Here’s an interesting guest contribution from Money Morning’s Investment Director Keith Fitz-Gerald, about how to protect yourself from the ravages of inflation. Of course I don’t agree with everything Keith says below – you know how big I am on Gold in particular – but I always believe in offering readers differing opinions. And I do agree that shorting the dollar is a great idea. Everything recommended below you can do through Offshore Brokerage Accounts.

In fact, we sent out a special mailing recently to Q Bytes readers because – as someone commented just today – there are a lot of people out there trying to sell investment tips for hefty fees… but few of them really come through. Keith is different, and his track record speaks for itself:

Since launching his Geiger Index trading service late last year, Money Morning Investment Director Keith Fitz-Gerald is a perfect 14 for 14, meaning he’s closed every single one of his trades at a profit. And he did this in the face of one of the most-volatile periods since the Great Depression. Fitz-Gerald says the ongoing financial crisis has changed the investing game forever, and has created a completely new set of rules that investors must understand to survive and profit in this new era. Check out our latest insights on these new rules, this new market environment, and this new service, the Geiger Index.

Here’s what Keith has to say…

Right now, there’s more than $9.5 trillion in cash on the sidelines – or more than twice the amount of money currently invested in stock mutual funds, according to MoneyNet.inc and the U.S. Federal Reserve. Private equity firms alone are believed to hold as much as an additional $1.3 trillion.

While I’ve always doubted that the “money on the sidelines” argument is really all it’s cracked up to be, one can hardly argue with a recently released report from Harris Private Bank of Chicago [part of the U.S. arm of the Bank of Montreal (NYSE: BMO) that notes that stocks have rallied for the next two years whenever money market assets have exceeded 25% of the capitalization of the Standard & Poor’s 500 Index. According to the Los Angeles Times, that figure is now 43%, down from 58% after having peaked in December – and that’s even after the 30%-plus run-up in the S&P 500 since March.

What’s interesting is that many investors holding large cash positions view their money as an asset, when, ironically, it’s really more of a liability at this stage of the game.
Some might take issue with that statement. After all, even we at Money Morning have counseled readers that cash – correctly deployed – can allow an investor to sidestep the worst stretches of a financial crisis, like the one from which we’re currently attempting to extricate ourselves.

But when the markets are as beat up as they as they have been, history suggests there’s probably more upside than downside – even if we haven’t bottomed out yet.
And there’s a broad body of research to support that contention – including our own newly created “LSV (LIBOR/Sentiment/Value) Index” (published as a part of The Money Map Report, the monthly investment newsletter that’s affiliated with Money Morning).

There’s also data sets widely published by others, such as Yale Economics Professor Robert J. Shiller. Shiller has found that when you look at 10-year periods of Price/Earnings (P/E) data dating all the way back to 1871, the markets tend to rise when the average P/E is low, as it is right now. Conversely, when the average Price/Earnings values are high – as they were in late 1999, and again in 2007 – a decline in stock prices is much more likely.

There are obviously no guarantees that history will repeat itself. But if it does, the same data implies we could see real returns of 10% a year or more “for years to come,” as Shiller noted in a recent interview with Kiplinger’s Personal Finance.

My own research seconds the general-market-increase theory, but I’m much more conservative in my expectations of returns and think that returns of 7% are more likely.

Perhaps what’s more important right now is that inflation typically accompanies growth – and with a vengeance. And that means that investors who are sitting on cash “until the time is right” may have their hearts in the right place but are relying on the wrong protection strategy.

My recommendation is a four-part plan that can help lock in the expected returns you want, while also protecting your cash from the ravages of inflation. Let’s take a close look at each of the four elements of this strategy:

• First, protect your cash with Treasury Inflation Protected Securities (TIPs). Even though the trillions of dollars the Fed has injected into the system seem to be having some effect on the critically ill patient the U.S. central bank is trying to fix, we’re likely to pay a terrible price in the future. Forget the hyperinflation scenario so many people are hyping at the moment. While that’s certainly possible, it’s not probable. However, what is likely is a dramatic realignment of the dollar and a general increase in worldwide living expenses.

If you’re based in the United States and have mostly U.S. assets, you may want to consider something as simple as the iShares Barclays TIPS Bond Fund (NYSE: TIP) to offset this risk. The TIP portfolio is chocked full of inflation-indexed securities, but it also offers a healthy 7.46% yield. If you’ve got international exposure, you may also want to consider the SPDR DB International Government Inflation Protected Bond ETF (NYSE: WIP). It’s a collection of internationally diversified government inflation indexed bonds that provides similar protection. Make sure you talk with your tax advisor about both, though. Depending on your tax situation, you may find that because of the tax liability on inflation-related accretion, these are generally best held in tax-exempt accounts.

• Own some gold but don’t go crazy. Despite widespread belief to the contrary, gold has never been statistically proven as an inflation hedge. But the yellow metal has proven to be a great crisis hedge because of the 10:1 relationship between gold prices and bond coupon rates – which obviously are directly related to inflation. Over time, the two move in such a way that having $1 for every $9 in bond principal can help immunize the value of your bond portfolio.

So to the extent that you own gold, do so not because you expect it to rise sharply, but because it will offset the inflationary damage to your bonds. A good place to start is the SPDR Gold Trust (NYSE: GLD) because it’s tied directly to the underlying asset without the hassles or risks of direct personal storage associated with bullion.

• Consider commodities. It’s too early to tell if the so-called “green shoots” that everybody is so excited about are little more than weeds. Therefore, it makes sense to concentrate on picking up resource-based investments. History shows that these things are less susceptible to downturns, but more importantly, rise at rates that far exceed inflation when a recovery begins in earnest.

I prefer companies like Kinder Morgan Energy Partners LP (NYSE: KMP) that are less dependent on the underlying cost of energy than they are on actual growth in demand. That way, if energy prices don’t take off immediately for reasons related to deflation or stagflation, those still will benefit from demand growth. It’s a fine point, but one that merits attention for serious investors. KMP, incidentally, yields an appealing 8.68% at the moment.

• Short the dollar to hedge your bets still further. Not only is the government going to borrow nearly four times more than it did last year, but when you add the complete federal fiscal obligations into the picture, our government owes nearly $14 trillion. This makes the dollar, as legendary investor Jim Rogers put it, “a terribly flawed currency” that could fail at any time.

To ensure you’re at least partially protected, consider the PowerShares DB U.S. Dollar Index Bearish Fund (NYSE: UDN), which will rise as the dollar falls. It’s essentially one big dollar short against the European euro, the Japanese yen, the British pound sterling and the Norwegian kroner, among other currencies.
In closing, there is one additional point to consider. You rarely get a second chance to do anything, especially when it comes to investing. So act now before the markets make it cost-prohibitive to protect yourself. When the economic recovery gets here, you’ll be glad you did.

Peter here again: Well, I hope this helps, and will be back soon with further offshore banking news.

From somewhere offshore!

Peter Macfarlane

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This is a question that was recently posed to me by real estate guru Thomas Bolther, who was setting out to answer this question on his own website.  How can one live free offshore and make money at the same time? Actually, it’s surprisingly easy. The offshore element gives you a huge head start over those who must deal with taxes and over-burdensome government regulations when setting up their businesses.

One good thing coming out of this recession/depression is that it is really making people question their lifestyle choices. Forcing radical change on people can be a force for the good. You might have been putting off something you really wanted to do for years, for example, because of pressure of work or lack of time. Then, suddenly, you lose your job and you are free to realize your dream! Ironic, huh?

Of course, in real life things aren’t that simple. But on the other hand, we often make things too complicated. Always ask yourself why. Things that have just come to be accepted as fact often need to be challenged. And right now we are all facing challenges. It is up to us to make the best of them, and that will probably involve doing something new and different.

Remember that in the years following the great depression in the 1930s, many of America’s greatest fortunes were made, and family dynasties were created that survive till this day. I believe that over the coming two or three years, many new fortunes will be created. Many of those, says Thomas Bolther, will be in real estate – that’s why he talks about How to be a Property Tycoon. The people who become rich will not be ‘lucky.’ They will be creative entrepreneurs who saw opportunities and reacted. People who are open minded.

In fact, a lot of it comes down to common sense. And most of those fortunes will not be made in the USA or the UK. They will be made (at least on paper, but more likely in practice too) in offshore havens like Panama, the Cayman Islands or Taiwan.

They say that “travel broadens the mind” and talking from personal experience I can say that is very true. Another wise man once said that the world is like a book, and those who never travel only see one page. You see that in different cultures and countries, there are different ways of doing the same thing, that work just as well. As you gain experience of the world, you just begin to see opportunities that never occur to people who stay at home watching soap operas.

The internet, of course, allows you to run an ‘ideas’ business like that from anywhere. A new concept for me, for example, was running an onshore real estate business from offshore over the internet. But my friend Thomas Bolther explained very neatly how he did this for years, and how he has now all but phased out the real estate part, making the transition to a 100% online business. He calls it Living as a Laptop Hippie.

All the while he was living the offshore lifestyle he wanted. Thomas’s article is called “How to Build Real Wealth Offshore and Online” and it’s Part 4 of our FREE FIVE PART Secrets of the Super Rich course, available free right now simply by entering your e-mail address in the box tothe right of your screen.

So to return to our original question, you just don’t need a million in the bank to be free, to be your own boss. There are millions of businesses out there you can start with no money down, and many of them can be run from a laptop, with the paperwork and banking elements all secured in an offshore tax haven. Even if you end up with fewer material benefits, you will buy peace of mind, freedom from stress.

Why go offshore? Going offshore is no longer about hiding money – it is about creating wealth in an environment that is free from burdensome over-regulation. Real free markets. And most importantly, by freeing up your mind’s creativity, by living free and hopefully debt-free, you reduce or eliminate the stress and worry that I’ll bet are the biggest factors holding you back right now. If you feel it’s time to change, then go for it! Don’t wait until you have a million in the bank, or you might never get there!

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Although we are a very much an international business, we naturally have more than a few readers who are US taxpayers in one way or another, and are liable to file IRS tax returns. And by definition most of our readers are already involved in offshore or international banking. A question that frequently pops up, therefore, is “Do I have to Report Gold Stored Offshore to the IRS on the FBAR (Foreign Bank Account Reporting) form?”

This question is also relevant to non-US residents as similar reporting requirements exist in other countries – although you should be sure to check local reporting requirements very carefully in the country where you normally file tax returns, as reporting requirements do differ significantly.

The so-called IRS  FBAR requirements actually refer to the requirements of a Foreign Bank and Financial Account Reporting form. The actual form number you will be working with is TD F 90-22.1. Under current U.S. law, any person living in the U.S. must file this form if he or she has a financial interest or signature authority in a foreign financial account that has an aggregate value of over $10,000 at any time during the course of a year. This not only includes U.S. citizens but also all residents, domestic partnerships, domestic corporations or domestic estates.

The question has been raised and answered many times before, but was addressed recently by Mark Nestmann of the Sovereign Society, in an article entitled Are Precious Metals Stored Offshore Reportable Financial Accounts? As Nestmann says, tax authorities “construe the term “financial account” very broadly. The definition unquestionably includes bank, securities, and other accounts that hold financial instruments. However, it does not include individual bonds or stock certificates.”

The question, therefore, is whether physical gold bullion that you hold in an offshore vault (or anywhere else offshore for that matter) is reportable. The IRS gives no clear guidelines on the matter, and you probably wouldn’t want to call your local IRS office and ask them directly. Better to check with a suitably qualified tax attorney who is working on your side!

Nestmann’s conclusion is that “If you hold the metals in a safety deposit box or private vault, without opening a bank or other financial account, you don’t appear to have any reporting obligation.”  At many offshore banks you must open an account in order to rent a safety deposit box, but you could always keep the balance of this account under the $10,000 FBAR reporting requirement. There are also a number of non-bank safe deposit facilities available in Austria, Switzerland and the Caribbean.

More information on how to buy gold bullion offshore, as well as where to store it (including specific names and addresses of little known storage and vault facilities) may be found in The Gold Report by Peter Macfarlane. There are also some important warnings about places you should NOT store gold bullion and other precious metals, including anywhere in the United Kingdom.

If you are interested in buying and storing gold bullion offshore, The Gold Report is for you. The good news is that it’s available free for immediate download to members of Q Wealth Report  in the members’ section. If you are not a Q Wealth member and don’t want to sign up, you can now also purchase Peter Macfarlane’s Gold Report as an e-book at the Expat Wealth bookstore.

Note:  sampling the quality of Peter Macfarlane’s articles costs you nothing. Simply enter your e-mail address on the box to your right to receive a free 6-part course entitled “Secrets of the Super Rich” in your e-mail inbox. No spam guaranteed!

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Everybody wants predictions. The following piece goes one better than that!

Doug Casey, publisher and Chairman, The Casey Report,  and a legend in the field of investments and geopolitics, wrote the following article back in November of 1997. It oultlines  several theories of history, and  anticipates what will likely happen to the world  over the next generation. Great food for thought!

As you will read, the methodology Doug relied upon for anticipating the events that are now unfolding – 11 years later – were actually quite accurate, confirming, in my mind at least, that now is a time to be very cautious in your personal and financial affairs. I believe you will find the following guest post by Doug Casey fascinating. But more than that, I hope you will profit from it! The article is unaltered in its text from the original, though Doug has added some current commentary in bold italics
The Original Article is called:

Foundations of Crisis

By Doug Casey, Chairman, The Casey Report, Casey Research, LLC

“Don’t know much about the Middle Ages, look at the pictures an’ I turn the pages. Don’ know much about no rise and fall, don’ know much ’bout nothin’ at all” “Wonderful World,” Sam Cooke

The lyrics quoted above probably describe the average American’s knowledge of history about as well as any academic study. Not only don’t they know anything about it, and think it’s irrelevant, but what they do know is inaccurate and slanted. And they must not think very much about the future either if the amount of consumer debt out there, mostly accumulating at 18% interest, is any indication.

One point of studying history is that it gives you an indication of what’s likely to happen now, if you can find an appropriate analog in the past. This is a tricky business because as you look at factors contributing to a trend, it’s not easy to determine which ones are really important. Making that determination is a judgment call, and everyone’s judgment is colored by his worldview, or Weltanschauung as the Germans would have it.

Let me briefly spell out my Weltanschauung so you can more accurately determine how it compares with your own, and how it may be influencing my interpretation of the future.

I’m intensely optimistic about the long-term future. It seems to me a lock cinch that the advance of technology alone – and nanotechnology in particular – will result in a future of incredible abundance and prosperity, and that alone will solve most of the problems that plague us. Space migration, intelligence increase, and life extension will be commonplace realities. These things, plus the growth of both knowledge and its accessibility and the concomitant rise of the individual from the group, will constantly diminish politics as an element of life. The future will be much better than anything visualized on Star Trek, and will arrive much sooner. That’s the good news.

The bad news is that within the longest trend in history, the ascent of man, there is plenty of room for setbacks, and much of history is a case of two steps forward and one back. My gloomy short-term outlook, and my reasons for maintaining it, is recounted here monthly. Whether it’s right or wrong, from an investor’s point of view, the short term is more relevant than the long term. Notwithstanding Warren Buffett’s great success in going for the long term, Keynes was right when he said that in the long run we’re all dead. History shows that goes for civilizations as well as people. The problem is that our civilization is probably just now on the cusp of the long term.

Hari Seldon: Where Are You When We Need You?

Isaac Asimov’s classic Foundation trilogy centers around a scientist, Hari Seldon, who invents a science called psychohistory, which allows the fairly accurate prediction of broad trends in society going for centuries into the future. Seldon lives on Trantor, the planetary capital of a galactic empire; the entire planet is covered with a high-tech version of Washington, D.C., devoted to nothing but taxing and regulating the rest of the galaxy. Seldon forecasts that the empire will collapse and Trantor turn into a gigantic ghost town. And of course that’s what happens, because it’s a novel, and that makes for a good story. It’s a good story because it’s credible, and it’s credible because people know nothing lasts forever, and there is a cyclicality to everything; birth, youth, maturity, senescence, and death. These stages are shared by everything in the material world, whether it’s a person, a city, a civilization, or a galaxy. It’s just a question of time and scale.

From that point of view everyone knows the future, i.e., we all know that everything eventually dies. But we’d like a bit more precision on the timing of their lifecycles. Some gurus believe, or appear to believe, they can actually predict the details of the future; I consider them knaves. People who actually do believe them should be considered fools. That said – Nostradamus, astrology, channeling, tea leaf reading, and the like aside – I do think the best indicator of what will likely happen in the future is what has happened in the past. That may seem like an obvious statement, but it’s not. There have traditionally been three ways of looking at the problem; call them theories of history.

Oldest is what might be termed a chaotic view, which presumes mankind doesn’t have any ultimate destination but is wafted on the wings of Fortune or hangs by the thread of Fate. Subject to the arbitrary will of the gods, whether it’s the Old Testament’s Yahweh, or Homer’s Zeus, the future is unpredictable, and prophecy or an oracle gives you as good a read as anything else. I discount this theory heavily.

A second ancient view is that everything is cyclical, and therefore somewhat predictable. History may be viewed like a giant sine wave that’s possibly headed somewhere, but the direction is unknown. Or history is really a circle, constantly repeating itself, much like the four seasons of the year. There’s a lot of wisdom to the cyclical view.

The third view sees history as a linear sequence, one that’s actually headed somewhere. That view holds a special appeal for followers of evangelically oriented religions, particularly Christians (many of whose beliefs have an apocalyptic tinge) and Marxists (who were, until lately, given heart by the “scientific” inevitability their views would prevail). The linear view ties in with the idea of Progress, that (more or less) every day and in every way, things are getting better and better – although there’s also a subculture populated mostly by deep ecology, animal rights, and anti-technology types who believe things are headed to hell in a hand-basket. But they all believe we’re headed somewhere in a more-or-less straight line. There can be a lot of truth to the linear view, certainly if you look at the technological progress of mankind over the past 10,000 years, and this view prevails today.

My own view is a synthesis of the cyclical and linear theories. I see history evolving towards an incredibly bright future, but cyclically suffering setbacks, cyclically repeating the same patterns along the way. To me history looks like a spiral, heading off in a specific direction, but always covering the same ground in a different way with each revolution.

That’s one reason The Fourth Turning, (Broadway Books, NY, 1997) by William Strauss and Neil Howe got my attention; we’re all drawn to those who see at least part of reality the way we do. The book is an extrapolation of their last work, Generations, and notwithstanding its literary faults, is simply brilliant. I’ve never met Howe, but did have lunch with Strauss once about five years ago. The way I see it, although they’re both conservatives, neither of them has any particular economic, political, or social philosophy, and they’re not trying to grind an ax. Their books are a value-free look at U.S. history, and their conclusions are more credible as a result.

Their basic hypothesis is one I suspect Hari Seldon would recognize, and my thoughts are built on the research Strauss and Howe have done over the years. I suggest you get a copy of The Fourth Turning while it’s still in the stores. That’s also true for my own Crisis Investing for the Rest of the ’90s, which has several chapters on related subject matter, and Arthur Herman’s just-released The Idea of Decline in the West, which also bears on the subject. With 50,000 new books published every year, very few stay available for more than a few months. If something has appeal, you should buy it now, because it may be hard to come by when you have the chance to get into it. (Of course, I was wrong on that point — websites such as Amazon and Alibris.com now make it easy to pick up many older books.)

Generations

Generational conflict has been recognized since ancient times. The twist here is the discovery of several things that have previously eluded observers. One is that the well- known conflict between fathers and sons is only half the story; there aren’t just two generational types that alternate (e.g., liberal and conservative), but four. The reason for looking at it this way is that a human life can be conveniently divided into four stages: Childhood, Young Adulthood, Midlife, and Elderhood. Throughout all of history, a long life might be considered to be 80 to 100 years, with each of the four stages equaling a quarter of it.

Just as each person’s life holds four stages of about 20 years each, each generation comprehends a group of people born over about 20 years. Members of a particular generation tend to share values and ways of looking at the world not only because their parents also shared a set of views (which the kids are reacting to), but because every new generation experiences a new set of events in a way unique to them. They hear the same music, see the same events, are exposed to the same books. Members of a generation share a collective persona. There appear to be four distinct archetypal personae that recur throughout American history. And throughout world history as well, although that’s a bit beyond what I hope to explore here.

It also seems, throughout history, that there are periodic crises. About once every century, or about when each of the four generational types has run its course, a cataclysmic event occurs. It generally takes the form of a major war, and it generally catalyzes a whole new epoch for society.

The four mature generations alive today each represent an archetype. Let’s review them from the oldest now living, to the youngest.

Hero Archetype

The “GI” generation, born between 1901 and 1924, includes basically all living people in their mid-70s and older. They grew up and came of age in the midst of the most traumatic years in human history: the 1930s and ’40s. This was a time of catastrophic financial and economic collapse, world war, political dictatorship, genocide, and virulent ideology, among other unpleasant things; a period of intense turmoil. The times required them to be civic minded, optimistic, regular guys who could be counted on to do the right thing, fit in, and see that everybody got a square deal. As a consequence of what they’ve been through, they tend to be indulgent parents. As kids they’re “good”; as adults they’re selfless, constructive, and communitarian. Hero archetypes encounter a Crisis environment in Young Adulthood; assuming they survive it, the odds are the rest of their lives will be lived in growing economic prosperity, leading to a leisurely retirement.

Artist Archetype

Meanwhile, another generation was being born at the height of the Crisis – something that seems to occur roughly every 80-100 years – from 1925-42. This generation, the “Silent,” watched these titanic events happen but were too young to take part in them. They were relegated to being protected, while trying to be helpful in the limited ways available to them. They’re overprotected as children, when they might be characterized as “placid”; they tend to underprotect their own children as a reaction. As adults they’re sensitive, well-liked, sentimental, and caring.

Prophet Archetype

Next came the group we call the “Boomers,” born from 1943 to 1960. This was the first generation born after the Crisis was over, and they grew up in an environment where their parents (mostly GIs and early cohort Silents) felt obligated to protect them from all the trauma of the preceding years and were desirous of giving them all the things they never had. As kids they’re seen as “spirited.” Later in life, they tend to be narcissistic, presumptuous, self-righteous, and ruthless. Born after a Crisis, their Childhood years coincide with a rebirth of society, and their Elderhood coincides with another Crisis. More on them below.

Nomad Archetype

The fourth generational type is represented by today’s “Generation X,” born 1961-81, during what might be called an Awakening period when the Boomers were in the limelight. As a consequence, they were overlooked and a bit abandoned. Their reputation as kids can be summed up as “bad.” They’re oriented toward survival, which is partially a result of their being underprotected as children. When they become parents, they react and become overprotective. They tend to be savvy, practical, tough, and amoral.

The kids born between 1982 and perhaps 2002 should be another Hero archetype. My own experience with them is that they’re shaping up that way. Represented by clean-cut, straight-arrow Power Rangers. Quite a reaction to the sewer-dwelling Mutant Ninja Turtles that were analogs for the previous generation. They’re “‘can do” kids, programmed to do the right thing in a smoke-free, drug-free, eco-sensitive, politically correct world. Like all Hero types, they respect their elders, do what they’re told without much questioning authority. That’s just the type of person you want to have fighting a war for you, and that’s probably just what they’ll wind up doing. Just like the last Hero types, the GIs. (Iraq was first. Iran next? Or will it be Saudi Arabia?)

It’s risky to characterize everyone born in a certain time frame as sharing a persona; after all, people are individuals, not ants or atoms, each like the other. But it’s really no different than characterizing people by the country they’re from. There’s no question in my mind that people share characteristics by virtue of the milieu in which they live, and that’s true of time as well as geography. Take a look at the people you know by age groups, and see if they don’t roughly fit the brief descriptions.

The interesting thing is that through about 400 years of American history, it’s possible to see these generational types repeating themselves. It’s not an accident. The characteristics of each type shape the next generation, as well as current events. And events leave a further imprint on all of them.

Making an Example of the Boomers

Just as every generation has its own persona, the character of each generation evolves as it moves through life. The Boomers are perhaps the most relevant example of this. First they were Mouseketeers and Beaver Cleaver clones. Who could have guessed they would mutate into Hippies and even Yippies as they reached Young Adulthood, reacting against everything they’d grown up with, everything their parents worked so hard to give them.

They came of age during a period that might be called an Awakening, and it’s recurred on schedule five times so far in American history. Awakenings are times of religious and moral ferment, when the youth tend to challenge prevailing cultural values pretty much across the board. Young adults were into New Age things this time around, in the 1960s and ’70s. At the time it seemed utterly shocking and completely new, but that was only because nobody then alive had seen the previous Utopian Awakening in the 1830s and ’40s, the Pietist Awakening of the 1740s and ’50s, the Puritan Awakening of the 1630s and ’40s, or the Protestant Reformation of the 1530s and ’40s.

Like all the generations before them that grew up in similar times, they eventually put away the things of their youth. But who guessed that their next mutation would be into Yuppies, whose motto was not “Peace and Love” or “Revolution for the Hell of It,” but “Shop Till You Drop” and “He Who Dies with the Most Toys Wins” as they moved into midlife.

But even now the acquisitive mania that characterized the ’80s is ebbing, now that the first cohorts of Boomers are crossing over 50. You can already see the signs of their next stage of evolution, in the judgmental behavior of people like William Bennett (George Bush) and Dan Quayle (Ann Coulter) on the “right,” and Al Gore and Hillary Clinton on the “left.” They did sex, drugs, and rock ‘n’ roll in the ’60s. They believe they’ve fought the war of good against evil in both Vietnam and the segregated lunch counters of the South. They know they were the first generation to have traveled widely thanks to the jet, to have been brought up by television, and had the telephone as a given. They’ve been there, done that, and now that they’re getting older, they’re going to make sure that everyone else benefits from their wisdom – like it or not.

The Boomers are an archetypal Prophet generation, a type born after a secular crisis, just in time to create another one. Get the image of a grim elder, with a well-defined vision of what’s right and wrong, calling down wrath, and laying down the law for a troubled nation in chaotic times. That’s the type of person who tends to lead countries into wars, as well as through them. Interestingly, the Boomers in America have their counterparts abroad today, especially in China, where they grew up during the Cultural Revolution. Two ideologically driven, righteous groups running two such powerful and alien cultures is almost a guaranteed formula for a millennial-sized crisis. Which should appear, coincidentally, sometime shortly after the millennium. (We’re right on schedule.)

So What’s Next?

The real watersheds in history, crises that make or break a civilization, occur roughly every 100 years. The most recent ones in American history that will resonate without looking up the facts in a reference book are the Revolution, circa 1782; the Civil War, circa 1863; and WW II, circa 1943. We’ve had other wars, and they were traumatic enough; that’s the nature of war. But the War of 1812, Mexican, Spanish, World War I, Korean, and Vietnam wars had nothing to do with the country’s survival as an entity, as a civilization. They were optional wars, sport fighting, if you will, by comparison. Wars that occur at a secular Crisis, a “Fourth Turning” to Strauss and Howe, when a Prophet generation is acting as elder statesmen, with Nomads as operational commanders, and Heroes as front line soldiers tend to be total wars that have an ideological underpinning. They’re life-and-death struggles not just for the individual participants, but for the civilization as a whole.

That major wars occur at such long remove from each other probably isn’t an accident. Really catastrophic wars, from at least the days of Troy on down, have usually been the Great Events that resound through living memory. The Great Event of a century forms the thought and character of everyone alive when it happens, influencing them relative to the stage of life they’re in at the time. Perhaps that’s why a people will collectively do its best to avoid a repeat, at least while there’s anyone still alive who saw the last crisis.

(It’s been said that war is a force that gives life meaning. And I think that’s true, although it’s perverse that the most destructive and idiotic activity that it’s possible to engage in would just have to be the most important. Maybe, after the orgy of self-indulgence and conspicuous consumption that has characterized the past couple decades, Americans collectively feel they need to prove something. There has to be some rationale for the current war hysteria other than pure stupidity…)

In any event, the way the current generations line up relative to historical analogs, an excellent case can be made the U.S. is approaching another time of secular crisis, a Fourth Turning, with an expected due date of 2005 – seven years from now – plus or minus a few years in either direction. The Stamp Acts catalyzed the American Revolution, the election of Lincoln catalyzed the Civil War, the Crash of ‘29 catalyzed the Depression/WW II era. What might precipitate the elements now floating in solution? The answer is, practically any random event that’s sufficiently traumatic. Any of the theses of current disaster/action novels and movies will do nicely. Perhaps the accidental or intentional release of a super plague vector. The crashing of an airliner into the Capitol during a joint session. (Close, but not quite.) An all-out assault on the IRS computers by an armed group – or perhaps the computers just melting down due to the Year 2000 Problem. Perhaps a financial disaster that cascades into the Greater Depression. In any of these, or a hundred other scenarios, the federal government would almost certainly act precipitously and with a heavy hand, which would bring on a whole other set of consequences.

(In the historical context, 9/11 will be viewed as the opening kick-off for the coming Crisis… and the messianic overreaction of Bush and his cronies as the catalyst for turning things from bad to worse. It may be that Hurricane Katrina, for instance, a completely accidental event, may be blamed for providing a pin to burst the financial bubble – which would be a pity, since the neocons could then blame it, not themselves.)

There’s no way of telling where the Crisis will lead, or how it will end. That’s going to depend not only on exactly who’s in control, but what they do, whom they’re up against, and a hundred other variables we can’t even anticipate. One thing that seems certain is that real crisis brings out strong (although not necessarily wise) leadership. Because of its age and size, it will come from the Boomer generation, and it will be in the mold of Roosevelt or Lincoln – both very dangerous precedents. The Boomers in Elderhood will be dogmatic, harsh, puritanical, and quite willing to burn down the barn in order to destroy whatever rats they see. Admix that attitude to a time resembling the Revolution, the Civil War, or WW II, overlain with today’s ethnic strife, urbanization, financial overextension, and powerful, compact new weaponry in the hands of foreign fanatics out to teach the Great Satan a lesson, and it’s a real witch’s brew.

If things evolve over the next decade as they did in past analogs, it will be a very un-mellow time indeed. That’s assuming things end well, and there’s no guarantee they will, as many foreign countries have discovered throughout history. We’ve been uniquely blessed.

What to Do

Strauss and Howe aren’t financial types, and their advice is nebulous along those lines. To sum it up, their suggestion is to learn to swim with the tide by not hoping the current good times last forever; the chances of the good times are coming to an end now. They’d also advise not sticking your head up above the crowd, something that is always very risky when times are in turmoil; remember what happened to Japanese-Americans during the last crisis. They suggest that there will likely be a resurgence of nationalism, much as was the case during past crises. It won’t be a good time to be a maverick in the U.S., a thought that makes places like Argentina and New Zealand look even more appealing.

(I bought property in both places shortly after this was written, and have been rewarded with a quadruple in both instances – considerably better than would have been the case in the U.S.).

Strauss and Howe suggest you look to diversify in all things, so everything won’t go bad at once. Brace for the collapse of public support mechanisms. Set your roots with your family, because people you can rely on will be at a premium. Heed emerging community norms, bond with like-minded people, and return to basic, classic virtues. This is sound advice any time, but critical if you’re rigging for heavy weather.

Assuming you wanted to stay in the U.S., you’d rather be on some land near a small town, and far away from a major city. You’d want to be self-sufficient in as many ways as possible – freeze-dried food. etc. Perhaps Howard Ruff will make a comeback with advice like that, which seems quaint today. But then I’m nothing if not a contrarian.

(In hindsight, the original article could have been a bit more specific – other than the suggestions about Argentina and New Zealand. Personally, I believe that unassailable wealth is the best protection against global crisis. For it to be unassailable, your wealth must be at once substantial, free from threat of confiscation, divorced from the whims of the masses, and located in a country or currency that has a good risk/reward profile. Unfortunately, the U.S. doesn’t make the cut.

In the first instance, the single best way to build wealth now, while there is still time to do so, is in carefully selected gold and other resource stocks. In order for it to be free from the threat of confiscation, at least some part of your wealth needs to reside in a country where you don’t. To state the obvious, I would be very cautious about traditional stocks and bonds until we see how things shake out. Rather, get positioned in gold and silver stocks now, ahead of the curve, then sell out for a big profit to the panicking masses and move an increasing percentage of your wealth into tangibles such as gold, silver, and maybe, as part of a diversified portfolio, real estate in especially attractive areas – but only after the bubble has decisively burst.)

A Parting Parable

In case you have any doubts, I buy the theory outlined above and its many ramifications that there isn’t room to explore here. It really is scary to think that we could again experience a real Crisis with a capital C; I’m not talking about just a bear market in stocks. If it happens, I promise you stocks and mutual funds will be about the farthest things from most people’s minds.

At the same time, there’s no point in feeling terrorized. This stuff has been going on since the dawn of history. So let me leave you with a parable. I could appropriately quote Ecclesiastes (To every thing there is a season, and a time to every purpose under heaven: a time to be born, and a time to die, a time to plant, and a time to pluck up that which is planted, etc., etc.). But everyone knows that reference. Let me rather give you John O’Hara. At the beginning of O’Hara’s novel Appointment in Samara, he tells a brief parable, which I’ll summarize:

There was a merchant in Baghdad who went to the market with his servant. There they saw Death, who stared at the servant in what seemed a threatening way. Later the servant said “Master, lend me a horse. I shall ride to Samara, and there Death will not find me.” The merchant did so, then returned to the market, where he again saw Death, whom he approached and asked why he had stared at his servant in such a threatening way. Death responded, “I wasn’t threatening him. I was just very surprised to see him here in Baghdad, since I have an appointment with him in Samara later this afternoon.”

(Strange, the location for the proverb, in that this was well before the current war).

***

There is no doubt that we are now in the Crisis stage… which, according to Strauss and Howe’s “Turnings” theory, may last another decade or more. Is there any way to escape this economic tsunami unscathed?

In fact, there is: market “riptides,” big economic trends that have always made money for those bold and farsighted enough to seize them. Those trends are what The Casey Report focuses on. Where others will be pulled under by the current, with the help of the Casey experts, you will be able to catch the big waves emerging on the horizon and ride them like a pro. If you try a risk-free, 3-month trial subscription with 100% money-back guarantee today, you will also receive our bonus report “The Greater Depression” – completely free of charge. Click here to learn more.

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Well, 2008 has certainly been an exciting year. Lots of problems, lots of opportunities. We’ll see more of that next year! Good news and bad news just depends on who you are and what your perspective is. Our declared aim is to help our clients not just survive… but to prosper and build wealth in a secure, offshore environment.

My major project for 2009 is opening up new avenues for clients who wish to hold physical gold. Many times I’ve recommended buying physical gold as a more secure alternative to both digital gold and certificates, since it has become clear that major banks in the USA, Switzerland and elsewhere are short on gold – that is, they don’t really have the gold to back up the certificates they are selling.

I am working on a very secure solution for my clients to hold physical gold and silver bullion (bars and coins) at one of two or three secure locations, in bank vaults in neutral countries in Europe and Latin America. Clients will be able to have their keys and access their safes anonymously. And of course ownership of physical gold does not have to reported on tax returns in most countries.

I’m not ready to announce details of this physical gold ownership and storage program yet but will do so in The Q Wealth Report issue 52, which should be online around the end of January. Private consulting clients will be notified first, as always. This solution will of course not be the cheapest nor the most convenient, but it will definitely be the most secure, both in terms of physical safety and in terms of anonymity. I’ll be working on the details over the holidays.

I hope to see some of you in 2009 in Ireland at the end of March, at our “Meet the Men Who Made Their Clients Millions” Offshore Wealth Creation and Preservation Event in Bantry. I’ll be explaining more there too about my strategies for physical ownership, and will be available to answer your questions in person along with Richard Cawte on a range of offshore asset protection and wealth creation topics.

Right now, however, I’m off. I’ll be back here on January 5th, 2009. I’ll be checking emails once in a while during the holidays, but all routine business will be taken care of once we are back online in January. On behalf of everybody here at Peter Macfarlane and Associates S.A. I would like to wish all clients and readers a great Christmas celebration with your families, and an extremely prosperous and wealthy 2009, rich in health, wealth and happiness! By being prepared and in the right mindset, you will achieve your goals in 2009.

I’ll be back soon, blogging from somewhere offshore…

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If you are looking for one of the very few genuine ‘high yield investment opportunities,’ you couldn’t do much better than microfinance – that is loaning money in small amounts at high interest rates to small business people in developing countries. The great thing about this investment is you can earn great returns and do good, helping entrepreneurs in the developing world, at the same time. It is something myself and a few of my clients have been investing in for several years now.

Read the rest of Peter’s article at Symbiotics.ch

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While my co-editor Richard has just written a fascinating article for Q Wealth Report on the rise of the east, regular readers know that I am bigger on Latin America. That doesn’t mean I disagree with Richard’s predictions (quite the contrary in fact) but I simply understand better Latin America and Europe. By definition, one can’t be an expert on everything.

Somebody whose opinion I greatly respect on Latin American investments is Gary A. Scott, and he recently posted on his blog an interesting insight into why Latin American markets have taken a beating, although the fundamentals are not so bad. This has created opportunities galore for investors.

But to invest in Latin America, the old saying “You don’t know until you go” applies more than ever. Latin American investing is for those of us who choose to live here in the region. There are lots of excellent lifestyle reasons to live in Latin America and the Caribbean, and not just the relatively low cost of living. I’m talking of course about beaches, food, and friendly people.

Jyske Bank says, in a recent multi currency emerging market update:

“Dante has again sent the emerging markets into purgatory and although all countries are hit hard at the moment, those countries which have been living modestly must also be the ones that will end in Heaven instead of ending up in inferno… We maintain that the Latin American countries are in a better position than the Central and Eastern European countries. But as long as we are in purgatory, nobody is unaffected.”

But as Gary says, bad conditions in emerging countries now create extra good business opportunities. Read more of Gary Scott’s commentary on Latin America…

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If you are looking into ways to make money, you may start to look into an offshore bank account. Opening a bank account offshore may appear, at first glance, to be a very paperwork-intensive process. It’s no longer just a matter of filling out a form on the internet then mailing off a copy of your passport.

But don’t despair. You’ll need a good dose of patience, and you will need to follow step-by-step instructions precisely. If you can do that, and your money is clean, you are in. Still, today.

People sometimes forget that banks are in business to receive deposits. I know a lot of bankers, and the main thing constraining them from doing business with you is bureaucracy and reputational risk. Banks want clients and they will look for ways take your deposit if they possibly can do so, within the regulatory framework they have to abide by.

The more substantial your business, of course, the more accommodating they will be. By this I don’t mean that banks are corrupt. I mean that if you want to invest a thousand dollars, bankers naturally have to apply a systematic, cookie-cutter approach administered by low-level personnel – and if you don’t fit in to that, they will just refuse your business.

On the other hand if you have a hundred thousand or a few million to invest, they will take the time to look more fully at your personal circumstances and can afford to dedicate more high level staff time to dealing with you. Your account application will be reviewed directly by the people who have the power to make decisions and the will to accommodate you as best they can.

It’s worth mentioning that some readers have wanted to open an account with the minimum balance, with a view to making a much larger deposit later if they are satisfied with the service. While that might make sense in most business relationships, in offshore banking it is probably not a good strategy. If the banks see serious money you will get better service from the start.

This is an extract from The Q Practical Offshore Banking Guide 2008 by Peter Macfarlane. It is available free for download in the Members Section of www.QWealthReport.com If you are not already a member, you can sign up online now to benefit from a library of free exclusive reports!

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I’m so often asked by clients “will my new offshore bank be required to report that I have an account with them?”

Here, for the benefit of my blog readers, is my standard answer.

Although there is a lot of variation between countries, the usual answer will be “no.” If you follow the basic advice you’ll find in The Q Wealth Report, in particular taking care to avoid the effects of the US Qualified Intermediary rules and EU Savings Tax Directive, banks will not automatically report anything about your account to anybody.

The more important question is this: will they give up your  information they have if asked about the account? Obviously, if someone just walks in off the street to ask about your account, they’ll be given a cold shoulder. But nobody serious will waste their time doing that. If anyone ever asks your offshore bank about you, the person doing the asking will almost certainly be a representative of the local government in the offshore haven, who has been persuaded to do so by some foreign power.

You can search around to open your account in the jurisdiction with the strictest privacy laws. However, if someone with official authority is on the warpath against a specific name or account number, it really doesn’t make a lot of difference. Any bank, anywhere in the world, will co-operate. Get that: nowhere in the world has privacy laws that will protect you against enquiries from a major western government. But, first, they will need to know that the account exists, under what name, and in which bank. Without that information, investigators can do very little.

Banks might claim that they will respect your confidentiality. They might even hold out for a while. If you have taken the time and trouble to maintain an excellent relationship with your bank, they might tip you off that someone was asking questions… but in the end, they will reveal all. I promise you.

I thought Liechtenstein had some of the strictest privacy laws. In fact it did, and still does. But, if someone breaks those laws, the fact that they are wanted for a criminal offence in Liechtenstein and are now hidden in a German witness protection programme probably won’t be of much comfort to you.  That’s exactly what happened recently when a former bank employee allegedly sold a list of account holders to German and British tax authorities for five million euros just recently.

In another recent UK case, it was shown that it was actually easier for the British police to obtain information on a bank account on the offshore island of Guernsey, than it was from a bank in the mainland UK! Guernsey (after a few scandals) now bends over backwards to appear co-operative. Local courts there will just rubber stamp any application for co-operation they get from places like the UK or the USA without giving them serious attention, because to refuse co-operation in a money laundering investigation would be political suicide. Whereas in the mainland UK, judges still sometimes actually ask some questions and demand to see real evidence of a crime before allowing the police to conduct a fishing expedition into a suspect’s banking records. So much for offshore confidentiality!

For the reasons mentioned above, it is well worth considering keeping your money in a more low-profile country, a place where nobody would think of buying stolen bank records for millions of euros. Remember that everything outside the borders of your own home country is offshore to you.  All banks, especially the offshore variety, offer some degree of privacy. Exactly how much privacy you get these days depends not so much on the law, but on you!

You must verify that there are no routine reporting requirements between the bank where you opened your account and any tax authority that has any possible interest in you. If they do not file any reports, the bank will not be a source of any leaks – until and unless somebody asks them directly about your account. If that happens, you should always assume the worst case scenario – that they will spill the beans immediately.

It is up to you to tell absolutely no one about your offshore account. Jealous ex-spouses and business partners are a major source of information on offshore accounts – and every other kind of damaging information on you. Everything may be fine now, but who knows what will happen to your relationships over the next few years. If you want to keep your account secret, you have to keep your mouth shut. Never leave any records of your secret accounts where others can access them.

We repeat: the only real way to keep a bank account private is to tell absolutely no one about it. Keep any electronic records encrypted.

This is an extract from The Q Practical Offshore Banking Guide 2008 by Peter Macfarlane. It is available free for download in the Members Section of www.QWealthReport.com If you are not already a member, you can sign up online now to benefit from a library of free exclusive reports!

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“Money isn’t the most important thing in life, but it’s reasonably close to oxygen on the ‘gotta have it’ scale.”

Zig Ziglar

Australia: Where the Beer Is Great and the Bonds Are Better

By Andrew Gordon

About a year ago, my father invested in a Merrill Lynch bond. I looked it over… noted its high rating… and saw nothing wrong with it.

Not long after that, I was speaking to a vice president of Bank of Nova Scotia. I asked him about the bank’s exposure to the subprime crisis. He said it was negligible. I then asked him about the GMAC loans it had recently bought. He said they were fine… the defaults lower than they had projected. So I added the bank to one of the portfolios I recommend to my subscribers.

The Merrill Lynch bond has since plunged and then rebounded. And the Bank of Nova Scotia’s shares are almost exactly where they were when I made my recommendation. That’s much better than most North American banks have done over the past year.
 
No harm, no foul?

I’d be the stupidest guy on the planet if I thought there were no lessons to be learned just because those investments didn’t turn to mush.

Fact is, my assumptions have changed.

Had I known then what I know now, I would not have touched that Merrill Lynch bond with a 10-foot pole. And I wouldn’t have cared if a high-ranking bank official swore to me they weren’t exposed to the U.S. subprime mortgage market. I wouldn’t have believed him. I definitely would have put off investing.

The housing bust, subprime mess, credit crunch, and resulting financial crisis have done more than just bring the market down. They’ve led to a stunning collapse of confidence that has infected the entire investment world. Banks don’t want to lend to each other… institutional investors no longer know what’s safe… and retail investors don’t believe anything anymore.

How can they? The rating agencies have proved beyond a shadow of a doubt that they do not understand derivatives. Their ratings are worthless.

And the brokers and analysts who follow every twist and turn the market makes? The last year must have made them so dizzy that they can’t see the forest for the trees. They’ve been making one bad call after another.

A few months ago, for example, Buckingham Research estimated that Bear Stearns had $35 billion in liquid assets and borrowing capacity, enough to operate for 20 months. Turns out it had enough for three days. This is one of dozens of examples I could cite.

There’s so much uncertainty in the investment world that we can no longer fall back on our long-held ideas of what makes a safe investment.

Munis? Sorry. Thanks to the shaky status of the monoline insurance companies (which insure munis), they’re no longer the safe investments they used to be.

Money market funds? They’ve been hit too. Some brokerages are covering losses with their own money rather than pass them on to those who invested in these supposedly safe havens. Good move. I don’t blame them.

What’s left? Oh, yes. How could I forget U.S. government bonds? Okay, they’re still safe… but are they really investments? I mean, can anything you get a negative return on be considered an “investment”?

I don’t think so – and that’s exactly what you’re getting with them. A 10-year Treasury note would give you a 4.01 percent yield. Meanwhile, inflation is running at 4 percent, and that excludes food and energy prices. The real rate of inflation would be much higher.

Investing in U.S. bonds is worse than giving the government a free loan. Instead of the government paying you for the loan, you pay the government for the privilege of loaning it your money.

Do you feel honored? Or cheated? Well, I can’t speak for you. But this is the kind of honor that could land me in the poorhouse. I’d say cheated.

So… is there any investment that is truly safe?

There sure is. Australian government bonds have never looked better than they do right now. And this is the perfect time to jump into them…

Not only because Australia has one of the strongest economies in the world. Unemployment is at a 33-year low. And prices of its two big exports – coal and iron ore – are at historical highs. It doesn’t hurt that around 66 percent of Australia’s exports are commodities.

And not only because Australia is effectively shielded from the problems we’re having in the U.S. They trade mostly with fast-growing Asia. In fact, 60 percent of their exports go to Asia.

The biggest reason the timing couldn’t be better is because the Aussie government has been raising its key interest rate to stave off inflation. They’ve raised it all the way to 7.25 percent. They’re at or near the top of their rate-raising cycle.

Other interest rates, including bond rates, feed off this basic government rate. If this rate is more than twice as high as the U.S. benchmark interest rate, then most of the other rates will be too – including Australia’s government bond rates.

Sure enough, the Queensland 10-year government bond pays a nice 6.99 percent interest. That’s not quite twice as high as the equivalent U.S. government bond rate, but it’s close.

What’s more, you can buy these bonds for a discount. And the discount isn’t going to get any better.

Here’s why…

The Australian government paused its key interest rate hikes three months ago. That means, for now, interest rates have peaked in Australia. The only way they would go higher is if the Reserve Bank of Australia resumed rate hikes. That’s possible, but unlikely.

And if you don’t want to tie up your money for 10 years? There’s another group of Australian bonds that could be perfect for you. I’m talking about corporate bonds, including bonds issued by GE – one of the biggest companies in the world.

These GE bonds are triple-A rated – the highest rating bonds can get – which means they come with very little risk. Usually, the lower the risk the lower the yield. But these highly rated bonds offer high yields of 7.97 percent. (Ask your broker for 8.5 percent coupon February 2011 maturity bonds from GE in Australia.)

Or you might prefer Australian bonds from Nestle, the huge Swiss firm. Its bond is double-A rated and offers a yield of 7.0 percent. (Ask your broker for 7.25 percent coupon January 2011 maturity bonds from Nestle in Australia.)

Because these bonds mature in 2011, they would tie up your money for less than three years. To get in before prices go higher (and yields go lower), you should buy Australian bonds NOW.

Buying international bonds is pretty easy… as long as you go to the right place. You can always go to a full-service brokerage specializing in international bonds. But many of the bigger brokerages are able to trade them, too, so call a few and find out.

You could also call up your broker. Ask him to recommend someone who does overseas bonds. Or you could call my colleague Richard Panchookian. (He’s with International Assets Advisory – telephone number: 800-432-0000, ext. 514.) He has several Australian and Queensland bonds to offer.

This article appears courtesy of Early To Rise, the Internet’s most popular health, wealth, and success e-zine. For a complimentary subscription, visit http://www.earlytorise.com.

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