that comes from having a second passport is even more important.

Unfortunately, getting a second passport, while necessary, is not easy. There are no solutions that are at the same time cheap, easy, fast, and legitimate. There is a lot of misinformation and bad advice out there regarding black and grey market passports that could likely end up causing you significant problems. It is essential to have a trusted resource to guide you through the process. There are definitely some options that are better than others. You can find our top picks for the best countries to obtain a second passport in and how to do it in Going Global 2013, a comprehensive guide to internationalization from Casey Research.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

http://www.marketoracle.co.uk/Article42146.html 

FURTHER READING ON THIS TOPIC AVAILABLE AT GLOBAL INTEL HUB

Securing your email

A guide to secure your email from Global Intel Hub

http://globalintelhub.com/securing-email/

Americans turn in passports as new tax law hits

HONG KONG (CNNMoney)

The number of Americans choosing to give up their citizenship has spiked dramatically this year as the government works to implement a new disclosure law aimed at stamping out tax evasion.

Some of the rush may be caused by Americans hoping to avoid the new disclosure requirements. Others living abroad say they are giving up their U.S. passport because they are tired of dealing with overly complicated tax filings.

http://money.cnn.com/2013/09/04/news/citizenship-us-tax/index.html?iid=s_mpm

U.S. Stock Market Indices Since Their 2000 Highs

Courtesy of Doug Short writes: Here is a update in response to a standing request from David England, a retired professor now actively educating investors through his Trader’s Eye website. In his presentations, he likes to disprove the standard message of Wall Street, “Don’t worry! The market will always come back.” I furnished David with some charts, and I now share them with regular visitors to my Advisor Perspectives pages.

Specifically, David had asked for real (inflation-adjusted) charts of the S&P 500, Dow 30, and Nasdaq Composite. So I created two overlays — one with the nominal price, excluding dividends, and the other with the price adjusted for inflation based on the Consumer Price Index for Urban Consumers (which I usually just refer to as the CPI). The charts below have been updated through the yesterday’s close (September 3rd).

The charts require little explanation. So far the 21st Century has not been especially kind to equity investors. Yes, markets usually do bounce back, but often in time frames that defy optimistic expectations.

The charts above are based on price only. But what about dividends? Would the inclusion of dividends make a significant difference? I’ll close this post with a reprint of my latest chart update of the S&P 500 total return on a $1,000 investment at the 2000 high.

Total return, including reinvested dividends, certainly looks better, but the real (inflation-adjusted) purchasing power of that $1,000 is currently, over 13 years later, is only 10 bucks above break-even.

- Phil

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www.philstockworld.com

Philip R. Davis is a founder of Phil's Stock World (www.philstockworld.com), a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders. Mr. Davis is a serial entrepreneur, having founded software company Accu-Title, a real estate title insurance software solution, and is also the President of the Delphi Consulting Corp., an M&A consulting firm that helps large and small companies obtain funding and close deals. He was also the founder of Accu-Search, a property data corporation that was sold to DataTrace in 2004 and Personality Plus, a precursor to eHarmony.com. Phil was a former editor of a UMass/Amherst humor magazine and it shows in his writing -- which is filled with colorful commentary along with very specific ideas on stock option purchases (Phil rarely holds actual stocks). Visit: Phil's Stock World (www.philstockworld.com)

http://www.marketoracle.co.uk/Article42138.html