Great Tips from Experts on Diversifying Political Risk

To paraphrase renowned speculator Doug Casey, the biggest risk to our portfolios today is not investment risk; but rather it is political risk. Mr. Casey authored the all time best-selling financial book CRISIS INVESTING, and is a well-traveled international speculator. He says that anyone who does not transfer a portion of his assets out of the country in which he lives will ultimately, in Mr. Casey’s words “be led into a lobster trap and cooked.”

So, how do we offshore our assets? There are currently a number of good options for transferring assets out of U.S. jurisdiction, including 1) acquiring real estate in foreign countries, 2) buying and storing precious metals outside the country, and 3) buying foreign currencies and/or opening bank accounts in foreign countries. Before acting however, it is important that those who plan to own assets outside the U.S. fully understand two fundamental concepts; 1) the concept of “reportable assets, and 2) U.S. Income Tax Law. Some foreign held assets are “reportable” to the U.S. Government and some are not.

Offshore Real Estate Holdings

If you own real estate in a foreign country that real estate is not reportable to the U.S. Government. Those who have read Ayn Rand’s opus ATLAS SHRUGGED remember “Galt’s Gulch.” It was a hidden enclave inhabited by true capitalists who physically and geographically removed themselves from the control of their government. There are a growing number of “Galt’s Gulches” springing up around the world today. Doug Casey is involved with one in Cafayete, Argentina, and you can check it out by simply Googling “Cafayete.” Cafeyete is near the equator, 7,000 up in the Andes Mountains. It has a nearly constant year-round temperature range of 40° to 80°, with sunshine almost every day, and it is surrounded on all sides by 15,000 foot peaks. Cafeyete is safe, clean, beautiful, and inhabited mostly by American capitalists and entrepreneurs. Another new foreign enclave that is extremely desirable is Rancho Santana on the Pacific coast of Nicaraugua. Rancho Santana can probably best be compared to Hilton Head Island forty years ago. Beautiful and lightly developed, ocean front properties can be purchased right now for 20% to 30% of today’s Hilton Head price for comparable property. Right next door to Rancho Santana is Guacolita, Nicaraugua. This resort is gaining renown as one of the most strikingly beautiful places on earth.

Many expatriate American capitalists now also are moving to Singapore, where entrepreneurial investment opportunities are said to abound, and some, including precious metals expert James Turk (see below), live in Southern Spain. In any event, you should consider having somewhere safe and far away to go to if and when food riots and looting begin in the US.

Offshore Precious Metals Ownership

Perhaps surprisingly, gold and silver bullion held abroad are also not currently reportable under U.S. law (this will likely change as the crisis deepens). Most investors know that all U.S. gold was confiscated by FDR in 1933, and they also know that it could conceivably happen again. There are several good alternatives for offshore precious metals ownership. My personal choice is Gold Money. Gold Money is owned by James Turk, one of the financial world’s most trusted and respected experts on gold and silver. Gold Money offers low acquisition prices, along with some unique storage options. The Company owns three vaults, located in London, Zurich, and Hong Kong, respectively. If you buy your gold and silver (or platinum and palladium) from Gold Money, it can be stored for you in a vault of your choosing and insured for a nominal price. Gold Money’s vaults are audited quarterly by an independent third-party and you will be provided with an audit certificate each quarter verifying your holdings. At any point in time, you may instruct Gold Money to change your vault, and, more importantly, entirely at your option, you may convert some or all your gold holdings into silver, palladium or platinum and vice versa. As testimony to Gold Money’s popularity, on May 31, 2011, Gold Money’s vaults safeguarded precious metals with an aggregate value of over $1.9 billion for 18,823 individual customers.

Another way to own foreign gold or silver is to buy shares in Switzerland’s Zurcher Kantonalbank (ZKB) ETF (Exchange Traded Gold Fund). ZBK is Switzerland’s third largest bank and is financially sound. Shares of the ZBK ETF are matched to physical gold stored in the Bank’s vault. You will buy the shares at the exact prevailing spot price of gold – no premium. The only requirement is that the shares must be purchased on the Swiss Stock Exchange. Your Broker should be able to help you do this.

Foreign Bank Accounts and Currencies

Currently, U.S. citizens can open and maintain bank accounts in foreign countries up to a maximum of $10,000 per person without reporting the account to the U.S. government. If your aggregate accounts reach or surpass $10,000 at any time, however, you must either report or face serious penalties. If there are five persons in your family you can open five accounts of $9,999 each in the five names without reporting. One good option for an offshore account is the Caye International Bank in Belize (CIBL). Banks in Belize have a 24% capital requirement compared to 3% for U.S. banks, and you can have check writing privileges on your CIBL account just like you do here. So, in relative terms, Belize banks are both safe and liquid. If Belize doesn’t appeal to you, you can take a trip to Canada any time you like and open an account there for $9,999.

In terms of foreign currencies you also have several options. Everbank, a privately owned bank in Jacksonville, Florida, enables customers to purchase Certificates of Deposit and/or maintain savings accounts in any one of 22 foreign currencies. All accounts are FDIC insured, and give holders the full benefit of appreciations of currency valuations. If you maintain an Everbank savings account (minimum $2,500 opening balance), you may call the bank at any time and convert to another currency (Swiss Francs to Chinese Yuan, for example). You can also convert back into dollars and take your “winnings” at any time you choose. Another option is to simply buy foreign currencies with your U.S. dollars and take physical delivery of the currencies just as you do with gold and silver. Both Asset Strategies and Gold Money can sell foreign currencies to you for physical delivery. The premiums are nominal in both cases.

Summary

Hopefully, it is not too late for the country to change course and avoid the coming crisis, but I, for one want to be prepared for what I believe is the inevitable reality. I hope that you have found these suggestions useful, and that you will consider them seriously as you plan for what almost certainly lies ahead.