S.O.S.: Swiss Offshore Storage
By admin | June 22, 2009
The article below was recently provided to us by the team of Big Gold at Casey Research. They are offering a free report on offshore gold storage to all our readers. I’ve checked out the report and it is well worth the price :) In fact, it’s worth a lot more, so considering it’s free, I would recommend signing up for it!
This article also considers the stability of Swiss banks and the exposure of Switzerland and the Swiss Francs to Eastern Europe, another topic we have touched on previously…
At Casey Research, our task is to accurately forecast trends, do it early, and help investors profit from what we’ve found. Without claiming infallibility, we’ve gotten it right more often than not, and by distinctly profitable margins.
But research to anticipate what to expect is the easy part. It’s the when-to-expect-it-to-happen that’s tricky, and waiting for a predicted trend change or crisis sometimes can test our confidence. The crisis we warned about years ago is now here, and its arrival has altered many of the rules for investing.
If you’re reading this report, you probably followed our earlier advice and have accumulated a nice-size crisis insurance policy in the form of physical gold. Now you need to decide what to do with that stash of Midas cash. It may have been born in a corner of your sock drawer, but perhaps now it’s stress-testing an attic rafter. Unlike gold ETFs and mining shares resting digitally in your brokerage account, physical gold brings with it questions of space and place: how and where to store it.
As to the how, the most common methods for storing physical gold will be obvious to most investors: concealment, a home safe, or a bank safe deposit box. In BIG GOLD, we recommended using a home safe because 1) it keeps the gold under your immediate control, and 2) it eliminates any risk that storage at a bank carries: emergencies don’t schedule themselves bankers’ hours; if a “bank holiday” occurs, access to a safe deposit box will be lost when it’s needed most; and a court can order the seizure of its contents, or the IRS can freeze your assets.
So that’s it? A one-size-fits-all storage solution?
No, not quite.
As your gold holdings grow, or if you already own sizable weight or are considering a large purchase, keeping all your golden eggs in one steel-and-combination-lock basket may not be the right solution. As we encourage above, having some gold in your immediate control assures that you can see yourself and your family through any calamity. Now ask yourself: can I keep a secret and not discuss it with anyone? Loose lips can only lead to a late-night, ski-mask-clad, armed visitation. How about the “security” company that installed the safe – how tight are their lips?
Further, keeping large amounts of gold in your possession exposes you to a latent threat: political risk. Or in ‘round the water cooler jargon, a “government gold grab.”
Think it won’t happen in the good ol’ U.S. of A.? Consider the surge of government pushiness over just the past six months. The U.S. government has usurped the free market by subsidizing entire industries and embarking on mega-dollar “stimulus” spending schemes, committing trillions to its efforts – money it doesn’t have and must borrow or print. With tax receipts falling off and government debt exploding, the government’s hunt for revenue could lead to increasingly desperate measures.
We’ve seen the 1933 black-and-white version of this script, in which the plot develops into a presidential diktat forcing delivery (confiscation) of gold owned by private citizens to the government in exchange for compensation at the price it finds most convenient. Will the temptation again prove too great? We don’t know. What we do know is that once the credits roll, it’s too late to start preparing.
So the final storage question must be confronted: where should your gold be stored?
Sending Out an SOS: Swiss Offshore Storage
One fundamental rule of investing that hasn’t changed is diversification, and the principle applies to the locations you choose for storing gold bullion. Follow the principle where it leads, and you find yourself thinking about “internationalizing” your gold by holding some of it in another country. But it should be the right country.
So exactly where is where?
The answer is the safest country with the most secure facilities: Switzerland. Yes, still Switzerland.
For our money, er, gold, we can’t think of a country with a stronger legacy of respect for private property. The country traces its formation back to 1291, and the first Swiss Confederation was formed in 1353. Complete independence came in 1648, when the Treaty of Westphalia recognized the final separation of Switzerland from the Habsburg Empire. Over the 361 years following the treaty, Switzerland has maintained its neutrality and shunned foreign military entanglements. Now that’s shock and awe.
The country’s domestic politics are characterized by stable, non-intrusive coalition governments. Such habitual civility, together with Switzerland’s long tradition of respect for individual privacy, has kept this small, largely alpine country atop the list of the world’s most trusted safe havens.
The Franc: Swiss Hit or Swiss Miss
The global financial and economic crisis has recently found its way into Eastern Europe, and the troubles brewing there center on the Swiss franc. The apparently dire situation led economist Arthur P. Schmidt to predict that Eastern Europe’s difficulties would pour over disastrously into Switzerland. His predictions grabbed the headlines and a bit of attention.
So, in keeping with the Casey, “Intensely Curious, Focused on Facts,” we dug behind the headlines. Here’s the big nothing we found.
Engaging in a carry-trade-like gamble, individuals and businesses in Poland, Ukraine, Croatia, Hungary, Latvia, and Belarus borrowed heavily in Swiss francs, attracted by low interest rates. They crossed their fingers for trouble-free repayment as, for a while, their currencies strengthened against the franc. But that strength didn’t last. The global economic slowdown hit Eastern Europe hard, and their currencies fell sharply against the Swiss franc, turning mortgages and other franc-denominated debts into horrible burdens. Said fingers are now doing a lot of pointing at who’s to blame. The size of the problem, according to Schmidt, is 230 billion Swiss francs (US$200 billion), and the difficulty of collecting on the loans supposedly threatens Swiss banks with huge losses that could bankrupt the country. Schmidt refers to Iceland’s recent national bankruptcy as a model.
We don’t blame him for trying, but the report incorrectly assumes that all the Swiss franc loans to Eastern Europe originated at Swiss banks. They didn’t. In fact, it’s Austria’s banks that have the greatest exposure to Eastern Europe. The day after the headlines, Credit Suisse released a report citing the latest figures from the Swiss National Bank that show Swiss bank loans to Eastern Europe totaled just SF33 billion (US$28.7B), or 6% of Switzerland’s GDP. In contrast, Iceland’s banks had lent over 1,000% of GDP.
Our conclusion: we see no evidence of an impending banking crisis or national bankruptcy in Switzerland. Heidi is safe.
To read the full report and learn all about Swiss specialist depositories, click here.
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UK Tax Freedom Day
By admin | June 2, 2009
Today, June 2nd, is Tax Freedom Day in the UK. Tax Freedom Day is the day on which we stop working for the Chancellor and start working for ourselves. So if the average person works from the first of January each year, it will be June before they have earned enough to pay their taxes.
Every major country has its Tax Freedom Day, usually calculated by free marketeers who are still resident there and thoroughly annoyed at having to pay so much tax. Tax Freedom Day is defined by Wikipedia as “the first day of the year in which a nation as a whole has theoretically earned enough income to fund its annual tax burden.” All taxes are included in the calculations, not just income tax. In recent years governments have introduced many so-called stealth taxes.
One thing that is not included in the calculation, however, is the ultimate stealth tax – inflation! And devaluation (The many Brits who own second homes abroad will certainly know what I am talking about here! No economics training required!)
Fortunately, all this only concerns me in passing. Although I was born a Brit, I’m no longer in the UK. Haven’t been for years. Like all UK non-residents, I am not obliged to file a tax return unless I happen to have income in the UK. The same deal applies to citizens of every other country in the world, with one big exception: the USA.
US citizens are required to file tax returns with the IRS wherever they happen to live in the world. Even Americans, however, get the benefit of a complete exemption on the first $85,000 of earned income each year. Not bad for starters. So even Americans can – by using offshore corporate structures, trusts, foundations and the like – pretty much avoid all taxes legally by moving offshore.
There are lots of reasons in this day and age to go offshore which have nothing to do with taxes. I am very fond of telling socialists I meet that most of my clients these days go offshore for reasons that have nothing to do with taxes. They end up having to agree with me, because they too are sick of big corporations and governments taking away our freedom, privacy and civil rights.
When you make that move to become an expat and start to receive your income through an offshore company, you simplify your life so much. No need to waste time keeping records of expenses and tax deductions. The simplicity of working for money, then keeping it, no questions asked, feels like an incredible burden being lifted off your shoulders. If you haven’t tried it yet, you really should! You will enjoy it.
The good thing, though, is that the news is out. You can opt out of unfair taxation. The number of people who are opting out of the tax system altogether, simply by going to live – at least part time – in a country where they can legally carry on their lives and businesses without paying tax. Examples of these countries would be Panama and Belize, amongst others. You can read more about both Panama and Belize, as well as other personal tax-free residence havens, by browsing this very site.
Meantime, would you like to hear some secrets? Would you like to know how to use offshore banks to protect your assets from greedy governments, you could do no better than starting here at my blog. If you feel I could help you individually, remember I do free consultations for members of The Q Wealth Report. There’s a lot more stuff going free too if you are interested in reading more about this topic… like our FREE Offshore Banking and Asset Protection E-Mail Course in association with Q Wealth Report. Have fun – and if you’re in the UK, at least you can breathe a sigh of relief! Come join us offshore soon though.
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A Fresh New Perspective on Panama Banking
By admin | May 26, 2009
I was back in Panama City last week and one of the most interesting meetings I had was with a young man who is setting up a new bank in Panama from scratch, almost single handedly! Right now he spends his days meeting with lawyers, other Panamanian bankers, bank regulators and contractors who are working on installing everything from the floor tiles upwards in the building that will shortly bear the name of his new bank.
Single handedly? Well not quite. What he is actually doing is opening the new Panama subsidiary of his employer, a European boutique private bank that is looking to expand their existing presence in Latin America.
What I liked is the breath of fresh air this will bring to Panama’s rather staid and conservative banks with their ‘take it or leave it’ attitude. For example, they will be offering multi-currency accounts, allowing you to hold 30-plus international currencies in just one account, with one account number and one login access for the internet banking. They are also introducing a customer-focused approach, something that is sorely lacking in Panamanian banks at the moment.
Right now this bank is still not open. They expect to open in 4 – 6 months with full banking facilities including a street level walk-in retail bank with tellers. (In other words this will be a real bank, not just a represenative office.)
However, if you are going down to Panama in the next few months you could certainly meet with this gentleman and start the process of opening your Panama bank account. Feel free to contact me and I will be happy to introduce you. The only condition is that this service is limited to QWR subscribers. There is no charge for personal account introductions, but we do make a nominal charge of about $1000 for corporate account introductions (Panama corporations and foundations, but also IBCs and Trusts from other jurisdictions are acceptable.)
Don’t miss out on this excellent opportunity to open your bank account in Panama!
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St Kitts Offshore Authority Feeling the Pinch
By admin | May 26, 2009
It’s been an open secret for the last 6-12 months that many beneficial owners of offshore corporations have not been paying their annual taxes and fees. This is not a good idea as it puts the whole structure at risk and the IBC ceases to be in good standing.
However I was quite surprised to receive this from our resident agent in St Kitts and Nevis:
22nd May 2009
To : Company Director(s)
Ref : Government annual renewal fees
Dear All,
The St.Christopher (St.Kitts) and Nevis Financial Services Regulatory
Department has announced new initiatives with respect to the payment
annual renewal fees for companies that are in arrears.The incentive offers company director(s) the option to settle arrears of
annual company fees over a period of 12 months, commencing with the
company’s annual renewal date,Please take advantage of this most welcome offer to bring your company
in Good Standing and keep your company current on the register.Best regards and feel free to call on us.
I suppose the St Kitts government are to be congratulated on their flexibility, but I frankly find it rather unlikely that this will benefit anyone unless they have dozens or hundreds of St Kitts and Nevis IBCs. Imagine the wire transfer fees involved in making a payment each month…
St Kitts of course is more famous for its tax-free residence and economic citizenship program, which offers a second passport in just a few months in return for a condo purchase in the island nation.
It’s interesting to note that Panama is still the only jurisdiction that does not automatically strike companies off the register after a time on the grounds of non-payment of franchise taxes.
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Offshore Online Brokerage Accounts – Are They Safe?
By admin | May 17, 2009
These days, we are all accustomed to doing almost everything online. There cannot be too many of us left who are nervous about using a credit card online, for example. Doing business online is a way to save time, money and headaches. Investing through online brokerage accounts promises much the same benefits.
However, when it comes to investing offshore, borders still pose a significant psychological barrier. There is no longer any real need to have your online brokerage account in the same country you live in, but it seems investors are still reticent about opening brokerage accounts in foreign countries.
An increasing number of financial service providers are offering cross-border online investment services. This trend has caught on more in Europe than in North America, with larger online brokerages like Saxo Bank and Swissquote offering services specifically tailored to investors from outside their home countries.
However North American investors are also becoming more adventurous, opening more and more accounts with foreign banks and brokerages. Such accounts may be opened as individual US citizens or, more commonly, through offshore corporations or trust structures designed to provide an additional level of privacy. However, the main reason for accessing these international markets is to benefit from more profitable cross-border investment opportunities, and diversify risk by spreading their portfolios across different institutions in different base currencies.
These sophisticated investors have potential access not just to a wider range of investment opportunities – but to simplicity, tax savings, and greater control over their portfolios. There is also the opportunity to save money, by gaining access through discount brokerage models to exchanges that would otherwise have to be traded by telephone through far-away correspondent brokerages.
The current economic climate means a lot of investors love the idea of being able to keep a much closer eagle eye on their internationally-diversified portfolios. But, there remains a concern. Is investing through online offshore brokerage accounts safe?
Are Offshore Online Bank and Brokerage Accounts Safe?
In short, the answer is yes, provided you apply normal common sense precautions. The internet allows you to buy and sell foreign securities through overseas brokerage accounts with just as much ease and security as paying your home electricity bill – and in many cases, much greater security.
The first of these precautions is to invest via a reputable firm. Do some due diligence on the company behind the service. Just as you should at home (but many people don’t) check references, make sure the broker is registered and in good standing with the relevant regulators, speak with them in person and find out what experience they have. You should also enquire about the security arrangements on their site, and what protection they offer in the case of DDOS and other types of hack attacks. Many offshore brokerages are actually fully licensed banks, which makes them more secure and makes due diligence easier.
Once you have decided where to open your brokerage account, it is important that you you’re your own precautions to ensure that nobody else will be able to access your account without your permission. Make sure that your security software, like anti-virus and firewalls, are properly installed, functioning and up to date. Consider using an encrypted VPN solution, especially if you are partial to doing your trading from a laptop connected via wifi, which is notoriously insecure.
Also remember that just like those anti-phishing warnings from online banking at home, offshore brokerages will not email asking for you to confirm your details. If you receive any correspondence via email, confirm it by phoning the company directly before clicking on any links or taking any action. Try to get to know a single executive in the brokerage who will recognize your voice over the telephone.
What Services Do You Need?
Just like at home, overseas investing services can vary wildly in terms of costs and features. Even within the same brokerage, there are often different packages available. Fees may differ significantly depending what features, information and access you request.
If you are considering investing in European bonds, unit trusts, ISAs or funds then you probably will not need access to the type of ‘offshore day trading’ account like Thales Securities in Panama that permits you to buy and sell individual stocks in real time.
A so-called ‘fund supermarket’ type account offered by a European bank would suit you in this case. But be sure to check which products of which fund managers are available, and whether the broker is prepared to negotiate fees or rebate commissions they receive from fund managers (many will, especially on larger amounts, but only if you ask them) .
Other banks and brokerages will offer discretionary management of your portfolio. This is suitable for investors who don’t want to have to watch their accounts every day, and who are looking for more of a Swiss-style ‘private banking’ feel in their brokerage. Having access to quality investment advice is of great importance in this case – so ask what kind of management skills the bank has access to in-house. Larger banks have more expertise, but they may be busy chasing bigger fish. Smaller boutique private banks and investment managers often offer a much higher level of personal service.
In turn these various institutions will often target different types of investor. The more questions you ask your broker or banker before you get started, the more benefits you will obtain from the account you finally choose.
If you take the time to do your homework, investing offshore and online is not only safe but it can be very profitable, cutting costs, diversifying risk, and taking charge of your own future. Are you ready for the challenge?
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