September 3, 2010
Dallas, Texas, USA

I’ve been really humbled by all the well-wishing emails and comments this week about my father’s health. He’s doing much better, but it’s good for us to spend some time together.

As I’m sure you’ll agree, there’s really nothing more important than health; all the money, freedom, and friends in the world mean nothing if we’re not around or able to enjoy the experiences.

Too many people these days are actively trading their health for money; in my father’s case, he’s spent the last decades making poor health decisions, allowing his professional obligations to monopolize his time, leaving him with little more than bad excuses for not getting exercise or eating well.

It’s an incongruous choice, when you think about it. Money is easy to make… it’s nothing more than worthless paper or a digital balance. One simple value-added service or well-reasoned investment (short yen, cough cough) and you can literally conjure money out of thin air.

Achieving health, on the other hand, requires steady dedication over a lifetime. While there is no shortcut or quick fix, health is not particularly complex: eat well, get plenty of exercise.

I think this is something that we should all be paying attention to; this little economic roller coaster ride that we’re all on is going to be pretty bumpy for the next decade or so… and consequently, this is NOT the time that you want to let your health deteriorate, if ever.

If you’re interested in improving your fitness and find that you need a bit of guidance, I have a free diet and exercise report that I’d like to put in your hands in appreciation for your kind thoughts and support this week.

The report was written by my close friend, fellow Atlas 400 member, and renowned fitness guru Craig Ballantyne; Craig is a regular contributor to Men’s Health, Men’s Fitness, and a number of other leading fitness publications.

He wrote this report recently about healthy diet and simple workout routines, all without having to spend a lot of money on diet foods or gym memberships. Craig was kind enough to let me give away his report to Sovereign Man subscribers, and you can download it for free here.

Moving on to this week’s questions, first James asks, “Simon, are you still planning on holding your own offshore strategies conference?”

Absolutely. There are a couple of things that you will be hearing about from me soon; the first is the launch of our premium service, the second is our comprehensive offshore conference, and the third is more details on a proposed sustainable community that I wrote about some months ago.

Regarding the conference, we are already working with organizers and are planning the event tentatively between mid-January and early February. As soon as we lock in the dates and venue, you will be the first to know.

I won’t reveal the details right now, but I can guarantee it will be the most comprehensive and actionable offshore event out there. I am personally planning the details to ensure the event’s quality and value, and I will look forward to meeting you face to face there. More to follow.

Next, Stephen asks, “G’day Simon! What do you think of this Paul Hogan nonsense?”

Australian actor Paul Hogan, aka Crocodile Dundee from the 1980s films, has been caught up with the Australian tax authorities for a disputed tax bill of over $30 million.

Hogan, 70, lives in Los Angeles, but recently traveled back to Australia to attend his mother’s funeral. Upon arrival, he was slapped with an exit prohibition by the tax authorities, legally barring him from leaving the country.

My understanding is that, as of this morning, Hogan’s attorney was able to negotiate a deal that involved posting some sort of bond in exchange for being able to leave the country.

Here’s the catch: Hogan has not been charged with tax fraud, tax evasion, or any crime whatsoever. Yet for two weeks, he has been stranded in Australia, unable to return home to his family simply because the tax authorities -suspect- impropriety.

Bottom line, this sort of thing is nothing more than criminal thuggery and underscores how the tax authorities of many nations have carte blanche to do whatever they want, even without concrete evidence.

In the eyes of the tax man, you are presumed guilty. Then they take away all of your resources and force you to prove your innocence. If this isn’t a strong call to plant multiple flags, I don’t know what is.

Last, Ryon asks, “Simon, my university economics text states that property rights are stronger in common law nations such as the UK and USA, and that civil law nations are more likely to ‘yield unpredictable changes.’ Does this stack up with your boots on the ground experiences?

No. Switzerland, for example, is a civil law jurisdiction. According to conventional economics, the Swiss government should be more likely to expropriate property from landowners than, say, Thailand which is technically a common law jurisdiction. In reality, this is highly unlikely.

Eminent domain / expropriation / compulsory purchase exists all over the world. If a government wants your property, they’ll take your property, legal system be damned.

If you want to take the temperature of a nation’s political risk regarding land rights, it really has very little to do with their legal system. The strength of title records and asset protection laws are much better indicators.

What’s funny is that if you Google “[insert country] property seizure” you’ll find a lot of hearsay horror stories that scare the daylights out of investors. People say things like “yeah, property is really cheap in XYZ country only because the government will just steal it from you.”

This sort of nonsense keeps buyers away and prices low.

Yes, there is some political risk everywhere, and in some counties more than others. But if you discard the conventional wisdom and do independent research on the ground, you’ll find that armchair expats often lack personal experience, and that for every horror story there are millions of successes.

September 2, 2010
Dallas, Texas, USA

The late, great comedian George Carlin once said, “I have certain rules I live by. My first rule: I don’t believe anything the government tells me.”

Carlin wasn’t a fringe lunatic or conspiracy theorist by any stretch; he was simply an intelligent man who had the courage and curiosity to ask uncomfortable, and usually hilarious questions about public policy.

I was thinking about Carlin a lot last night at a dinner party I attended; a friend of mine was celebrating her birthday, and somehow the conversation gravitated towards politics… trust me, it wasn’t my choice.

One of the guests, a single professional woman in her mid-50s, was a self-avowed tea-party activist. My impression is that she was still rather fresh in her philosophical journey towards limited government, but she was very sure that she did not like the direction of the country and sensed trouble in the greater trend.

At some point in the conversation, she asked me what I thought about the removal of combat troops from Iraq. She must have have been a bit loud, because suddenly the room became very quiet, and I could feel all eyes turning towards me in anticipation of my response.

“Well…,” I began rather uncomfortably, “I think we need to be honest about what’s happening. It’s easy for bureaucrats and politicians who sit in air-conditioned offices to declare an end to America’s combat role in Iraq. But there are still 50,000 troops in Iraq, and a lot of heavily armed locals who don’t like them very much…”

I paused briefly to scan the room for red faces and continued. “Sure, they’ve changed the name to ‘advisory and assistance’ brigades, but a combat troop by any other name is still a combat troop. They did the same thing in the early days of the Vietnam War, sending in ‘advisors’ who fought alongside South Vietnamese forces.”

The temperature seemed to be rising a bit. “Not to mention, don’t even get me started on the private contractors and their ongoing role there. It’s still US defense spending, ergo YOUR tax dollars, going to fund a war now being carried on by unaccountable mercenaries instead of military.”

You could hear a pin drop at this point. “Look, I don’t want to make for an uncomfortable evening… all I’m saying is that this is simple misdirection, a way for the politicians to say that they kept their promises in a difficult election year. But if you think there won’t be any more body bags coming home, you’re fooling yourself.”

And then, almost as if on cue, the party started again and people went back to their conversations as if the whole exchange never happened… it was like a scene from a really bad sit-com.

Many of the guests came up to me later to voice their serious disagreement. A few even complained to my friend (the birthday girl) that she should stop hanging out with people like me who ‘hate the troops’.

The whole episode was rather disappointing; what ever happened to intellectual curiosity? Since when does questioning the motives of the ruling establishment signal such depravity? It’s the most inane illogic I’ve experienced in a long time.

It seemed to me that people would rather stick their heads in the sand and accept everything that they’re told by their leaders– about the war, about the economy, about the currency, etc.

To be clear, this is not simply an American phenomenon, it happens all over the world; the vast majority of people everywhere, whether Chinese, German, Argentine, British, simply don’t ask probing questions to seek the truth… it’s easier to trust in the authorities and label the dissenters as blasphemous.

Perhaps this is simply human nature; it’s been happening for centuries. Even the Greeks, arguably the most intellectually enlightened of early civilizations, sentenced Socrates to death for asking too many meddlesome questions.

Unexpectedly, the experience reinforced something quite valuable to me. Human beings have long identified themselves through groups… families became tribes, tribes became kingdoms, kingdoms became empires, and empires became nation states.

Traditionally, groups defined themselves through common characteristics like geography, language, and DNA. Certainly in the past, people who shared common geography or ethnicity likely shared the same core philosophies and values… but this is no longer the case.

For example, there I was last night, standing in a room full of people who look like me, talk like me, and hail from the same place. Yet, I felt intellectually isolated from everyone. We all had the same passport, yet there was no philosophical commonality.

I have much more in common with my friend Virgis, a philosophizing yoga guru in Lithuania, or my friend Kumar, a hilarious real estate developer in Panama, or my friend Tatianna, a Russian debutant who lives in Thailand.

In 2010, crude divisions like the color of one’s skin, or the color of one’s passport, should no longer bind individuals together. Technology frees us to explore the world, either digitally or in-person, and seek out the people to whom we are the most philosophically aligned.

In an effort to facilitate the gathering of like minds, I plan on implementing an interactive online community as part of the Sovereign Man premium service which we’ll be rolling out towards the middle of this month. It’s something that I’m really excited about, and I’ll have more details to share with you soon.

September 1, 2010
Dallas, Texas, USA

I’ve been on the ground in the United States for less than 48-hours, and it’s already become clear to me that this country is in need of some therapy.

The American public seems to be getting a steady diet of negativity from the media– headlines are incredibly gloomy, and advertisers are incorporating the recession into their TV and radio commercials. Even President Obama turned his Iraq speech last night into desperate rallying cry about the economy.

It seems as if a dark cloud of despair is draped over the country, and I can understand why the national mood is so dismal. If we’re told each and every day that we’re all screwed, sooner or later we’ll start believing it.

My assessment is that, for people who spend all of their time in the US, the constant barrage of gloom creates a bubble mentality; their imaginations get trapped in the negativity, and they erroneously begin to think that the rest of the world is in the same boat.

As a naturally a positive person, I dislike seeing so much pessimism… and I’m here to tell you that there’s a lot of reason to be optimistic.

First, there are a lot of countries in the world that are on much better economic footing; they don’t have the same structural issues that are causing so much economic and social chaos in the west, and they are much better positioned to deal with the downturn.

India, for example, posted annualized GDP growth yesterday of nearly 9% through the quarter that ended on June 30th. Now, I’ll be the first one to point out that any government’s GDP figures– India’s, China’s, or Brazil’s– are full of fanciful gorilla math.

The situations on the ground in these countries, though, are absolutely clear: an emerging middle class of roughly 1 billion people is busy scooping up all the things that developed nations take for granted– TVs, air conditioning, refrigerators, toasters, etc.

This is exactly the sort of thing that I witnessed with my own eyes when I was in Brazil 2-months ago, China a few months before that, and it is what I expect to see when I’m in India next month.

There are a lot of armchair analysts who will point out things like China’s real estate bubble as evidence for future economic chaos in Asia. (you know, sometimes I think that people purposely really look for reasons to be gloomy rather than investing that energy in finding solutions…)

Yes, it’s true that no economy goes up or down in an uninterrupted straight line. China, in particular, will have some serious restructuring to do as it eventually becomes the world’s most powerful economy. Clearly, the world’s most powerful economy cannot simultaneously be the world’s biggest low-cost manufacturer.

As its economy grows and people become wealthier, China loses its competitive edge in low cost production to places like Vietnam; this will have significant consequences to China’s manufacturing base, and there will have to be a period of restructuring. A bursting real estate bubble will have the same effect.

Regardless of the short-term consequences, however, the long-term growth fundamentals of many of the world’s developing economies are sound.

Long-term growth is ultimately driven by the accumulation of large pools of capital, and by technology; and even the greatest skeptic must admit that China and India have enormous financial and intellectual capital at their disposal.

One must also consider places like Australia, among most economically viable developed countries. Australia posted 3.3% annualized GDP growth, thanks in part to its vast natural resource wealth and strong trade relations with emerging Asia.

Speaking of natural resources, I would be remiss if I didn’t mention places like Mongolia and Kazakhstan, both of which are set to become wealthy beyond belief thanks to inordinate quantities of oil reserves and mineral deposits.

I could go on citing numerous places that are doing just fine in these difficult times… the bottom line, however, is that there are a lot of good news stories in the world– Chile, Brazil, Abu Dhabi, Qatar, Mongolia, Kazakhstan, Australia, India, China, etc.

It’s easy to be gloomy when the media is constantly telling us to feel miserable. Given the evidence, I would suggest rejecting that notion altogether.

Let us be absolutely realistic about what’s going on right now, though– we live in tumultuous times… probably the most economically tumultuous in modern history.

The next 10-years will see a complete system reset. Economic conditions will drive massive political and social changes in both developed and developing nations. Some places will see the rise of centrally planned police states, while others will become unlikely havens for productivity and prosperity.

We have to recognize the trend before us– the old system is defunct, and the rules are being rewritten. This is a situation to feel excited and optimistic about, not gloomy.

Some people will cling to the old system that worked so well for the last several decades… and they will have their lives turned upside down. For others who are willing to reject the old system and become more self-reliant, incredible freedom, wealth, and opportunity awaits.

August 30, 2010
Frankfurt Airport, Germany

Though I’m penning this letter to you from the airport in Frankfurt, Germany, I will likely be somewhere over Nova Scotia by the time you receive it. My father is quite ill– I’m traveling to the United States to see him, as well as attend to some other personal business.

He’s a strong guy and I’m sure everything will be fine, but I think it will do us both some good to spend a few weeks together.

The rather unexpected nature of this trip has led me to think about the nature of family as it relates to expatriation and planting multiple flags.

I have met a lot of people, for example, who remain in a particular location simply because they find it necessary to stay near elderly parents, to be close to the kids, or because the spouse isn’t philosophically ready to take the leap.

I read a few comments about this just in our most recent post from Friday– such as Don’s remarks: Now if I could just get that one person in my life who’s the hold-up in me getting out of here…”

The reality is that sometimes the people closest to us aren’t on board with the same philosophy… or that we have overwhelming family reasons to stay in our home country.

This is simply a personal choice– people weigh the costs and benefits of staying vs. leaving, and major issues like family will (and should) have a substantial impact on the decision-making process.

For some people, the easy compromise is heading to a nearby country, like Mexico or Panama for North Americans, where they’re only a few hours away by flight. For others, a spouse’s unwillingness to leave, or the need to reside in the immediate vicinity of one’s family supersedes all other priorities.

I realize that I fall into a unique category; I’m happy to hop on a plane when necessary to come visit, but I’d much rather spend the bulk of my time exploring exciting opportunities overseas. I do, however, completely understand the logic of staying near family.

Regardless of personal priorities, though, everyone should still be making basic preparations. We are living in an age of turmoil– economic adversity, constant government bungling, resource shortages, environmental problems, social strife, the steady erosion of civil liberties, etc.

Given the social trends and the historical patterns of elected leadership, it looks like things are going to get much worse for a long time.

Don’t get me wrong– I am not making a prediction for doom and gloom, nor am I trying to stoke fear. You know me well enough by now to recognize that I’m an optimist, and frankly I don’t think that there’s anything to be afraid of in all of the coming chaos… if you’re prepared.

Ultimately, the solution to surviving and prospering in challenging times is to take steps towards becoming more self-reliant. Those who depend 100% on the existing systems– corporate jobs, fiat currency, the pension system, our food transportation network, law enforcement agencies, the government’s ability to ‘fix’ things– may find their lives turned upside down.

Making basic preparations does not have to be complicated, costly, or time consuming… it’s simply a question of putting yourself in the right frame of mind– are you the type of person who will wait for others (the government, employer, police, etc.) to fix everything… or the type of person who will solve your own problems?

With the right attitude, everyone can be the latter– self-reliant, prosperous, and solidly confident about the future… even if family obligations are holding you back geographically.

August 27, 2010
Vilnius, Lithuania

I’m really excited about something.

While I have no Polish ancestry, I thought it might be useful to you if I found and published a reliable immigration resource while I was in Poland a few weeks ago.

After spending a lot of time interviewing various attorneys and testing their qualifications, I found one who 1) had solid English skills, 2) would be willing to do all the administrative legwork, and 3) charge our subscribers less than $1,000.

Great news. The attorney I selected just sent me a nice email saying that he will be confirming Polish citizenship for at least 10 of our subscribers who contacted him.  In just a few months time, these members of our community will have Polish passports.

I’m really happy about this and am gratified to have played a role in the process. Most of all, though, it’s great to see people taking action and getting prepared.

As you can see from this success story, it doesn’t have to be hard, and it doesn’t have to be expensive… all you need is the will to act and to make these preparations a priority.

Taking these steps– acquiring a second passport, planting an offshore banking flag, learning valuable skills, developing alternative sources of income, etc.– are all of tremendous importance in this turbulent world.

Each represents a way to reduce your risk on any single government or system, and to increase your level of self-reliance. This leads me to our first question this week:

Ron asks, “Hi Simon- a friend of mine has just gone to the Dominican Republic for economic citizenship and a passport. I bought the Going Global report that you co-authored, and I see that you put DR on a list of countries to avoid for economic citizenship. Can you provide some details?”

Yes, it’s simple. There is no economic citizenship program in the Dominican Republic. Anyone who tells you otherwise is scamming you. Be sure that you don’t confuse ‘Dominican Republic’ with ‘Dominica,’ which has a legitimate economic citizenship program.

If you want to obtain citizenship in the Dominican Republic, it is possible through long-term naturalization. You first have to declare residency there, which can be accomplished through an investment in the country.

After several years of residency in the Dominican Republic, you can apply for naturalization.  Given the amount of capital, time involved, and value of the passport, however, I don’t think that this is a good option for most people unless they intend on living in the country.

Much better options exist, including Ecuador and Paraguay.  I will be detailing these soon in our forthcoming premium service.

Next, JB asks, “Hi Simon. I was wondering if you could recommend a reliable offshore web hosting company for a simple business website with PayPal functionality.”

If you have an online business, it’s pretty easy to plant multiple flags; you can own the intellectual property in one jurisdiction, host the website in another, and process the payments in another.

For places to base the company, look at common law jurisdictions with strong intellectual property protection that do not tax profits earned overseas. Hong Kong and Singapore are great examples.

For hosting, I won’t comment on specific providers, but you should consider jurisdictions with top quality Internet architecture and English-speaking support. Canada and the US are great examples (though not if you’re from there). Norway and the Baltics are also good choices.

Finally, your payment processor should ideally be in another jurisdiction. In a jam, you -could- use PayPal because they have subsidiaries worldwide. You can establish, for example, a PayPal Singapore account to receive payments, and none of the income would ever touch your home country.

Lastly, Wayne asks, “Simon, what are your thoughts on the organization called GOOOH, or organizations like it that aim to clean out the political system and replace all sitting politicians with fresh blood?”

Look, I agree with their goals, and I think it’s admirable that such organizations really want to make a positive difference. I truly despise politicians and bureaucrats– I think they’re power-hungry sociopaths who enrich themselves by bankrupting the middle class and stealing from the productive.

In theory, replacing all of them sounds like a good idea; I would rather have a team of well-trained monkeys in our capitols than the folks who are there now.

Here’s the thing, though: while the goals of these organizations are admirable, it’s futile to try convincing the preponderance of 300 million Americans / 60 million Brits / 30 million Canadians / etc. that less government is the answer.

“We the people” around the world are getting exactly the sort of leadership and solutions that we’ve demanded– more regulation, more stimulus, lower interest rates, more bailouts, etc.

It’s nearly impossible to win over the people’s hearts and minds to the ideals of limited government when an average Brit believes that taxes should pay for free swim lessons… or when an average American thinks that Obama’s stimulus spending comes from ‘his stash.’

We all have a finite amount of resources– time, money, and energy. Trying to change people’s minds about the political establishment may be morally fulfilling, but it will likely be a waste of these precious resources.

As I travel around the world and I see such a massive transformation underway, I honestly believe that much of what we know today will be virtually unrecognizable in just a few years’ time.

Think of how much the world has changed in the last 10-years… and understand that things are changing even more quickly now.

The fundamental question is– should we be investing our time, capital, and energy to affect a fractured and corrupt political system, and to change people’s minds who frankly don’t want our help? Or should we invest our resources to prepare and safeguard our families, our assets, and ourselves?

I’m curious what you think.

August 25, 2010
Paris, France

It may be a bit ironic that I’m discussing expatriation today from Paris; this city was widely known as the world’s cultural capital for much of the 20th century, and it attracted a large number of intellectual giants who lived here as expats.

Gertrude Stein coined the term “lost generation” to define this group of expats who moved to Paris, most of them at the end of World War I. Many turned out to be incredibly famous– Hemingway, T.S. Eliot, Steinbeck, F. Scott Fitzgerald, etc., and their time as expats left a profound impact on literature.

Most of the expats were disillusioned by the Great War and felt alienated by the sheepish cultures in their home countries. Paris became the gathering place of their phyle– their group that was based on intellectual and philosophical commonality, not accidents of birth like skin color or national origin.

For this reason, I really respect their movement… and frankly, I expect a similar movement to emerge over the next several years as the disillusioned masses with portable financial and intellectual capital seek greener pastures overseas.

Many people may choose to punctuate this step by renouncing their primary citizenship… either as a political/philosophical statement, or simply to save money on taxes.

I’ve discussed this topic before, but I recognize that there are a lot of misconceptions on the subject, so I thought I would go right to the source and conduct an interview with Mark Nestmann.

(you can right click/’Save As’ the mp3 file to your computer/iPod as well).

Mark is a renowned asset protection lawyer, and part of his business is taking US citizens through the renunciation process. I’ve sat down with him today for a short 25 minute interview in which he discusses the ‘how-to’– why someone would want to do this, what are the benefits, and what are the consequences.

I guarantee that you’ll be surprised by his comments, it’s definitely worth your time to listen.

Afterwards, if you want to learn more, I’d encourage you to check out Mark’s book, The Billionaire’s Loophole, which you can find on his website. At $25, it’s incredibly inexpensive considering the first hand, valuable information that he provides, and I know of no greater authority on the subject.

To be clear, this subject (and Mark’s book) are not just for US citizens, so regardless of where you’re from, I think you’ll find the information valuable. Mark’s book, in fact, goes into specific detail about renunciation regimes in other countries.

August 24, 2010
Paris, France

Yesterday I wrote to you about Sophia Antipolis, a beautiful place in the South of France that’s just about perfect for expats with families who don’t want to make any compromises… what I call the “Internationalists” from the 7 expat categories.

Today I want to tell you about another French-influenced place that’s great for “pioneers” and “expedtioners” who are opportunity-focused but not concerned about being in a developing country.  I’m talking about Laos, and the capital city of Vientiane in particular.

Vientiane definitely has a lot of French influence… like Beirut, New Orleans, Shanghai, and Buenos Aires, there are French elements in the architecture, cuisine, and local culture. Unlike those other cities, however, most people have never heard of Vientiane. This is why I want to bring it to your attention.

Given the recent boom that has occurred in parts of Southeast Asia, most notably Thailand, Vietnam, and Cambodia, I think Laos has several of the key ingredients to prosper in the long run.

First of all, it’s already one of the poorest countries in the world. To give you an idea, the top tax bracket in Laos applies to people who make more than $1,800 per year.

It’s hard (though not impossible) for a country to head anywhere but up when it’s sitting at rock bottom. But what really sets Laos apart from other cheap countries is that it is home to massive amounts of the world’s most valuable resource.

No, I’m not talking about oil & gas, or gold for that matter. I’m talking about the stuff we all need to survive– food. Laos is covered with nutrient-rich arable land that is among the most productive on earth… yet only a small percentage of it has been industrialized and cultivated.

I am a strong believer that the growing world population will increase global demand for food, especially in major Asian population centers. This spells rising food prices. Laos is well-positioned to capitalize on that trend because of the combination of low costs and high yields.

Consequently, it won’t be long before both Chinese and western companies start leasing and developing large tracts of land there to cultivate agricultural products. In my experience, anytime foreign companies enter a new market, it creates tremendous opportunities for local entrepreneurs who can facilitate business services.

So what’s it like being in Laos? Well, as the only landlocked nation in Southeast Asia, Laos is not a place to go looking for beautiful beach resorts… but you’ll find 5-star hotels, inexpensive guesthouses, and everything in between.

For businesses, it’s a far cry from the tax nightmares and rising costs in other, more developed countries. Although a one-party Politburo runs the country’s socialist political platform, the bureaucrats are fairly hands-off with foreign companies that create jobs in the country.

They realized years ago that the only way to prosperity was loosening restrictions and adopting a more market-oriented economy. They’re in the middle of that transition right now.

I think there’s ample opportunity in Laos for anyone looking for a crowd-free, low-stress, low-cost place to do live and business.  Vientiane would make a great spot to retire, open up a small restaurant or bar, get into the tourism business, or just lay low for a couple years.

The city sits on a bend of the Mekong river, literally a stone’s throw over the water from Thailand. Vientiane is a cozy little town with unbelievable food and a pleasant, laid-back expat atmosphere.  It’s distinguished by beautiful Buddhist temples, traditional monasteries, and French colonial architecture.

Vientiane is cheap too.  Imagine eating an impressive 3-course French dinner (with wine) at one of the city’s finest restaurants for less than $20.  You can also rent a luxury serviced apartment for only $1,200 per month.

One evening on my last visit to Vientiane, I ducked into a comfortable expat-owned pub that was brimming with locals and travelers alike. Sitting at the bar, I met a friendly Australian woman who turned out to be the owner; she’d been in Laos for eight years and absolutely loved her new home and business.

There are hundreds of small foreigner-owned establishments like hers in Vientiane– restaurants, pubs, hostels, and tourism businesses.  And as she told me, police officers and government cronies are actually a very rare sight.

With so much available at an incredibly low cost, it makes for a great getaway for expatriates who need an escape from the hustle and bustle.  Given the future opportunities that I expect, it’s a solid destination to plant a business flag or start a new life abroad.

August 23, 2010
Somewhere in France

I’ve spent the weekend exploring a wonderful place in the south of France that definitely has something for everyone.

I recognize that there are a lot of people interested in expatriation… but they’re picky. Maybe they don’t feel safe in some countries, don’t want to deal with poverty or infrastructure challenges in others, etc. In short, they want something that looks and feels just like home.

If this sounds like you, then Sophia Antipolis in the south of France is one possible solution for you. I spent some time there over the weekend looking at housing, schools and generally trying to get a handle on the quality of life for expats; specifically, I had those with families in mind.

To give you an idea of geography, Sophia Antipolis is a village nestled between the snowy Alps and the azure waters of the Mediterranean Sea northwest of Antibes. This is one of the largest cities on the French Riviera.

The surrounding area is probably one of the most international places I’ve ever been… and if you’ve ever spent a few weeks’ vacation in the Côte d’Azur, you know that the Mediterranean coastline along the south of France is absolutely gorgeous.

Just a 20-minute drive from the seaside resort of Cannes, which has 320 days of sunshine each year, Sophia Antipolis is first-world with great infrastructure and technology, but with the charm that comes with so many smaller European cities.

To put it mildly, it’s just as modern, quaint, and sophisticated as Zurich, Chicago, or Vancouver. The weather is spectacular, the scenery is gorgeous, and the local culture is vibrant.

Most of all, the region is flourishing with English speaking expats numbering in the tens of thousands. Sophia Antipolis was designed to be France’s version of Silicon Valley in a way– the government figured that global knowledge workers and professionals would flock to a beautiful place with great weather.

They were right. Today, Sophia Antipolis is home to about 1200 institutions and enterprises that are on the cutting edge of technology. Prominent companies such as HP, IBM, Accenture, Infineon, Texas Instruments, Honeywell, and Orange have large operations in Sophia Antipolis, and employees hail from 60+ countries.

While I always think people should learn the language if they’re moving somewhere, you could probably do just fine for the rest of your life in this area and never learn a single word of French.

I met many British nationals, and there is a vibrant community of expats from all around the world, making it easy to build English-speaking relationships.

The city attracts many young people and feels like something of a mix between Silicon Valley and a college town like Berkeley or San Diego.  Thousands of students attend the University of Nice Sophia Antipolis, and if you’re a skilled worker there are employment opportunities at the firms in the area.

For those with families, I can’t stress enough how great the lifestyle is. Schools are spectacular, based on the British system, and there are a lot of great activities for children– Sophia is even bordered by a large national park, and it’s within a half-hour of the Nice airport.

Speaking of which, I should mention transportation options; even if you travel a lot like me, it’s a great place to be. The airport in Nice, for example, has more than 100 destinations in 33 countries… so getting around is not a problem.

So what’s the drawback? It ain’t cheap, at least nominally. Make no mistake, the south of France is not Ecuador or Indonesia.

On a value-adjusted basis, however, I find the cost of living in the area to be quite reasonable once you factor in the cleanliness, fabulous quality of life, culture, and weather. This is definitely expatriation without any sacrifices.

August 20, 2010
Paris, France

I met a French couple last week when I was vacationing in the Tatra mountains of southern Poland, and I had a rather rude awakening: my French has gotten terribly rusty. I stammer in mid-sentence and fill the awkward gaps with Spanish and Portuguese words as an odd replacement.

French was my first foreign language– my European mother taught it to my sister and I since we were children, and I had a very solid command of the language by my teenage years.

Unfortunately for my French skills, I only find myself in a French-speaking country for just a few days each year, and my skills have deteriorated precipitously over the years in favor of other languages like Spanish which I speak much more frequently.

Needless to say, after such a poor showing last week, I booked myself on a trip to Paris to brush up on my French for a few days.

Part of being self-reliant is having a wide and useful skill set… and language definitely qualifies.  If you speak a foreign language, you can solve problems and add value for others… and this is the foundation of any successful business or profession.

On that note, Jeff comments, “Simon- I bought the overseas business opportunity report that you mentioned yesterday; I’m only halfway through it, but it’s already given me some great ideas– thanks for referring it. Where do you think are the best places to go to start one of these businesses?”

I’m glad that you’re getting a lot of value from the report. It was written by a bunch of different expats and permanent travelers (not me); I know several of them, and I’ve often found their ideas to be insightful.

If you’re interested in implementing some of the ideas in the report, or one of your own, the ‘best’ place really depends on the specifics of the idea. In general, though, I would suggest picking the places where you can get ahead of the trend.

To give you an example, I think that the world will experience a massive demographic shift over the next decade as anyone with portable financial and intellectual capital leaves their home country for greener pastures.

Small countries like Uruguay will probably absorb a lot of the net migration; if you spend any time at all in that country, you can see that it’s already quite a hit with Europeans and wealthy South Americans.

Because Uruguay has a fairly small population, you can imagine the effect it will have on the economy when thousands of relatively wealthy expats descend on Punta del Este and Periopolis, effectively doubling the size of those towns.

Each of them will need a variety of products and services, and this spells opportunity for those who arrive ahead of the trend. There are dozens of other countries where this could be the case, but the same analysis applies.

Next, David asks, “Simon, I’m struck with a horrible bout of indigestion every time property tax season roles around.  I despise being compelled to bribe the government just so that I may enjoy the privilege of owning what I have already purchased. Can you discuss jurisdictions which have no real estate tax?”

This is a great question… it’s a funny thing about owning property– in most cases, you never really own your property, you just rent it from the government. Stop paying that rent (i.e. property tax) and see what happens.

The worst offenders are western developed nations; in the US, there is a whole industry devoted to scooping up cheap property because someone didn’t pay his rent to the government. The whole idea is intellectually offensive.

Outside of the Caribbean or South Pacific, it’s uncommon to find places with zero property tax. In many developing nations, however, property tax regimes are much more lax.

The rates are embarrassingly low (you could pay the bill from the spare change you find in your couch), and no one comes knocking until you miss several years of payments.

I think that the idea of foreign property ownership is riddled with misconceptions that just make me chuckle sometimes. People buy the fear-mongering they read online, and many believe that foreign governments will automatically confiscate or socialize property with squatters.

In my own experience, I’m far more likely to get cheated out of a property in South Carolina than in South America.

Last, Li asks, “Simon, what’s your take on the currency markets right now? I can’t believe my eyes when I look at my Bloomberg sometimes.”

Tell me about it. I think the yen’s strength is becoming one of the biggest bubbles we have seen in a long time. Japan’s economy has P-A-I-N written all over it– they’re in debt past their eyeballs, the economy has been stagnant for 20-years, and the aging population will soon break the pension system.

And yet, the yen has surged to levels not seen in 15 years.  This is a guaranteed bust. The bubble may keep expanding in the short-term, but I think financial markets will soon set their sites on Japan’s role in the race to the bottom. This has me tempted to short the yen in the near future.

Have a great weekend / passez un bon week-end.

August 19, 2010
Krakow, Poland

I took a short tour to the Auschwitz museum a few days ago. It was my second time there, and I still lack the words to adequately describe the experience.

If you’ve ever been to the Grand Canyon and seen that vast expansiveness first hand, you probably thought the same thing I did the first time I went there and stared ostensibly at the edge of the earth–

“Wow. All the photos I’ve ever seen simply don’t do this justice.”

Auschwitz is something like that. You can read all the books in the world about it, but they don’t prepare you for seeing the gas chambers, the firing squad walls, and the tons of human hair and personal effects first hand.

Over 1 million people ended up there, and the majority of them were executed or succumbed to disease or starvation. They were the unlucky ones… or perhaps the ones who ignored the warning signs.

Almost 71 years ago to the day, Hitler’s forces were massed at the Polish border waiting for the order to invade. In retrospect, the warning signs may seem fairly obvious to us… but I’m sure that in 1939, the majority of people had complete confidence that their government would protect them.

As it turned out, those who relied on their governments and institutions to protect them endured some of the harshest experiences imaginable– war, occupation, and genocide.

Those who were prepared and took the necessary steps to safeguard themselves, their families, and their assets survived and prospered overseas.

We can recount numerous examples throughout history when individuals thrived in times of turmoil because they were self-reliant. They went against the grain, often to the bewilderment of friends and colleagues… but they and their families were better off for following their instincts.

Today, we’re once again living in a time of turmoil. The conditions are vastly different, but equally pressing. Worldwide extremism, resource shortages, booming populations, ongoing wars, and economic depression are all essential ingredients in stoking chaos and police states.

Eventually, most people will reach their breaking points… though most likely when it’s too late. At this point, they’ll begin the search for solutions.

The good news is that, for those who take action early, tremendous opportunity awaits. This is one of the biggest questions that I frequently receive, and what people ask me about when they engage me in personal discussion– what are the best opportunities overseas? What are the best ways to find them?

I recognize that economic interests really impact people’s decision-making process. A lot of folks are philosophically ready to expatriate, but they don’t yet know what they want to do, or how they will earn money overseas.

In some places, like Chile, Hong Kong, Abu Dhabi, and many more, it’s fairly easy for a skilled expat to find a well-paying job. For other people, their capability to generate income is not based on geography, but on the availability of the Internet or air transportation.

Still, others are looking for that killer opportunity overseas… they want to be the guy/gal who opens up the shovel shop in San Francisco in the mid 1840s, ready to cash in on the coming boom.

I like this style myself… and in that case, my ultimate suggestion is quite simple: get ahead of the herd, find a large problem, and provide a solution.

This, ultimately, is what entrepreneurship is all about– creating value by solving problems. The greater the problem, or the more people who are affected by it, the greater the value provided (and greater the financial reward for the entrepreneur).

I’ve previously discussed some examples that require minimum startup capital– property management, assisted living services, English language schools, organic food shops, alternative health care, construction management, property inspection, business concierge services, etc.

Each of these types of businesses has the capability to thrive in any location where there is a net inflow of foreigners. So where are these places? The same places that we talk about all the time in this letter.

I’ve also been reading a rather interesting report lately written by a bunch of permanent travelers and entrepreneurs; the report describes in great details some of their best ideas– careers and businesses that are completely portable and can prosper anywhere on the globe.

I knew the report would be a great read when I saw sections like:
- getting paid to be an ambassador to an island nation,
- how an illiterate made a fortune as an author
- how to make money as a tracer of missing heirs,
- opportunities for the artist with no talent, and my personal favorite,
- start a residential address service

Frankly, I’m marveled at the authors’ creativity, sometimes wondering aloud as I read this report, “Wow. That’s so obvious, why didn’t I think of that?”

Anyhow, I haven’t finished reading it yet, but if you’re interested in some seriously out-of-the-box ideas for making money overseas, I’d definitely encourage you to check out this book.

I was reading the Financial Times on board a recent flight from Vienna to Vilnius. Right smack dab on the front page was an article about the growing movement of Americans who are renouncing their US citizenship.

As the article goes,

“At the US Embassy in London, there is a waiting list that none of the officials likes to discuss. On the list are Americans hoping to give up their citizenship, as they seek shelter from the Internal Revenue Service.”

The rest of the article drives home a prescient point: renunciation of US citizenship is an emerging trend that, while still in its infancy, is growing.

So why are so many people doing this, or at least considering the option?

There are a few reasons. For many, it’s about money. They live, work, and invest overseas, and none of their income is earned from US sources; yet, the US government still has its hand out for a portion of their profits.

To many expats, this is unjustifiable and abusive: forcing people to hand over a portion of their labor and receive no benefit in return is akin to slavery.

Expats who renounce US citizenship are freed of this parasitic relationship; they can focus their efforts on things like providing value and growing their businesses, and not thinking about ridiculous and unproductive tax strategies.

For other people, the decision to renounce is rooted in a serious disagreement with the direction that the country is headed. They don’t like war, socialism, big government, or the erosion of civil liberties.

While no country is perfect, they realize that there are much greener pastures elsewhere. Their renunciation is a declaration of independence– a declaration of self-reliance in a turbulent world.

In time, I’d like to open a larger discussion about this issue because it’s such a growing trend. Today, though, I thought I’d dispel a few myths about expatriation because I hear these sorts of things all the time.

My personal favorite is the commonly held belief that if you renounce your citizenship, you will end up on some list… and they won’t let you back into the country.

This is simply untrue. If you already have another passport from a visa waiver country (like Canada or Germany), you could enter the US the very next day.

If your other passport is from a non visa waiver country (like St. Kitts or Panama), then you would have to go through the process of applying for a US visa at a foreign consulate just like everyone else.

The thing is, one of the primary missions of consular officials at foreign embassies is to determine whether visa applicants might intend to overstay their visas and illegally reside in the United States.

Clearly, someone who has just renounced citizenship is in no danger of becoming an illegal alien. As such, it’s pretty easy to apply for and receive a 10-year multiple entry visa, unless you’ve managed to land on a terrorist watch list or have a serious criminal record.

This leads me to the second commonly held myth about renunciation– people think that if you renounce US citizenship, you can only spend a short amount of time in the US each year as a foreigner.

This is also untrue. Most multiple entry tourist visas are good for 90-days per visit; they can be extended through application, or simply by exiting and re-entering the country at a later date.

The biggest thing you have to watch out for, though, is falling back into the US tax net. Generally, after 4-months a non-resident foreigner would become subject to tax on his/her worldwide income. This is common in many countries– New Zealand, for example, has a six month window for non-residents.

Another big misconception is that renunciation reduces your capability to travel. Sure, a US passport is pretty convenient in that you can travel to quite a few places visa-free, but there are easy alternatives.

St. Kitts, for example, has an simple economic passport program that provides visa-free travel to Canada, Europe, Hong Kong, and dozens of other countries. Brazil and Singapore are also great options, and fairly easy to obtain.

The point is that visa-free travel need not end because of renunciation; in some travel cases, renunciation can even be a benefit. After all, no one has ever hijacked a plane and threatened to kill all the St. Kittsians.

Lastly, there are a lot of misconceptions about loss of benefits. If you have retired from the US military and renounce citizenship, you -will- lose your retirement pay. Check out DoD Financial Management Regulation Volume 7B, Chapter 6 for more information.

Social security, on the other hand, is not forfeited; one would continue to receive checks as a non-citizen, at least until Social Security finally goes bust.

I plan on discussing this topic a lot more– next week I plan on interviewing an attorney who specializes in taking people through the renunciation process. Stay tuned.

August 17, 2010
Krakow, Poland

I opened up the papers a few days ago, and the top story really surprised me. The Russian government announced that it was banning grain and flour exports through the rest of the year. Belarus and Kazakhstan may do the same.

Russia is dealing with record drought and heat; crop production is down, and this has caused a recent surge in domestic prices. In an attempt to curtail this inflation, the government has decided to impose an export ban, effectively preventing Russian farmers from generating the highest profits for their produce.

This sort of thing has been tried time and time again, most notably with Argentina’s recent beef export ban. It always ends badly– producers go bankrupt as a result, people lose their jobs, the economy suffers, and long-term food production actually falls… but the politicians never learn.

At a minimum, Russia will suffer significant damage to its reputation as a place to do business. You see, the export ban even applies to existing contracts… so if a Russian farmer already has a deal to export X tons of grain overseas in October, that contract has now been forcibly canceled by the government.

Ironically, Russian President Dmitry Medvedev has been practically begging foreign business leaders to invest in Russia, recently. He is particularly focusing on investment in his country’s version of Silicon Valley.

While the government may consider allowing some contracts to be fulfilled, the message that Russia is sending to the world with this ban is that contracts mean nothing.  This is not exactly good for business confidence.

Wheat futures in Chicago jumped on the news of the ban, flirting with their 2008 highs. I find it coincidental, perhaps, that we just recently had a discussion about the benefits of farmland.

I’m not in the least a doom and gloom survivalist who thinks that the end of the world is coming; frankly, I’m quite optimistic and see progress and opportunity everywhere.

To me, though, a small investment in arable land outside of your home country makes a lot of sense, both as a speculation as well as a hedge against risk.

For starters, buying property outside of your home country is a really effective way to move money. It is not reportable to any government authority in most cases, and it cannot be forcibly repatriated.

Second, if you believe that the unprecedented printing of fiat currency around the world will eventually lead to substantial price inflation, then property (and especially productive land) is a great hedge against inflation.

Third, owning some property outside of your home country gives you a places to go at some point in the future should you decide that, finally, it’s time to hit the escape button and get the hell out of dodge.

Finally, I think we should all consider a bit of productive land to ensure the safety and security of our families.

At the end of the day, we only have ourselves to rely on. The governments and institutions that we have become so dependent on might be there for us at the moment… but this relationship is rather ephemeral.

All it takes is one little monkey wrench– heat wave, drought, storm, strike, ban, embargo, riot, war, coup, blackout, brownout, bankruptcy, bugs, disease, fuel shortage, etc. and the whole system can fall apart… or at least be pressed to its limits, causing serious discomfort for consumers everywhere.

Most people take it for granted that when they get in their cars and drive to the grocery store, there will be an entire aisle of bread waiting for them. They don’t give much thought to the complex logistical system for how the bread actually arrived to that point, starting with the farmers in Russia and ending with the truck drivers in Bristol.

If any of these monkey wrenches gets thrown into the machine, a small bit of productive land goes a long way in establishing peace of mind that you will always have a place to sleep and way to put food on the table for your family.

A lot of people don’t buy the argument; their skepticism kicks in and they immediately assume that there’s ’something wrong.’ Fine by me.

Devoid of all facts, skeptics come up with insipid excuses that keep them out of the best opportunities. You know the sorts of people I’m talking about– the ones who always find a reason to NOT do something…

Do yourself a favor… ignore the naysayers. In this, the age of turmoil, focusing on self-reliance is critical.

August 16, 2010
Zakopane, Poland

I am a mountain person. There’s something about peaks that just makes my heart sing; I’ll take fresh mountain air over beaches any day of the week. The really interesting thing about the mountains, though, is how unpredictable and unforgiving they can be. I was given a friendly reminder of that over the weekend.

Several friends and I spent the last few days hiking and climbing in the High Tatra mountains of southern Poland, just over the border from Slovakia. The views are inspiring, if not slightly imposing… but in this kind of place, I am completely in my element.

Yesterday my friends and I set out on a mountain trail called Morskie Oko. It’s supposed to be one of the most difficult trails in Poland and passes by a number of pristine mountain lakes. I think we clocked about 30km in distance and several thousand feet of ascent over about six-hours.

Here’s where the story gets interesting: after reaching the top of the trail, we were feeling rather pleased with ourselves… exhausted, but engaged in the normal self-congratulatory high-fiving and photo ops that you would expect for this sort of thing.

Suddenly, though, without warning, the clouds rolled in. All of the weather reports said that Zakopane would have perfect weather all day… and yet, within 10-minutes, the sky was covered with ominous dark clouds. Needless to say, we could sense our fortunes changing rather quickly and made a swift decision to start our journey home.

Almost immediately, the temperature dropped. Then the wind picked up. Then the rain. Then the lightening. Then the hail. For the next 13 kilometers or so, we sloshed through the mud, our clothes soaking wet from the cold rain, all while being viciously assaulted by angry pellets of hail.

I would definitely have to think back several years to my days in the military before I can remember experiencing something so unpleasant.

What struck me the most, though, is how quickly things changed– the entire morning was bright, clear, warm, and sunny. We were far more concerned about sun burns and dehydration than anything else, and we made our provisions accordingly. And yet, the exact opposite of what we planned is what actually happened… and as you know, this is not uncommon in life.

You and I could undoubtedly have an entire discussion about this, perhaps making reference to Murphy’s Law, or Clauswitz’s friction and fog of war.

I think Mike Tyson put it best, though, when he said ‘everyone has a plan until he gets punched in the face.’

I know a lot of people who obsess over planning… whether it’s for travel, business, or anything else. I’m sure you know some people like this, the ones who can’t leave the house without an itinerary. They plan to the point of missing out on the action, trying to predict and mitigate every possible risk from every possible angle.

This is impossible. In my opinion, there is a difference between overplanning and being prepared. For example, before heading up the mountain, we made basic, common-sense preparations. Check the weather. Pack some food and water. Money. Map.

Sure, we could have packed a lot more gear, planned the routes more precisely, or made direct contact with the weather service. Regardless, we would have ended up either loading ourselves down with too much equipment or missing the entire experience.

If you’ll indulge me an analogy, I’d like to draw a parallel to planting multiple flags. Planting multiple flags is a system to protect yourself against sovereign risk, which I believe to be the greatest risk we all face. There are some fairly clear indicators about what’s going to happen– higher taxes, capital controls, long-term inflation, erosion of personal liberty, rise of a police state, etc.

As such, there are some basic no-brainer preparations that we should make– establishing a foreign bank account, purchasing some real estate overseas, seeking alternate sources of income, etc. Similarly, there were some basic, no-brainer preparations that we made before heading up the mountain– food, water, cash, and map.

Obviously, there are a lot of other things that could happen… things that we cannot see or predict at the moment. I see a lot of people getting wrapped up in these prognostications, though. They’re already trying to figure out how to protect their assets (or plan the hiking route) from every contingency.

For example, what if they open a bank account in Hong Kong, and then the US goes to war with China 10-years from now? What if they apply for an ancestry passport in Ireland, and then the EU falls apart in the next decade? What if they form a company in Singapore, and then Singapore gets taken over by a corrupt dictator at some point in the future?

These are not terrible questions to ask, but I think that by the time capital controls get implemented, these folks will still be sitting in a room ‘what ifing’ everything.

Overanalyzing leads to inaction and paralysis. You can try to plan every possible contingency and never accomplish anything, or you can make some basic preparations, sleep well at night, and make sure to stay on your toes in case things change.

There is no perfect situation or perfect solution, so planning for perfection is futile. Taking action now by making basic preparations is critical; in my opinion, this includes offshore bank accounts and foreign property for starters.

August 13, 2010
Zakopane National Park, Poland

After finishing off a very successful liberty camp yesterday, some friends and I arrived in southern Poland last night where we plan on spending the weekend rock climbing in the High Tatra mountains.

Perhaps it’s not particularly auspicious to kick off this trip on Friday the 13th… but fortunately I’m not a superstitious man.

Before heading up into the mountains, though, I’ve been spending some time catching up on emails and questions from our community.

The first one that caught my attention was from Stuart– he writes, “Simon- after reading the “Going Global” offshore guide, I noticed that the Norwegian krone is recommended for investment. Do you have the same level of confidence in Norway’s banking system? Would you plant a banking flag there?”

Norway’s currency is becoming increasingly popular as a store of value thanks to the country’s stable economy and balance sheet. The Norwegian government ran an 11% budget surplus last year at a time when the most of the world was running an equal amount in the red.

Investors know that Norway’s wealth is based on abundant natural resources, therefore it has a higher likelihood of long-term economic strength than other economies based on consumption.

In the late 1980s and early 1990s, Norway experienced a terrible banking crisis that affected 2/3 of the industry and led to the nationalization of the three largest banks. It was caused by a chain reaction of deleveraging and asset price devaluation, leading to significant banking losses.

Essentially, this was a dress rehearsal for what the world experienced in 2008. Having learned the lessons from its own banking crisis, however, Norway was well-positioned to deal with the most recent credit crunch.

Banks there are well-capitalized, and there is a Guarantee Fund that covers all accounts up to 2 million krone (roughly $325,000).

In order to open an account, you would need a passport and a Norwegian national ID number; this can be applied for with the government tax office. You do not need to be a full time resident of Norway, though, anyone can open a bank account.

Overall, Norway is a reasonable place to plant a banking flag, and it may be worthy of your consideration depending on your personal circumstances.

Next, Kim asks, “Simon, I’ve been looking online at some legal service providers in Panama. I would be interested to know whether you think they are reasonable and legitimate, and whether their appraisal of opportunities that exist is accurate.”

In my opinion, the best way to find reliable and trustworthy contacts is to put boots on the ground in a new country. This is something that I’ve done in multiple places around the world, and I can tell you from experience that it can be time consuming and sometimes costly.

The short-cut that a lot of people rely on is Google, what I often call the ‘black hole of accurate information’. Most of the time (but with some exception), offshore service providers who rank highly in Google are great at marketing, but not spectacular at actually providing a service.

In fact, I know personally of one online service provider in Panama who ranks highly in Google that ran off to another country with clients’ money. This sort of thing unfortunately happens all the time, all over the world.

The highest quality service providers won’t be found online… or in magazines or on billboards. They get new business by word of mouth.

They don’t run factory-style businesses that churn out generic, cookie-cutter services. They take time assess each client’s individual needs and customize a solution. And the only ways to find them are through a personal referral, or by spending time on the ground.

If you’re interested in learning more, I wrote about the process for how I have done this in the past in the above-mentioned Going Global report. I also wrote a bit about the process in the free Network Infiltration report that was released last year.

Last, Betsy asks, “Simon, I’m learning a lot from your emails. I’m wondering if you could explain what is this 30% ‘exit tax’ that’s charged to American citizens who renounce their citizenship? Thank you, and keep up the good work!”

Sure; if you’re a US citizen and you want to renounce your citizenship, the government will have its hand out one last time for a portion of all of your remaining assets.

Effectively, they tax you as if you had a giant liquidation sale on the day of your renunciation, realizing the gains from all property– houses, cars, stocks, boats, bonds, businesses, art collections, retirement accounts, etc.

The tax is 30%, but they give an allowance for the first $2 million. Effectively, if your net worth is under $2 million, you can escape without paying the exit tax. Anything over $2 million will be taxed.

Have a great weekend… and keep your fingers crossed that I won’t be too accident prone in the mountains.

August 12, 2010
Trakai, Lithuania

The last couple of days have been among the most rewarding of my entire life. Since Sunday morning, I had the honor of hosting 50 Eastern European university students at a small, boutique resort that I rented just outside of Trakai, Lithuania.

Most of these students grew up in nations that were struggling to emerge from Communism in the 1990s; they’ve experienced quite a bit of economic adversity in their young lives– massive inflation, debt default, political instability, etc.

Having already lived through these events, they know for certain that they want to protect themselves from being vulnerable. All of the students want to work hard, create wealth, and plant multiple flags to achieve more freedom and happiness in their lives.

With the generous help of a couple of Atlas 400 members, we sponsored this event to teach them about entrepreneurship, investing, liberty, and planting multiple flags… all in an environment where they can practice vital English-language skills.

I invited along some of my most successful friends who excel at lifestyle design, starting businesses with little capital, or generating huge investment returns. Then we set up formal lectures, interactive workshops, and small-group sessions, including twice-daily workouts to reinforce the mind/body connection.

The week’s discussions varied from the finer points of Austrian economics, to finding and operationalizing business opportunities, to analyzing investment deals, to planting multiple flags. There were, however, two central themes that we reiterated all week.

First, I wanted everyone to focus on adding as much value as possible in their prospective businesses or careers.  This is what’s ultimately best for everyone in the marketplace– the more value that is created, the better off the consumers will be, and the more profitable the business will become.

We also talked about various countries where the culture is one of value destruction– people who try to cheat their way to wealth through theft, fraud, or coercion. I also find this to be the nature of governments, which inefficiently redistribute capital and establish bureaucratic impediments.

In my opinion, value is like the karma of business. If you create value, positive things will happen to the business (i.e. loyal customers, more sales). If you destroy value, negative things will happen to the business (i.e. angry customers, high refunds and chargebacks, brand destruction, lawsuits, etc.)

I wanted to impress this upon the students because, fundamentally, everyone is capable of creating value. We’re all good at something, usually many things, and can solve problems for others. The bigger the problem, or the greater the number of people whose problems we solve, the more value we create in the marketplace.

The second major theme we discussed was attitude. We all know people in our lives who are smart and capable– they talk a lot about the business that they want to start, or the management position at work that they would be good at, or the no-brainer deal that they could get involved with.

Yet, for whatever reason, few people follow through and actually take action… usually this is due to fear of the unknown. I think that human nature would have us remain in a bad situation where we at least know what to expect, rather than take a small step into a potentially great, yet uncertain situation.

The advantage that the students have is that, despite being short on capital and experience, they are young, energetic, and have very little to lose when making radical decisions in their lives. Conversely, they have so much to gain.

Age and family considerations often play heavily into people’s decision-making process; they say things like, “If I were younger, I would…” or “If I didn’t have my spouse and children, I would…”

I respect that there are certain obligations and limitations in nature; these are definitely important. I think we can recognize, however, that they older we get, the easier it becomes to make up excuses for not taking action to improve our lives.

Often the catalyst that can generate the most positive benefit takes nothing more than a little bit of extra effort, or small baby steps towards an uncertain outcome.

Planting multiple flags fits in this category– I see instances where people would rather stay in a known bad situation rather than risk the unknown. This is why I think taking small steps can be so effective… once you take the first step and get comfortable, the next step always becomes clear.

To me, this starts with analyzing your own situation and determining where you are most vulnerable– do you have too much cash in one place? are you too dependent on your employer? are you living costs spiraling out of control relative to income? are your assets in danger from lawsuit? etc.

Once you figure this out, I think the next step will become evident… perhaps moving money offshore, buying foreign property, establishing an international business structure, seeking stable employment opportunities overseas, etc.

Anyhow, I appreciate you being patient with my silence over the last few days. Everything about the event was absolutely perfect, except that our Internet connection at the resort facility was insufficient to withstand being bombarded by so many people!

August 9, 2010
Trakai, Lithuania

Do you remember when the FBI used to be an ethical, highly respected police agency with only the purest of intentions? Neither do I.

As far back as I recall, the FBI was the butt of jokes, jeered and sneered for its incompetence, bureaucracy, and extortionist approaches to law enforcement. Lately, though, the organization has been building a well-deserved reputation for being a bunch of out-of-touch sociopaths.

Case in point– FBI Director Robert Mueller has been recently made to explain in front of the press why so many of his agents cheated on an exam of the Bureau’s most-important regulatory policies.

You see, the FBI ordered all of its agents to take a compliance exam, ensuring that they understand the rules for conducting surveillance on Americans without evidence of criminal wrongdoing.

I’m not even going to address the obvious issue of conducting surveillance without evidence of criminal wrongdoing… but the fact that so many agents cheated on the exam is a testament to the cavalier attitude with which they treat the civil liberties of Americans.

Not to be outdone by its own perversity, the FBI followed up that stunt with something to prove unequivocally to all Americans how completely out of touch the Bureau really is. Instead of fighting terrorists and organized crime, the FBI is now focusing its resources on…. Wikipedia.

In a letter dated July 22nd to the free online encyclopedia, the Bureau has demanded that Wikipedia remove an image of the FBI’s seal from its website. The FBI asserts that the image facilitates “deliberate and unwitting” reproduction of the seal, and must be removed.

Considering that any knucklehead who watches an FBI news conference on CSPAN, or does a simple search for “FBI seal” (which returns over 500,000 results), or takes a tour of the FBI headquarters can get an up-close and personal view of the seal, I wouldn’t exactly consider this the world’s best kept secret.

Clearly, though, Wikipedia poses a major security risk and needs to be stopped.

We live in a time when any element of any situation can be construed as a threat, including a teenage girl blowing bubbles within a 5-meter vicinity of police during G20 protests… or an innocent Londoner walking home from work, also during G20 protests.

Even when police agencies’ responses to perceived security threats border on the insane or criminal, heads rarely roll.  There is an unspoken bond of protection between police agencies and the masters they serve– and no, I’m not talking about ‘the people.’

Anyone who thinks that the primary responsibility of police agencies is to keep the people safe is absolutely kidding himself. These organizations exist to keep the people in check, not to protect them. In fact, they exist to protect the political leadership from the people.

Sure, in their spare time they’ll pound the streets catching prowlers, speeders, and drug dealers, stuffing the prison system full of nonviolent offenders.  But make no mistake, when the bureaucrats come to town, police agencies will quickly shift their focus back to fear and intimidation tactics.

The quid pro quo is extremely twisted.  The politicians get their backs scratched, keeping protestors at bay and ensuring that everyone is afraid of the government. In exchange, the police agencies get their backs scratched– expanded powers and authority, impunity, and public defense in front of the media.

Western economies are becoming more and more like police states. Unless you plan on living your life in the most unnaturally sterile way possible, I think everyone in these places should count on the very high probability of a run-in with the government at some point in the future, whether it’s the cops, tax authorities, or some regulatory agency.

It’s not enough that all of these police agencies have the power to confiscate all of your assets with no evidence of wrongdoing whatsoever, and then force you to defend yourself without any resources to do so. Now the trend is against you personally, not just your assets.

Every time I read about these sorts of things, I’m thankful to be living outside of this system by planting multiple flags.  I think anyone who lives, works, invests, banks, holds assets, etc. in the same country of their citizenship without having a multiple flags plan is setting themselves up for trouble.

If you’re not sure where to start with your own plan, I would definitely encourage you to pick up a copy of Going Global if you haven’t done so already; this is the special report that I recently co-authored with some of the folks at Casey Research.

Going Global is a detailed multiple flags overview that explains all of the key concepts of offshoring– where should you get started looking for second passports, international property, foreign bank accounts, and more. Consider it your quick start guide to planting multiple flags.

You can learn more about it by clicking here.

August 6, 2010
Vilnius, Lithuania

Believe it or not, Vilnius is one of my favorite cities in the world. It’s a fairly large city with a metro population of just under 1 million, but in many ways it feels like a small town.

English and Russian are both widely spoken, and there are some ancestry passport opportunities that I will try to get to next week if I have the time.

On this particular trip, I’m in Vilnius to sponsor a sort of educational charity event.  I’m funding a week-long camp for 50 Eastern European university students to learn about freedom, economics, investing, entrepreneurship, and multiple flags.

My goal is to hopefully undo years of socialist brainwashing and help them realize that they can all be successful and free if they simply have the will to take action.

I first got involved with this project last year when I was invited to speak at a similar event sponsored by Louis James and Doug Casey. It was incredibly rewarding to help energize so many young minds, and this year the local organizers asked me to sponsor my own camp.

It kicks off this weekend, and I’m really excited about it… more to follow on that next week. For now, let’s move on to this week’s questions.

On the topic of planting electronic flags, Barry asks, “Simon, any recommended offshore locations for website hosting?”

Sure. In North America, I would choose Canada or the US; in Europe, anywhere in Scandinavia or the Baltics. In Asia, I would choose Japan or South Korea.

These are the places that have modern, fast Internet architecture with professional support services. The important thing is that you want to plant this ‘web hosting flag’ in a country other than where you live and where your business is structured.

For example, you could live in England, host in Norway, and structure the company in Cyprus.

Next, Bill asks, “Simon, would you explain what being a ‘PT’ means?”

Depending on who you ask, PT could mean permanent tourist, prior taxpayer, or permanent traveler. I refer to the latter.

Regardless of the terminology, though, the meaning is the same: PT is someone who has no fixed base, never actually establishing residency anywhere.  The purpose of this way of life is to ensure that you never get caught up in any country’s tax net.

For example, if you are in New Zealand for more than 183 days in any 12-month period, the government will expect a share of your worldwide earnings, even if you earn no NZ income. In this case, a PT would spend up to 183 days in New Zealand and then move on to another country.

Next, Mike asks, “Simon- My wife and I are from India, working in the US on H-1B visas. Now she’s lost her job and is having trouble finding a new one; no one will sponsor her visa due to high unemployment. I enjoy the quality of life in the US, but I’m weary of the attacks of liberty. Plus, India is really growing and we could work there. What do you think?”

I think that businesses should be free to hire whichever person they feel is the best fit for a job, regardless of nationality. The collectivist mentality that somehow we ‘owe’ jobs to our fellow countrymen just because we happen to be born within the same invisible lines on a map is intellectually offensive to me.

In a country whose Declaration of Independence starts with “… We hold these truths to be self-evident, that all men are created equal,” it seems rather peculiar that the H-1B visa even exists.

Further, it’s ironic that leaders of western developed countries decry the evils of racism, sexism, etc., yet they still cling to nationalism like a warm blanket. This is simply another form of discrimination– that one individual has privilege over another simply by accident of birth.

Regarding Mike’s specific problem, yes, India has a rapidly growing economy. But there are other places to consider where you can work with minimal red tape and not sacrifice quality of life for economic opportunity. Singapore, Chile, and Abu Dhabi are good examples.

I’d love to hear what you think about this– should businesses be forced to hire within a particular country, or be free to hire any nationality they choose?

August 5, 2010
Vilnius, Lithuania

Our website was down yesterday. You probably noticed… I think it was down for over 12-hours. Now, I’m normally a pretty laid-back guy, and there’s not a whole lot that bothers me. But when technology that’s supposed to make our lives easier suddenly doesn’t work, I become unglued.

After 12-hours, the tech support folks at our hosting company finally determined the root cause of the issue: a faulty network cable. That’s it… nothing sinister, nothing complicated, just a 19th century solution to a 21st century problem.

It’s amazing how reliant on technology we have all become; this is not necessarily a bad thing. Every successive generation in the history of the world has had its own emerging technology that became integrated into their society.

Furthermore, each caused the older generations and social critics of the day to bemoan how that new fangled technology was ruining their civilization, making people ’soft’, etc. Electricity, indoor plumbing, the telephone, etc. were all met with resistance by some measure of the population.

The chief difference between then and now is that our technology, at least in the consumer’s perspective, is in digital or electronic form… and that the rate of technological progression is exponential (according to Moore’s Law). Naturally, the government has been keen to adapt (somewhat reactively) to these changes.

Curiously, a lot of people think that the government actually spearheads and innovates technological advances. This may have been true 50-years ago when many of the world’s brightest tech minds aspired to government service. Today they aspire to Apple, Google, and their own startups.

Governments now rely on the private sector for their technology needs, and the latest issue with Blackberry is an excellent case in point. For its enterprise service, the popular data handset uses a series of complex encryption algorithms that are frankly too difficult for most government security agencies to break.

So, instead of spending all of that time, money, and effort trying to break Blackberry’s encryption, a handful of governments have issued its maker, Canada-based Research in Motion (RIM), an ultimatum: hand over your encryption key, or we’ll ban your product.

The United Arab Emirates and Saudi Arabia, among others, are the first to do this. Ironically, while authoritarian governments may or may not be successful in a deal with RIM, they are still going to be behind the learning curve when it comes to new technology.

Simply put, the market will continue to adapt, and new technologies will emerge that thwart the best efforts of government to intercept every bit of data flying through the air.

In my opinion, though, this Blackberry case underscores a critical point that we have discussed before– technology is an important flag that you should consider planting in order to diversify your sovereign risk.

For example, if your email provider is based in the same jurisdiction where you live, work, and hold citizenship, the chances of being locked out of your account, or having your private messages used as evidence against you, increase dramatically.

Switching over to an offshore email provider can be done at no cost, an often you don’t even need to change your email address.

For technology entrepreneurs, I would strongly advise planting multiple flags and spreading your sovereign risk across multiple jurisdictions; for example, you can base your company in one country, your web server in another, your email server in another, your bank account in another, and your merchant processor in another.

This safeguards your business, as well as your information, from the ridiculous and often unpredictable acts of impetuous bureaucrats who know no other means but to confiscate and regulate their way to achieving their own agenda.

August 4, 2010
Vilnius, Lithuania

Remember the credit rating agencies– specifically Fitch, Moody’s, and S&P? Among other things, they take on the responsibility of rating the creditworthiness of sovereign nations.

This is a pretty important task that has become critical to the global financial system. Bear in mind, though, these are the guys who slapped perfect ratings on pools of risky mortgages– the ones where they gave no money down loans to people with no job, no income, no assets.

In terms of their sovereign ratings, agencies dish out their best scores to countries like the US and UK which borrow money like degenerate gamblers. Places like Abu Dhabi– which are cash-rich and in excellent financial health– are scored lower. It makes little sense.

Recently, in another brilliant move, S&P warned that the UK’s debt level ‘may prove inconsistent’ with its pristine sovereign rating.

Hardly a bold claim, wouldn’t you say?

British debt, currently at 64% of GDP, is rising every day, just like Spain, Greece, and Portugal; it seems like everyone else in the world has figured this out– a nation that is in debt up to its eyeballs and borrowing record amounts every month is simply not worthy of the world’s best credit rating.

Yet, for whatever reason, it takes the rating agencies’ teams of monkeys several years to wake up and smell reality.

I’ve recently been given an insider’s perspective into this system. A few weeks ago, I made the acquaintance of a person I’ll call “Sal”.  Sal is a high level executive at one of the major rating agencies in London, and we met under casual circumstances.

Personally, Sal and I hit it off instantly… only later did I find out what Sal does for a living. Needless to say, we immediately dove into a rather heated debate about the nature of the financial system.

I argued that rating agencies distort reality by ignoring simple and obvious facts; this has far reaching implications because trillions of dollars are allocated based on these ratings– and I’m not just talking about wealthy investors either.

Pension funds, mutual funds, and money market funds make their capital allocation decisions partly due to the rating agencies’ analyses.  As such, when S&P gets it totally wrong, the consequences affect little old ladies and factory workers just as much as the wealthy.

Believe it or not, most fund managers don’t want to stick their necks out… especially if they’re managing retail money like pensions or mutual funds.

They know that they most likely won’t get fired for following the advice of the rating agencies; if S&P says that Greece has investment-grade debt, and later Greece defaults, the fund manager can always point the finger at S&P’s shoddy analysis.

It’s all part of the very childish financial system blame game.

Ironically, my new friend Sal agreed with all of this, stating very simply “well yeah, but if we downgraded Greece a few years ago, it would have caused a colossal decline in the markets back then… and then people would be blaming us for sparking a crisis.”

OK, wait… so instead of doing your job and publishing a factual analysis, you stuck your head in the sand and waited for it to blow up in everyone else’s face because you’d rather look stupid than a financially conservative?

This logic is like shouting “FIRE!” from outside a crowded theater after it has already burned down to the ground.

China apparently realizes the insanity of this system; in April of this year, Chinese President Hu Jintao said the world needed “an objective, fair and reasonable standard” for rating sovereign debt.

(China’s own rating agency, Dagong Global Credit Rating Co rates the US as the third highest score; it rates China with the second highest along with Germany.)

For individual investors, I think we can look at the situation on the ground and figure out for ourselves that bond yields for these debt-laden countries must rise.

With the UK’s deficit shattering its own record levels, for example, Her Majesty’s Treasury is simply going to have to pay a higher rate in order to attract lenders. That makes today’s gilts an excellent target for shorting.

Britain will fall behind first because its currency is not seen as a safe haven anymore. In the long run, though, the same fate will befall the other traditional safe havens that are drowning in debt.

For example, I saw Bill Bonner speak at a conference recently about why he thought shorting Japanese bonds and buying their mid-cap stocks could be the trade of the decade.

Given that Japanese yields are basically nothing, its government has indebted the nation over 100% of GDP, and mid-cap companies often trade for less than  tangible assets, I am inclined to agree.

August 3, 2010
Vienna, Austria

There’s something I really like about the rural areas of Central Europe.  Whether you’re in Poland, Slovakia, Hungary, or Ukraine, just about everyone you meet outside of the major cities is an amateur farmer.  As this area was the breadbasket of the old Soviet Union, it’s truly an ‘agriculture culture.’

Their gardens are generally small, usually about an acre at most.  But in this small space, locals will raise an impressive variety of grains, vegetables, fruit trees, and even a few chickens and pigs.

It’s not a question of money– it’s not like these people are so broke that they can’t afford to buy a head of lettuce at the grocery store. Many of them simply want to know exactly what they’re putting their bodies, and it’s worth the extra 30-60 minutes in daily chores.

For most, though, their reasons are largely cultural– they were taught farming at a young age by their parents, and having a garden is simply the normal thing to do.

On a personal level, I could write to you all day about how delightful it was to have home-cooked meals all weekend where every ingredient came from my friends’ gardens… right down to the artesian well water.

Taste buds aside, though, I think that on an economic level, there’s hardly a safer bet than agricultural land.

On the demand side of the equation, one only needs to look at the world’s population explosion, especially in the developing world.  These are people and cultures whose dietary habits will shift from vegetables and grains to resource-intensive meats.  Their wallets and waistlines will get fatter together.

If you have any doubt, take a trip to China one of these days and check out all the fat kids running around town eating donuts and McDonalds.

Unquestionably, it takes far more land, grain, and water to raise one pound of beef than it does to grow a pound of rice or carrots. As millions of babies are born into rapidly expanding economies and increased disposable income, they will be brought up with new dietary norms– a chicken in every pot, two all-beef patties in every lunchbox.

Among everything else, this dietary shift may end up having the greatest impact on the world. For example, people talk about “the China effect” when addressing rising oil or copper prices. I’m not dismissive of that argument, but I believe that technological advances and alternative resources will dampen the rise of those commodities.

On the other hand, there really is no substitute for food. Agricultural yields and production methods have certainly improved over the years, but two things prevent technology from holding back food prices, at least for the time being:

First, the emerging dietary trend in the developed world is towards natural production methods that eliminate the hormones, pesticides, and industrial harvesting. This organic approach is much slower and less efficient when strictly comparing yields.

Second, a lot of the new agricultural technology these days is focused on things like carbon capturing rather than improving yields or production efficiency. Some of the greatest scientific minds in the world are toiling away trying to figure out how to contain bovine flatulence rather than dealing with the coming resource imbalance.

Furthermore, regardless of where you stand on climate change, it’s indisputable that arable land around the world is declining– soil erosion, development, drought, etc. are actually reducing the amount of land available for farming. And as they say, they ain’t makin’ any more of it.

To me, all of this makes a very compelling case for owning agricultural land. Given that land prices in many parts of the world are depressed at the moment, I think it’s an absolute no-brainer.

A few weeks ago I wrote about South American farmland, for example, that can be purchased for as little as $25/acre. This price point is not uncommon in the remote areas of Paraguay and Brazil. Frankly, 20 times that price would still be quite a bargain.

Even at higher prices, there are great deals to be had; for example, I have seen small homes with 5-10 acres of land in Paraguay and Ecuador selling for less than $39,000– they’re basically selling the house for the cost of construction and giving away the land for free.  This is a deal by any standard.

There are a lot of other places in the world where I’m looking as well– including certain countries in Asia and Africa.  To be clear, though, the best deals will never be published online. Don’t expect to Google “farmland in Paraguay” and find the bargains.

Sniffing out the best properties, negotiating the best price, and finding the best people to work with requires boots on the ground.  It has taken me several years to build up a network of trustworthy contacts who can source these opportunities, and I plan on sharing their knowledge with you when we launch a private forum in a few weeks.

For today, though, I simply want to plant a seed (ha) and get you thinking in this direction. Allocating a few thousand dollars of your savings to agricultural land somewhere outside of your home country is a simple, cost-effective no-brainer. In the end, you’ll have an escape hatch, a means of survival, and an excellent store of value.

July 30, 2010
Budapest, Hungary

This weekend I’ll be in a forgotten corner of eastern Hungary, just south of the Polish Slovak (thanks Jana/Rad) border and just west of the Ukrainian border; it’s a beautiful area, adorned with splendid castles and palaces that were commonplace during the Hungary’s days as a powerful kingdom.

One of the interesting things about the area is the abundance of natural hot springs. There’s an interesting mountain cave in place called Miskolctapolca where the water is a balmy 31C (88F) and contains a variety of aromatic minerals.

Many ancient cultures believe in the healing powers of these natural hot springs, especially to reduce bone and joint stress, ease respiratory infections, and relax the muscles.

On that note of health, this week’s first question is from G. Mitchell Sr.:

“Simon, I’m finding much useful information in the e-letters, but here’s a question I’ve not seen addressed– I’m just home after six weeks away. I now find that I’ve put on about five pounds/2.7 kilos. How the bloody do you keep fit whilst travelling full time?”

Nothing is more important than our health… and it’s true that traveling can take a toll.  Eating out every night can lead to weight gain, and it’s easy to skip out on the gym. Fundamentally, though, staying healthy is a question of priorities and lifestyle.

For me, eating well and working out is something that I plan into the travel. For instance, I always seek out a gym wherever I go. Constantly paying day rates can be a bit annoying, though– I estimate that my monthly gym dues in various cities/countries probably run about $300/month in total.

For those who’d rather sweat it out in their hotel rooms, my friend and fellow Atlas 400 member Craig Ballantyne has designed a fantastic series of hotel-based workout programs that take as little as 15-minutes; you can check them out on Youtube.

Eating well can be a bit harder. I avoid chemicals and try to eat natural foods as much as possible; when I go out to eat in a new city, I do a bit of research first to find the restaurants that serve organic food. I also subscribe to a few services that do this work for me, like HealthyEatsHere.com

The bottom line is, there really is no great mystery to keeping fit and healthy– eating well and getting exercise is the tried and true formula that will work for every human being alive. Ultimately, though, it’s up to each of us to make it a priority in our own lives.

Next, Jerry asks, “Simon, I applied for Irish citizenship several months ago via genealogy. Once I become Irish I will renounce my US citizenship and live in Panama. In this case, will I have to pay Irish or US taxes on income that I earn from a portfolio of US mortgage loans?”

The United States government has its hand out for a piece of all US-source income, regardless of who earned it. An Irishman living in Panama who generates US income will owe a certain percentage of that income to the IRS, plain and simple.

The Irish government, however, does not tax non-residents on income that is not sourced in Ireland. Furthermore, if you sell your portfolio to someone else for a gain, Ireland does not tax capital gains that do not arise in Ireland and are not remitted to Ireland.

Next, Kate asks, “I had twin boys at a US military hospital in Germany. My husband and I are both American. Are my boys eligible to acquire German citizenship?”

No. German nationality is based on the principle of Jus sanguinis, or right of blood. Children born in Germany must either be stateless, or have at least one parent who is German (or living in Germany with a permanent residency permit).

Lastly, John asks, “Simon, I’m clicking around the Internet and see that Poland is very bureaucratic, does not recognize dual citizenship, can require a person to pay income tax on money earned abroad, serve in the Military, and other possible disadvantages. Given all this, is it worth pursuing Polish citizenship?”

This is why I consider Google to be the “Black Hole of Accurate Information.” A lot of what you are reading on those sites is just plain wrong, or taken out of context.  Do what I do– ignore the armchair expats and go straight to the source.

In this case, you should consult with a Polish immigration attorney. You can find you own, or use the one that I already pre-screened for you while I was on the ground in Poland. Either way, get your information from credible sources so you can separate fact from fiction.

Have a great weekend.

July 29, 2010
Budapest, Hungary

“Take your package and shove it!”

This was the tone set by Hungary’s new Prime Minister Viktor Orban last week as he engaged EU and IMF officials about his country’s bailout package.

Back in the early days of the financial crisis, Hungary’s economy was one of the hardest hit in the European Union.  The EU and IMF moved quickly to stave off a total collapse by promising a 20 billion euro standby bailout package to back the country’s finances.

This package is enormous by any standards, comprising over 15% of the country’s GDP.

As in common in these sorts of deals, though, the IMF likes to dish out a lot of cash and then tell the recipients exactly what they should be doing with it.  This was all fine and well in the last administration, but earlier this year, Hungary elected a new Prime Minister in Victor Orban.

Oban is apparently the sort of individual to look a gift horse in the mouth; Hungary’s most recent talks with the IMF disintegrated into a macroeconomic punch line, and Orban has made one thing perfectly clear to the IMF:

“I run this country, not you.”

As a populist by nature, Orban has ruled out the possibility of any further austerity budget cuts and is instead shifting the burden to the financial sector. The IMF, bond creditors, investors, and financial markets are just going to have to take their lumps under Orban’s administration.

This sentiment has made Hungary a particularly unattractive place for bondholders to hang out. Rating agencies Moody’s and S&P, always the last to show up to the party, are now threatening to cut Hungary’s credit rating to junk; just yesterday, Hungary’s PM acknowledged that their rating would suffer.

All of this adds up to a situation that is as bad, if not worse than what is happening in Greece: no one will lend to them, and they’re just about out of cash. Unlike Greece, though, Hungary looks like it may have to deal with its debt problems alone.

That would leave only a handful of strategies:

1) Inflate. Hungary is not part of the eurozone, so it can print as much as it wants of its own currency to pay off local currency debt, EU inflation targets be damned. As the forint is not exactly a global reserve currency, however, this would lead to substantial inflation in the country, and decimate the exchange rate against the dollar and euro.

2) Tax. Foreign currency debt can only be paid by generating actual revenue, not conjuring it out of thin air. Therefore, Hungary’s government must raise taxes in order to close its budget gap and pay the interest on its debt. This, however, is unlikely to happen with this populist government considering that income taxes are already at 40% at VAT at 25%.

3) Default. This is the ultimate option, and may in fact be their most logical choice. With their sovereign debt likely to be rated at ‘junk status’ shortly, Hungary’s leadership would have little to lose by defaulting… or threatening to default.

This would force the EU and IMF to either back Hungary at all costs, or sit by and watch the country go bankrupt.  Either way, it’s going to be costly for both Europe and Hungary… and here’s why it matters:

Back during the good times when their currency was strong, many Hungarian borrowers took out loans in euro and Swiss francs because those interest rates were lower.

Because the loan balances and monthly payments are denominated in a foreign currency, however, if the forint depreciates then suddenly the borrowers have to come up with more forint each month to meet the minimum payment. This increases the risk of loan default dramatically.

This wouldn’t be a big deal if it were just a few loans here and there… but the total amount of exposure that western European banks have to the Hungarian market actually exceeds the entire GDP of Hungary.

If Hungary breaks and sets off this chain reaction, the markets will experience European Financial Crisis 3.0. I would expect the dollar and yen to surge again in this case as the ‘least worst’ of the major currencies, and all world markets to fall on the standard line of risk aversion.

Stay tuned for more.

July 28, 2010
Vienna, Austria

Austria has significant opportunity for anyone who wants to plant multiple flags.

As one of the world’s 12 richest countries, Austria’s 8.3 million people enjoy a very high standard of living with relatively low unemployment. I find the country to be as nice as Switzerland, but without the Swiss prices, and as efficient as Germany, but without the German socialism.

As a place to live, Austria gets very high marks from me. The country is exceedingly beautiful with some of the best mountains and skiing you could ever hope for. Vienna is great because it’s a major city, yet literally within a 20 minute drive you can be out in the country in the middle of nowhere.

It’s also a great place to base yourself as a PT; you can fly to just about anywhere in the world from Vienna on Austrian Airlines. If you travel frequently on the continent, Vienna is also THE hub for travel to all the smaller capitals and towns of Eastern Europe.

As for cost of living, Austria is quite reasonable. Property prices in Vienna and Salzburg are very moderate, often less than $3,500 per square meter (about $325 per square foot); a comfortable 2-bedroom apartment rents for less than $1,200/month.

As a place to plant a banking flag, Austria also gets very high marks.  Austrian banks are based on the Swiss system of personalized, private banking. Until recently, the country had some of the world’s strictest banking privacy laws, perhaps even more black box than Switzerland was.

Today is a different story unfortunately. There is very little legitimate banking privacy left in the world… but this isn’t the reason that you want to bank overseas. Offshore banking isn’t about hiding money or keeping it a secret, it’s about diversifying your sovereign risk.

If you live in North or South America, for example, and you bank in Austria, your funds are safe from your government’s and court system’s interference. No three letter agency in your home country will be able to punch a few keys on a computer and lock you out of your account.

In this respect, I think Austria’s banking system will continue to maintain a high degree of procedural independence from foreign governments, therefore it is quite useful as a banking jurisdiction.

Recently, some of Austria’s largest financial institutions have come under fire for having too much exposure to the rocky debt situation in Eastern Europe– specifically in Hungary and Ukraine.

This is probably true for Austria’s largest banks. Many of the smaller boutique banks, however, have very little exposure to Eastern Europe, and their balance sheets are quite strong.

As a place to store gold, Austria also receives high marks. One of my favorite offshore gold storage locations, Das Safe, is located in Vienna. You don’t need to worry about transporting gold here, either; you can buy gold coins at just about any bank in town.

Planting a tax residency flag in Austria, however, is probably not a good idea. Residents are taxed on their worldwide income at a headline rate of up to 50%. Capital gains are taxed as ordinary income.

Austria does have double tax treaties with the United States, Canada, UK, Australia, and New Zealand; this means that, more than likely, if you paid income tax in Austria, you would not have to pay any additional income tax in your home country.

Fortunately, the Austrian government defines tax resident as any individual who spends more than six months per year in the country. This allows PTs or seasonal travelers the opportunity to spend half the year in Austria, then move somewhere else for six months without getting caught up in the tax net.

As a place to plant a citizenship flag, Austria may have some opportunity for you. The passport is among the best in the world, and the Austrian government has an economic citizenship program available for very high net worth investors who are willing to invest several million dollars in the country.

In some cases, it is also possible to declare residency and be naturalized in a total of six years; in this case, though, I would recommend Belgium over Austria because the duration is much shorter.

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July 26, 2010
Krakow, Poland

By the late summer of 1939, Hitler’s forces had absorbed Austria and Czechoslovakia into his growing empire, and Germany’s military was massed at the Polish border clearly preparing for invasion.

In an astonishing display of perhaps the greatest complacency in the history of the modern world, however, Polish people sat lazing about their lakes, beaches, and riverbanks worrying about more pressing matters– like how to beat the summer heat.

In September of that year, German troops easily vanquished the Polish army, and Krakow became the colonial seat of the occupying forces. Almost immediately, under the direction of the German SS, anyone who posed a threat was rounded up and imprisoned. This included over 180 Polish university professors and many businessmen.

Krakow, of course, is also very close to two of the main concentration camps used during the German occupation, nearby Oswiecim (Auschwitz) and Plaszow.

The worst part is that, even after the war was over, Poland merely swapped fascism for Stalinism. Overall, the country was shrouded in brutal totalitarian control for half a century; undoubtedly, the Nazi invasion of Poland set off a chain of events that would forever affect the lives of all Poles.

It’s true that no one had a crystal ball back then… but it would certainly stand to reason that with Hitler knocking at your door, you would probably want to have an escape plan. Even more prudently, perhaps to have already executed it.

Many Poles did just that; they spent the preceding seasons liquidating assets, stocking up on gold, and getting their travel documents in order.  By the time Hitler came to town, many of the smart ones were already gone.

My guess is that the ones who left were probably ridiculed by their peers as “crazy”, or “fringe”, or “out of touch”, or my personal favorite, “unpatriotic.” It’s as if they had a solemn national duty to stay, get roped up and waste away in a concentration camp for the ‘greater good’ of Poland.

For those who escaped before the war, many of them went on to build new lives in places like the United States, Brazil, and Argentina.  They prioritized freedom and opportunity, and they went to the best places that were safest for themselves and their families.

I’ve met a businessman here (I’ll call him “Jarek”) who I think has the best story to sum this up; when Jarek’s father was just a boy in Krakow, the family saw the warning signs and decided to leave town. This was 1938.

Jarek’s grandfather owned a successful bakery at the time, yet he felt that he would rather start over somewhere else than risk the safety of his family by living in a police state. They sold everything– the house, livestock, and business… and everyone else thought they were crazy.

Within six months, the family was in Curitiba, Brazil; Jarek’s grandfather soon established a new bakery that eventually became a thriving business. Jarek’s father grew up in Curitiba and integrated into the local culture, yet he maintained his roots since there were many other Poles who followed them there.

30-years later, the face of Brazil started to change. By the mid-1960s, the whole of Latin America was becoming a military dictatorship.  Once again, the family decided to get out while they could and head towards better opportunity; they sold the business, liquidated their assets, and this time headed towards the United States.

Jarek was just a baby when the family made this move. He grew up in a Polish neighborhood of Chicago, spoke Polish at home, and married a Polish girl from his neighborhood.

He was working as a young real estate professional in the Chicago suburbs when the Berlin Wall fell, at which point he began making more frequent trips to Poland to visit his family’s homeland.

In his subsequent trips throughout the following years, Jarek began feeling like there was more and more opportunity in Poland; in 2003, fearful of what would happen in Chicago because of the “War on Terror,” Jarek moved his family full-circle back to Poland because he felt like it was the safest, most opportunity-rich place for him to be.

He may have been right; his business is booming, and the family really enjoys the life they have built for themselves here. To listen to him talk, though, they would happily leave and go somewhere else if the right circumstances were presented.

“My most important obligation is to my family,” he told me. “I will go wherever I can provide the best life for them, whether that is Poland, America, Brazil, or anywhere else. Nothing lasts forever, you have to expect that these things will change from time to time. People have to learn to change as well, to not get rooted in ideology.”

I think Jarek has an interesting point; I’d really like to hear from you, though, what do you think?

July 23, 2010
Krakow, Poland

Krakow is always beautiful in the summertime. It has one of the most vibrant city-centers in Europe… and as the economy is fairly healthy here in Poland, there are always a lot of people out in the streets enjoying themselves.

I’ll tell you more about Krakow next week; for now, on to this week’s questions.

First, Heather asks, “Simon, the article your wrote about currencies racing to the bottom is dead on.  I am trying to protect my retirement savings against depreciating major currencies, and I’ve been looking at using a Swiss annuity in my IRA. Have you heard much about this approach?”

Sure; a Swiss annuity is a fixed-income instrument that provides a low, fixed rate of interest, plus profit-sharing dividends. It is not subject to Swiss withholding tax, income tax, or capital gains tax, and in your IRA it would not necessarily be subject to US income tax either.

While a Swiss annuity may accomplish your goal of currency diversification, though, there are disadvantages; the rate of return can be fairly low, and there are often stiff penalties if you want to exit the annuity and redeploy your capital elsewhere.

For most people, a Swiss annuity makes a lot of sense if they’re looking to receive guaranteed income, or if they need to protect significant assets within the Swiss system through a legitimate, accepted tax shelter.

If your primary goal is currency diversification, you may want to consider an Open Opportunity IRA structure. This allows you to maintain 100% control over your retirement funds; in this case, you could keep your retirement funds in cash, diversifying across any currency of your choosing.

One approach would be to open an account at Everbank on behalf of the LLC owned by your Open Opportunity IRA; Everbank can denominate deposits in 20-different currencies, including the Swiss franc, Australian dollar, Brazilian real, Chinese renminbi, and Indian rupee.

With this approach, you can achieve currency diversification while maintaining liquidity of your retirement funds. If, in the future, you decide to plant a flag with your retirement funds by buying foreign property, you will have the liquidity and purchasing power to do so.

I really think that taking control of your retirement funds and planting this flag is a financial no-brainer. If you haven’t yet seen Terry Coxon’s book on the subject, Unleash Your IRA, I’d encourage you to check it out to learn exactly how to do this.

Next, Tim asks, “Simon, I’m an Australian citizen currently looking at Vanuatu as both a place to live and for planting tax flags; is this a good place for me to consider? Thanks for the great letter.”

Australians and Kiwis should definitely consider Vanuatu. As a small island nation fairly close to Australia’s eastern coast, you’ll have close proximity to home without having to deal with 45%+ Aussie tax rates.  In Vanuatu, there are no taxes on corporate profits, wage income, capital gains, or dividend income.

Planting a tax residency flag there makes a lot of sense, assuming you don’t have Australian-sourced income. Just be careful how much time you spend in Australia going forward; more than six months out of the year will pull you back into their tax net regardless of where you earn your income.

Next, Craig asks, “Simon, can retired members of the US military who renounce their citizenship still receive their retirement pension, or is it forfeited?”

In the US military, retirement is just one kind of personnel status, just like being active duty or reserve. Though no longer on active duty, retirees can technically be called up to serve again should the Defense Department deem this necessary.

As such, retirement pay is the compensation given to retirees for still being carried on the military’s personnel roster. This pay is contingent upon their eligibility to be recalled to active duty, as unlikely as that may be.

Upon renouncing US citizenship, a retiree forfeits his/her eligibility to serve in the US military, therefore the individual would no longer be entitled to receive retirement pay.  Note, renunciation would not affect disability pay.

For more information, read DoD Financial Management Regulation Volume 7B, Chapter 6.

Lastly, in response to a recent note I wrote about German citizenship, Marie was kind enough to provide some of her own experience about how she obtained citizenship:

“Simon, I was granted German citizenship from ancestry (my grandfather). There are major restrictions– the gender of the last two generations must be the same.  In my case, it was a German male, his daughter (my mother), and then me (female). If I had a brother he would not be entitled. Plus I had to be single, born after 1975, and never served in another nation’s military.”

Strange indeed; ancestry programs can be excellent, cost-effective ways of obtaining a tier-1 second passport. Unfortunately, it can be very challenging because the rules are rarely clear or logical. The same thing goes for ancestry citizenship here in Poland, which I shall tell you about at a later date.

Have a great weekend

July 22, 2010
Krakow, Poland

If you pay attention to currencies much, you’ve probably been following the euro closely over the last few months.  The euro hit its 24-month high in US dollar terms on November 30, 2009, right around $1.50. It’s been on a steady slide ever since.

Earlier this year, serious concerns began surfacing about the balance sheets of many European governments.  The “PIIGS” nations were all simply borrowing too much money; for many, it reached the point where they had to borrow just to pay interest on what they had already borrowed.

Needless to say, this model is completely unsustainable.  Investors’ concerns were justified, and the euro absolutely cratered.  It reached a low in May that had not been seen since 2006.

Over the last six weeks, though, something interesting has happened. The euro has come off of its lows, surging as much as 9%. This is a huge move for any currency, especially one that commands a 30% share of global reserves.

Some level of retracement was to be expected; nothing moves up or down in a straight line forever. To me, the best indicator is simply watching a bit of Bloomberg or CNBC. When all the guests who come on the show talk about euro/dollar parity, it’s time to exit the short position.

What’s been so strange, though, is the reasoning behind the euro’s recent strength. Spain, Portugal, and Greece have all held a series of bond auctions over the last several weeks, each of which was oversubscribed.

In other words, the Greek government found more than enough people to buy yet another 1.6 billion euro (roughly $2 billion) worth of fresh debt in a recent issuance. Markets cheered this optimism, and the euro surged.

Wait a minute. Full stop.

The eurozone has been in a crisis for months because Spain, Greece, etc. had unsustainable levels of debt. Now they’ve all held bond auctions and taken on even more debt… and everyone is happy about this?

Something is definitely wrong with this picture.

Greece’s ability to indebt itself even further is nothing to cheer about, plain and simple. This crisis was set off by too much debt, and increasing those nations’ debt levels should make the crisis worse, not better.

This utter lunacy suggests to me that we are experiencing the early stages of the “race to the bottom.”

The world’s three major open economies– the EU, US, and Japan– are all in major debt trouble, and trillions of dollars of institutional funds are sloshing around the system trying to figure out which one is the ‘least bad.’

For a while, everyone was avoiding Europe like the plague. Now it seems that the market is more concerned about the deteriorating balance sheet of the United States.

I think we’re going to see this game of financial hot potato play out for the next several years. Trillions of dollars of institutional funds will flow in and out of the major currencies, perpetually swapping one for another in search of safety and a reasonable store of value.

The euro will likely be the first of the three majors to fail; this is because none of the sovereign nations in the eurozone can print money– only the European Central Bank has this power.

In America and Japan, the governments can simply conjure more money out of this air. As ridiculous as it seems, this gives institutional investors a bit more confidence. They might not generate an inflation-adjusted return, but at least they don’t have to worry about an outright default… or so they think.

In the long run, smaller currencies like the Australian dollar, Norwegian krone, Canadian dollar, etc. will begin commanding a larger share of global reserves.

The final nail in the coffin, though, will come when a viable alternative to the major currencies emerges. There needs to be a safe home for the trillions of dollars worth of global capital out there… if not the US dollar, Japanese yen, or euro, then where?

China’s renminbi may be the most reasonable alternative in the future, but its economy will not be large enough for another several years. Not to mention, China’s exchange controls need to be dropped altogether before the renminbi could even be seriously considered as a reserve currency.

This will happen in slow, baby steps… assuming silly distractions like global warfare don’t get in the way first.

Meanwhile, be mindful in which currency you’re parking your long-term savings, especially if it isn’t actively invested in meaningful assets. You should be comfortable that your savings instrument is a reasonable store of value… if not, consider alternatives.

You know the argument for gold and silver, so I won’t get into that today. As another option, though, consider offshore real estate, and arable land in particular.

This may be one of the best stores of value you could buy… after all, it’s tough to go wrong when you can pick up great farmland in South America for less than $25 per acre that actually has agricultural yield.

More on this in future letters.

July 21, 2010
Krakow, Poland

I was on the phone with a major bank last night. As usual, I had to navigate their automated phone system hitting ‘zero’ until my finger turned blue… I was finally forwarded to an offshore call center where the representative was more keen to follow the script than to actually help me.

We’ve all been there. Sometimes it’s perfectly fine, and other times the communication barrier is just frustrating. When done right, though, it can be a seamless step for the customer while adding significantly to the bottom line.

Outsourcing is something that large corporations have been doing for decades– usually farming out work to international markets in an effort to minimize expenses. It’s still a debated practice, but I believe that it’s an important flag that any entrepreneur should consider planting abroad.

While you can outsource plenty of work to service providers in your home country, going offshore lets you take advantage of lower wage demand abroad. This can be a much more efficient use of your capital.

So where are the best places to establish an outsourcing flag?

Depending on your budget and workload, first you have to know what you’re outsourcing. For example, requirements and quality for a one-time project vs. a part-time assistant vs. a full time worker will all vary from country to country.

India is still a top destination for task-based work. There are a number of popular firms that offer on-demand help, charging by-the-hour or per-task. The advantage with hiring an outsourcing company is that you typically get access to a team of outsourcers, and the firm will outsource each of your requests to the most skilled person for the job.

Hundreds of thousands of information technology students graduate from Indian universities every year, and communications infrastructure is reliable within the country’s special IT parks. But India is now struggling to meet demand, and its currency appreciation has reduced price competitiveness.

Eastern Europe is rising to the challenge, marketing its legacy reputation as the center of Soviet technology and scientific research.

Ukraine stands out with the region’s fastest-growing software development and IT industry. Labor and infrastructure costs are still mostly buffered from the Eurozone, and Western venture capital funds have made large investments into offshore development centers there.

Eastern European contractors can deliver anything from a $500 web design to scientific equipment and microchip design. For skilled programming, information security, engineering, research & development, and sophisticated product and software development, look to Ukraine and other developing economies like Romania, Hungary, and the Czech Republic.

There are some well-rated outsourcing firms that you can find with a simple Google search, but I recommend seeking out independent contractors with oDesk, where you can easily search providers by country. oDesk gives you useful tools to manage your assistants and ensure they stay on-task, and you only pay for the time they work.

The advantage to hiring full-time outsourcers, on the other hand, is that you buy their downtime without having to worry about taxes, insurance, retirement, and other benefits.

I’ve worked with many outsourcers around the world, and in my experience if you want extremely loyal, articulate, punctual workers, especially full-time staff, you simply won’t find more value for your money than in the Philippines.

The country has a massive base of talented, college-educated professionals, and because of long ties to Spain and the U.S., the majority of young Filipinos speak English very fluently and are well-versed in Western business standards.

The Philippines is becoming the go-to destination for call center operations, as well as business process outsourcing (BPO) services. This includes things like accounting, human resources, and data analysis.

The best source of resumes is the country’s top job listing site, JobStreet, if you can get access. They typically require a business license in the Philippines, so you’ll either need to jump through their hoops or get creative and find someone who can help you. Otherwise, as above, search the oDesk marketplace for providers in the Philippines.

You can find full-time staff who can help you with finance, marketing, medical & legal transcription, web development, graphic design, and more. Rates range from $250-650 per month.

Wherever you do your hiring, enlisting others is instrumental to scaling your business. Planting one or more outsourcing flags overseas is a wise step that will likely generate a significant return for your business.

Do you have your own experiences? Let me know what you think.

July 20, 2010
Krakow, Poland

Apparently, all of us little people just need to sit down and keep quiet… so sayeth Kartik Athreya, senior economist for the Federal Reserve Bank of Richmond.

In a recent paper entitled “Economics is Hard. Don’t Let Bloggers Tell You Otherwise,” Mr. Athreya chastised the world of bloggers, talking heads, and anyone else who isn’t named Kartik Athreya for speaking their minds about economic policy.  Clearly, everyone else is too stupid to have an opinion.

“Writers who have not taken a year of PhD coursework in a decent economics department (and passed their PhD qualifying exams), cannot meaningfully advance the discussion on economic policy,” wrote Athreya. “[I]t is exceedingly unlikely that these authors have anything interesting to say about economic policy.”

Yeah, OK, there are a lot of dimwits out there… but this sort of “shut up and do as you’re told” mentality is precisely what is so flawed about the system to begin with.

Let’s be honest, though, this isn’t indigenous just to the United States. The powers that be have been doing this for centuries. Even the Greeks, arguably among the more enlightened of early civilizations, sentenced Socrates to death for asking too many annoying questions.

Over the years, intellectual discourse has bee squashed through fear and coercion,  giving rise to such illustrious events as the Dark Ages and Inquisition. These days, if anyone gets out of hand, they send the cops out in their blackest, most intimidating paramilitary gear… just to send a message.

It should be encouraged to question, to argue… the decisions that these people are making behind the curtain are far too important to be left to faith, especially when they have such a dismal track record.

At some point in the future, perhaps decades from now, I think people will look back with astonishment at this period in history.

They’ll wonder how such a small group of people could become empowered to conjure up trillions of dollars, blow trillions more, bail out their banker buddies, erode the value of people’s savings, wage senseless wars, wreck entire economies through misallocation of resources, and yet ridicule public discourse as ignorant and irrelevant…

In any different context, this would all seem completely insane.

Mr. Athreya could have spared himself and the taxpayers a couple of hours by simply penning his own resignation, rather than criticize those who dare to question the intellectual righteousness of his bosses.

July 19, 2010
Copenhagen, Denmark

The Kingdom of Denmark is one of those places like Ghana or Guatemala… everyone’s heard of it, but no one really knows anything about it aside from what they read in Hamlet. I’m here to tell you that the country definitely has some merit, and it may be worthy of you planting some flags, with caution.

For starters, Denmark ranks very highly as a place to plant a PT or part-time residency flag. One of the biggest reasons for this is because there is no language barrier; sure, Danish is the official language, but North American English is spoken with a near native fluency.

This is quite common in Scandinavia; despite sharing certain core traditions and characteristics, each country in the region has its own language. They’re not even necessarily related, either. Swedish, for example, is Germanic in origin, while neighboring Finnish is actually closer to Hungarian.

To cope with this disparity, English has become the de facto pan-Scandinavian language… it’s simply assumed that everyone speaks English.

Aside from being an easy place to communicate, the standard of living is high in Denmark. It’s a very clean country, and crime is low. Copenhagen has seen an increase in certain drug-related turf battles in the seedier areas of town, but this hardly affects the vast majority of the populace.

As such, families with children should have little concern about planting a flag in Denmark.

For single people, Denmark can be a veritable paradise; the locals are very attractive (both men and women), and they tend to react favorably to foreigners… especially those with darker features.

On the downside, living costs are significantly higher than North America and most of Europe. Danish import duties and taxes are among the highest in the world, and this is what contributes so much to the excessive pricing.

To give you an example, dining out can easily set you back $50 per person at an average restaurant. Things like rent which aren’t subject to VAT, however, are much more reasonable. A 2-bedroom apartment in the city center rents for about 1,000 euro/month.

As a place to plant a tax residency flag, Denmark fails miserably. Residents of Denmark are taxed on their worldwide income, and capital gains are treated as income. In total, Danes can pay up to 59% of their income in taxes.

Most of whatever money is left over that is spent on goods and services is subject to a 25% VAT. Painful. Tax residency in Denmark simply isn’t worth it.

One of the nice things about their VAT regime, though, is that you may be entitled to a VAT refund if you are not a resident. Provided you keep your receipts and do a bit of paperwork, you can collect a refund on your way out of Denmark… this is one of the advantages to being a PT.

As a place to plant a business flag, Denmark is not worthy of your consideration; employees are incredibly expensive, both due to their high salaries as well as the payroll tax liabilities.

Furthermore, Danish employees simply aren’t very ambitious. A recent survey indicated that only 4% of Danish employees are actively seeking to move up in their organization, while 68% said that they specifically do not want to be promoted.

Employees with this sort of attitude are not the type who will bust their butts in order to make themselves and the company more successful.

As a place to explore new markets for your business, though, Denmark is definitely worthy of your consideration. The average Danish bank balance is just shy of $30,000; they have money, and they will spend on value-added products and services.

As a place to plant a banking flag, skip over Denmark. There are better jurisdictions in nearby Switzerland, Austria, and you normally have to be a resident to open a Danish bank account.

If you’re looking for an online brokerage, Denmark may be useful to you. Saxo Bank has a great online trading platform that gives you access to a variety of international stock exchanges and FOREX. I can tell you from experience, though, that they’re a bit weak on customer service.

It’s also important to note that Saxo Bank no longer accepts new applications from US citizens. This is a recent change, and another example of how the window is closing on many offshore opportunities for some nationalities.

Lastly, as a place to acquire second citizenship, Denmark is unfortunately not a viable option; the Danish nationality law requires 9-years of permanent residence, and you must agree to renounce your previous citizenship. If you’re seeking an EU passport, Belgium is a much better option.

Children born in Denmark are also not entitled to Danish citizenship, unless at least one of the parents is a Danish national.

July 16, 2010
Copenhagen, Denmark

I’m back in Copenhagen today in the middle of a heat wave! This city definitely has a lot to offer potential expats, and I’m going to publish a short article about it on Monday assuming I don’t dismember myself during tomorrow’s parkour training.

On to this week’s questions:

First, Chris asks, “Simon, the new Going Global report sounds very interesting, but can you comment on to what extent the report is targeted at US citizens vs citizens of other countries? I very much enjoy your newsletter– keep up the great work!”

Thank you! Going Global is a new multiple flags overview that has just recently been published by Casey Research. I had a very strong hand in writing and shaping this report, and I can tell you that I wrote my sections for a global audience.

My understanding is that their final, edited product is addressed and marketed towards US citizens, but I believe that anyone in the world, regardless of nationality, will get a lot of value from the information presented in this text.

We covered things like how to find and assess foreign banks, who to contact for certain foreign trust and corporate structures, what to consider when buying foreign property, details of various citizenship programs, and more.

As I was writing, my goal was to provide a fundamental overview of offshore topics so that the reader would finish the text, have a clear understanding of his/her options, and know exactly what the next steps are to start planting multiple flags.

Casey Research is selling it for $99 and they’re including some complimentary bonus material along with your purchase; you can pick up your electronic copy here.

Next, Jessica asks, “Simon, what are the rules for transporting gold overseas?”

There’s been a lot of talk lately in the blogosphere on the subject of transporting gold. This is something that I have quite a bit of experience with as I take a bit of gold with me everywhere I go on my permanent travels, and I’ve moved large quantities of gold on several occasions.

Most countries have regulations for how much money and merchandise can be moved across their borders without declaration. These rules change all the time, and they vary from country to country.

Regarding gold, some governments only consider the face value of gold. For example, a one ounce American Eagle coin has a $50 face value, so you’d have to move 200 ounces in order to hit the threshold in the United States.

Other countries consider the gold’s market value; earlier this year in Singapore, for example, a Swiss national was fined for failing to declare 58 gold coins valued at $15,000, even though their face value was substantially less.

As another example, reader Don checked with the customs authorities in Panama and found that they follow the same scheme– valuing gold based on its merchandise/market price, not face value.

If you do decide to transport gold on your own, there’s one basic rule of thumb that you should follow: when in doubt, declare it. This includes the exit from your originating country, entry to your final destination, as well as through any transit country.

Next, “El” asks, “Simon, are body scanner machines being used in all major airports in the world now?”

No… at least not yet. Just in the last 30-days, I’ve gone through at least a dozen major international airport security checkpoints on three continents. I didn’t see a body scanner at any of them.

I know of at least 10 airports in North America that have body scanners, including DFW, LAX, BWI, and that hotbed of terrorist activity, Tulsa, Oklahoma.

They’ve been introducing them slowly in Europe as well– Amsterdam was the first and most vocal about it. Not to be outdone by the Dutch in curtailing civil liberties, though, the British government has promised to install these $125,000 machines across the UK “as soon as is practical.”

I suppose that’s Newspeak for “as soon as the foreign bondholders loan us the money.”

Lastly, an anonymous reader asks, “Simon, I am always amazed at your schedule. How do you handle laundry? (lol)”

It’s actually a fair question! When I travel and I’m staying anywhere for more than just a few days, I always try to rent a short-term apartment. These are usually equipped with a washer/dryer, as well as a full kitchen, etc.

Just recently in Bath, for example, I stayed in a very nice 2-bedroom flat in the city center for about 500 pounds ($750) / week. I’m moving on to Krakow early next week where I’ll spend about 10-days in another centrally located, luxurious apartment that runs only about $100/night.

July 15, 2010
Bath, England

I’m presently writing this missive on the UK’s Great Western Railway somewhere between Bath and London’s Paddington station. I’m flying back to Copenhagen in a bit to meet up with my business partner, but I wanted to take a few minutes and tell you about an interesting woman that I’ve met.

“Emma” is a 70-year old British widow who originally hails from Bath. Perhaps it’s true what they say about Bath’s mineral-rich waters, because Emma looks absolutely spectacular for her age, and her energy level would make a 40-year old envious.

For the last several decades, though, Emma has been living an expat lifestyle all over the world– in Dubai, Scotland, Switzerland, and now finally in Malta.

Here’s what’s most intriguing about her, though… she’s always worked. Even as a 70-year old widow in Malta, she still has a job. In her own words Emma says, “I’m a war baby. My generation doesn’t think that anyone owes us anything, doesn’t think that it’s other people’s responsibility to take care of us.”

I recognize that a lot of people are scared to expatriate simply out of financial anxiety; they don’t know how they could find a job, make money, and pay the bills. Even with three children to take care of, though, Emma never let that uncertainty stop her.

You see, Emma always had supreme confidence in her own abilities to add value everywhere she went; she’s hard working, intelligent, and resourceful, and she knew that she would always be able to put those qualities to work for someone everywhere she went.

She was right. Even in male-dominant cultures like Dubai in the 1970s and 1980s, Emma was able to find work and thrive. Moreover, she religiously saved her wages, believing in the old adage “waste not, want not.”

For this reason, she says, she has been able to accumulate substantial retirement savings, even though she never held an extremely high paying job.

She also made the decision to denominate her savings in the Swiss franc many years ago; she set up a bank account in Switzerland when she was living there in the 1970s, and this is still the bank that she uses today. Even back then, she felt that the franc would be a better store of value than the dollar or pound.

Today, she enjoys a bountiful life on Malta’s pristine coast. Between the beautiful weather, the friendly people, the reasonable cost of living, and the work opportunities, she’s extremely happy there and is able to live well on her retirement savings and part time wage income.

Overall, I think Emma has a really interesting story of someone who has planted multiple flags (banking, employment, residence) and sought out unique opportunities around the world.

Mostly, though, I really like her strong, positive attitude. Many people in her position would probably wilt at the challenges and adversity of being a widowed mother of three. Emma has thrived. And the main reason is because she had the self-confidence to overcome excuses and limitations, and the courage to not be afraid of living free.

July 14, 2010
Bath, England

For beginners, planting multiple flags can seem like a complex topic. How does one even begin selecting jurisdictions? How do you actually go about selecting the right offshore bank, or foreign real estate agent? What are the best passport opportunities available?

Until now, there hasn’t been a ‘quick start’ guide to explain all of these concepts and get people headed in the right direction. I try to cover each of these topics in our daily conversations, but frankly there’s just way too much information to convey… and this public e-letter isn’t always a suitable forum to discuss sensitive topics.

A few months ago, though, I was asked by my friends at Casey Research to co-author a new comprehensive report to address these issues.

We spent months working on what I believe is now the best multiple flags overview in the industry– it covers all the core topics like banking, passports, gold storage, retirement accounts, foreign property, offshore structures, currency diversification, renunciation, and more.

I can tell you that I had a very significant role in putting together this product, and as I sat down to write my sections, I kept the needs of the Sovereign Man community in mind.

This report is written especially for you. And my goal is that, by the time you finish, you’ll know exactly what you need to do next, and how.

As such, if you find yourself just getting started with your multiple flags action plan, or if you’re not sure how to get started, this special report is definitely the most useful tool out there for you.

I’d love for you to take a look and send me your feedback. You can get your copy here.

July 13, 2010
Bath, England

It’s no secret that the government– any government– has nearly unlimited authority to do whatever they want, whenever they want. They can bend the rules, spin reality, and use their national constitutions like a roll of cheap, single-ply toilet paper.

Lately, governments have been unafraid to increase the size and scope of their powers, making drastic changes often with near immediate effect.

For example, UK Chancellor George Osborne shocked British investors several weeks ago when he announced that capital gains tax rates would increase for many Brits effective midnight that same evening.

Not to be outdone by Chancellor Osborne, the United States Congress has actually gone back in time and made retroactive changes to tax and reporting regulations. There are some recent instances of this in 2010’s controversial HIRE Act.

Even better, Canada’s Legislature amended the Retail Sales Tax Act earlier this year to be retroactive effective May 1997. The amendment specifically affected certain companies which had to come out of pocket for 12-years worth of tax that they had previously been exempt from. Ouch.

Today marks another example of the government showing us how quickly it is willing and able to make changes. Effective today, the United States Department of State is increasing fees for consular services across the board– things like visas, passports, and notary services.

The state department made this announcement just two weeks ago; the thing that caught my eye and sparked this letter today is their new $450 fee for renunciation of US citizenship.

This is a brand new fee that has never been imposed before. Apparently the number of Americans queuing up at embassies around the world to renounce their citizenship is exploding so rapidly that the State Department had to formalize the process and tack on a fee… this, of course, on top of the 30% exit tax.

With all of these examples, there’s really one single point that I want to drive home today: you can only kick the can down the road for so long…

By that I mean, these examples show that governments are constantly finding creative new ways to increase their domain and grow their tax revenue. We cannot count on any level of stability– what’s accepted and allowed today can change tomorrow.

The only thing we can really count on is the pace of change– how quickly and how drastically governments will reshape the system to suite their own needs at our expense.

All of these changes have an effect. Some are large (retroactive tax code changes, an overnight revaluation of a currency) and some are small (higher fees for a passport). As we go forward, though, you can expect these changes to be more surprising, more swift, and more painful.

It’s easy to kick the can down the road and say, “well I’ll take action later when things start to get really bad.” This approach might work for a while, but the logic will abruptly run out only once it’s too late.

Protecting yourself and your assets– moving some money to a foreign jurisdiction, scouting out locations for a new home overseas, exploring second citizenship opportunities, etc.– can be accomplished by investing some time and energy right now and making it a priority.

I really want to encourage you to make every effort to start this process as quickly as possible. Put it on the calendar, call it a midsummer resolution… whatever works. I don’t want you to be one of the people who wakes up one day and is completely enslaved by capital controls or a military police state.

Also bear in mind that whenever you step outside of your home country, wherever that may be, there is literally a world of opportunity waiting for you.

In the coming days and weeks, I plan on releasing some new information, including a free, short video series about steps you can take right now, as well as a comprehensive “going global” overview that I co-wrote with my friends over at Casey Research.

More to follow, stay tuned.

July 12, 2010
Bath, England

The most expensive city in the world is not in the North America, or Europe, or even the Middle East… it’s in Africa.

According to an annual cost of living survey that is sponsored by international HR consulting firm Mercer, the most expensive city in the world is Luanda, Angola.

In case you’re scrambling for an atlas right now, Angola is an oil rich country on southern Africa’s Atlantic coast. It was a Portuguese territory from the 1500s until independence in 1975, at which point it plunged into a decades-long civil war between communist and anti-communist factions.

Needless to say, Angola was one of those unfortunate countries where the United States and Soviet Union duked it out, supplying their respective sides with money and munitions despite a UN prohibition against arms deals in the country.

When the war finally ended in 2002, the Angolan economy went bananas. Large multinationals had already been drilling and producing in Angola’s rich offshore blocks… but once peace was finally brokered, the economy really blossomed.

Today, Angola is a nation of significant economic contrast– though the government is growing rich from oil revenue, the majority of locals live in poverty on less than $1/day. For expats, though, costs are astronomical:

Three-star hotel rooms start at $750/night, apartments run $7,000/month, a silly cheeseburger can cost $30 or more, a haircut will set you back $150. This is why Luanda tops the Mercer ratings.

Also making an appearance in the Mercer survey’s top 10 are fellow African cities of N’Djamena, Chad and Libreville, Gabon, each of which is a costlier place for expats to live than London, Zurich, Vancouver, or New York.

This sort of price disparity is not unusual in Africa. Key cities are often severely limited in supply of expat-quality products and services… there might be only one hotel in the city with four walls and a ceiling, running water, and a mattress devoid of insects.

When the economy starts booming, demand outstrips the limited supply and prices soar. Meanwhile, expats stay focused on whatever big project they’re working on instead of developing more services, and the locals generally lack capital to start a business… so it takes years for more supply to enter the market and for prices to adjust lower.

I think these sorts of places can spell extraordinary opportunity for hungry entrepreneurs who don’t mind relocating and overseeing the development of new expat-quality products and services, particularly food and lodging. This is the equivalent of selling shovels to gold miners.

I also think that even greater fortunes can be made in places that haven’t quite boomed yet, but are likely primed for a boom based on a key event.

Burma, for example, will experience an enormous investment boom once the junta finally disintegrates. North Korea will be an entrepreneur’s paradise once Kim Jong-Il passes and his sons kill each other fighting for control of the government.

Incidentally, the other cities in the Mercer top-10 survey are Tokyo (2), Moscow (4), Geneva (5), Osaka (6), Zurich and Hong Kong (tied for 8), and Copenhagen (10).

Other notable cities include Singapore (11), London and Paris (17), Shanghai (25), New York (27), Rio de Janeiro (29), Havana (45), Madrid (52), Dubai and Los Angeles (55), Vancouver (75), Bangkok (121), and Auckland (149). The least expensive places in the world included La Paz, Bolivia; Managua, Nicaragua; and Asuncion, Paraguay.

The survey covers 214 cities based on US dollar costs in housing, food, transportation, household goods, and entertainment. Multinationals use the survey to determine compensation and benefits for expat employees. I find it to be reasonably accurate with some slight discrepancies that I will address in future letters.

July 9, 2010
London, England

Today’s letter is a bit early– I’m running out soon to meet up with several subscribers at the Clarendon lounge in Notting Hill. Feel free to drop by if you’re in the area tonight between 6pm and 7pm.

On to this week’s questions, which are ironically all about citizenship:

Reader Antagau comments, “Simon, I am a South Korean citizen living in the U.S. as a permanent resident (green card). I am qualified to become a US Citizen and was considering doing so. After discovering your website and others, now I am not so sure. What are the pluses and minuses of my options?”

A US passport used to be the holy grail of citizenship and envy of the world. Now, this is not the case. I believe the most valuable passport in the world now is Singapore, but there are dozens of others that are also great options.

The most important question to answer when looking for a second passport is, “will I be better off with this document?” As a South Korean citizen, you already enjoy excellent visa-free travel around the world… South Korea is even on the US visa waiver program.

As such, I don’t think that obtaining a US passport will be of much benefit for you, travel-wise.

In terms of rights and privileges, as a permanent resident you already have nearly the same liberties as a US citizen. Aside from voting and a few other exceptions, you’re nearly one and the same.

The major difference is that you can always walk away from US residency, and hence the US tax net. Raising your right hand and taking the oath of citizenship signs you up for painful worldwide taxation, and undoing this can be costly.

Consider these issues when making your final decision– as a South Korean resident in the US, will you be better off with a US passport? I don’t think so.

Next, Larry asks, “Simon, by giving up US citizenship, do I lose the right to enter the country?”

No. This is a common misconception about renunciation; if you give up your US citizenship, you’re treated just like any other foreigner. If you already have a passport from a country like New Zealand or Germany, you’ll be on the visa waiver program and can enter/exit the US without applying for a visa.

If you have a passport from another country (Ecuador, Dominica, etc.), then you’ll have to apply for a visa at the nearest US consulate. This is much less problematic than you would imagine; US consulate officials are trying to keep foreigners out who will try to stay and reside in the United States illegally.

Clearly, as a former American who has renounced citizenship, you would not be someone wanting to stay in the US for the long-term… so unless you’re on a terrorist watch list or have a bad criminal record, you wouldn’t have any problems obtaining a visa.

Lastly, Todd asks, “Simon, I’m an American living in Spain. My Brazilian wife is on track to get Spanish citizenship within one year. I am beginning to wonder if the extreme hassles we are enduring here to acquire citizenship in the end will be worth it– where do you see Spain in 5, 10, 20 years?”

First, if your wife is Brazilian, you should already be standing in line at the consulate to obtain your own Brazilian passport… that will soon be one of the world’s more valuable travel documents.

Second, Spanish citizenship takes a long time to acquire… so if you have already invested the time and effort into residency, you might as well go ahead and finish the process. Spain will definitely drop out of the eurozone within a few years, but I’m sure that the EU and borderless schengen area within Europe will likely persist in the long-term.

As such, it’s probably worthwhile to continue with your Spanish citizenship track as long as you have the Brazilian passport as well to fall back on.

Incidentally, for anyone who is looking for an EU passport but doesn’t want to spend a decade treading water in Spain, Italy, or France, I would suggest looking into Belgium. More on that in future letters.

Have a great weekend.

July 6, 2010
London, England

It appears that Wachovia Bank has been a bad little boy and not following the rules.

Recent reports from a US Justice Department investigation suggest that the bank didn’t follow anti-money laundering requirements from 2004 to 2007. During that time, over $378.4 billion of Mexican drug money passed through its offices.

Wachovia was formerly one of the largest banks in the United States; they went bust in 2008 under the weight of their subprime losses. I used to be a customer of theirs, long ago… it’s funny that my $10,000 foreign wires used to be  scrutinized by the bankers, but $378.4 billion worth of cash deposits was not.

US banks are required to abide by a litany of anti money laundering (AML) regulations, including the Bank Secrecy Act, FINCen requirements, and the USA PATRIOT Act.  Each of these rules effectively requires bankers to be unpaid government spies and report customer activities to a variety of agencies.

These government agencies have ever-expanding authority to control and confiscate private funds on suspicion of drug involvement, or money laundering, thanks to America’s pointless and endless ‘war on drugs’. If they deem something to be suspicious, they have the power to seize everything.

Given Wachovia’s failure to follow the rules, I suspect two things are going to happen.

First, the CEO of Wells Fargo (which bought Wachovia in 2008’s financial meltdown) will be called to the carpet and be forced to tap dance in front of Congress, BP-style.

As it is so popular for politicians to lambast the bankers, Barney Frank and the gang will take turns pummeling the CEO and jostling each other for the best evening news sound byte.

Wells Fargo, of course, will be forced to pay a hefty fine.  Given that they have been raking in huge profits by borrowing from the Federal Reserve at 0% and investing in US Treasury Securities yielding 3%+, they’ll be able to afford it.

The second thing that will happen is that Congress will use this as an excuse to call for stricter, tougher measures.   Wachovia failed to follow the rules, therefore the rules must clearly be too lax.

The end result will be harsher rules and more scrutiny.  For US residents who bank in the US, this means giving the government tighter control over your money.

In the long run, I expect bureaucratic, third-world type processes (lots of stamps and signatures) for carrying out any transaction considered ‘exotic’. This would include anything involving large amounts of cash, multiple parties, and foreign accounts.

Politicians can pass these laws overnight with the stroke of a pen.  They can bury nasty regulatory requirements deep inside the text of otherwise innocuous legislation– like this year’s HIRE Act which was signed into law 2 months ago.

The HIRE Act was designed to provide incentives for businesses to hire employees, yet a small portion of the text imposed new penalties and requirements for Americans with offshore holdings.

(you can read more about those requirements HERE, and I encourage you to do so…)

Consequently, we should all be taking action now before they enact any of these overnight changes… this means opening a foreign bank account, and parking some long-term savings in foreign property.

Remember, regardless of your home tax jurisdiction, diversifying your sovereign risk and planting financial flags overseas is always a smart move.  If your home tax jurisdiction is becoming increasingly authoritarian, it’s a no-brainer.

July 7, 2010
Berlin, Germany

As I’m in Berlin for some quick business, I wanted to take a few minutes to talk about planting flags in Germany; perhaps today is an appropriate day to do so as the Deutschland national football team is taking on Spain in tonight’s World Cup semi-final… and there are German flags flying everywhere.

As a place to visit or plant a residency flag, Germany is a personal call. You might love it– the history is really unique, the people are nice enough, and the nightlife is really interesting (often adult-oriented).  I like it fine, but there are more exciting places in Europe for my taste.

As a place to establish tax residency, Germany should definitely not be considered. Individual income tax rates can be as high as 67%, and the government taxes its official residents, both foreign and citizen, on their worldwide income.

As a place to establish a citizenship flag, Germany is a valuable passport. Germans have visa free travel to more countries than the US and Canada, and they’re not ill favored in the world.

Unfortunately, it’s not one of the countries whose nationality laws provide ancestral citizenship… so if your grandparents were German, it won’t make much of a difference to you.

Germany does provide for naturalization after 8 long years of permanent residency… but Belgium is a much easier option at only 3-4 years, and it’s an equally valuable passport.

I do know of people who have gained German citizenship by going through the process of being married or adopted, but this is not a good forum to discuss that.

As a place to plant an emergency flag, where you would go in the event of a global meltdown, I would give Germany mediocre marks (no pun intended). The country has enough food, water, and arable land to sustain itself, but I worry about its energy security.

For now, Germany has too much reliance on foreign nations to import critical oil and gas supplies.  The government has been pushing for renewable sources, and while these have been growing, Germans would probably freeze to death if they were shut out by Russia.

In my assessment, Germany does score rather well when it comes to investing and business opportunities.

The German economy is one of the largest and most powerful in the world; I think it serves as a reasonable model of how a modern, developed, industrialized nation can simultaneously be among the wealthiest in the world but still have a solid manufacturing and export base.

Yes, there are problems, starting with their bloated welfare programs and high tax rates. The government appears to be taking positive steps with unpopular austerity measures, but I really doubt these will stick in the long run.

Regardless, though, the overall German savings rate is quite high at 12.8% of their disposable income.  Germans have money, and they save quite a bit of it. For entrepreneurs, this makes the country a solid consumer market, as well as a great place to source investment capital.

For workers and professionals, there are reasonable employment opportunities in the country for would-be expats; the German labor market has been steadily strengthening, and multinationals are hiring once again.

In terms of an investment flag, there are some opportunities in Germany.  Thanks to decades of gross economic mismanagement by the Spanish, Greek, and Italian governments, quality German assets are selling at a discount for non-euro investors.

The entire eurozone has suffered, and will continue to suffer, because of the most rotten apples in the bunch… so in a way, investing in Germany gets you Deutschmark assets at a Greek drachma discount.

I’m rather averse to most European equity markets right now (with the exception of Cyprus and a few others).  I do think, however, that German real estate may be a reasonable speculation.

The country never experienced a massive real estate boom, so prices never got out of control. At $3,500 per square meter of residential space, an apartment in Berlin is not much more expensive than top-end property in Panama! And it’s a hell of a lot cheaper than what I’ve seen recently in Spain and Italy.

The rental yield is not spectacular at 5%, but I think that property prices could rise significantly on a currency-adjusted basis. When (not if) the eurozone finally breaks apart, the new German (or modified eurozone) currency will be much stronger, resulting in fantastic profits

July 6, 2010
Berlin, Germany

Last Friday, I read about how the US workforce shrank by over 650,000 in June, one of the sharpest contractions ever. Private sector hiring was also less than expected, suggesting that joblessness in the US will remain sluggish.

Always ready to spin a bad story, US politicians immediately began heralding the jobs data as clear evidence that the tide was turning, that the US economy is headed in the right direction, and that their lavish stimulus plans are working.

This gorilla math is truly amazing; it’s the doublethink from 1984 that makes 2+2=5.  So… I decided to do a little number crunching of my own, and the results are pretty incredible.

The ‘recession’ officially began in late 2007, coinciding with the government’s fiscal year 2008 budget.  At this point, politicians became nervous and started dumping money into the economy, which has continued to this day.

What I wanted to do is find out how much money they’ve really poured into the economy, and what the overall impact has been.

I started by looking at the US budget in 2007, which ended September 30th of that year. This was pre-crisis, before the bubble really burst and things got bad. That year, the US budget deficit was ‘only’ $160.7 billion… this is the amount that the government required to function that year– conducting a two-front war, providing social security, etc.

Realistically, if the government hadn’t started its anti-recession stimulus programs, the fiscal year 2008, 2009, 2010, etc. budget deficits should have been $160.7 billion or better; essentially, the government should have spent as much in 2008 as it did in 2007, barring the recession.

Next I added up all the additional deficit spending above and beyond the 2007 level… and then subtracted the hundreds of billions that went to bail out the banks, unions, and big businesses.

The remainder reflects the amount of money that the US federal government has spent since October 2007 to fight the recession, stave off foreclosures, and boost the labor market.  The total amount? About $1.7 trillion in just under 3-years.

I then wanted to find out what kind of impact that spending has had on the economy, so I compared GDP from 2007 through the first quarter of this year.  You would expect that if the government invested $1.7 trillion in the economy, that there would be at least $1.7 trillion in additional economic growth.

Needless to say, this wasn’t the case. Since the end of 2007, the economy has only grown by $476 billion, if you actually trust the government’s inflated numbers to begin with. Even taken at face value, this means that the government has generated a return of $476 billion on an investment of $1.7 trillion.

Let me put this another way– the US government effectively lost 72 cents out of every dollar that it spent on ‘economic stimulus’ since the recession began.

And as for the 8 million jobs that have been lost in the meantime?

With $1.7 trillion in additional deficit spending, they could have paid every single unemployed person in the United States an annual salary of $75,000 for the last three years to sit around and play tiddlywinks all day.

Adding insult to injury, despite racking up a $1.7 trillion bill to fight the recession, politicians remain awfully proud that they increased unemployment benefits by a whopping $25/week, or about $1,300/year.  I’m really wondering what happened to the other $74,000….

Most politicians believe in Keynesian economics, that government spending is a righteous corrective mechanism to economic decline.  As a free market guy, I find this entire philosophy offensive. Individuals and businesses know how to spend their own money better than the government does.

Even if we momentarily suspend disbelief, though, and agree with the philosophy of massive government spending, just look at the results– they lose 72% of the stimulus money, yet they want to keep doing it over and over again.

This is not a Democrat or Republican issue, this isn’t about Obama or Bush, and it’s not even a US issue.  This is simply a structural failure in the system itself: government cannot be trusted under any circumstances.

At the end of the day, regardless of the guarantees and welfare programs that governments promise, we are all fundamentally responsible for ourselves.  No one should trust in the government to be there when it comes time to retire, look for work, or pay for the hospital bill.

Believe it or not, this is a good thing, and I’m optimistic in their serial failures. In my opinion, the sooner people realize that they’re ultimately in charge of their own destiny, the sooner they’ll find an entire world out there full of incredible opportunities.

Planting multiple flags is a great way to protect assets and safeguard against sovereign risk… but keep in mind, it’s also the best way to maximize the opportunities available to you, both personal and professional.

The world is not full of doom and gloom. Yes, our political leaders are a bunch of idiots, but we can rise above that easily and find new possibilities everywhere to secure and improve our lives and the lives of our families. This is one of the most important points that I hope you get out of these conversations.

July 2, 2010
Copenhagen, Denmark

I’m in a bit of a rush this morning as I have to catch a plane to Copenhagen; it’s a great, clean city with lots of English speaking people and a reasonable banking system– I’ll tell you more about it next week.

Before moving on to this week’s questions, I want to mention that I’ve recently put the finishing touches on my share of a new ‘offshore strategies’ guide that is going to be published soon by my friends at Casey Research.

We worked very hard to put this together, and I believe our combined efforts have resulted in the best multiple flags overview that exists; I’m very proud of the final product, and I’ll be sure to let you know where you can pick up your copy, hopefully over the next few days.

On to this weeks question…

First, Jes asks, “Simon, I’ve enjoyed reading your letters, and I’ve also just finished reading a book called ‘Emergency‘ by Neil Strauss. It includes the author’s account of obtaining a second passport. I am curious if you recommend that book.

I do recommend the book. Neil is a great writer, and I’d encourage anyone to pick it up and give it a read. Neil tells an important story that we are all completely dependent on a functioning system of complex infrastructure.

We don’t think about, for example, whether or not the lights will turn when we flip the switch. We don’t think about whether or not water will come out of the faucet, if the toilet will flush, if the grocery store down the road has food in stock, or if the gas station will be pumping fuel tomorrow.

We take these things for granted… Emergency tells Neil’s story about making this realization, and the actions he took to do something about it, including obtaining a second passport from St. Kitts.

Neil realized that with only one passport, he was simply a slave to his government… and the second passport gave him new options and new freedom that he never had before.

If you’ve ever thought about obtaining a second passport, definitely read his book. Just don’t call the lawyer he used in St. Kitts– the guy skipped town with clients’ money… I can get you someone more reliable who I trust implicitly.

Next, Norman asks, “Simon- Thanks for your emails. As a gay man in my 50’s I am looking at alternative residency/citizenship opportunities. You may not know a lot of gay people, but where do you find the most gay friendly/tolerant places out of the countries you recommend?”

I’m going to go out on a limb here… it’s not exactly my scene, but I can say that, from a social/political standpoint, your best bet is in Europe. Specifically, Denmark, the Netherlands, Belgium, Iceland, and Spain. Most of these countries grant same-sex marriage rights.

Elsewhere, you might consider Thailand and the Philippines in Asia. In Latin America, consider Uruguay, Argentina, Chile, and Brazil. They’re all pretty GLBT-friendly places

Next, Libero asks, “Simon- How do you pack for your trips? Don’t you have some comfort items that help to make you feel “at home”? Do you pack Backpacking style, as a tourist, or pack everything you need so as to live long term in a place?”

Believe it or not, I go all over the world with just a carry-on and my briefcase. I’ve never been one for material possessions, or to accumulate junk… and I definitely don’t derive comfort from ’stuff’.

Sure, I have all the essentials– clothes for most occasions including some formalwear, workout gear, toiletries, etc. Other than that, I travel pretty light.

Henry David Thoreau had it right when he said, “A man is rich in proportion to the number of things he can afford to let alone.” You’d be amazed what you can do without.

Understandably, this probably wouldn’t suit most people, but it’s the way I get around. Give it a try, though, just once… on your next trip, pack as light as possible– if something’s not absolutely essential, leave it at home. I think you’ll be pleasantly surprised at how you fare.

July 1, 2010
Oxford, England
– Happy Canada Day –

One aspect of multiple flags that I don’t address too much is using corporations to your advantage. This is an important strategy that I think you should consider, and there are several reasons for doing so.

Most importantly, governments generally respect businesses a hell of a lot more than individuals. To politicians, people are just slaves to be controlled… as my friend Doug Casey says, “tits on cow” that can be milked over and over again.

Businesses, on the other hand, are an important means of creating jobs and generating revenue– a successful business can create hundreds, and even thousands of jobs. This is beneficial both for the economy, as well as a sitting government’s popular standing.

Politicians understand this quite well, and as such they often go out of their way to court businesses through a variety of tax schemes and incentive programs. It’s commonplace to hear about politicians going overseas to attract foreign investment– many nations rely on this as a source of economic growth.

Once such example is right here in the UK. Last week, the government unveiled its ‘emergency budget’ which implements the most severe austerity the country has seen since World War II. Absolutely EVERYONE is going to have to contribute more, including the Queen herself.

While most individual income tax rates are going up, corporate income tax rates are actually headed in the opposite direction, from 28% to 24% over 4-years.

This may seem strange at a time when Britain is desperate to fill its coffers with more tax revenue. Those in power, however, understand that low corporate tax rates attract businesses, and with businesses come jobs and economic growth.

In his address to the nation in which he unveiled Britain’s emergency budget, Chancellor George Osborne underscored this point when he said:

“I want a sign to go up, over the British economy, that says Open for Business… Corporation tax rates are compared around the world, and low rates act as adverts for the countries that introduce them.”

Osborne realizes that businesses have a choice. They can literally pick up in the middle of the night and move to a lower tax jurisdiction. Haliburton famously comes to mind; the Houston-based oil services firm moved to Dubai several years ago, drawn by the Emirate’s 0% corporate tax rate.

(quite honestly, individuals have a choice too; they can pick up and move to another jurisdiction, or plant multiple flags just as easily– most people simply don’t realize that they have this choice… but I’ll save that for another time.)

Russian President Dmitry Medvedev is taking similar action in his nation, cutting taxes, strengthening the rule of law, privatizing state-run dinosaurs, and making it easier to obtain visas.

Russia’s one trick pony economy is starving for foreign investment to diversify away from reliance on oil and gas, and Medvedev understands that the best way to do that is to roll out the red carpet for businesses and investors.

So how do we benefit from this?

First, for entrepreneurs and self-employed professionals, I would suggest looking overseas for opportunities, both to structure your company, as well as for your customer base.

For example, Brazil and Chile are in serious need of people and businesses with experience in mining and finance. China needs anyone who can help manage growth. Qatar and Abu Dhabi are excellent markets for IT, retail, and finance; Taiwan, South Korea, and Israel for defense. Russia for retail and entertainment. Etc.

To structure your company, it makes sense to look in low-tax (Hong Kong, Singapore, Bulgaria) and even no-tax jurisdictions (Panama, BVI, Labuan).

I am particularly fond of structuring in Singapore simply because there is so much transparency there; and even with its low flat corporate tax of 17.5%, it is still possible to avoid taxes entirely by banking in another jurisdiction (like Hong Kong) and not repatriating the funds to Singapore.

If you’re not an entrepreneur, investor, or professional, you may still be able to benefit from this strategy as an employee. Depending on your home country’s tax code, you may be able to change your employer/employee relationship to a client/contractor agreement using a new company that you set up.

For US taxpayers, the IRS has some simple guidelines to determine if being an independent contractor is permissible. I think it also makes a lot of sense to use an Open Opportunity IRA structure instead of a foreign corporation.

June 30, 2010
Oxford, UK

I’m impressed by many insightful responses we received from yesterday’s letter. I’d really encourage you to browse the comments section and see how everyone weighed in on the topic of politicians protecting their interests at the expense of our civil liberties.

It’s important to explore these issues from time to time– they serve as a reminder to take action while we still can. But rather than dwell on the political negativity that seems so pervasive these days, I really want to get us refocused on solutions.

After all, there are a multitude of options and opportunities out there that lead to increased wealth, asset protection, and a fuller, more independent lifestyle. Each of us has the power to exploit these.

Before discussing solutions, though, I first want to give you a much better understanding about the philosophy of where I’m coming from. I think it’s probably obvious at this point– you realize that I’m no fan of government, but I want to explain why.

Sure, I’m dismayed when I see signs of increased authoritarianism, such as what happened at the G8/G20 summits in Canada. The greater concern I have, though, is that these rapidly expanding governments routinely destroy value and make things more difficult for productive individuals.

One of the comments that I read yesterday from reader ‘Chengdu Express’ summed it up quite clearly. To paraphrase the comment, there are essentially two types of people– those that benefit from the system (government jobs, free health care, generous pensions), and those that provide the benefit (taxes).

Certainly, while everyone pays a share of taxes and receives a share of services, at the end of the day there are clearly net beneficiaries and net providers… and this system is facilitated by the government.

As governments continue to expand, the number of net beneficiaries will rise, all at the expense of the few remaining productive citizens. Naturally, the bigger the beast becomes, the more people will find their livelihood directly tied to it.

This is what they’re facing right here in the UK, where public sector employment already comprises the preponderance of the economy. Yet a recent report published by the center-right think tank Policy Exchange demonstrated that public sector workers enjoy better pensions, earlier retirement, shorter hours, and as much as 30% more pay than their private sector counterparts.

What do all of these public sector workers actually do? According to some accounts, absolutely nothing. For those UK public employees who actually show up to the office, there are a variety of insane laws and regulations to enforce.

For example, the government has mandated, by law, that a shot of alcohol in a bar must be exactly 25 mL in volume… not 24, not 26. The owner of a private establishment has no flexibility to pour his own drink without violating the law.

Needless to say, there are entire offices of bureaucrats who get paid to inspect and enforce the 25 mL alcohol rule… just one example of the transfer of wealth to the net beneficiaries at the expense of the productive.

Here’s an even more insane example. Over the weekend, the Daily Mail reported that under a new law, British shopkeepers will no longer be able to sell eggs by the dozen, but must rather relabel their packages by weight (“I’d like 322 grams of eggs, please…”)

Clearly this is the most important priority facing a nation in crisis. And you can bet that there will be yet another office of egg carton inspectors to enforce this new regulation as well, if it passes.

None of these laws makes a bit of difference or provides the slightest benefit to anyone, yet they provide jobs to public sector employees at the expense of everyone else… and I mean everyone, from the business owner to the investor to the bartenders and janitors that have to pay more in taxes.

To be clear, I’m not trying to demonize public sector workers. I know that the majority probably work hard and take their jobs very seriously; the problem is that the regulations they are tasked to administer and perform are incredibly costly and destructive to the value-creation process.

This is the fundamental structural failure in our system– politicians are richly rewarded for increasing the number of net beneficiaries at the expense of a shrinking pool of net providers. And as we saw with the G20 protests, they can hide behind their police forces and do it at the point of a gun.

Conclusively, governments exist to support themselves first and keep the party going. They do so by sprinkling a few dollars here and there to the net beneficiaries, and then truckloads of dollars to their crony friends and insiders.

The value equation is highly skewed, though. If the government collects $1,000 from the net providers, the beneficiaries might end up with $100, and the other $900 is wasted or given away in corrupt schemes.

I hold these truths to be self-evident, and my goal is to exist outside of this system as much as possible by pitting competing governments against each other to my advantage– this is what planting multiple flags is all about, and what we’ll be discussing in the coming days.

June 29, 2010
Oxford, England

My apologies for not writing to you yesterday… I was angry (a rare occurrence for me), and I hate writing to my friends when I’m angry. You see, the G8/G20 summits took place over the weekend in Toronto, and everything about these events simply boils my blood.

To me, there’s nothing more utterly worthless than a bunch of corrupt, irrelevant, incompetent bureaucrats who generate enormous pomp and circumstance to gather together at taxpayer expense in order to accomplish absolutely nothing.

Yet this is what happens at these ’summits’ year in, year out.  They’re not exactly staying at the Holiday Inn Express, either. The events are always in some posh resort where legions of underlings can enjoy champagne and filet mignon, courtesy of Joe Public, all the while their bosses strut and glad hand in front of the cameras.

This year, the focus of the summits was on the state of the world economy. They spent the weekend arguing, debating, and deal making… yet by Sunday evening, the only real accord reported by the group was an insipid statement about halving budget deficits by 2013.

The truth is, these summits carry absolutely no weight whatsoever; the G8/G20 are not sovereign bodies with any authority to enforce any of the resolutions. At the end of the day, each of the member countries is going to march to the beat of its own drum, no matter what it may have signed up for at the summit.

Regardless, the media ate it up.  Newspaper headlines around the world heralded the governments’ progress to reduce their budget deficits… apparently failing to realize that half of a budget deficit is still a budget deficit, generating yet another uptick to the national debt.

I’m sure that years ago these summits probably mattered. Back when the United States was the undisputed world economic power thanks to devastated post-war economies in Europe and Asia, the annual summits were a great way for the US to bend the rest of the world to its own agenda.

Decades later, the results from this summit paint a very clear picture about waning US influence. American priorities going in to the summits– sustaining government stimulus programs, cooperation in Afghanistan, currency flexibility in China, etc. remain unresolved and conspicuously absent from the groups’ final reports.

It’s obvious that other countries, particularly the ‘emerging’ G20 nations, have achieved significant political power on the international stage, and this is the surest sign of a major shift in the global balance of power.

One day, I expect that, if these summits still exist, it will be a platform for China to dictate the rules, and for the rest of the world to follow. In the meantime, they will continue to be worthless and wasteful, furthering governments’ record of unsustainable largess.

Needless to say, voters are understandably unhappy about this– the ‘leaders’ who gathered in Canada this weekend are the same people who have been effectively stealing from their voters and squandering every penny on wasteful programs designed to get them re-elected.

Despite nearly 2-years and trillions of dollars spent, little has improved. Politicians can smile in front of the camera and talk about how wonderful the global economy is, but the people standing in the streets have an entirely different perspective. Protesting at the summits is one small way for them to express their views.

This is the thing that made me so angry: Canada spent over a billion dollars of taxpayer money to turn itself into a police state and send a very clear message– that the government is the boss and in complete control, and all the little people singing in the streets will be stamped out like bugs.

All weekend long, riot police viciously assaulted unarmed, nonthreatening protestors in the streets of Toronto, as well as designated ‘free speech zones.’ Sure, there were a handful of people who shattered windows and even lit a police cruiser ablaze, but the vast majority of protests were entirely peaceful.

After the weekend, politicians (including the Mayor of Toronto) stepped up to defend the police actions and sell the public on the idea that assaulting peaceful protesters is a reasonable way to maintain order.

I find myself disgusted by the idea that serially, criminally incompetent politicians can pillage their countries, then hide behind armies and police forces, protecting themselves against the public that they’re supposed to be representing.

The big question I have is, why does the government even bother holding these events in a city like Toronto?  They could have gathered anywhere in the world, such as a remote province in northern Canada.  Yet they chose a major population center instead.

I think they made this decision on purpose, hoping that protesters would show up en masse so that they could send the message loud and clear: If you question the government’s authority, you will be crushed.

It reminds me of that quote from the very prescient book, 1984, “[i]f you want a picture of the future, imagine a boot stamping on a human face—forever.”  I think it serves as yet another reason to get busy planting flags and diversifying away from all of this ugliness.

Tell me what you think about it– I’d like to know.

June 25, 2010
Barcelona, Spain

It’s early in the morning here in Barcelona– the part of day they refer to as ‘madrugada’ in Spanish… near dawn.  I’m just wrapping a few things up here before heading out on a long drive.

My weekend plans entail meeting up with a rather eclectic group of bankers, investors, and diplomats in a remote location high up in the mountains. We’re gathering at an old monastery that’s been converted into a luxury boutique hotel… one of those places that you’ll only find in Europe.

Before I get going, I want to take a minute to thank you for taking the time to fill out yesterday’s survey.  People from over 60 countries provided their valuable feedback, ranging from the Tanzania to Croatia to Afghanistan to Bolivia. It’s amazing how diverse our group is.

I’m still going through all the responses, but so far I’m really encouraged by what I’m reading, and I hope to be able to make our publications more beneficial for everyone.

Regarding this week’s questions, I want to spend a few minutes making some clarifications. On Wednesday, I wrote what was probably among the most important letters that I’ve published about the British government’s overnight tax code changes.

This is really important because it provides a clear example for the rest of us to start taking action now… politicians have the power to make changes, literally overnight, so that we all wake up in the morning to a completely different reality.

Planting multiple flags is a great way to take action.  Every country has some merit, something good that it offers. One country may have a great banking system but terrible courts (Panama). Another may be great for citizenship but bad for tax residency (Italy).

The idea is to pick and choose the best parts about each jurisdiction and apply those benefits to your life.

Protecting yourself from tax code changes, such as what happened in the UK, could mean a variety of different strategies. For many nationalities, it may mean holding assets in a foreign structure, and never repatriating those profits.

For other, less fortunate taxpayers (specifically from the US), offshore tax shelters cannot be employed without serious penalty. In this case, one of the best solutions that I outlined in Wednesday’s letter is the self-directed, tax-deferred structure known as an Open Opportunity IRA.

Through this structure, you have the flexibility to invest in alternative assets (physical gold, foreign property, etc.), plant multiple flags, and be in complete control of your own money.

This is a completely legitimate strategy, just as much as a 401(k) or traditional IRA– you can read about it yourself in the tax code. There are some basic rules, however, and you need to follow them in order to maintain the integrity of the structure.

Regardless of which strategy you pursue, the time to take action is now… as I outlined in Wednesday’s article, these massive changes can occur overnight. I encourage you to re-read Wednesday’s article to learn more.

Moving on, Keith asks “Simon- My grandmother was born in Switzerland in the late 1890s and lived there until she was 95 years old. I know some countries allow you to acquire a second passport from grandparents, is Switzerland one of those countries?”

No. If she were Italian, Lithuanian, Polish, or a few others, you would be in luck. Unfortunately, Switzerland’s nationality law does not pass on generational blood lines for individuals who do not have significant ties to Switzerland.

To make matters worse, being naturalized in Switzerland as a permanent resident is also an extremely long and difficult process. I know people who have been living there for nearly 20-years and have not become citizens yet.

The bottom line on Switzerland– there are a lot of great aspects about the country, but you shouldn’t consider planting a citizenship flag there.  Look at better options like Belgium in Western Europe, Brazil or Paraguay in South America, or Singapore in Asia.

Lastly, Dirk asks, “Simon– I have been following your letter with growing fascination over the past weeks; can you recommend a certain threshold over which you should start looking to plant multiple flags– is there a minimum net worth?”

There is no net worth requirement for planting multiple flags. You can be flat broke and still plant an electronic flag with a foreign email provider to safeguard your privacy. Furthermore, many people may find that planting business flags overseas could be a path to creating wealth.

The truth is that it might be easier to make your fortune outside of your home country, in a place where economies are moving forward rapidly and your skills can be of great value. After all, everyone has something that he or she excels at, and there are several places in the world where those skills are in demand.

As for planting certain financial flags, it really depends on the situation. A young entrepreneur, for example, may benefit from creating a foundation of offshore bank accounts and structures, even though s/he does not have much money or income at present.

Others who might not have significant assets but steady income from a job may also benefit from establishing a foreign bank account to safeguard their growing savings.

The important thing is to have a firm idea about specifically what you need, and why. Don’t haphazardly plant flags that make no sense in your life, i.e. there’s no need to establish a foreign company if you don’t expect to operate a business or understand the tax implications. Don’t open a foreign brokerage account if you have no investment capital or prospects of building investment capital.

When planting flags, think about your own situation and what makes sense. Once you do I’m sure you’ll see planting flags as I do… not just a way to hedge your bets or protect your assets but as a way to really live your life through deep, rewarding experiences and unimaginable opportunities.

June 24, 2010
Barcelona, Spain

At the spur of the moment, I decided to fly to Barcelona yesterday to attend the ‘Fiesta de San Juan’.  It’s common in many parts of Europe and Latin America to celebrate the official, astrological first day of summer, which also happens to be the longest day (and shortest night) of the year.

In Barcelona, it’s an all night party that includes beach bonfires and a hell of a lot of pyrotechnics.  Thing is, summer solstice was actually on June 21st! The celebration was a couple of days late, just like everything else in Spain I suppose… mañana, mañana.

As is common in my travels, I met a few interesting people during the evening’s festivities. One gentleman was key executive and technical architect at a small biotech firm.

He was attending a conference in Barcelona, and we spoke for over an hour about his company and its major pipeline drug that has recently received FDA approval. Much to my amazement, they’ve managed to synthesize a vaccine that has proven to be incredibly effective in treating certain types of cancer.

In the course of our discussion, he told me about several other companies in the same industry which were deeply undervalued by the market.

“The interesting thing about this industry,” he said, “is that all the science is already public information, published in the medical journals. Our stock prices don’t move, though, for months until the IR department issues a press release. Smart investors have an interim window to scoop up the next breakthrough drug company for pennies.”

He cited a few examples, including one company that had over 9-months between its medical journal publication and press release. The stock barely budged during that time period, but within weeks of the press release it was a 10-bagger.

Not only was I amazed at his company’s biotech breakthroughs, I was even more amazed at the financial implications of his earth-shattering investment revelation.

This is one of the things that I appreciate so much about being an expat and permanent traveler– the exposure to so many compelling opportunities, industry secrets, uncommon wisdom, and interesting people.

These sorts of encounters happen all the time when you step outside out of the daily grind, expose yourself to new surroundings, and maintain an open attitude.

To give you another example, when I was in Brazil last week I met a local businessman who was literally making his living selling shovels to gold miners. His company specializes in importing mining equipment from China and selling it off to Brazilian firms that are mining for gold in the rural provinces.

Based on the volume and type of equipment that the miners are ordering from him, he can tell how close the companies are to striking it rich, or whether they’re just turning big rocks into little rocks. He uses this information, which he kindly shared with me, to reduce his risk in the Brazilian stock market when he speculates on these companies.

His track record is impressive, and his investment gains are far outpacing what he earns from operating the business.  It’s an intriguing model– one that I would not have been exposed to if I had been closed to the opportunity or stuck in a routine.

I’m telling you all of this because I hope to encourage you to shake up your routine a bit in order to increase your exposure to more opportunities, and also cultivate the right mindset for planting multiple flags.

I think travel is a great way to go about doing this… after all, nothing shakes up routine like heading overseas, even if only for a short time.

I’ve been fortunate to meet many subscribers in my travels who are out there doing this– learning, exploring, and benefitting from their unique experiences overseas.  I hope to meet many more in the future as we continue these discussions… perhaps overseas at an upcoming Sovereign Man conference that we plan on organizing.

On that note, I’d like to mention one last thing before I sign off for today; summer solstice was not only a celebration here in Barcelona, but it also coincided with the one year anniversary of launching this letter.

I wanted to take a moment and thank you for your continued subscription. Given all the professional demands I have in my life and the various ventures that I’m involved in, writing this daily letter remains one of my great pleasures simply for the fantastic interaction it affords me with so many interesting people.

Thanks again for being a subscriber, and I look forward to our continued discussions.

June 23, 2010
Oxford, England

Yesterday in the UK, something happened that has significant implications for us all.

Old western economies are clearly losing their dominance. Particularly in Europe, the costs of broken pension plans and entitlement programs are bankrupting entire economies.

Yet, national governments continue to perversely borrow and consume; politicians have been acting like degenerate gamblers, borrowing money from anyone they could, blowing it all on terrible bets, borrowing more money to make even worse bets, and actually expecting different results.

Something needs to change… and it appears that Britain is the first major western government to face the music. As such, British Chancellor of the Exchequer George Osborne unveiled yesterday what has been touted as ‘emergency’ budget austerity.

Osborne’s budget cuts deep. It hits the elderly, it hits low income workers, it hits single mothers, it hits business owners and investors… it even hits the Queen, who will see her multimillion pound salary frozen for several years.

To give credit where credit is due, Osborne should be commended for looking his nation in the face, speaking about a very grim reality, and being candid about the tough sacrifices that everyone will have to make.

But here’s the scary part, and what we need to learn from:

While there was significant talk in Osborne’s speech about spending cuts, most line items have yet to be fully determined. What they are absolutely clear about, though, are the tax changes.

Britain’s VAT, for example, will increase from 17.5% to 20%.  Many personal income tax rates will rise as well, particularly for high income earners.  These changes will be phased in gradually… except for one.

Osborne announced that Britain’s capital gains tax will increase from 18% to 28% for higher income earners. Yet unlike the other changes which are phased in over time, capital gains tax change occurs IMMEDIATELY.

There is a serious lesson here: governments have the power and willingness to make major changes overnight. With the stroke of a pen, they can impose capital controls, higher taxes, gold forfeiture, confiscation of retirement savings, or anything else they can dream up.

Britain’s emergency budget underscores this point even more, and reminds those of us who aren’t in the UK that we need to prepare NOW.  Why? Because other countries won’t be far behind, including the United States.

At a certain point, President Obama will be forced by circumstance to look the American people in the eye and ask them to sacrifice… and pay higher taxes effective immediately.

Also, it’s likely that the US government will get its hands on private retirement savings some day soon… there’s about $5 trillion out there, and at some point that they’ll mandate a portion of all managed retirement accounts to be held in the ’safety’ of US Treasuries.

I can’t stress this enough– proper financial planning should be an integral part of your multiple flag strategy.

To protect yourself from overnight tax hikes, this means using existing, legitimate tax shelters.  US tax code, for example, provides a means for people to set aside tax-deferred savings for retirement through an IRA or 401(k).

Most of these entities, though, are unfortunately engineered to generate profits for the financial institution who manages the account, rather than the individual who is busting his butt every day to save for retirement.

The best solution that protects your savings from rising tax rates and government confiscation is to hold your investments in an Open Opportunity IRA structure.

Similar to a regular IRA, an Open Opportunity IRA allows you to generate tax-deferred (or tax-free) returns on your savings. Unlike a regular IRA, this structure gives you complete control and flexibility to do what you want with your retirement savings– like planting multiple flags overseas.

With an Open Opportunity IRA structure, you can buy foreign property, store gold overseas, establish an offshore bank account… as well as invest in all the other instruments that you might already be investing in right now with your retirements savings.

The big difference? It’s nearly impossible for the government to get their hands on it.  And if you start investing through this tax deferred structure, you won’t wake up one morning to higher tax rates that will pummel your investment returns… which is exactly what happened in the UK this morning.

This is one of the biggest no-brainers for US taxpayers… even if you’re just starting out, establishing one of these structures provides a long-term solution to generate tax-deferred or tax-free savings as you make contributions over time.

Terry Coxon is a leading expert in this industry; he’s authored numerous books on tax and personal finance issues, and his latest e-book is one that you should absolutely own.

In Unleash Your IRA, Terry explains the real magic behind these structures– how to set one up, how to protect yourself and your assets, and all the amazing things you can do while still following the tax rules.

Click here to get this book now.

I strongly urge you to take action now… continuing to kick the can down the road is a very dangerous course of action given all the warning signs around us.

June 22, 2010
Oxford, England

In our daily conversations, we talk a lot about planting multiple flags– this is the practice of diversifying sovereign risk in order to protect or asses and our assets.

After all, sovereign risk is the greatest risk we face today as investors, entrepreneurs, professionals, and free individuals. Governments have absolute authority to seize, commandeer, or otherwise control any asset of their choosing, including ourselves, and they can back it up at the point of a gun.

If you have all of your eggs in one basket– i.e. you live, work, invest, own property, run a business, bank, etc. in the country of your citizenship, then you’re risking everything. If you want to do something about it, then you only really have two options:

First, you could go dark… and I mean completely black. There is some merit in this approach, but it’s incredibly tricky to pull off in the long-term.  Going off the grid in 2010, at least in a developed country, requires intense discipline and adaptive creativity.

The second option (my favored approach) is to use the system to your advantage. Play governments against each other by diversifying different aspects of your life across different geographies– plant multiple flags.

As an example, this means structuring your business in one country, banking in another, having official residency in another, having citizenship in another, and investing in another. It might sound complicated on paper, but I assure you in practice, once you get the hang of it, it’s quite simple.

When I write this daily letter, I normally stick to the major areas of planting flags– banking, brokerages, citizenship, residency, property, etc., but when you really sit down and think about it, there are literally innumerable ways of diversifying yourself geographically.

Some people may choose certain jurisdictions for shopping, for example (a country with no VAT, or a state with no sales tax). Others may choose certain countries for dental care (due to the value for price), others for hiring outsourced labor (due to high skills and cheap wages), and others for acquiring pharmaceuticals (due to price and legal differences).

The possibilities are nearly endless, and just about every country has something it can offer.  As I find myself in the UK this week, I thought I would raise this point again by taking you through my own analysis of the country:

Would I establish tax residency here? No. I wouldn’t want to get involved in this country’s slippery slope of a tax net.

Would I store gold here? No. Scotland Yard has already established a trend of raiding private vault facilities and confiscating the contents.

Would I establish electronic assets here? No. The UK has little regard for privacy, and this is one of the most critical elements for electronic assets like an email or web server.  Digital property should be located in a country that respects privacy and won’t bow to a foreign court to lift this veil.

Would I intentionally seek medical or dental treatment here? No. Public hospitals in the UK are substandard, and the private facilities are too expensive compared to Asia and Latin America.

Would I invest here? Yes. But with my eyes wide open and protective measures in place. There are significant risks to investing here, including rising taxes and a depreciating pound. Foreign exchange losses can be mitigated with options and forward contracts.

I’ll have a deeper analysis about British investments in a future letter because it’s an important topic.

Would I spend time here? Yes, definitely. To me, the greatest value of the UK is for planting a flag that I seldom talk about– countries that you go to just because you like to have fun there.  After all, what’s the point of life if it’s all about business, investing, asset protection, and sovereign diversification?

I, for one, derive great pleasure in experiencing the finer things in life, particularly in the course of travel… and there are certain places that I simply just like to be.

For all of its faults, southern England is one of these places for me– specifically London and Oxford.  And right now, it’s on sale. Given all the deep retail discounts, and with the Queen’s pound sterling under $1.50, England is cheap for US tourists and “ridiculously cheap” for Canadians and Aussies.

Call this a ‘fun flag’ or a ‘pleasure flag’ or ‘vacation flag’ or whatever floats your boat… but think about these places where you can get away and do nothing but enjoy life for a little bit.

Lastly– would I bank here? No. There are too many quasi-state owned zombie banks in this country. There is, however, an interesting alternative that I’ve investigated a bit in my time here.

The UK’s famed Lloyds Banking Group has a subsidiary in the Channel Islands called Lloyds TSB Offshore, Ltd.  Lloyds wouldn’t be my first choice– there are better banks out there… but if you’re really looking to open a foreign bank account and are constrained by travel limitations, consider Lloyds TSB Offshore.

I say this because you can apply to open an account online and denominate funds in either US dollars, euro, or British pounds. They’ll even send you a Visa debit card that can be used worldwide to access funds… no need to show up in person.

June 21, 2010
London, UK

While I have been traveling around Latin America and Europe for the last few weeks, there has been one constant in my travels: World Cup football.

I’m not a huge fan of the sport, but as an amateur athlete I appreciate the excitement and spectacle of international competition, particularly one that draws billions of eyeballs. Watching Brazil’s victory in Rio was definitely an amazing experience, as was watching the UK’s draw in London over the weekend.

In case you haven’t seen the games, one of the things that has been so interesting about this particular World Cup is how most of the European teams which usually dominate the FIFA world rankings– Italy, Spain, Portugal, France, UK, Greece, etc.– have really been struggling on the field.

Ironically, these are also the same countries struggling with disastrous balance sheets and bloated entitlement programs.

At the same time, young upstart teams like Paraguay, South Korea, New Zealand, and Uruguay have proven themselves to be extremely effective against these legendary, once-dominant opponents of Old Europe.

I feel like this sports metaphor, which is being consistently played out on the field during the World Cup tournament, represents the changing of the guard that is taking place in global economics and geopolitics– the rise of the developing nation, and the decline of the developed.

If you’d indulge me a bit more leeway with the sports metaphor, one could argue that this tournament’s lackluster teams of old Europe are well-endowed with enormous assets– great players, goodwill, training programs.

Just like governments which rely on the same tax and spend playbook year after year, Europe’s great football teams are being rendered ineffective by sticking to the same old tired tactics of the past.

The more effective teams from developing nations, however, are experimenting with innovative approaches, such as extreme conditioning regimens, or Chile’s unique 3-3-1-3 formation, and even North Korea’s massed defense approach.

Overall, the results are clear, both on and off the field.

Here in London, where the national team has been suffering from anemic performance thus far, the population is simultaneous gripped with a severe economic crisis. With a new political party at the helm, England’s leadership is now tasked with the mission of doing *something* to stem the crisis.

Needless to say, this will unfortunately rely on the old, ineffective playbook of drastically higher taxes. The government has already announced increasing capital gains tax from 18% to 40%, and yet another VAT increase from 17.5% to 20% is also expected.

By comparison, South Korea charges a 0.3% tax on capital gains for small investors, and 11% in other instances.  In Paraguay, the rate is 10%, as is the income tax rate. (in Singapore, UAE, Labuan, and Hong Kong, there is no capital gains tax at all)

Tomorrow, the UK’s new Chancellor of Exchequer, George Osborne, will unveil the kingdom’s “emergency budget,” which should provide more details on the tax increases. The government has been vocal about its intention to curb spending, though most cuts are paltry line items like a $6 million swim program for kids.

How about taking a look at the millions upon millions of government workers who add no value to vital production in the economy? With their bright reflective vests, they’re ubiquitous in England, yet they have less authority, responsibility, and productive value than your average high school hall monitor.

It’s difficult (but possible) to fathom a greater waste of taxpayer money.

I would suggest that for countries like the UK, both their politicians and football coaches should take a few pages from the playbooks smaller, developing countries.

For us, I think this rather interesting sports metaphor highlights the importance of selecting the right jurisdictions to plant multiple flags– focus on cities and countries that have a bright future of strong economic growth, a stable balance sheet, and politicians who don’t belong in prison.

If you do happen to be drawn to a country with less than stellar fundamentals, be very careful about which flags you intend to plant, and ensure that you have properly protected yourself with the right structures if you do decide to invest time and money there.

I’ll talk more about these steps later this week when I examine the UK in more detail.

June 18, 2010
Madrid, Spain

Long haul flights from South America generally tend to leave in the evening, usually between 7pm and 1am. The airlines do this so that you arrive first thing in the morning and can catch any connecting flight you may need… which is nice for travelers.

The flight schedule does make things a bit inconvenient prior to departure, though.  Even with a late hotel check-out, you’ll have about 5 hours to kill before heading to the airport.

This happened to me yesterday in Rio, so I took the opportunity to work on my tan a little bit on Ipanema beach. Even though it was just a normal winter weekday afternoon yesterday, you would think they were having a supermodel convention at the beach given the abundance of bronzed beauties.

It’s no wonder why Brazilians are so carefree about life… how can you feel despondent when you’re immersed in warm weather, sunshine, mountains, the ocean, and gorgeous, friendly people?

After the 11-hour Iberia flight (average business class, in my opinion), I now find myself in Madrid, where I’ll spend the day before heading to London to meet up with some friends and Atlas 400 colleagues.

I’ll have more to follow on my plans next week; you may be interested in what I have in store regarding passports later this month. For now, let’s move on to this week’s questions.

Starting off, I got a chuckle from a comment by Garth this week when he said “the rose colored classes are on,” in response to an article about Rio. I thought I should take a moment and explain something about myself.

Here’s my confession: I am an unabashed optimist. I tend to see the good in everything– people, situations, and countries.  Even in the midst of chaos, my natural instinct is to see opportunities. There’s too much negativity in the world, and I’m weary of cynics who dwell on it.

You can always count on me to be candid about my thoughts, but don’t expect me to obsess over the negative aspects about a country. I will acknowledge them, and then move on… if a country’s issues are so serious that I don’t think you should consider planting a flag there, then I won’t even bother writing about it.

I recognize that people potentially base major life decisions on the information provided in this letter; this is a responsibility that I take very seriously, and I have a few simple rules that I follow which guide me as I write.

First, I won’t ever suggest a country that I wouldn’t recommend to my own mother. Second, I only discuss multiple flag tactics (banks, passport programs, corporations, etc.) that I have first-hand experience with and can vouch for.

Third, I won’t negatively bias someone’s opinion about a country simply because I don’t personally like it… I realize that not everyone shares my taste. As such, I tend to focus on the good points. If there’s not enough good points to consider, then it won’t be on my list. Simple.

Moving on, JT writes, “Simon, what are your thoughts on renouncing US citizenship?”

Renunciation is a decision that more and more people are making each year. The movement is still embryonic, but I expect the coming years that there will be great waves of Americans taking this step.

For most people, the chief reasons are generally financial– they no longer feel comfortable making Uncle Sam a 40% partner in everything they do around the world.

One thing’s for sure– no one should make this decision for emotional reasons because they hated Bush or hate Obama. These guys are as ephemeral as last night’s meat loaf. The decision should be made pratically with a well-reasoned financial analysis.

It is absolutely possible to mitigate or defer tax liability by properly planting multiple flags (i.e. business structured in one location, consumers in another, banking in another), but the ultimate tax break will come only when you renounce.

If you take this step, you have to pay a one-time tax to Uncle Sam as if you had liquidated all of your assets and taken the capital gains. Sammy gives you a $600,000 tax-free allowance and taxes you on the rest.  I’ll have more on this in a future letter; it’s definitely a topic worth discussing.

Next, Deiter asks, “If one were to disclose the existence of a foreign bank account, wouldn’t that make it accessible to frivolous lawsuits?”

Great question. One of main benefits of planting multiple flags is diversifying your sovereign risk so that your assets are no longer exposed to government agencies, tax authorities, and the court system.

Just because you disclose your assets, either due to government regulation or in a court-ordered discovery process, doesn’t mean that your assets are exposed. Let’s say you own property, for example, and you lose a court case… the judge decides that your property should be awarded to the Plaintiff.

Well, if that property is located within the court’s jurisdiction, then the judge can simply have the title conveyed to the other party. If the property is located overseas, far away from the court’s jurisdiction, then they have no power or authority to forcibly convey the title.

The same thing goes for bank accounts, gold stored overseas, etc. When you move assets overseas, you are effectively removing those assets from the jurisdictional authority of your home country.  Disclosing those assets as required by law does not eliminate that benefit.

Lastly, Dave asks, “Simon I’m curious. As a PT, what do you do for postal mail?”

Does anyone still use postal mail? My banking/credit card statements are all email, and if I need a parcel sent to me, I usually just give the hotel address where I expect to be staying by the time it arrives.

If you get a lot of postal mail, you could try the Swiss Post Box service. They’ll receive your mail, scan the envelope, then forward/shred/scan the contents upon your instructions.

That’s all for this week, have a great weekend.

June 17, 2010
Rio de Janeiro, Brazil

I’m dashing off to the airport this afternoon to catch my flight to Europe… but I wanted to leave you with a few final notes about Brazil.

First, to properly set your expectations, Brazil is not poor– it’s not some third world country where everyone is grateful that foreigners have arrived to sprinkle their pocket change. A typical university graduate in Brazil, for instance, can expect to make $1,500 to $2,000 per month starting off, net of taxes.

Second, along the same lines, Brazil is not as cheap as one might expect. In fact, in many respects (retail sales, restaurants) it can be damn expensive.  I expect that there may be a downward correction in the currency (real) to offset this, but it will be short-lived as Brazil’s vast resources will always be in demand.

Third, to give you an idea of exactly how much incredible resource wealth Brazil controls, take a look this interview with Eike Batista. Batista is a Rio native whose vast oil holdings will undoubtedly make him the world’s richest man by the end of the decade by an enormous margin.

In the interview, Batista is thoughtful and well-spoken about the massive transition that Brazil has undergone since its days as a fledgling banana republic.

It’s worth watching because I think it gives a strong sense of the country’s mentality: Brazil is culturally self-contained. There is no obsession with the US economy, American movies, French fashion, German bonds, Saudi oil, or US/European politics.

With a nation of over 200 million, they have their own culture, music, movies, brands, wealth, and resources; as such, there is no deference given to the old economies of western dominance… and this level of confidence is highly unusual, even in China.

Check out the interview so that you understand what I mean… and with that, I have to run. We’ll talk again tomorrow when I’m on the other side of the Atlantic.