Rolling my Investment Positions

The world is looking increasingly unstable and dangerous, and it would be strange if this doesn't get reflected in the markets.

Gold should be going up relative to other assets. That means that there should be opportunities for those holding gold to roll into other assets. However, we must neither be too quick nor too slow to do so, or we will squander our chances. We need to have a plan as to what to do, and stick to it when the wind blows.

Looking at the Dow to Gold ratio, we see that a ratio of about 7 looks like the neutral level. Ratios above that makes the Dow look expensive. Ratios below it looks cheap. We also see that there's a lot of support at about 5.

The Dow to Gold ratio is currently at about 17, which is roughly where it's been ever since 2017. Those who've been sitting on gold since 2017 have done no better and no worse than those who've been invested in the Dow. However, an imminent drop in the Dow to Gold ratio is likely due to recent developments. A drop to about 5 within a year or two isn't unthinkable. From there, it may fall further to 2.5. It may halve again to 1.25. Even 0.625 may happen. But it's hard to see the Dow fall further from there.

That leaves us with four entry points which I intend to use for myself. I also want to set aside some gold for real-estate, so I don't want to put all my gold into the Dow or similar indexes. A good allocation would be 2/3 in shares and 1/3 in real-estate. If I divide my gold into six equal parts, I can use four of them to buy shares at the above mentioned ratios, and two parts for real-estate.

If things crater completely, I'll end up owning a lot of shares, some real-estate and no gold. Otherwise, I'll remain partially invested in gold, which is fine by me because it's impossible to predict the future with sufficient accuracy to roll positions perfectly. The goal isn't perfection. I'm merely looking to do better than average, and that's only possible if I roll in and out of positions at opportune times.

The idea is to buy shares at ratios of 5 and below, and sell at ratios of 10 and above. I have no shares at the moment, but with a bit of luck, I might have some in the not too distant future. With even more luck, I might have some shares to sell at ratios of 10 and above within a decade or two.

Sovereign

By Heritage Auctions for image, Mary Gillick for coin - Newman Numismatic Portal, Public Domain, Link

The Coming Winter Offensive

Russia will stage a major offensive in Ukraine this winter. That's a near certainty. The objective will be to secure the territories now considered Russian after the referendum that they concluded this past week. The Russians may also extend their operations farther into Ukraine in order to gain territory with which to broker a peace treaty on their terms.

This may sound farfetched, given how Russia is on the defensive at the moment. But the current Russian weakness is going to turn to strength once the frost sets in.

Ukranian territorial gains have come at a great price, both in manpower and material. Russians, on the other hand, are keeping their powder dry. Come winter, Ukrainian forces will be depleted and in dire need of more military equipment, while Russians will have a surge of new soldiers with plenty of hardware and ammunition coming to the front line.

Once the frost sets in, military mobility increases, because heavy vehicles are no longer confined to roads and bridges. They can cross fields, lakes and rivers in broad attack formations. This is why winter is the season for war in countries with cold climates. Russians know this better than anyone, and are simply waiting for the frost to set in.

There's no point in staging any large-scale operation at the moment because fall as well as spring are wet seasons when armies can get bogged down in the mud. Fall and spring are ideal for defensive operations. Winter is ideal for large scale offensives.

The coming winter offensive will not only be swift, but also more brutal than what we've seen so far, because Russian forces will feel entitled to use more force now that they see themselves as operating on Russian soil. However, up until the offensive starts, the war may seem like it's winding down, with both sides spending less and less effort.

The Ukrainians will wind down due to a lack of manpower and material, and the Russians will simply stay in their defensive positions.

The winter offensive will come as a surprise on everyone who buys into the propaganda that the reduced activity during fall is due to both sides being exhausted.

Those who believe that Ukraine will do fine due to billions of dollars in military help from the West will also be disappointed, because the help is no longer coming in the form of fresh equipment. The West has depleted its stockpiles of hardware. The money pledged is for new equipment that will take years to build due to the West's obsession with high tech equipment.

The Russians have remained relatively low tech, with more focus on production capabilities. Their stockpiles of hardware are not nearly as depleted and will be replenished in time for the offensive. There're also a whole range of particularly brutal weapons the Russians have so far refrained from using.

As for any Russian military operations outside Ukraine, the chance of this happening is minuscule. Russia has no history of going to war against the West unless provoked. They don't annex territories unless there are Russians living those areas. Russia is not at war with the West and has no interest in provoking such a war.

The Western elite, on the other hand, seems hellbent on escalation. Pipelines are blown up. Anything that ties the West to Russia is a legitimate target in their efforts to isolate Russia.

The fact that our elite is now openly terrorizing us is a sign that they too know that a major offensive is coming this winter, and that there's very little they can do about it unless they can get Russia to lash out at them, and thus provoke a total war where everything can be burned to a crisp.

Mark Esper with Jens Stoltenberg

By U.S. Secretary of Defense - 200212-D-AP390-6107, CC BY 2.0, Link

Blowing up European Infrastructure

Someone blew up Russia's two main gas pipelines to Germany. This means that Russia can no longer turn their gas deliveries to Germany back on. Putin's leverage in that respect is gone. He can no longer entice the German people with the promise of normality if they simply accept his demands.

From this fact alone, we know that it's highly unlikely that the Russians blew up the pipelines.

Meanwhile in the North Sea, mysterious drones are flying around the Norwegian production platforms, making it clear to everyone that these platforms can easily be knocked out if so desired.

On the face of it, we might expect Russian escalation in the North Sea. They may choose to knock out a pipeline or two in retaliation. However, this will not benefit anyone but the US who sell LNG gas to Europe. Destroying European infrastructure will do nothing to end the war, and only play into the hands of those who want to divide and conquer. The Russians are therefore unlikely to blow anything up in the North Sea. The response is more likely to come in the form of propaganda.

Putin can again claim that he has the interest of the common people in mind. He has nothing against ordinary hard-working Germans, or the downtrodden Englishman, or ill-treated US citizen. He will go to extraordinary lengths to avoid hurting them. But as long as the elite in these countries insist on poking the Russian bear, he has no choice but to protect his own people.

Putin can further lay the blame on the American for the destruction wrought upon European infrastructure. It will be easy to convince a large swath of Germans that it is the Americans that are at war with them, and that the Russians are their true friends.

Putin can mention the North Sea infrastructure and point out that if he truly wanted to hurt the Germans, there would be no gas coming to Germany from that side either. The destructive capabilities of the Russians are immense, but they are restraining themselves out of love for the common people.

Whoever blew up the pipelines in the Baltic Sea handed Putin a golden opportunity to come across as the rational leader while painting the US as a demonic entity hellbent on destruction.

Vladimir Putin

By Kremlin.ru, CC BY 4.0, Link

Covering my Children's Expenses

I haven't been to Norway in over four years, so it was quite a treat to be back for ten days to visit friends and family. Among other things, I got to see how my three adult children are doing.

One is living in Bergen, another in Oslo, and a third in Drammen, so I got to see them separately as I moved between town. As a gesture of generosity, I told each of them that I'll cover any expenses related to eating out.

This resulted in an interesting dilemma that I hadn't expected, because the bills were not of the same size. My daughter in Bergen did a lot of cooking at home, and we hardly spent any money in restaurants. My son in Oslo took me to a burger place, and my son in Drammen took me to a fancy restaurant.

My original idea was to cover these bills according to what each had spent, but that would mean that my daughter would be compensated with a small amount for all her efforts. My son in Oslo would be compensated for a burger and a beer, and my son in Drammen would be compensated for a lavish meal. That's hardly fair. Moreover, it would generate a perverse incentive in the future, if I was to stick with this type of compensation.

Compensating any expense, however large or small, as if they were equal, incentivises indulgence. The smart thing to do when I come visiting will be to take me to expensive restaurants and spend no time preparing food at home.

The ones who host me at home with home-made food will feel unfairly treated relative to those who go out spending lavishly at my expense. I risk both incentivising indulgence and stoking resentment among my children. However, the solution to this dilemma isn't hard to find. Instead of covering every bill as if they were the same, I compensate everyone with an equal amount.

My plan is to take the biggest bill and pay everyone that amount. My daughter in Bergen will in this way end up with a monetary compensation for her frugality and homely generosity. My son in Oslo will get some spare cash for his modest and sensible choice, and my son in Drammen will get fully compensated for our indulgence.

This will come across as fair and generous towards everyone, and it will encourage everyone to spend according to their preference. My daughter will continue to be her natural homely and frugal self. My son in Oslo will continue to look for good inexpensive places, and my son in Drammen will continue to seek out fancy restaurants because that's what he likes. No-one will be incentivised to change their behaviour or feel unfairly treated.

A roast lamb dinner

By Acabashi - Own work, CC BY-SA 4.0, Link

KISS

My wife doesn't like the tax evasion plan I came up with yesterday. It's too elaborate and contrived, and I agree. There has to be something more straight forward that we can do.

This touches upon a general principle when it comes to systems and schemes: Keep It Short and Simple. That's KISS for short.

A good plan deviates only marginally from the truth, and it involves as few people as possible. Ideally, only a single person is at risk of interrogation, and that person should be the one who has thought up the scheme in the first place. That would be me in my case.

My original plan was not KISS. However, this alternative plan falls into this category:

The first thing to recognize is my overall goal which is to avoid a 10% transaction tax on money that is already taxed in Norway. The simplest way to do this is to refuse to see the money as a gift in the first place.

The next thing to recognize is that only gifts require recipients to report to tax authorities. Since the money coming from Norway isn't a gift, nothing needs to be declared. It isn't up to me to report my private affairs to them. It's up to them to start an investigation into whether or not the money can be categorized as a gift.

Since we know that taxmen are in the business of extracting as much money as possible from their subjects at as low a cost to them as possible, we know that they are unlikely to investigate anything that isn't either easy to verify or involving a lot of money with a high potential pay-out for them.

Ten percent of the money coming to me from Norway is a lot of money for me and my family, but hardly worth an investigation from the perspective of the tax authorities. Hence, the most likely outcome of doing nothing on my part is that there will be no investigation and the money will flow unhindered.

However, there has to be a story that I can present in the off chance of an investigation. We can't have a situation where we struggle to explain what's going on.

If there is an investigation, I imagine that it will start with a quick call and grow from there until they either give up or come to the conclusion that I have to pay the ten percent. However, I don't think I'll be fined for my conduct because my story is sufficiently close to the truth to argue that I misinterpreted the law with no ill intent.

This is how I imagine an investigation by the taxman may evolve:

1. My wife receives a phone call related to the money coming into her account from Norway. She tells them that the money isn't hers, it's mine. I'm a Norwegian, taxing to Norway, and the money is merely transferred to her account for convenience. The taxman can now choose to talk to me or give up, satisfied that the money is not a gift.
2. The taxman decides to talk to me. I tell him that the money comes from the accounts of my children in Norway because I don't have a personal account there anymore. However, I have capital income, taxed in Norway, that flows through my children's accounts for convenience. The taxman can now choose to talk to Norwegian tax authorities or give up, satisfied that the money is not a gift.
3. The taxman decides to talk to Norwegian tax authorities. He learns that I have no registered income or capital in Norway, and that I owe them money. It appears that the money may be a gift from my children. He decides to call me again.
4. I tell the taxman that it's true that I technically don't own anything in Norway, because I have passed ownership to my children against a private agreement that they pay me money every year.
5. The taxman tells me that this looks like a gift rather than a payment. I tell him that I think he's wrong and that I'm prepared to hire lawyers to prove my case. The taxman can now choose to call my bluff or give up.
6. Seeing that the money in question is flowing into Portugal as opposed to out of Portugal, the taxman will most likely give up, because a victory in court by the taxman may stop the flow and produce no benefit.

Keeping in mind that the above exchange is unlikely to take place, and that the outcome is unlikely to be more severe than a slap on my wrist, I see no reason to report anything to anybody related to my fixed income coming from Norway.

Schloss Vaduz

By Michael Gredenberg - Own work, CC BY-SA 3.0, Link

65,000 Cases of Monkeypox Worldwide

It's September 27, and we've reached 65,000 cases of Monkeypox worldwide. That's 2,000 more cases than predicted 17 days ago. Instead of a drop down to 250 new cases per day, we remained at 500 new cases. However, the downward trajectory remains in place. The outbreak may still be over by Christmas.

The worldwide number of cases currently in hospitals can be estimated to be 5,000 based on an assumption that patients are released within 10 days.

Assuming that this trend persists, we can make the following projection going forward:

• July 24 - 17,500 cases, 700 new cases per day, 7,000 inpatients
• August 1 - 24,000 cases, 750 new cases per day, 7,500 inpatients
• August 9 - 32,000 cases, 1,000 new cases per day, 10,000 inpatients
• August 17 - 39,000 cases, 875 new cases per day, 8,750 inpatients
• August 25 - 46,000 cases, 875 new cases per day, 8,750 inpatients
• September 2 - 53,000 cases, 875 new cases per day, 8,750 inpatients
• September 10 - 57,000 cases, 500 new cases per day, 5,000 inpatients
• September 18 - 61,000 cases, 500 new cases per day, 5,000 inpatients
• September 26 - 65,000 cases, 500 new cases per day, 5,000 inpatients
• October 4 - 67,000 cases, 250 new cases per day, 2,500 inpatients
• October 12 - 69,000 cases, 250 new cases per day, 2,500 inpatients
• October 20 - 70,000 cases, 125 new cases per day, 1,250 inpatients
• October 28 - 71,000 cases, 125 new cases per day, 1,250 inpatients

Pride flag

By Gilbert Baker (Vector graphics by Fibonacci) - SVG based on this image, Public Domain, Link

Doing the Impossible

Fresh back from a ten-day break in Norway, I was told by my wife to take a look at an article in a local financial paper. A new tax law has been introduced where gifts above €500 are being taxed at 10% when not received from a parent or grandparent.

This affects the way my wife and I have arranged our affairs. My children have been sending me money every year as a gift in return for an early inheritance I bestowed upon them. From the article, it appears that we have no option but to subject ourselves to a 10% tax. However, I wasn't much bothered by this news. I felt intuitively that it was but another law that cannot be properly enforced.

I didn't immediately see a solution to the problem, but I know that a similar law was rolled back in Norway a few years ago due to the impossibility of enforcing it. I also have some experience with tax evasion, and I have what some would call a criminal mind. I don't pay much attention to the laws of the land. The details don't interest me. What draws my attention is whether or not a law can in fact be enforced.

This particular law may have some loopholes for people in my situation, so we will look into the exact letter of the law to see if we are in fact affected by it. However, I can't help dreaming up schemes that will work regardless.

The basis of my thinking is that we're dealing with something that's man-made, as opposed to that which exists in nature. Tax laws are not natural. They are man-made. Hence, we have nature on our side.

The state tends to lean towards Lucifer, which is the antithesis of God, aka nature. As such, we have an advantage due to the way God has constructed the universe. Elements that play to our advantage are time, complexity, size and physical laws of nature. Any man-made law that requires omnipotent powers in relation to these obstacles is impossible to enforce with any degree of success. To believe otherwise is to believe in the state as somehow equivalent to God.

As a staggering example of hubris that I recently came across, I can mention a law passed in Sweden. Its enforcement will result in the establishment of many small electrical generators, and the winding down of large power-plants. The fact that this is physically impossible to achieve because power grids need a large base load to operate, didn't bother the politicians one bit. They passed the law, nevertheless.

It appears that politicians these days see themselves as elevated above God Himself. Even obstacles that exist physical in nature can now be bypassed by one of their laws. However, this is not something to fear. Quite the opposite, the fact that they consider nature irrelevant makes it easier to evade their attention.

In the case of the law related to gifts, now operating in Portugal, there's another aspect of nature that's being ignored, namely the fact that a gift is no different in principle than any other payment. Using an analogy from physics, it's as if the politicians decided to tax potential energy while letting kinetic energy pass without taxation. The result of such an idea would be the production of flywheels where excess energy is stored in a kinetic rather than potential form.

The fact that we have different names for different types of energy doesn't mean that there's any real distinction between them, and the same holds for payments which can come in all sorts of forms, ranging from gifts and discretionary purchases to investments and speculation.

The key to tax evasion is to recognize that most things described by politicians are merely word. They are not part of nature. A gift is a payment. All that's required in order to evade a tax on it is to find some other type of payment that carries little or no tax.

When this insight is combined with the recognition that God's own money, namely gold, is impossible to tax due to the ease with which we can hide and transact in it in secret, we find a solution to my particular problem.

My children will no longer send me any gifts. They are going to invest in my gold. The money coming from them will be declared as an investment, and the price they will pay will be such that no profit is made by me. Hence, there will be a gift of sorts flowing from me to my children. However, that's a direction that is tax free according to the man-made law.

This is preferable to the ultimate evasion which would involve smuggling of cash and/or gold.

My scheme breaks no law in the here and now. I get time on my side. I also avoid the physical hassle and danger related to smuggling. This is how the scheme will work:

• My children in Norway send money to me in Portugal
• The money is declared as investment in gold held by me
• No purchase of gold is necessary on my side because I already own gold
• No gold is sent to Norway because we take care of it in Portugal
• If anyone asks, I can show them the receipts for the gold purchased for my children
• There're enough such receipts to keep the scheme going for years
• Physical possession is real ownership, hence there's no real transfer of gold
• The gold remains an inheritance to my son in Portugal, as originally intended

The only time when this scheme may break a law is when everybody involved forget that the gold was purchased by my children in Norway. However, this is unlikely to be a problem because no records are going to be kept by anyone. There will only be some vague declarations of intent every time money is sent from Norway to Portugal. This is not sufficient to null the fact that it's my son in Portugal that owns the gold.

This is the beauty of time. Things are forgotten. With little to no record keeping, nobody but the involved parties will know what went on, and no-one will bother to dig into the details on a vague suspicion that something dodgy may have taken place.

Nature is complex, big and powerful. Tax offices are small and staffed with people with no motivation to look into something that took place years back in time. Hence, there's little danger of any investigation, and even less danger of anyone finding anything illegal.

The most likely outcome of this, if we choose to implement it, is that there will be no investigation whatsoever, and if there is one, it will happen at a time when no law has been broken.

Sovereign

By Heritage Auctions for image, Mary Gillick for coin - Newman Numismatic Portal, Public Domain, Link