HELPING PHYSICIANS ATTAIN FINANCIAL SECURITY
By Robert M. Doroghazi, M.D., F.A.C.C.
For some time I have been emphasizing the importance of where your money is domiciled. This was mentioned by multiple Roundtable members at the last two Barron’s Art of Successful Investing Conference and is mentioned frequently again in the Barron’s Roundtable just published.
This has become an important issue because of the fragility of the world’s, including the US’s, financial system. If there should be a real crisis, capital controls could be imposed; you might not have access to your money. As Barton Biggs notes in Wealth, War & Wisdom, bad things do happen once or twice a century and can occur with little or no warning. The only time to adequately prepare is yesterday. (It’s safe to say there are people in Tunisia and Egypt who wished they had moved some money out of their country last month).
Some of the following points are taken from Offshore Investments that Safeguard Your Cash (Nolan and Crouch, McGraw-Hill). This book is a reasonable place to start and provides many details beyond the scope of this discussion.
Here are the main points you must consider before opening an offshore account:
1) Make sure everything is done by the rules. Consult an attorney with specific expertise in this area before opening an account. You don’t want to be accused of trying to launder money or avoid taxes. After opening the account, yearly forms must be filed with the IRS.
2) Do not use a bank that has branches in the US. This includes banks domiciled in the US but with offshore branches, or foreign-domiciled banks with has branches here. These banks are subject to the influence of the US government (and US Courts in the case of a judgment against you). In plain words; they could be strong-armed. You have defeated your purpose.
3) Offshore accounts must be opened in person. Communicate with the bank beforehand; they will tell you what is required. In general, you will need positive ID, such as a valid passport and/or a birth certificate, and proof of your address, usually a utility bill less then 3 months old. You may need a letter of introduction from your local bank. Make sure there are people at the bank that speak your language.
4) The sources of your funds must be obvious. Don’t even think about walking in and just peeling off hundred dollar bills. Bank wires are best.
5) You must do your own homework; you must personally do the due diligence. Check out all of the things you would when doing business with anyone.
I also suggest you do not ask your local banker for advice on how to open an offshore account. Think about it; what do they have to gain? In fact, there is a very good chance they will try to discourage you (don’t let them). Likewise, you will need their assistance along the way.
6) I think it would be very desirable to have physical gold outside the US in a safe deposit box (also, see below). As above, contact the bank beforehand. Note that the contents of a safe deposit box are not insured (When I asked a local banker if the contents of a safe deposit box are insured here in the US, he said “No, because how do we know what you had?”. He paused, and then added “and we don’t want to know anyway”).
7) Now for the big question: Where is the best place to open your account(s)?
Switzerland probably has the greatest (and very well-earned) reputation as an investment haven, but it is not my first choice. Barron’s Roundtable member Felix Zulauf, who lives in Switzerland, said if worse came to worse, he thought the US could exert enough pressure on the Swiss banks that your money might not be safe.
The Swiss have been able to maintain their neutrality only because others allowed it. Hitler “tolerated” Swiss neutrality in WW II because it suited his purposes. He could have marched in any time he wanted. He certainly didn’t respect Belgian neutrality and he obviously didn’t care about world opinion while he exterminated the Jews.
My first choice is easily Hong Kong (my second choice is Singapore). Skeptics might be concerned that Hong Kong is a “special administrative territory” of a communist country. But the truth is that China wants, they profit from, they need, a vibrant Hong Kong. Note that Hong Kong retains a strong set of (English-based) common-law statutes governing banking and finance. Business people from all over the world feel confident their investments are respected. Hong Kong is the entrepot to China.
To quote Barron’s Roundtable member Marc Faber (who lives in Hong Kong), if the US tried to pressure Hong Kong banks, “The Chinese will protect your money”. The US will not be able to intimidate them.
Here are several possible ways to own gold outside the country.
1) Fred Hickey is the editor of The High-Tech Strategist, but for some time has held significant positions in the precious metals. In the Barron’s Roundtable of 1/24/11, he mentions Sprott Physical Gold (PHYS), a closed-end fund that stores gold in the Royal Canadian Mint. They will deliver the gold to you anywhere in the world, although he notes you need 400-500 ounces to get it delivered.
2) James Turk is one of the most respected gold analysts in the world. It was his interview in Barron’s in 2003 that introduced me to the bull market in the precious metals. He previously wrote the Freemarket Gold and Money Report and now has the website http://www.fgmr.com. About 10 years ago he started Goldmoney (http://www.goldmoney.com), which stores physical gold, silver and now platinum at vaults in London, Zurich and more recently Hong Kong.
Before finishing; a disclaimer. This is a very superficial discussion. There are many rules in the US and in the destination country. It is your personal responsibility to make sure everything is done correctly.
RMD
Wall Street Journal, 1/27/11. “The EPA finalized rules that subjects dairy producers to the Spill Protection, Control and Countermeasures program, which was created in 1970 to prevent oil discharges…the EPA has discovered that milk contains “a percentage of animal fat, which is a non-petroleum oil”…
In other words, the EPA thinks the next blowout may happen in rural Vermont or Wisconsin. Other dangerous pollution risks (might include) maple sugar leaks…
The EPA rules requires farms—as well as places that make cheese, butter, yogurt, ice cream and the like—to prepare and implement an emergency management plan in the event of a milk catastrophe. Among dozens of requirements, farmers must train first responders in cleanup protocol and build “containment facilities” such as dikes or berms to mitigate offshore dairy slicks…
You can’t make this stuff up”.
RMD comment: This is just a microcosm of how government rules interfere in your life. Dairy farmers must milk their cows twice a day, 365 days a year: these guys work really hard. After these regulations are implemented, there is a good chance that all of them will be in violation of something.
Look at the Obama Health Care Bill. The 1300+ pages includes provisions about a sales tax when selling your home and the requirement to file IRS forms when doing more than $600 a year business with someone.
As I have mentioned before, take something to an extreme to see what happens. I just finished a book about Russia (vida infra). They noted that in Stalinist Russia, there were so many laws and rules that everyone, just going about their daily lives, broke the law; everyone was a criminal. They could be prosecuted for something whenever the state wished.
This is in response to my last three newsletters “It’s Not Different This Time”.
“Our democratic society is foundering because it has forgotten the lessons of our founders…Though the politicians tell the population they can have their cake and eat it too, you and I know they are devaluing our currency, and in the end our society That is why we (him and me) had a wonderful financial year in 2010 as we bet against the US dollar and for gold, the age-old store of value”.
OO, Austin, TX
RMD comment: I agree. There are some people who cannot fend for themselves, otherwise, we will be better off if people get back to relying on themselves and their family rather than on the government. And buy some gold.
I strongly recommend The Return: Russia’s Journey from Gorbachev to Medvedev (Treisman, Free Press).
“The president (Bush Jr.) was laying on the folksy charm and Texan bonhomie, as if he thought he could turn a trained intelligence agent like Putin with declarations of friendship”.
“In light of US actions around the world, American lectures (to Russia) about
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