"The banker says the U.S. government won't allow you to open an account here"...
A friend was visiting at my house when his wife called just as we were pulling our steaks from the grill (huge rib eyes stuffed with gorgonzola and bacon). She's on vacation in Canada, and he had asked her to open a bank account while she was up north. The banker didn't want her business (my friend and his wife are both MDs with strong incomes), so he lied and said the U.S. government won't allow it. The truth is, Canada (along with Switzerland and most of the world) doesn't want U.S. citizens as banking customers. It doesn't want the scrutiny and regulatory pressures involved with U.S. clients. And my friend simply wanted to open an account with less than $10,000, which doesn't require annual reporting to the IRS.
The government hasn't enforced currency controls yet... But with every newly printed dollar, regulation, and tax, we get one step closer. If you haven't begun internationalizing yourself with bank accounts, real estate, foreign passports, etc., we recommend you get started. You can still find banks that accept U.S. clients, though it's getting harder.
Don't know where to start? You could read the September 2009 issue of Retirement Millionaire, "How to Build Your International Lifeboat" (to learn about Retirement Millionaire and access the issue, click here). In it, editor Dr. David Eifrig describes several strategies for moving assets overseas.
Also, The Atlas 400, the high-end travel and wealth club to which Porter and I belong, has several members with expertise in the area (including one of the world's best international asset protection attorneys, international men like Doug Casey and Simon Black, and several wealthy members exploring different opportunities around the world). Depending on your situation, you may want to consider applying for a membership. You can learn more about Atlas here.
Moody's is on top of things once again... Yesterday, the credit-ratings agency warned Spain may lose its triple-A rating (Moody's would be the last major ratings agency to downgrade Spain). What could have prompted Moody's sudden revelation? Could it be Spanish unemployment above 20% (with youth unemployment around 40%)? Or the 11.2% budget deficit?
In any case, the ratings agency will conduct a three-month review of the country's finances. "[If] at the conclusion of the review, Spain's ratings are lowered, it would most likely be by one, or at most two, notches," Moody's said. Kathrin Muehlbronner, a Moody's senior risk analyst, does not want investors to take the review out of context, assuring everyone "Spain is a very highly credit worthy country."
It is obvious Spain is not "a very highly credit worthy country." Spain is broke and has few prospects for future growth. Its currency, the euro, is doomed. And it will have an increasingly difficult time refinancing its debts as investors continue to lose faith in the euro. (Spain has $16.2 billion coming due next month.) While Moody's is still considering downgrading Spain as a whole, it did downgrade five Spanish regions today, though they all maintain double-A-plus ratings. Moody's is doomed to operate while looking in the rearview mirror.
Need proof that gold could still skyrocket from here? Check out this chart from JPMorgan...
As you can see, in 1982, at the end of gold's historic bull market, investible gold accounted for 17% of the world's financial assets. Today, that number is only 4%. If gold returned to its historical weighting, the metal could easily reach $5,000 an ounce. There's no guarantee more money will flow into gold. After all, history can't predict future performance. But this chart proves the money is there... And more of it will start flowing into gold as investors realize it's one of the few safe assets left in the world.
A little levity in today's Digest... Watch this hilarious advertisement for the new "Nationalized Citibank." Warning: the video contains the "f" word (which only makes the joke funnier). Watch the video here.
New high: Barnes & Noble (BKS) short position.
Do any of you have similar stories of failed attempts at moving assets abroad? We'd love to hear them... feedback@stansberryresearch.com.
"Jim wrote: 'What happened to GE – it has gone up ever since you folks said it would go bankrupt?' I sold GE short the day after I read Porter's 12/7/09 PSIA. That investment is up 8%. So where is Jim getting his information?" – Paid-up subscriber Richard Shaw
Goldsmith comment: We don't have a clue, Richard.
"First I was remiss in not sending a supporting email earlier. The S&A staff of writers has helped my investing knowledge and results immensely. I had subscribed to a number of other newsletters, read many books, read business newspapers, etc. but my investing did not come together until I began learning from the S&A writers. I have never felt mislead or unfairly dealt with. I started with Steve Sjuggerud and subscribed to various other letters, canceling at least one along the way. My confidence was such that eventually I invested in an Alliance membership. Thank you for your commitment to quality products and top notch research and writing. The lawsuit is a travesty. S&A is a solution not a problem.
"Second, the German inflation discussion this week reminded me of some reading on the subject I did a few years ago. There is a great summary of the investing history of the German hyperinflation in Marc Faber's 'Tomorrow's Gold.' I also read some social history in various books including Stefan Zweig's 'The World of Yesterday' and Otto Friedrich's 'Before the Deluge: Berlin in the Twenties.'
"At one point in the inflation the valuation of Daimler Company, one of the largest and most profitable German companies of the time, fell to the equivalent of the purchase price of 327 cars.
"The social effects were devastating. Of course there was Hitler later, but the striking thing is that the inflation destroyed the German middle class and its mores. Prior to that time there were dowries and it made social and economic sense for young women to remain virgins until marriage. But the inflation wiped out dowries and all other middle class wealth. Families prostituted their daughters to feed themselves. After the hyperinflation the behavior of young women did not return to the old ways. People on fixed incomes starved to death. Men whose lives were economically destroyed would commit suicide or sit on rooftops shooting randomly. Owners of businesses, buildings, and other fixed assets who had no other way to raise money sold to foreign speculators for very small amounts measured in non-German money. This in part fueled German resentment against foreigners.
"The poor had never had anything so the inflation was hard but they had little in the way of wealth to lose. The upper classes had alternatives including investing overseas or in trade-able hard assets so that they had funds to live on and did not have to liquidate fixed assets. They generally survived. For the middle class the value of hard work and saving became a joke as their incomes and wealth disappeared.
"The possible coming inflation could be much worse, especially if it spreads to many countries it would be very hard to resolve. The middle class will be destroyed and the world will change significantly. God help us all." – Paid-up subscriber Bruce Mayer
Regards,
Sean Goldsmith
Baltimore, Maryland
July 1, 2010