I wrote to fellow blogger Kevin Graham the following warning after his repeated insistence that Wells Fargo is very safe and cheap:
Kevin: Are you aware of the consequence of the FATCA legislation and how it will affect investments in the United States? As a Canadian you can easily protect yourself from these consequences by pulling your investments out of the United States. I am involved in a group blog, the Isaac Brock Society, which is dealing with the questions of US persons abroad and the attempt of the United States to crack down on alleged tax evaders living abroad, including Canada.
I say this because you promote Wells Fargo, and not a few other US equities as “safe”. I am not sure that anything in the United States can be deemed “safe” and I recommend all investors to get out before the meltdown of the economy there. The other issue of course, is that the United States debt has no surpassed 100% of GDP. This seems to me to be a reason to be extremely cautious.
Kevin and I had a good time going back and forth over Petrobakken last year, when PBN hit its nadir. I was the bull; he was bear, even when PBN was at $6.50; Petrobakken achieved its year end exit production guidance and thus is on its way to a full recovery (which I think will be above $24). It didn’t hurt that Sinopec bought Daylight Energy, a company which had a similar debt issues to Petrobakken, but Daylight was arguably less attractive because it was more weighted towards natural gas than Petrobakken, but it did give us an opportunity to see what an outside buyer would pay for a mature intermediate oil and gas company, and it was double the then-current market price of Daylight. I took tender for my shares of Daylight and I am happy to say that I have, as of today, received into my brokerage accounts.
Unfortunately, Kevin’s recommends US bank after US bank. But he is apparently unaware of FATCA and the likely damage that it will do as a result of the exodus of foreign investment in the United States. Furthermore, I consider American banks black boxes. Who can possibly know what they are worth when they have so many derivative contracts that nobody understands? I consider the banks bad risk since the time that I learned that many of them (e.g., Scotiabank) have large short positions in gold through their sale of unallocated gold certificates.
One might ask why I bother checking Kevin’s blog. Well, I like reading some blogs that look at the world in a totally different way than I do. I also like to challenge them. Then, if they can muster cogent responses, it makes me think about my position. I can’t say that Kevin has ever succeed in convincing me of anything though. Each time that he talks about a company being safe (like Sears), I get the urge to add to my Spam collection.
My Spam collection
The Righteous Investor 
Kevin Graham responded to me at his blog:
I answered:
Much to my surprise, Kevin permitted my comment and responded again:
Petros, we don’t still don’t how the FACTA is going to be implemented and if capital is really going to fly out of America. I think it’s too early to call. We could see:
1- A rush to the doors;
2- Companies gradually scale out
3- Only the smallest companies pull out
4- No reaction at all
So while I understand your intentions, that blogger is doing the right thing by (for now) including the US on his radar. I don’t know if he is some American flag waiver, but there ARE actually some decent investments in America, much better than you can find anywhere else. Personally, I have always done my best when I seperate my opinions from the facts that I see on the screen.
This, however, in no way shape or form affects my view of America and my desire to renounce. My decision for renunciation will be fulfilled.
Thanks for the comment.
My view of Sears is related to my view of the US. If the US wasn’t going down the tubes, they wouldn’t be hounding us for money. This can’t end well–only with a mass repudiation of the US and investment there.
I disagree with your point about the US. The investments may look like deals, but they are what are called “value traps” because inflation is going to destroy the ROI until they fix the budget problems.
Canada is indeed a much better place to invest. There are great deals in the oil and gas and gold mining sectors, at least for now. I still avoid Canadian banks because housing is in a bubble here and because they’ve shorted gold.
And finally, if you don’t make moves before the crowd, you will never win in investing. You have to move before people start jumping on the band wagon. I’ve made my call about FATCA. This is going to happen–if not because of Canadian investors in the US, because the international community is already moving out of the US. Canada is small compared to Japan and China, for example. I made move out of US three years ago. So far that decision to short the United States has worked out very well for me, and I expect, even better in the future.
My bet is that it will take some time. The FACTA is terrible, but I don’t think it’s a very simple process to delist from a stock exchange, or sell off trillions in assets. Everybody wants to get a good price, so they sell, then wait for prices to rise, then sell some more. Everybody knows that if everybody heads for the door at the same time, everybody ends up with a terrible price. That is, if they REALLY want to sell their US assets.
Moreover, most everything with associated with the US (t-bills and the US dollar) are ** risk-off ** asset classes. If the US fabricates another war, then the value of these US investments will rise.
About inflation, one could argue that the run up on commodity prices COMBINED with low interest rates in Canada has increased inflation in Canada, which actually happens to most commodities-based economies.
About the “good” investments in America:
Let’s assume that an American has a brokerage account in America. There is a family of funds that pays from 10% – 15% a year, with low expenses too.
Compare that to Brazil, where foreign investment has been coming in like mad since 2002: I can get roughly the same rate with something like a CD or a better rate by buying government bonds. But I will deal with government-induced inflation to the tune of around 10-15% per year. They say it’s lower that that, but prices track the minimum wage, which goes up almost every year. The increase this year was just shy of 15%.
In the US, I still don’t believe the official figures, so let’s add a few points just to be safe, so around 7% inflation per year. That’s still much better than most places.
You of all people know I’m not a US cheerleader. In this case, I’m just going off the numbers. If you have an better alternatives in Canada, I’m all ears.