What's your escape plan?
Editor's note: One of Porter's goals for 2009 was to make sure he could leave the country – fortune intact – within 24 hours. It might sound crazy to some. But as Porter wrote, "It's foolish for you to pretend America is the same country now that it was when your grandparents came here. It's not."
We think there's a good possibility that eventually the U.S. will impose currency controls to rein in inflation. Below, you'll find a few subscriber questions and Porter's best advice on protecting yourself from the economic destruction that would be sure to follow.
Do any of your analysts have an exit strategy for leaving the country?" – Paid-up subscriber J.S.
Porter comment: I wouldn't call it an exit strategy – because I have no plans to leave permanently or give up my citizenship. But I'm building a nice house directly on the beach in Nicaragua (for about one tenth of what it would cost in the U.S.). I'm also probably going to acquire at least a share of a residence at Doug Casey's development in Cafayate – Argentina's wine country. Again, my total costs will be about a tenth of what a similar property would cost in Sonoma or Napa.
Not to mention the fact that in both Nicaragua and Cafayate I can live like a king – a driver, a cook, a maid, a gardener, etc. – for maybe $500 per week. So financially, it's a good deal to live overseas, even if you don't give up your citizenship.
Meanwhile, I'm establishing assets and savings out of the reach of my government. I think that's simply prudent, given the madness taking place in Washington and the high likelihood that it will get much, much worse. Most Americans simply have no idea how well you can live outside the U.S. – January 16, 2009
At his conference last weekend in Las Vegas, Doug Casey told the audience what he's doing to protect himself from what he sees coming next: soaring inflation, capital controls around the world, and vast increases to America's already confiscatory tax regime. What is Doug doing? First, he built a very private community in a very safe place about as far away from the centers of government power as you can get. His development is called Estancia Cafayate. It's located in the southern part of Salta province in northwest Argentina. Why in the world would you want to live in a valley of the Andes Mountains in rural Argentina? Well, Uruguay is nearby, a place where you can still bank privately and where you can still arrange for citizenship.
Second, Salta is incredibly rich in natural resources – water, farmland, oil and gas, vineyards, cattle, cultural attractions, etc. All of the things you need to lead a very wealthy, civilized life are in great abundance. And everything is cheap. A first-class steak dinner at a good restaurant on the central square in Cafayate costs about $4 per head, including wine. Finally, you have plenty of opportunities to make money with commodities. Doug has become a large-scale dairy farmer.
While you might think moving out of the United States is a dramatic overreaction to the current crisis, I think Doug is absolutely right about one thing: capital controls. The last time America experienced a debt collapse on this scale (the Great Depression), the government seized all of the privately held gold in the country, then devalued the dollar by 60%. Most people have forgotten this lesson: When the government gets desperate, it will openly steal from its own citizens. Back in the 1930s, currencies around the world were based on different weights of gold.
Today, currencies aren't backed by gold, they're backed by U.S. dollars. As the Fed devalues these dollars, everyone is going to want out of the dollar. And our government will do everything it can to prevent anyone from selling the dollar...
That will mean rules against taking money out of the country. It will mean rules against buying gold, silver, or foreign currencies. And I can even tell you the exact day these controls will take effect: The day after the Treasury secretary promises America will never institute exchange controls. There's no liar in the world more full of crap than a Treasury secretary in the midst of a devaluation. If you don't have a foreign bank account, I highly suggest you open one now, while you still can. At the very least, you ought to own gold, silver, and oil, either directly or via securities. – March 23, 2009
"Please expand on how you plan on achieving your goal of being able to leave the country with fortune intact, within 24 hours. I have this same goal, for the same reasons, but lack a clear vision. How can one actually GET a large sum of money out of the country? Physically carry it out? Wire it? I think that both of these options are or may soon be, impossible. And if the poop really DOES hit the oscillating device, would I really WANT to walk away from my multitude of almost-paid-off rental properties and my other cash-generating business as well? And risk regretting it at a later date if, for instance, America recovers." – Paid-up subscriber Rich Levine
Porter comment: I honestly don't know yet, in terms of specifics. But I have a pretty good idea of what needs to be done. First, you've probably got to have a second citizenship. Foreign banks generally will not do business with Americans because of U.S. laws and diplomatic pressure from D.C. You can get around these restrictions by becoming a citizen of another country. Such citizenships can usually be purchased, if you know the right people in the right places. Next, you'd want to move as many of your assets as possible into trusts and foreign corporations beyond the reach of the U.S. government.
If your asset base is a bunch of real estate in the U.S., this might not be possible. But if your asset base is a company like mine with lots of international customers and mostly intangible assets, it can work very well. It would be hard to seize my business, if my core assets were located on a computer server in Costa Rica, if my bank accounts were in half a dozen different countries, and if I was a citizen of Switzerland. That's just hypothetical, of course, but you can see the gist of it. – March 30, 2009
"I agree totally with your 'End of America' prophecy but am rather surprised that you believe that simply leaving your country to live elsewhere will help in the worst case scenario? I would be most intrigued to know your views... Unless we persist there really will be no future (worth living) for our children and the Orwellian nightmare the elite have in store will be upon us sooner rather than later... Come on Porter, it's not like you to hold back, and now not only your country but the world needs influential people like you to help fight the onset of global tyranny before it is too late!" – Paid-up subscriber Terry James
Porter comment: It's far too late. Once the mob (unlimited democracy) has gained control over the Treasury, it will never willingly concede power. That's occurred in all of the major western countries. The mob will require more and more tributes (taxes) to fund its objective – as much plunder as the economy will bear. Sooner or later, the mob will make a mistake. It will go too far and seriously disrupt the economy – perhaps it has with the huge amount of federal spending on the bailouts. But even then, the mob will not concede power without a struggle. And that's what makes our soaring debts and the increasing power of government so frightening.
Any person truly interested in freedom, liberty, and personal safety cannot live in countries like the U.S.A., where there is no limit whatsoever on the state's legal right to tax and zero legal right to privacy.
The only option for people who truly want to be free is to live a multistate existence with a legal residence in a state like Singapore, which does not tax global income, and residences in several peaceful countries that have a culture of privacy. If you've done something like this, get in touch with us. We're interested in knowing how you did it... and why.
If this sounds crazy to you, perhaps it is a little crazy to value your liberty so much that you'd go to such extremes. But you should know this: The American government fears its wealthy citizens fleeing and has made it nearly impossible to leave the country legally with your assets. And that makes me wonder what's coming next. – April 17, 2009
"IT IS A GOOD THING YOU LIVE IN AMERICA, SPELLED CA, NOT KA, IN RUSSIA YOU WOULD BE IMPRISONED FOR INSULTING THE Gov. AND THER PRESIDENT THE WAY YOU HAVE/ WHY DON'T YOU LEAVE IF YOU DON'T LIKE IT HERE." – Paid-up subscriber Frankie Rader
Porter comment: Well... let's see... If I lived in Russia, I'd pay a 12% flat tax on my income. I wouldn't have to worry about estate taxes – there aren't any. And if the government "asked" me to leave, I wouldn't have to pay any exit taxes or any taxes on my foreign earnings – unlike here in the "land of the free." – May 6, 2009
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. – May 21, 2009
I had never driven up a river before... It was May 1999. I was in an old Toyota truck with Steve Sjuggerud. The river was the closest thing to a road we could find. When the river got too deep, we crossed dozens of cow pastures, asking the cowboys to open their gates and let our mud-encrusted SUV through. The cows said nothing.
It took us about three hours to drive roughly 25 miles, north of San Juan del Sur, Nicaragua. We were searching for a kind of Holy Grail – a perfect, undiscovered wave. We'd dreamed of this nearly our entire lives, growing up together in central Florida. Finally, we drove up about a 150-foot cliff, the jungle gave way, and we saw this:
If you're not a surfer, that picture might not mean much to you. But finding big waves that break, uninterrupted, for such a long distance is extremely rare. Finding a wave like this, without anyone else surfing it, is a dream come true. Finding a wave like this that's consistently good, all day long, is almost unique in the entire world. You see, in nearly every other great surfing spot in the world (Hawaii, for example), the wind blows the wrong way at least half the time.
But along the southwest coast of Nicaragua, the wind blows offshore more than 300 days a year – the absolute perfect wind conditions for surfing. The conditions exist thanks to the unique geography (Lake Nicaragua)... Nothing blocks the Caribbean trade winds. I've been surfing this wave for 10 years now. I've never seen anyone else surfing at this spot – not once.
Why does any of this matter to you? Well, actually, it probably doesn't. But this wave (and one other world-class left point break) sit inside Rancho Santana, a vast track of mountainous, oceanfront land my friend Bill Bonner and several partners are developing. What was once a raw jungle has been transformed into a thriving community. Dozens of luxury homes have been built on these hillsides.
Several families now reside here fulltime – living the dream of escaping to a tropical paradise. The photo below is the view from my friend Marc Brown's house, which overlooks one of the greatest waves in the world, a left-hand point break called Rosada.
Lots of people have asked me over the years, "Porter, what in the hell are you doing in Nicaragua?" But they don't anymore. Now they ask me, "Porter, where should I stay when I go?" Nicaragua is my favorite place in the world to surf and one of my favorite places to vacation. That's why I bought an oceanfront lot there three years ago and why I'm building a house this year. Why did I buy, rather than just rent?
I bought because Nicaragua is still very affordable. I'm building a large house, with luxury finishes. In the United States, a house like this on the beach would cost between $2.5 million and $10 million, depending on location. I'll spend roughly 70% less. Given what I'm paying to build my house (roughly $90 per square foot), it will be hard for me to lose money on the deal.
My bet is, more and more Americans will want to own property outside the United States. Why? First, it's affordable. A fulltime cook or gardener costs $130 per month. You can still buy small casitas in good beachfront communities for less than $150,000. For retirees who may no longer be able to afford their dream retirement in the United States, places like Nicaragua will be very competitive with other locations, like Arizona or Florida. But for me, another reason is just as important: personal freedom. I think more and more people will want to escape, at least part of the year, to a place where the government leaves them alone and their neighbors are open-minded...
Realizing most people won't want to go to all of the trouble of building their own house, the developers down here have finally gotten around to building large, luxury condominiums. These new projects will make it easy to have a place of your own – there's backup power, zero maintenance, and steady rental demand.
If you're interested in learning more about the new condos at Rancho Santana, get in touch with Marc Brown (marcb@ranchosantana.com). My friend is a former software executive from San Francisco who moved to Rancho Santana in 2004 with his wife and two children. He's been dabbling in real estate down here for several years, and now he's managing the sales office for the community. Out of the 24 units they're building, Marc has already sold 10.
Pricing starts around $300,000 – which I think is a great deal, considering the beachfront location and the quality of the construction. These units will be finished soon. And when they're complete, prices will go up. Also, a lot of the people who bought land down here a few years ago have made a lot of money. I know some of these folks have decided to sell the land and buy a condo rather than building – and I know these condos will sell out faster than most people expect. This isn't the Miami condo market. There isn't much supply. – June 8, 2009
"There is a certain amount of humor and irony that a rich american who rails about communism in his own country is now building a luxury home in a known socialist country. I guess our own pathetic attempts at providing basic social services to our citizens weren't good enough for you." – Paid-up subscriber Stewart Miller
Porter comment: No, actually, I don't consider it a legitimate function of the government to provide social services of any kind. The government owns a monopoly on the legal use of force and the power to tax. These are the ultimate powers in society. These powers ought to be used sparingly – to enforce contracts and provide security – so the rest of society can function on a civil basis. Instead, our government is now directly in control of more than 30% of our economy and has begun to tax the next several generations of Americans to pay for it. Meanwhile, more than half of the living citizens pay nothing in taxes.
Such policies have transformed our country. We were once the world's largest creditor. Now, we are the world's largest debtor. We were once the freest country on Earth. Now, we are barely in the top 10. We were once a "city on a hill," respected by the whole world for the nobility and the restraint of our government. Now, we maintain the world's most powerful armed services and bases in more than 100 different countries, most of which consider us occupiers. We once adhered to a gold standard, which made our currency the most reliable in the world – literally better than gold itself. We now have a central bank that works day and night to destroy the value of our savings, while propping up notoriously corrupt banks.
While I don't know what will happen from here, I can certainly see the trend. Frankly, I wonder why any American wouldn't want to own a second home that's out of the country. At the very, very least, every American should be terrified of what has happened to our country and should take whatever precautions he can afford. – June 10, 2009
"I have a friend who is a big Obama supporter. I mentioned that if you try to flee the US that the government would confiscate half your wealth. My friend does not believe this is true. Can you provide a reference or link to the government regulation on this topic so I can forward it to my friend?" – Paid-up subscriber Bruce
Porter comment: Just type "The Hero's Act of 2008" into Google. The bill, which was passed in June 2008, requires citizens who desire to leave the U.S. and give up their citizenship to pay their estate taxes before they leave. That means you have to surrender roughly 50% of your global assets if you want to leave the country. The old Soviet Union used the same kinds of taxes to prevent its citizens from leaving. This is only the beginning, trust me. The currency controls will be next – controls that will make it illegal for you to move your assets out of the country. – June 19, 2009
"You mentioned a while back that we are better off in some foreign countries like Argentina and Panama. If I moved their within the next few years will I be better off against the huge inflation that the U.S. will undergo?" – Paid-up subscriber Andres Acuna
Porter comment: If you can find a way to generate income in a sound currency, while living in a country with a weak currency (like the USA or any of the other banana republics in South America) you can live very, very well. I remember back in 2002/2003 right after Argentina's big crisis. The U.S. dollar was still strong, but the Argentine peso had fallen from parity to 4-to-1 to the dollar. Friends of mine were buying $5 million apartments in Buenos Aires for $125,000. These were truly trophy properties, too. Traveling down there was incredible: We had a steak lunch, served outside at the best restaurant in this little town in Salta province. Including good wine, the entire bill came to $2.45 per person.
So yes, you can use currency devaluations to your advantage, if you're able to generate income in a strong currency, while keeping your debts and expenses denominated in a weak currency. – October 16, 2009
I never thought I'd quote Peggy Noonan in my Digest. In my mind, she is a hack political writer, completely out of touch with what's happening in the real world – the world outside the Washington D.C. beltway. But... today... she wrote this in the Wall Street Journal:
The biggest threat to America right now is not government spending, huge deficits, foreign ownership of our debt, world terrorism, two wars, potential epidemics or nuts with nukes.
The biggest long-term threat is that people are becoming and have become disheartened, that this condition is reaching critical mass, and that it afflicts most broadly and deeply those members of the American leadership class who are not in Washington, most especially those in business.
I've been writing about this risk – call it the Atlas Shrugged risk – for months. Most people don't understand how dangerous a narrow tax base is, especially when those few heavily taxed people have the means to exit. Right now, we're running deficits approaching $2 trillion annually. We can get away with this kind of fiscal behavior for a little while because we control the world's reserve currency (at least for now) and the world thinks of America as a law-and-order place, where people pay their taxes.
Unfortunately for our creditors, only about 1% of Americans pay around 40% of all income taxes. There are roughly 100 million U.S. households, which means about 1 million people are currently paying for about 40% of all the income tax receipts.
That doesn't count the big contributions these folks make to the tax base as a whole – their corporate taxes, their sales taxes, the payroll taxes they pay on their employees, etc. What if this 1% – these million people – decided they don't need a big income anymore? Or what if they decided they'd rather live somewhere else... some place where the weather is always perfect... where a great bottle of wine costs $5... where a steak dinner (grass-fed beef, no hormones) costs $10?
I am writing this Digest on my laptop computer on the back patio of Patios de Cafayate, a small luxury hotel in Cafayate, Argentina. A vineyard stretches out to my left, a crystal blue pool in front of me. And in the distance, I can see 15,000-foot mountains.
I'm here for a few reasons: Cafayate sits in the middle of an enormous, high desert valley, about 7,000 feet up in the Andes mountains. It's high enough and close enough to the equator that the weather is essentially the same year round. And it's perfect – highs in the 80s, lows in the 40s each night. No humidity. The climate and the dry, rocky soil is perfect for planting high-quality grapes and making super-premium wines. This is a special place, easily one of my favorite three or four places in the world. It is also a very, very safe place. It's a small community that's literally at the end of the road. Even a nuclear holocaust wouldn't change life around here very much.
As recently as 15 years ago, you wouldn't have found a single American here – it's just too far out. (It took me 23 hours of constant travel to get here yesterday, and that's the fastest I've made the trip.) But technology is allowing lots of folks to come here without losing touch with their businesses, investments, and families. And so the area's advantages – its incredible beauty, fantastic climate, friendly and educated people, etc. – have begun to outweigh the disadvantages of distance.
Several of my friends (Atlas 400 Club members) came here in 2005 looking for a place to build our version of Gault's Gulch. I've written about these efforts over the years. Judging by the feedback, most people thought the idea was crazy. But on Sunday, I'll give a speech at the grand opening of La Estancia de Cafayate – where more than 150 lots have been sold, where a golf course has been built, and where a beautiful clubhouse now stands. I'm sharing the podium with Doug Casey, Rick Rule, and Bill Bonner – the three most successful and influential businessmen I know well...
And 270 other people – nearly all Americans – will join us. I don't know if all 270 folks here are in the 1%... But it's a safe bet most of them are significant taxpayers. These are the wealthy folks Peggy Noonan is afraid will stop paying their taxes. And she's right. That's why many of them are here. They're looking for a place to escape, where the government will leave them alone... where they are safe... and where they are free. – October 30, 2009