Yesterday, Joel Nagel, an international asset-protection attorney and one of our guests at the annual Stansberry Editors' Conference, gave us some quick and easy tips for protecting your assets...
First, he said when you're filling out your tax return and you get to the question that asks if you have offshore accounts, don't lie... "It's very difficult to prove tax evasion," he said, "but it's very easy to see you've lied on your forms." Trying to hide your accounts on your tax return is an easy way to get a $10,000 fine and raise major red flags.
Joel said life insurance is the best loophole that still exists – probably in part due to the massive quantities of money the insurance companies spend lobbying Congress. A life-insurance policy can grow tax-deferred and pay out to heirs tax-free.
Joel, who is part of an international real estate development firm, also noted he's found a number of opportunities in Central American real estate, saying he has "never seen better buying opportunities," especially at the wholesale level...
Two years ago, his international real estate firm, ECI, was negotiating for a piece of coastal property in Panama. The asking price was $19.7 million. After tough negotiations, Joel was able to get down to $19.2 million, but decided against the deal. Fast forward to January 2009... The attorney for the property owner called Joel and said the same property was available for $4 million – and this was with zero negotiating on Joel's part. Joel said he couldn't come up with $4 million. The attorney said they would take $3 million – nearly $17 million less than the initial offer.
There is no floor for Latin American real estate prices right now because there is no bid. If you're considering buying a home abroad – in Nicaragua, Panama, Belize, etc. – now is a great time to shop around.
Britain may soon become the fifth European Union nation to lose its triple-A credit rating after Ireland, Greece, Spain, and Portugal. Standard & Poor's lowered Britain's outlook to negative, saying "the net general government debt burden could approach 100% of gross domestic product." The country's deficits this year will reach 175 billion pounds, or 12.4% of GDP.
Britain plans to sell a record $343 billion of bonds in the fiscal year through March 2010, and the government gave the bank of England permission to buy up to 150 billion pounds of assets to lower borrowing costs... Although Standard & Poor's counterpart Moody's labels Britain as "stable," the rating agency said in a recent report, "Britain's balance sheet is deteriorating rapidly... The government is taking risk with public finances."
If taking big risks with public finances is cause for losing your triple-A rating, then the United States should be next in line for the downgrade...
One of the things hardly anyone ever talks about is the risk of hyperinflation in the U.S. But right now, the U.S. is a prime candidate for it. Debt, both public and private, is at record levels, and Obama is going to raise the public debt more than all the presidents who preceded him combined. Jobs are disappearing a half-million at a time.
The typical government response to the current situation isn't hard to predict. Debts this big, especially public debts, are never paid back. They're inflated away. In our case, that'll take a lot of inflation.
I think this will send gold to $2,000 in a year or two, so I've recommended three mining stocks that I believe will soar even more than gold. To find out which three I like and why they're superior to the vast number of low-quality gold investments in the world, click here.
And you can make another equally obvious trade in an inflationary environment... Bet on soaring long-term interest rates. As the government continues to print money and devalue the currency, borrowing rates will inevitably rise. You could just short a long-term bond fund and probably make double-digit returns this year. But Porter engineered a trade that can easily return 50%... and it pays you almost an 8% yield. This is the easiest-money trade out there. Subscribers can refer to his January 2009 issue. To learn more about PSIA, click here.
While the market's recent behavior signals a turnaround in the economy – the S&P is up 32% from its March 9 low and the VIX (the market's "fear gauge") has fallen from almost 90 to 30 – Whitney Tilson isn't convinced...
"There will be a headwind of continued losses for the better part of five years," Tilson told Reuters. Banks are facing more losses on residential and commercial real estate, and we'll likely see another $1 trillion or more of losses. In addition to losses on real estate loans, the residential crisis will hamper individuals' access to credit and cause an increase in consumer-loan defaults.
Tilson says the mortgage bond market offers "enormous" returns, but he's not buying at current prices. Instead, he's hoping to get filled on lowball "stink" bids.
New high: Seabridge Gold (SA).
Today, we got a good question about an exchange-traded fund (ETF). If you have questions about how ETFs, preferred stock, or any other unfamiliar type of investment works, please send them to us at feedback@stansberryresearch.com.
"As a subscriber to several of your newsletters, please explain how it is that SRS – which is the double inverse bet on commercial real estate – continues to be in a freefall when all the talk is about how tough the commercial real estate market is. Just about everything one reads says commercial real estate will continue collapsing this year.
"This seems to be either an outright manipulation of the fund tracking the market by the managers of ProShares, betting against themselves possibly or else it makes no sense. Their website does not define or list the Dow Jones Real Estate index. Where is the transparency? What gives here? Thanks." – Paid-up subscriber Tom Mahoney
Ferris comment: The following companies comprise the top 10 positions in the Dow Jones U.S. Real Estate Index and account for 44% of the index:
| Stock | Ticker |
| Simon Property Group | SPG |
| Annaly Capital Management |
NLY |
| Public Storage |
PSA |
| Equity Residential |
EQR |
| Vornado Realty Trust |
VNO |
| Plum Creek Timber |
PCL |
| HCP |
HCP |
| Boston Properties |
BOP |
| Avalonbay Communities |
AVB |
| Health Care REIT |
HCN |
This means SRS's 10 largest positions should be leveraged short sales of these 10 stocks. Go to Yahoo Finance and get a chart of SRS, then enter four or five of the above ticker symbols into the "Compare" function.
I believe you'll see the SRS's performance is indeed an exaggerated inverse of the performance of its largest positions. The components have risen since early March (along with everything else), and the UltraShort fund has fallen sharply, exactly what you'd expect from a double inverse fund. The SRS fund appears to be doing its job more or less as advertised...
And the fact that it might have fallen more sharply than the index rose isn't surprising. Since the short funds are inverses, they should be the mirror image of the long side. But I noticed recently they're never quite a perfect mirror image for long. They sometimes fall farther than the corresponding index rises. It makes sense because the fund deducts fees from the assets, just like any other fund.
It's like Porter's dad always told him, "You get what you pay for... or a little bit less."
Regards,
Dan Ferris
St. Michaels, Maryland
May 21, 2009