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.

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 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 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.

June 14, 2010
Rio de Janeiro, Brazil

It’s nice to be back in Brazil again… if you haven’t been to this country, I highly recommend that you check it out.

Brazil is one of the largest countries on earth in terms of both land mass and population (over 200 million); consequently, there is tremendous diversity. The capital city of Brasilia is completely different than the tourism hub of Rio de Janeiro, which is completely different than the commercial center of Sao Paulo.

As a nation, though, it has an incredibly bright future, mostly due to its substantial economic prospects. This is what I want to talk to you about today because it’s one of the reasons that I think Brazil should be on your radar for planting multiple flags.

Remember, when you’re considering foreign jurisdictions, it always makes sense to plant flags in countries that have strong economies– they will be the least likely to change their policies and deteriorate.

Below I outline the reasons why I expect Brazil to maintain its economic power in the future, which is why it is should be on your radar for multiple flags, especially residency, citizenship, banking, property, or investment:

1) Industrial capacity. Long-term economic power is derived from the ability to turn savings and resources into productive goods and services.  A nation’s industrial capacity is its means to accomplish this task, and includes things like the quality of its work force, magnitude of entrepreneurship, availability of factories and heavy equipment, etc.

Brazil has all of these elements in spades; it can manufacture the full range of products, from raw materials to finished goods, in a variety of sectors including agriculture, biotechnology, automotive, and even airplanes.

2) Technological  capabilities.  In the long-run, real economic growth requires two key ingredients– a substantial pool of savings which can be invested in production, and technology which boosts productivity.

In many ways, technology is the more important of the two because the right technology can obviate the need for capital.

In Brazil’s case, the country has been able to effectively develop and deploy alternative fuel technology that has eliminated its import need for retail gasoline. It’s amazing that the Brazilians have been able to do this, but other countries haven’t.

3) Resource independence. Being reliant on foreign countries for vital resources is a death blow to an economy. Real power is rooted in independence, creating a position of strength at the bargaining table.

In this respect, Brazil is one of the most fortunate countries on earth. It requires absolutely nothing from the outside world to sustain itself and is blessed with massive reserves of just about every resource a country could ever want, including the three most important: energy, food, and fresh water.

Given the vast amounts of oil that continue to be discovered off the coast of Brazil, the country will likely end up as #3 or #4 in the world in terms of proven oil reserves. Additionally, Brazil is home to more fresh water than just about every nation on earth, and its agricultural capacity could easily feed the entire hemisphere.

As such, Brazil is in a fortunate position in global trade– other nations are in desperate need of Brazil’s resources, and that directly translates into wealth and economic power.

4) Consumer market strength.  The stronger a nation’s consumer market, the more powerful its economy becomes to the rest of the world.  The US is in that position now– companies around the world want to sell their products to US consumers, and they’re willing to make necessary concessions to achieve that end.

If you’ve ever run a business, you know that your biggest customer frequently has more clout than your biggest shareholder. The customer is always right, and the same rule applies in macroeconomics.

By nature, Brazilians tend to be spenders, not savers. If you think that the average American is a shopaholic, hop a plane for the nearest Brazilian shopping mall and marvel at all the useless trinkets and knick-knacks that they waste their money on.

As the US consumer market runs out of steam, I’m convinced that the Brazilian market (numbering well over 200 million) will pick up the slack. They have the right consumer psychology, and they’re getting richer by the day from their immense resource wealth.

5) Balanced macroeconomic fundamentals.  Economic power starts with a healthy balance sheet. Debt to GDP ratios and government spending must inspire confidence in global financial markets, not horror.

Brazil’s economy is fairly sound. It has experienced crisis in the past, and the trend is towards more stability, more discipline.  The government and society seem determined to not repeat the fiscal mistakes of the past.

6) Political and military reputation. It’s no good having economic power if you can’t back it up with military power; how are other countries going to take you seriously if they know that they can just waltz in and steal your resources at gunpoint?

Brazil doesn’t exactly have the most active military forces on the planet– you don’t hear about the Brazilians deploying soldiers to 30 different countries at a time. Yet, its military remains strong enough that no one would be stupid enough to start a fight unnecessarily.

This stability generates investor comfort and helps promote growth in domestic financial markets.

Overall, each of these factors bodes very well for the Brazilian economy, which means that as a multiple flag jurisdiction, it will likely improve rather than deteriorate.

I would also suggest parking some of your long-term savings in the Brazilian currency (the real), which you can do through an Everbank foreign currency account, or the Wisdomtree Trust ETF (NYSE: BZF).

Over the next few days I’ll talk a bit more about Brazil, as well as what I think is the best part about the country– its passport.

More to follow.

June 2, 2010
Washington, DC

A few days ago, Colombian voters went to the polls for the first round of their quadrennial presidential elections. For many, it will be the most important decision of the new century thus far.

The current President, Alvaro Uribe, leaves office later this summer after two consecutive terms in office. He is legally barred from serving a third term. Uribe is regarded as the nation’s savior by many Colombians, and as the devil incarnate by others.

While his administration was salted with multiple accomplishments and scandals, Uribe’s lasting legacy will be the tough war that he waged on the FARC and paramilitary groups… and by many accounts, it is a war that the government has won.

I need to pause for a moment and explain a bit about the differences in the various groups in Colombia, which are often used interchangeably by mistake.

The FARC (Revolutionary Armed Forces of Colombia) is a Marxist guerrilla group numbering anywhere between 10,000 to 20,000 strong. The FARC’s aims are political, and they fund their operations primarily through ransom kidnappings.

Conversely, the paramilitary groups in Colombia consist of loose factions that are largely driven by economic prospects rather than political change. They are not Marxists, they are drug traffickers and extortionists.

While in office, Uribe stood up to both the FARC and paramilitaries, waging a tough war of attrition that turned his nation into a police state, albeit a much safer one than before.

According to Uribe’s numbers, over 16,000 ’subversives’ have been killed since he took office in 2002, while kidnappings and other violent crime have fallen precipitously. I’m not sure the body stack is an accomplishment, but Colombians generally feel much safer than 5-10 years ago. The credit has gone largely to Uribe.

His hand-picked successor is Juan Manuel Santos, a former defense minister who was an active architect of Uribe’s war on the guerrillas. Santos was credited with engineering multiple blows against the FARC, including the 2008 rescue of Ingrid Betancourt.

Santos is viewed as the Presidential candidate who would most seamlessly carry on Uribe’s policies and maintain the stability that the current government has been able to achieve. As such, Santos was the undisputed victor in the first round of the Presidential elections, and he will advance to the June 20th runoff.

Some Colombians, though, are ready for a change. They are weary of the super-security culture in their country and would rather focus on things like education, regulatory reform, and economic growth rather than continuing to wage war on fractured guerrilla organizations.

The second candidate who will join Santos in the upcoming runoff is former Bogota mayor Antanas Mockus– an eccentric mathematician and university professor who is as close to Santos’ polar opposite as it gets among political candidates.

Mockus is a self-proclaimed pacifist whose focus on education and tolerance propelled him to second place in the first round of the elections with 21.47% of the vote. He is the change candidate and represents the desire of at least a minority of Colombians who want to move on from terrorism and security.

Santos garnered 46.57% of the votes in the first round though, so it is widely expected that he will handily win the June 20th runoff election to become Colombia’s next president.

The Colombian peso, local stock market, and government bonds have all rallied on the expectation of a new pro-business, pro-security Santos administration. Santos himself has stated that he would like to raise tax revenue, not by increasing tax rates, but by encouraging investment to boost production instead.

I’ve stated before that I think Colombia is largely undervalued. Real estate prices, for instance, are incredibly cheap in many parts of the country, frequently selling for less than the cost of construction. This is due mainly to the ‘Colombia stigma’ that has long plagued the country… it keeps foreigners out and prices low.

In the not-so-distant-future, though, I expect this stigma to fade… possibly under a Santos administration. When that happens, you can be sure that Colombian assets will experience significant growth.

Overall, I think the country has one of the brightest futures in Latin America.

June 1, 2010
Undisclosed Location

I had a really great long weekend in Chicago (hence the day off yesterday) and was fortunate enough to meet up with a couple of very interesting subscribers. President Obama was even in town, and the entire city was in a heightened state of security.

Regardless of the President’s presence, though, there were 30 shootings in the city over the weekend… which is enough to make anyone scratch his head and wonder about safety.

You hear about similar crime statistics from time to time, whether in places like Chicago, Mexico, Africa, etc. People automatically assume that those places are inherently dangerous. Sometimes that’s true… but usually not.

The reality is that most crime around the world, in North America, Asia, or Latin America, generally takes place in localized areas. Even in your own home town, chances are that you know the places to avoid.

In Chicago, for instance, I was been running all over town having a great time, completely unaffected by the criminal shootings going on in other parts of the city… simply because I have situational awareness and didn’t bother venturing to the areas that I know to avoid.

It’s rarely different anywhere else. In Medellin, Colombia for example, the sprawling and wealthy el Poblado district is a beautiful, safe area that I would feel comfortable recommending to my own mother. The shanty neighborhoods built into the hillside, though, are where you want to avoid.

These are common-sense choices that any individual should make, expat or not, traveler or not. Safety, fundamentally, is an individual responsibility… too many people place their livelihood into the hands of the government, expecting safety and protection in return for their tax dollars.

Unfortunately, this simply isn’t the case.

In 1981, after a series of events which led to the brutal abuse and robbery of two Washington DC women, the US Court of Appeals ruled that “a government and its agents are under no general duty to provide public services, such as police protection, to any individual citizen.”

This sort of puts “to serve and protect” in a new light… so much for your tax dollars at work. This is why, fundamentally, we are all on our own in this world, whether we realize it or not. The government is not there to save us.

People always ask me about safe places vs. unsafe places, and I have a pretty good sense of the issue from having traveled so much. I don’t recommend countries that I find to be unsafe, and to be clear, I define this as having an elevated chance of criminal encounters outside of the ‘unsafe’ parts of town.

Buenos Aires is an excellent example. It’s a beautiful city, sort of, but the crime situation has really deteriorated to the point that you can easily be robbed and/or assaulted in broad daylight on the most popular tourist streets in town.

It happens every single day, and I know numerous people who have fallen victim.

I wouldn’t rule it out as a place to live, but people should have much more situational awareness in that city than in, say, Medellin.

In an upcoming report about expatriation that I have co-written with the folks at Casey Research, I provide crime and safety details on dozens of cities around the world where people might want to plant an overseas flag.

Below I list a few that are covered in much more detail in the upcoming report:

Tier 1 (incredibly safe): Singapore, Dubai, Havana, Beijing
Tier 2 (“normal”, reasonable crime levels): Panama, Budapest, Kuala Lumpur
Tier 3 (requires elevated awareness): Buenos Aires, Cape Town, Tangiers

May 21, 2010
Quad Cities, IA, USA

It’s been a lovely few days here in America’s heartland… I’ve been able to catch up with some of my friends, but to be honest with you, I’m aching to get back on a plane and get out here.

I’ve decided to wait it out for another 2-weeks; there is an Atlas 400 gathering in New York City on June 4th, and a lot of my friends have committed to attending. One member is traveling from as far as the Philippines to attend, so I’d really like to be there.

Immediately after the Atlas event, though, I’m going to hop on a plane with my business partner and a few other members for Panama, then Brazil, then Europe.

I’ll tell you more about what I have planned for that trip later. For now, let’s move on to this week’s questions.

Leading off, Kyle writes, “Simon- I would first like to thank you for your letter; it is a very good way to start my day. Question: I am a 20 year old male who is soon joining the US military. Given my small budget, what do you recommend I do to protect my assets?”

I get this question a lot, and it’s great that you’re thinking in the right direction. However, with limited assets, you really don’t have any assets to protect. Instead, if I were in your soon to be well-polished boots, I would focus on four things:

First, the military has a way of taking young people at an impressionable age and teaching them how to excel within a bureaucracy… not to mention the military can also inculcate groupthink. I’m speaking from experience.

This may be good for unit discipline, but it’s terrible for the mind of a free man. I would strongly encourage you, during your service, to focus on keeping your mind free and creative– read as much as possible, ask questions, and understand that the military microcosm is not the real world.

Second, as you will not have much time or availability to build financial assets during your time in service, you should focus on building up your most important asset– yourself.

This means developing skills. Learn as much as possible– a foreign language or two, a technical trade, medical training, etc. These are subjects which are easy to pursue in the military. On the side, I would also be reading about sales and marketing– generating revenue is always a valuable skill.

Third, I would focus on cultivating an international mindset. Try to get stationed overseas, and immerse yourself in the culture. If you unfortunately end up deployed to the Middle East, make the most of it by interacting with the locals as much as allowed and learning the language.

Fourth, be smart with your money. The military makes it easy to save– they provide a roof over your head and food on the table, so save as much of your salary as you can so that you have a sizeable pool of capital by the time you are finished.

Next, Rick asks, “Simon, I get your Notes from the Field every day. Do you have any premium services available that I can subscribe to?”

I enjoy writing a free, daily publication… but I recognize that there is a lot more information that I can provide that goes beyond the scope of this short blog.

Not to mention, there is a lot of information that I would like to provide that I am simply unwilling to publish in this forum. My trusted contacts around the world don’t want their contact info posted online, and I don’t want the most sensitive information to be indexed and archived by Google.

Matt and I have come to the conclusion that the best way to provide the most comprehensive and sensitive information to subscribers is to launch an additional premium service. I’ll give you more details at a later date when I can dedicate more space to the topic. I need to move on for now.

Peter writes, “Hi Simon, earlier this week you said that you are closing out almost all of your speculative positions. Does that mean you are holding on to your non-speculative positions? What type of investments are those?”

For me, my nonspeculative positions are anything where I simply don’t care about the investment return. Physical gold is one such example– it doesn’t matter to me whether the price of gold rises or falls, the value of my coins remains the same to me.

Another example is private stakes in non-public companies, of which I own a few; I made these investments to generate long term profits and enterprise value, not to speculate on the immediate appreciation of share price.

Real property that I hold for its yield, or because it has personal benefit (an escape pad) is also a nonspeculative position.

When I say ’speculative position,’ I’m referring to instruments in the public markets (stocks, currency, etc.) that I purchase or sell short because I’m speculating on a rise or fall in the asset price.

These are the positions that I’ve closed– there is way too much government intervention in the marketplace right now, and whenever that happens, there are always gross misallocations of private capital that wreck havoc on asset prices.

To be clear, this includes the long gold/short euro position that we closed on Tuesday at 1,003 euro, booking a 35% gain.

May 20, 2010
Quad Cities, IA, USA

The New Zealand government just announced something that I find rather surprising… but a step in the right direction. Concerned about debt levels, both public and private, they’ve announced changes to the tax code which encourage savings and investment, and discourage consumption.

Specifically, the government is planning measures which cut and simplify income tax rates, ranging from 10.5% to 33% (down from as high as 38%). The corporate income tax rate will be cut from 30% to 28%.

Meanwhile, the changes also include an increase to the national sales tax from 12.5% to 15%. In the long run, this should be favorable for New Zealand economy because the new scheme encourages the replenishment of a large pool of savings… this is critical to long term economic growth.

Overall, I’m bullish on New Zealand and would recommend it as a place for you to consider as an expat destination.

Over the last few months, I’ve occasionally published some letters from my friend Mark who has been living there and exploring the country for his own expatriation. Mark quickly became an expert in NZ residency, immigration, and real estate, and I think his letters served our group quite well.

Mark recently returned to the United States after almost a year on the road, and he’s written a very comprehensive e-book about New Zealand that covers all aspects of living, working, and investing there.

Below is his latest letter since he returned from down under:

Since I last wrote about New Zealand lifestyle and immigration, serious macro-economic changes have begun to unfold. Simon speaks at length about these in his daily missives, so I don’t need to elaborate. What is important to us is predicting how these changes might affect New Zealand, and therefore impact a decision to relocate there, either full or part-time.

But before making the decision to uproot and take the plunge into this new lifestyle, culture (yes, it’s a bit different than where you live now) and system of law and taxation, let’s review the reasons why New Zealand is so desirable.

As a reader of Sovereign Man, our guess is that you believe the world is currently on an unsustainable path, financially and perhaps socially. We are squarely within that camp, and therefore wanted to find a place where we could ride out the storm.

In our first post herein we listed 10 reasons New Zealand was a good choice:

1. Geo-politically and physically ‘Remote’
2. Abundant and reasonably priced lifestyle type properties
3. Plenty of water. Ocean, lakes, rivers…
4. Reasonable annual sunshine hours
5. Clean environment
6. Educated, English speaking population
7. Safe, clean and readily available organic food
8. Physical safety and the rule of law
9. Fair taxation
10. Accessible, high-quality health care

These are factors we evaluated when choosing New Zealand. We said that it didn’t tick all the boxes, as taxation is as predatory here as it is elsewhere. But, now that situation seems to be improving.

As for the other criteria, NZ has those in spades. So now let’s review why it’s a good choice if the world falls apart, even temporarily.

First, you will want to live as far away from the angry masses as possible. And, make no mistake; they ARE getting angrier by the day.

New Zealand is about as geographically remote as you can get while still remaining a part of modern civilization. If Doomsday is your prediction then stay away from the cities. Thankfully you’ll have lots and lots of empty space and small towns to choose from.

Secondly, New Zealand is basically resource independent. They do import fossil fuels, but their electricity generation relies heavily on renewables like hydropower and geothermal.

In fact almost 70% of the power is generated from renewable resources. Auckland is power hungry, and grid interruptions can occur there, but the South Island, with its small population and immense hydropower resources is adequately supplied.

Third, New Zealand has ample food production to sustain its small population. Remember, without food and water nothing else matters. Think about how you would provide food for your family if the supply lines shut down in the urban centers of the U.S. and Europe..?

Fourth, the people, Kiwis are by nature, good-natured! They aren’t the most gregarious, the funniest or even the most polite at times, but they ARE kind at heart and peace-loving.

We would much rather be facing tough times surrounded by strangers in New Zealand than in almost anywhere in the U.S. Your average Kiwi is a survivor; they either live on a farm or are likely only one generation removed from that lifestyle.

Finally, we believe New Zealand is relatively safe from geo-political events. Yes, it is an ally of the Empire; however it’s more like Switzerland in this respect. Their anti-nuclear stance, in our opinion, just increases its rating as a ’safe place’.

Moreover, New Zealand is likely not a terrorist target, or a military target. And, we believe if the global situation rapidly deteriorated, we’d fare better there, than elsewhere in the world.

So, in summary, New Zealand may in fact be an ideal place to ride out a serious economic, social, or geo-political disturbance. You can learn more about how to make it your primary or secondary residence by getting a copy of our New Zealand Retirement, Immigration and Lifestyle Guidebook.

In the e-book, I discuss the reasons why you should consider residency, and even citizenship in this beautiful country. I review the legal steps, introduce you to competent professionals, provide precious metals purchase and storage options, and even show you current examples of real estate opportunities you can capitalize on right now.

Simon again. I’ve read Mark’s book and find it to be the best source of information about New Zealand out there in the marketplace right now, so if you’re possibly interested in migrating to NZ, I’d encourage you to give it a read.

May 18, 2010
Undisclosed location

You know by now that I generally don’t spend very much time in the US.

I think there are more desirable places out there… and to me, the US is just like any other country in decline like Italy or Spain– I really enjoy it as a tourist, I just don’t care enough for the politics or media to stay for long periods of time.

That’s one of the benefits of being a permanent traveler with no fixed home: I have the luxury of not being constantly force-fed propaganda that spreads fear and ignorance.

When I come back to the states, though, I feel like there’s a political agenda being thrown in my face everywhere I look. One of the most pervasive, from my outlook, is this notion that the economy is rosy, and that the government has everything under control.

I think this is absolutely ludicrous. The government doesn’t have anything under control, including themselves. Instead of putting the country on sound financial footing, they’re doing the exact opposite– spending without limit, borrowing without regard, and furthering a culture of entitlement.

Congressman Ron Paul was on CNBC yesterday talking about these same issues. He criticized the administration and Congress for their reckless spending, and he railed against the Federal Reserve for inflating away the currency and bailing out select banks.

For whatever reason, his ideas don’t seem to resonate with the public. Becky Quick even chided the Congressman for his bullishness on gold as a more effective store of value than paper dollars.

In fact, a bit of basic math shows us that, since the dollar became a worthless piece of paper in 1971 when Nixon left the gold standard, gold has generated a 9.2% annualized return in dollar terms, while stocks have only returned an annualized 6.6% and bonds about 8%.

Now, I’m not a gold bug, but I’d rather take my chances on this ‘barbarous relic’ than on a worthless piece of paper controlled by bureaucrats.

(Actually I prefer ammunition as a store of value, but I’ll save that for another time…)

Think about it– the entire modern financial system is based on a very small group of people having the power to create money out of thin air. It’s obvious that this is corrupt and unsustainable.

So is borrowing trillions of dollars each year.

They (the government) think that we can simply grow our way out of debt… that if the economy has a big boost, the size of its debt won’t matter very much in relation to the size of our economy and consequent tax revenue.

This is also completely ludicrous. If every single person in the US were to pay 100% of his/her salary for the next year to the federal government in taxes, it still wouldn’t be enough to pay off the debt– the US would still be a few trillion in the hole.

That’s just a pipe dream anyhow. The government is going to give the largest voting blocs even more tax cuts and entitlement programs, then stick the bill to (1) future generations; (2) those who are unprepared to deal with inflation; (3) productive citizens who generate wealth and create jobs.

We can see this already happening around the world.

In Portugal, their government has even gone so far as to introduce a special ‘crisis tax’ to bring down that country’s deficit… punishing the entire population for decades of politicians’ mismanagement.

In Australia, that government is singling out the resource industry and charging them with a special tax to redistribute mining profits across the rest of the economy.

Sure, that sounds like a great idea, mate. Penalize your most profitable industry that provides ample jobs and wealth, then choke off the profits that they need to reinvest in exploration and extraction technology. That ought to be good for long-term growth.

Unfortunately, this is only the beginning. You can expect even more Draconian measures in the countries with the most desperate balance sheets– that’s the PIIGS, the US, and Japan.

Here’s the good news: As an expat, all of these measures are largely meaningless. When you’re a ‘permanent tourist’, governments compete for you rather than try to bleed you dry. They want you to spend your time and money in their country, and they’ll do whatever it takes to attract you.

I think there’s going to be a massive wave of expatriation over the next few years, and it’s already begun. Everyone has a breaking point, and a lot of people are going to be reaching theirs very soon.

The solutions are already out there– offshore bank accounts, foreign property, tax residency, second citizenship, etc. It’s simply a question of will and mental attitude.

Are you seriously considering expatriating or at least planting flags internationally? What’s your single biggest question about it? If not, what’s holding you back?

May 17, 2010
Undisclosed location

You’ve probably seen some clips on the news about the political current unrest in Thailand, and some headlines like “CHAOS IN THAILAND!”

These headlines are inaccurate. Thailand, the country, is not in chaos. The political unrest is taking place in a small section of Bangkok, and this is where the chaos is… actually, it’s more like a war zone.

In the rest of the country, though, it’s business as usual.

I’ve been talking to a lot of my friends and business partners fairly regularly who live in Thailand. Most of them have noticed no changes at all– they’re still sitting on the beach in Koh Samui or drinking beer with the bar girls in Pattaya.

Even some friends who live in Bangkok are going on about their normal lives.

One close friend of mine, though, is living quite literally in the middle of the kill zone. He tells me about how he can hear gunfire and explosions from his living room window… and as a young, brand new father, he’s nervous.

Rightfully so, I’d say.

He went on to describe the ‘business as usual’ attitude in Thailand– “hey look, this is the Land of Smiles. They treat conflict with passivity… just ignore it with a smile and hope that it goes away. That may be beneficial for small conflicts, but in this case, it’s gotten out of hand.”

To be clear, political tension is normal for Thailand– coups are frequent, corruption is pervasive, and demonstrations are commonplace. You can see this in the market as investors have shrugged off the turmoil; the Thai baht and stock exchange are both largely unchanged over the last 3 months.

This latest conflict, however, seems to be something entirely different. Local Thais are now starting to take notice and say “this is unlike anything we’ve seen before,” and their anxity level is starting to rise.

The seeds of revolution were planted in September 2006 when “democratically elected” Prime Minister Thaksin Shinawatra was ousted, in absentia, by a military coup. It appears now that a civil war has been brewing ever since.

Thai protestors are demanding that the current, ‘illegitimate’ government step down and hold new elections. They don’t seem to be going anywhere until they get their way.

The government has rolled out the military to contain the protests… but as it turns out, the protesters are well armed and equally willing to shoot, and kill.

Jean-Jacques Rousseau once wrote in his treatise The Social Contract, “as long as a people is compelled to obey and does so, it does so well; as soon as it is able to throw off its yoke and does so, it does so even better…”

True believers are skilled at insurrection, and for this reason, the conflict could go either way. The protestors could be overpowered by government forces, or the government could finally be compelled (with support from the international community) to hold new elections.

Here’s what really scares me, though…

The King of Thailand is old. He’ll be 83 this year and has reigned for nearly 64 years. This longevity has created an overwhelming sense of respect and adoration for him among all Thais– the monks, the military, and the people.

In this conflict, he wields power over both sides… and while he has a history of staying out of political maneuvering in Thailand, the few times he has used his authority to step in has immediately ended the conflict.

If things truly get out of hand in Thailand in the coming weeks and months, the King could put a stop to it all by wagging his little finger.

But if something should happen to the king during this conflict, I’m concerned that the country could descend into major turmoil. At best, Thailand would have another military governorship. At worst, the present quagmire could persist for years.

In the long run, Thailand will pull through just fine, as it always does. It will remain an international hedonist’s and retiree’s paradise, full of cheap living, wild nightlife, and accommodating locals.

But Thailand could be in for a rough couple of months… especially if something does happen to the king.

In that case, I would expect that the price of rice (of which Thailand is a major supplier) would go through the roof, and both the Thai baht and stock exchange would take a major beating.

You can invest in rice futures (either going long in expectation of conflict, or shorting at the peak) with any commodities broker, or an Interactive Brokers account. You can take a position in the Thai baht and stock market through a brokerage like Boom Securities, based in Hong Kong.

May 14, 2010
Undisclosed location

I want to start off today by once again thanking you for all the well-wishing emails after my operation this week. I read through a large backlog of email last night, and I was truly humbled by all the positive energy and goodwill out there. Thank you.

With that, I’d like to jump in to this week’s questions:

Phil says, “Simon, I sincerely appreciate the info contained in your letter. I’d like to take your advice: get second citizenship, buy property overseas, store assets outside the US, etc. I’m wondering if you can recommend a ‘how to’ guide with specific instructions for these issues?”

At the moment, there really isn’t one out there that covers the specific ‘how to’ details of getting started with multiple flags. I try to cover these issues on a daily basis, but as our conversations cover so many different topics an abbreviated space, I know we could go much deeper.

Right now, I’m working with a very capable partner to draft a multiple flags instructional overview. I suspect it will be exactly what you’re looking for. We should be finished in a few weeks, so stay tuned for more information.

Maldek asks, “Simon, how do you think the Euro/dollar exchange rate will change if Germany leaves the eurozone and introduces its Deutschmark (DM) again?”

Rumors are already flying that both France and Germany have separately threatened to bail out of the eurozone. It will happen eventually– the single currency is absolutely doomed, just as I believe the integrity of the United States are doomed in the long run.

A German factory worker would no sooner pay for a Greek hairdresser’s early retirement than an overtaxed California entrepreneur would pay for a Rhode Island school teacher’s pension.

Yet these are the kinds of mandates that politicians are forcing on people. Voters may act like sheep when their civil liberties come under attack… but put your hand in their wallets and they get militant.

The real irony is that breaking apart the eurozone is a popular idea in Europe, so you can be sure that the dissolution is inevitable.

If the relatively healthier economies in Europe actually did break away– Germany, Luxembourg, Slovakia (yes I’m serious), Netherlands, Austria, Belgium– the resulting economic union would certainly be among the healthiest, most balanced in the western world.

In other words, today’s euro would become worthless, but the future euro would be quite valuable and respected by investors. The major issue is whether the new currency would be large enough to challenge the dollar’s dominance. We won’t know the answer until they piece the deal together.

William writes, “Simon, I bought Terry Coxon’s book “Unleash your IRA,” and it’s probably the best thing I’ve bought this year. I’m amazed at everything I can do with my retirement funds, including buying gold bullion and foreign property, tax free. Is this a good way to plant another flag offshore?”

Absolutely. Terry is one of the most knowledgeable people I have ever known about all matters related to money, and the Open Opportunity IRA structure he talks about in his book is one of the biggest no-brainers I see out there right now.

Why? A couple of reasons.

First, the US government has its targets set very squarely on retirement funds. There are trillions of dollars of savings that politicians could easily regulate.

For example, do-gooders in the Congress could whip up a new law tomorrow requiring that a percentage of managed retirement funds be invested in US Treasuries… you know, because they’re so secure.

Through Open Opportunity IRA structure that Terry describes in his book, you ensure that no one can confiscate your hard earned savings.

More importantly, though, you can take ordinary returns and make them extraordinary by planting a retirement savings flag overseas.

Imagine that you buy an undervalued property in Colombia. The property is selling for $100,000 and yields about $1,500 per month in net rental income.

Over the years, as Colombia’s economy continues to perform strongly, the property appreciates substantially in value. The Colombian peso outperforms the US dollar. And the rental income rings the register month after month with the reliability of a Swiss train. Not a bad deal, right?

Now let’s assume that you bought the property with your retirement funds through an Open Opportunity IRA. Not only do you receive the rental income, the property appreciation, and the currency appreciation, but you get to take it all tax-free because your IRA owns the property.

I could cite you a million more examples, but frankly Terry’s book does a better job. Bottom line, this is one of the best ways to plant and overseas return and make lot more money at the same time.

Finally, Libero asks, “Simon- you mentioned that Italy has a reciprocity agreement with Panama. I just spent about 2 hours searching and can’t find anything. Can you provide more information?”

Sure. I’m not surprised. Google is the Black Hole of accurate information, and most of the people who write about this sort of thing are just armchair expats who parrot others’ work without putting boots on the ground.

I can tell you with 100% certainty that Panama has a bilateral agreement signed with Italy that provides instant residency for nationals of either country to live in the other. In other words, Panamanians can acquire Italian residency, and Italians can acquire Panamanian residency.

How do you do this? If you’re an Italian citizen, head to Panama and talk to a local **reliable** immigration lawyer. If you need a referral, drop us a line and my assistant will get you in touch with someone. I don’t like to publish these things for Google to index.

May 6, 2010
Undisclosed Location

Most people don’t realize how many countries out there are dollarized.

In some countries, like El Salvador, Panama, Palau, Ecuador, etc. the US dollar officially circulates in the economy. In others, like Cambodia and Zimbabwe, the US dollar is the de facto currency, which means that they officially have their own currency, but US dollars are commonly used and accepted for everyday purchases.

Moreover, in other countries like Uruguay and Argentina, high ticket items like real estate generally change hands in US dollars. And finally, in many countries like Venezuela, Ukraine, Saudi Arabia, Hong Kong, Cuba, etc., the local currency is pegged to the US dollar at a fixed rate.

To be clear, there are many advantages to being dollarized. For tourists, it is far more convenient to deal in a major currency. For investors, there is generally less stability risk if you don’t have to deal with a third world peso. For business owners and traders, it makes sense to use the world’s #1 reserve currency.

But just as there are a lot of benefits to using the US dollar in a foreign economy, there is one massive, critical risk: what happens to these economies when the greenback finally breaks? What if there’s a run on the dollar, similar to what’s happening with the euro right now? Are these countries insulated? Here’s my take:

The actual currency unit in circulation, whether official or unofficial, is not that important. What is far more important is determining a country’s level of exposure to the United States.

El Salvador, for example, is heavily dependent on trade with the United States; 48% of its exports and 35% of its imports depend on the US… so a substantial dollar crisis which erodes the purchasing power of the greenback and reduces real wealth in the United States will have a devastating impact on El Salvador.

Then again, consider Honduras, which is not dollarized. 62% of it exports and 50% of its imports are bound to/from the United States. Honduras has an even greater level of exposure to the US, so a dollar crisis would likely be even more severe in that country, even though it circulates its own currency.

In contrast, consider Saudi Arabia, whose riyal currency unit is pegged to the US dollar at 3.75/$. Naturally, the preponderance of the Saudi economy is based on its oil exports, which it has no problems unloading to any number of countries across the globe, including China.

If the US dollar started to plummet, the price of oil (in dollar terms) would increase accordingly, and the Saudis would still be generating the same level of inflation-adjusted oil revenue. Net impact to the Saudi economy would be marginal, especially compared to places like Honduras.

We can see a very clear illustration of what would happen to these countries in the future by taking a look at the countries that are affected by the euro’s decline right now.

Take Switzerland, for example, which has its own, independent, time-tested, fairly sound currency. The Swiss economy is heavily dependent on the European economy, however, so as the euro has declined, so has the Swiss franc. Same with the Polish zloty, same with the Hungarian forint.

Overall, regardless of the currency in circulation, the safest places to be (economically speaking) in the event of a dollar crisis will be countries that have an independent source of income and do not depend on the United States for the preponderance of their trade.

Panama is one such example; revenues from the Panama Canal, its perpetual cash cow, will generally be enough to offset the negative impacts of a US decline.

Ecuador, with its reasonably well-developed (albeit de facto nationalized) oil sector, should also limp along just fine, similar to Saudi Arabia.

Peru, Chile, and Brazil are also on excellent footing; each of the three is blessed with substantial natural resource reserves and hungry export markets that are already diversified across the world. Chile’s trading partners, for example, are almost evenly split between China, Japan, the US, the EU, and the rest of South America.

This is a complicated topic, but it’s an important one to understand for anyone looking to plant multiple flags. I’ll be devoting more time to this next week when I talk about the nature of a dollar crisis, what it will look like, and when it will come.

April 23, 2010
Quito, Ecuador

It has been a whirlwind week this time around in Ecuador; I’ve been to just about every corner of the country, inspecting property, making new legal, banking, and real estate contacts, and cementing old ones.

In short, it’s been an incredibly productive trip. Most importantly, I picked up on some really valuable immigration leads that I plan on sharing with you soon once I test it out myself… more to follow on that.

Tomorrow I’m leaving for the Dominican Republic where I will spend the weekend prior to heading to the United States for a couple of conferences. Before I head out, though, I wanted to address some specific Ecuador questions to lead off this week’s Q&A:

Peter asks, “Simon, what is the technical situation regarding high speed internet in Ecuador?”

It’s good. Ecuador is very wired. Most places have at least 4MB/s broadband, and it seems like there’s an Internet cafe on every corner. I’ve been making Skype calls all week without any problems. You may run into power outages in some areas, but this is a different issue.

Jai asks, “What about income earning prospects, either an Internet sales business or something for clients outside of Ecuador… or any on the ground opportunities?”

I don’t find Ecuador to be ripe with substantial business opportunities like Panama or Malaysia. There is not much of an emerging middle class, so the domestic market is out.

Moreover, the expat market is still embryonic, and I don’t think that the local labor force has the skill set to be competitive for outsourcing.

Bottom line, Ecuador is a place to plant a residency flag, and possibly a citizenship flag, but not much else.

Mike asks, “Simon, we are a gay couple, 48 & 37. I was wondering if Ecuador is a gay friendly area?”

This isn’t one of the things that I really watch out for, but my impressions are that Ecuador is neither friend nor foe of the gay community. You would probably have better luck in Panama and Brazil, or even Uruguay where the government passed a law recognizing gay marriage a few years ago.

Bob asks, “Simon, what is the tax situation like for expats? And do you plan on publishing a Black Paper with your Ecuadoran contacts?”

Taxes are reasonable in Ecuador. According to my legal contacts here, non-residents are taxed only on their Ecuadoran-sourced income, and the tax rates are progressive in some cases, and a flat 8% in other cases.

Regarding a Black Paper– one of the things that bothers me is that there seems to be so much misinformation online about the Ecuador, usually promoted by groups that have a financial interest in misrepresenting and overselling the country.

It’s disappointing to set people’s expectations in a certain way, only to find out that the country, while wonderful in many respects, is not as advertised.

Black Papers are designed to be a sort of ‘Consumer Reports’ about a country with actionable contacts; so, if there’s substantial interest, I may put together an inexpensive, limited-release Black Paper about Ecuador.

Either that, or just bring you some free interviews with a few of my contacts there if I can get them to agree… this is my preferred solution because it’s a lot less work on my part.

Richard asks, “Simon- great information about Ecuador. Can you tell us what websites you look at for overseas property?”

I know it’s tempting to let Google do the heavy lifting these days, but rest assured, if you find a property website in English, particularly in the top 5 search rankings, you are already paying a premium.

There is no substitute for being on the ground– the farmer who will sell you his land cheap has never seen the Internet in his entire life.

Doug asks, “Simon, can you recommend some Ecuadoran banks that will work with American citizens?”

Most of them work with US citizens; the problem is that the account opening procedures are highly bureaucratic, and most banks require you to be a resident in order to open an account… unless, of course, you know someone.

There are reasons to open a bank account here, though not for planting a financial flag. It’s nice that Ecuador is a dollarized economy paying 7% to 9% on a 1-year CD, but the primary reason for doing so has to do with immigration. More on that later.

Lastly, Rexx asks, “Simon- thank you for Monday’s interview with Mark Nestmann about capital controls. Many of us would love to buy his book ‘The Lifeboat Strategy‘, but the price is a bit of a stretch.”

I think Mark’s book is one of the best actionable expatriation guides out there– he teaches you how to move your assets, and yourself, safely and legitimately overseas, and discusses topics like second passports and overseas structures in significant detail.

Given the value of the information, I’m amazed that he gives it away for $95… but frankly, if $95 is a stretch for you, then you probably won’t get too much out of Mark’s book and I wouldn’t advise you to pick it up.

Instead, I would concentrate your efforts on making money and building assets. Focus on finding opportunities that are in significant demand and short supply, then become an expert in that field.

Examples could be expat headhunting in Asia, small business fundraising, or just being the ‘go to guy’ in a quickly growing market like Peru or Mongolia.

There is no great mystery to making money… you might miss a few times, but once you tap into a niche that you can fill, you’ll start building assets. At that point, once you have money, I guarantee that you’ll get a lot out of Mark’s book.

That’s all for this week, have a great weekend.

April 20, 2010
Cuenca, Ecuador

Ecuador is not one of those places on everyone’s radar. In fact, when I recently announced that I would be returning to Ecuador, I received a handful of subscriber emails like this one:

“Why are you wasting your time in that communist money pit? [SB: strange choice of words...]”

Clearly, Ecuador suffers from a similar reputational stigma as Colombia, and this keeps that majority of gringos away. The country’s president Rafael Correa is aligned with Venezuela’s widely disparaged Hugo Chavez, both of whom focus their policies on a pro-social agenda.

Just recently, in fact, Correa announced that he would be taking steps to nationalize foreign oil companies who don’t agree to limit their profits based on a government mandated ceiling.

These sorts of things tend to make foreigners run away like a scalded dog.

Politically, Ecuador is a disaster. The country saw seven presidents from 1996-2007, which makes it about as stable as Thailand. But while I wouldn’t take the political risk in Ecuador as an institutional or resource investor, I have no problems being an expat there.

Why? Just because the government is going after oil profits doesn’t mean that they want the title to your house in Cuenca. Dispossessing foreigners of their property would do absolutely nothing for the government, or for ‘the people’ that Correa so desperately wants to please.

Would I buy a nice house with a small farm in Ecuador? Sure. Would I buy 10,000 acres of land adjacent to an impoverished village? Doubtful. You see the difference.

Today, my goal is to provide you with a short, balanced overview of Ecuador, with the intention of providing more details later this week.

The bottom line is that Ecuador is definitely worthy of consideration. Specifically, based on how I define the “7 expat categories“, Ecuador is great for retirees, hermits, nomads, and internationalists. It’s terrible for hedonists.

Here are six reasons why:

First, as you’ve probably heard, cost of living is dirt cheap in Ecuador… and by cheap, I mean that you actually feel guilty that it’s so cheap.

Quality housing, for example, can easily be had for less than $1,000 per square meter (which is my line in the sand for ‘CHEAP’), and $350 to $500 per month for a nice rental is quite common.

Labor costs nothing, so you can have a whole staff at your hacienda for the equivalent of a Mercedes payment; and food prices are generally 20% to 60% less than in North America or Europe.

It’s also worth mentioning that the US dollar is the official currency, which has several advantages and disadvantages that I’ll get into in a future letter.

Second, life is slower and much more traditional in Ecuador. The common analogy is that it’s like the United States in the 1950s (which is a similar analogy used in Uruguay and Paraguay).

Well, I wasn’t around in the 50s, but I certainly agree that life is very simple in Ecuador.

For example, the government typically does not pass invasive laws designed to save people from themselves; the concept of ‘family’ is still of tremendous importance; and people spend more time hiking and picnicking than sitting in front of a computer.

Third, medical care is of reasonable quality; I have never had any issues with minor medical care here (both western and aboriginal), and there are a variety of high quality anti-aging clinics in the country. For major medical issues, though, I would probably seek aid elsewhere.

Fourth, English language penetration is satisfactory in the larger cities like Quito and Guayaquil (pronounced ‘why-uh-KEEL’), but once you get into the smaller towns, you’d best be able to speak some basic Spanish.

Fifth, food quality is typically excellent; many of the southern valleys have impeccably grown organic food, and the soil quality often yields enormous proportions… I’m talking about fruits and vegetables the size of your head.

As a warning, however, there is some credible evidence of substantial pesticide usage in many parts of the country, as well water pollution from oil spills over the last several decades in the Amazon basin.

In fact, there is a $27 billion lawsuit pending in an Ecuadoran court at the moment against Chevron for substantial environmental damage without proper attention to clean-up.

Sixth, despite the negative attention that the oil sector receives, the country is quite open and friendly to foreigners, and the government makes it easy for them to come to Ecuador with a variety of retirement and investment schemes.

Overall, if you’re looking for deep discount living, a slower lifestyle, and only minor sacrifices to modern convenience, I would strongly recommend that you check out Ecuador.

I will be here for the rest of the week, so if you have any specific questions that you want me to find out about, drop me a comment here.

April 19, 2010
Quito, Ecuador

I don’t have to tell you that world governments are collectively pushing hard against people who abusively hide money overseas.

Governments’ primary motivation at the moment is to make sure that no one is evading their tax obligations; for now, they don’t care much if you pay taxes on your income, and then transfer after-tax earnings overseas.

In a way, though, their offshore crackdowns have become a self-fulfilling prophecy that is creating its own demand.

People who understand what’s going on are now more motivated than ever to take action using legitimate and available tools– proper use of international business structures, offshore bank accounts, foreign real estate, second passports, etc.

Why? Because they don’t want to get caught with their pants down when the window of opportunity closes.

Someday, and likely soon, cash-starved governments will implement whatever measures are necessary to trap capital within an economy, enslaving people to taxation, regulation, and inflation.

These are called capital controls, and I think that they’re an absolutely certain part of our future… though ‘future’ is the operative word. There has been a lot of insidious legislation passed around the world recently, but none so far has been capital controls, at least in developed countries.

A few weeks ago, blogger after blogger set off a wave of panic across the Internet by announcing that capital controls had, in fact, been implemented in the US. They were erroneously interpreting a new law called the HIRE Act, claiming that certain provisions were tantamount to capital controls.

This interpretation was simply wrong.

Frankly, I’m pleased that so many websites are now paying close attention to expatriation issues. It seems like every time I turn around, someone is sending me an article from a new website that is doling out advice on internationalization.

I think this is fantastic, and indicative of a growing concern around the world. The problem is that most of them are armchair expats handing out monkey see, monkey do information from Google or Wikipedia that is totally inaccurate.

Misinformation can cause panic and even direct financial loss… this is why you want to be careful about your advisers and go straight to the source.

For example, if you want information about international taxation, talk to an international tax attorney, not Wikipedia. If you want to know about expatriation, talk to people who have successfully done it, not the armchair expat who watches CNN International.

This is one of the chief reasons why we are in the process of redesigning our website; it will allow subscribers to connect with each other in order to swap stories and advice based on their own personal experiences. More on that later.

Today, though, I really wanted to set the record straight about the HIRE Act. On March 30th I initially responded to the misinformation about capital controls; in that missive, I promised that I would soon conduct an interview with an international tax law expert to shed more light on the subject.

Today is that day… and if you’re interested in objective truth about capital controls without all the ‘Chicken Little’ sensationalism, I highly encourage you to check out this interview with Mark Nestmann.

In the interview, we’ll discuss:

- What are capital controls and why the HIRE Act doesn’t qualify
- What capital controls will look like when they’re implemented
- Warning signs to watch out for in the future
- What you can do today to protect your savings
- Options for opening a foreign bank account

Mark Nestmann is an uncontested expatriation expert. As a trained international tax lawyer, Mark has been in the industry for two decades and authored many books on the subject.

One of them, the Lifeboat Strategy, is a really comprehensive, actionable guide to expatriation.  If you’re wondering how to develop a legitimate strategy for going offshore, you should absolutely start with his book.

(as an aside, Mark is putting the finishing touches on a new update to the book which he will list at a much higher price. Anyone who purchases the Lifeboat Strategy today at the lower price will be automatically sent the updated version at no charge.)

I hope you enjoy the interview.

April 13, 2010
Medellin, Colombia

Just about anyone who has been to Medellin, Colombia in the past 5 years will tell you that the city is about as perfect as it gets. I’m one of them.

Travel there yourself and you’ll find that it’s no understatement.

Medellin is one of Colombia’s largest cities, set in a picturesque Andean valley that could probably pass for Austria on a warm summer day. Because of its altitude at about 1500 meters, coupled with equatorial climate, the temperature varies between perfect and near-perfect, 365 days a year.

This is why they call it the City of Eternal Spring– year round warmth with very little humidity. You don’t need heat, you don’t need air conditioning, and the flowers literally grow like weeds.

In short, it’s all the benefit of the tropics without the nasty weather or bugs.

But there’s a lot more to Medellin than the weather. In fact, I would go so far as to say that, for some people, Medellin is definitely Shangri-La. Here’s the type of person who I think would thrive here:

- You speak at least basic Spanish and are willing to learn: Medellin is NOT an international city. It is very clearly Colombian, so the locals’ English skills are marginal at best.

- You do not need to travel frequently: Colombia, in general, is a very challenging place when it comes time to travel. Check in times at airports generally take about 2-hours for reasons that I will discuss momentarily.

- You like steady temperatures, not four seasons: Again, the weather doesn’t vary here a bit.

- You have about $1,500 to $2,000 per month for living expenses: Medellin is not an expensive place. Sure, you could probably get by on $800/month, but for the range I quoted, you can be living a very active lifestyle in the nicest part of town.

(note: if you’re looking to buy, property is pretty cheap. Even in the best part of town, you can buy property for under $1,000 per square meter, which is my usual ‘cheap’ threshold)

- You like the outdoors: There is no shortage of outdoor activities in Medellin… it’s like Austin, TX without the infernal temperatures.

- You have no major or chronic health problems that require regular treatment: medical care in Colombia is adequate, but I would say it is definitely not tier 1. You would do much better in Brazil.

- Bonus points for single men: I could write volumes about this, but there’s enough information on the Internet about it. Suffice it to say that the women in Medellin live up to their reputation.

And now for the potential drawbacks that you would need to consider:

First, the security culture can get fairly annoying, though to be fair, this is a national issue in Colombia. These people have spent decades dealing with paramilitary terrorist groups and drug violence, and while those issues are all in the past, the scars still remain.

To be clear, Medellin is exceptionally safe… but people have a way of remembering. Years ago, the government really stepped up security, and even though the threat has subsided, the security remains.

You still see a lot of police in the streets and at the airports (this is why the check-in procedures take so long); even doormen at residential buildings are quite vigilant about security.

People have simply gotten used to security as part of their lives… and it’s going to take time for the paranoia to heal. Security is not an impediment or obstacle in daily life, but it is noticeable.

Second, Colombia has a higher tax and bureaucratic structure than neighboring Panama. Most places in Latin America do. While Medellin is not an expensive place, I have found that the current tariff system generally limits the availability of import products on store shelves.

Third, and this is the big one for me, depending on where you are in the city, the air quality can be quite poor on some days… though if you are from a big city like Los Angeles, Buenos Aires, Hong Kong, or Houston, you probably won’t notice.

A study conducted by the Panamerican Health Organization found that Carbon Monoxide is the most emitted pollutant, almost all of which comes from motor vehicles.

In fact, according to the study, motor vehicles in Medellin are responsible for 58% of the city’s air pollution. Most comes from trucks and buses, which the local government has been phasing out in favor of natural gas vehicles. This should have a positive impact on air quality over the next few years.

One last potential drawback to mention, and this only affects some people– Medellin is not a walker-friendly city… not because there are no sidewalks, etc. Actually, the city is quite clean, you could almost eat off the streets.

The problem is the topography: Medellin is just too damned hilly. A short walk down the street can be the equivalent of 20 flights of stairs. Think San Francisco on steroids.

Taxis are such an integral part of the scene here that distances between two points are generally quoted by taxi fare… (“Oh, from my house to the bank is about 5,000 pesos”)

More on Medellin tomorrow.

April 2, 2010
Panama City, Panama

It’s been a great week so far in Panama. Each time I come back to this country I become even more sure in my conviction that Panama has a bright future.

For the next few days, though, I am going to set aside market forecasts and expatriation strategies… you see, my friends from the Atlas 400 club are starting to arrive, and I’m looking forward to a few days off at the very exclusive Tropic Star fishing lodge in Panama’s Darien province.

The cast of characters attending this event is really impressive– and I’m excited that several members of our own community will be there.

I’ll tell you more about it when I return on Wednesday. For now, though, let’s move on to this week’s questions.

First off, Jeff in Ohio asks: “Simon, thank you for the clarification about the new H.I.R.E. Act, I was really confused and concerned.  Why do so many people continue saying that this new law is the same as capital controls?”

It’s easy to overreact and say that the sky is falling.  To be fair, a layman’s reading of the bill makes it seem like the government is imposing a 30% tax on foreign bank transfers… but that’s exactly why I had my team of tax attorneys and CPAs analyze it– I wanted to know the truth.

The truth is, the H.I.R.E Act is an administrative enforcement of tax reporting; it’s bad news, but it’s no more capital controls than the qualified intermediary rules or withholding requirement for some payments to foreign companies.

The big problem is that this new law provides a disincentive for foreign banks to work with US customers… more and more, Americans are simply not worth the hassle for foreign banks.

There are still solutions, though. Americans who want to open a foreign bank account (as everyone should) ought to consider larger multinationals that already have a US presence. They’re accustomed to the paperwork already and are less likely to turn you away.

There are, of course, other jurisdictions that frankly don’t care much about the H.I.R.E. Act, and we can discuss those more in the future.

Steve writes, “Mr. Black, is Panama still self-reliant and independently wealthy if income from the Panama Canal drops off?”

This is a good question. Panama is heavily dependent on the Panama Canal, just as Saudi Arabia is heavily dependent on its oil supplies.

Fortunately, Panama has been able to diversify its economy away from transportation and trade– banking services, real estate, tourism, customer service, and others… but the Canal still generates the preponderance of external economic activity.

If global trade were to take a major hit (as it did in 2008/2009), Canal revenues would certainly decline and Panama would suffer economically… but bear in mind that Panama still posted positive economic growth last year.

I suspect that major economic pain would come only with a cataclysmic reduction in Canal usage, either due to another economically viable transportation route in the western hemisphere (unlikely) or a total collapse in global trade.

Mark writes, “Simon: I am a 65 year old disabled retiree.  Later this year I will have about $30,000 per year to reside on. Can you give me several ultra low-cost living places to consider that have SOME civilization?”

Everyone has different personal tastes and circumstances, but here are some ultra cheap countries that are safe and reasonably civilized: Malaysia, Ecuador, Thailand, Sri Lanka, the Philippines, Egypt, India, Paraguay.

There are more, but this should be a good start.

Anonymous asks, “Simon, if I have a civil judgement ruled against me, would that disqualify me from a second passport?”

No, not in most cases. Most countries require a medical exam and a criminal background check. If you have a felony conviction, that’s a red flag. Civil judgments are usually not problematic… you’d undergo more scrutiny testing positive for syphilis.

That’s it for this week. Remember, I will be at the closed-door Atlas 400 event for the next few days in the middle of the jungle, so you will more than likely not be hearing from me until next Wednesday.

April 1, 2010
Panama City, Panama

No place is perfect. There’s not a single country on the planet that is a total paradise, so prospective expats need to be willing to make compromises and trade-offs.

Naturally, it’s much better to be well-informed in advance about the challenges and limitations about a particular country… it’s easy to tout the positives, but finding objective information about a country’s negative aspects can be difficult to find.

Panama, for example, is a place that I’ve been vocally bullish on. But it’s nowhere near perfect… there are significant infrastructure challenges, corruption, and inefficient bureaucracies to deal with.

On the balance, though, the positives outweigh the negatives in my assessment; most importantly, the country is consistently maturing on an upward trend.

New Zealand is another country that gets a lot of favorable press in the expat community, but I think it’s important to balance the information with a realistic description of the country’s challenges.

As such, I’ve once again asked my friend Mark who is on the ground in New Zealand to give his take:

Simon has asked me to write a few articles for SovereignMan.com to discuss living and immigrating to New Zealand; now it’s time to talk about the bad and the ugly.

As Simon likes to say, no place is perfect…  but lack of perfection sometimes equals opportunity, and New Zealand is no exception.

So, here’s the “bad”–

Censorship: There is now Internet censorship in New Zealand.  As of February 1, 2010, some New Zealand ISPs have begun implementing a new government Internet filtering scheme.  This is bad news, but unfortunately in-line with Internet monitoring around the world.

Internet and wireless service:  In general, they are expensive compared to North America, and much less reliable. However, plans are in the works to bring fiber to the door of every NZ home.  Furthermore, the wireless duopolies of Vodafone and Telecom are starting to get some competition.

Bureaucracy: According to an OECD report, New Zealand has more government departments and ministries than any other developed country in the world.   To be fair, John Key’s National Party government has been unwinding some of Labour’s socialist agenda, but there is much further to go.

Taxation: New Zealand is not a tax haven, and depending on your line of work, you could be paying more than in your home country.  It looks like the top tax rate will be falling from 38% to 33%, but GST (sales tax) is getting a boost from 12.5% to 15%.

Now a little of the “ugly”…

Drunk driving: The local paper just ran a story about a guy who has had 17 drink driving convictions, and he is STILL on the road!  Drinking in general is a problem here; it embarrasses a lot of Kiwis, but little is being done to solve it.

Teen angst/violence: Auckland and some of the other larger cities have gang issues.  The police DO NOT carry guns, so there is little deterrent when trying to break up a drunk mob of teens in a park.  Many police officers end up in the hospital after taking beatings from civilians.

New Zealand’s “green” image: This is excellent marketing at best. The locals are totally uneducated about organics; New Zealand drops 1080 poison from helicopters to kill possums in its national parks, builds full-scale hydro dams on pristine rivers and has open pit coal and gold mines.

It’s “green” because of its low population density, period!

So, what do I think of this?  Look, New Zealand isn’t perfect, but I’m quite happy with a relatively unspoiled, empty, economically sound, English speaking, educated country.

Lack of perfection is what provides us with opportunity, and New Zealand holds a lot of opportunity for anyone with a little initiative.

Simon again. As usual, Mark’s New Zealand notes are on the money. I’ve mentioned before– New Zealand passes my ‘fundamental country test.’ When you look 10-years out, is New Zealand likely to be in a better position than today? Absolutely.

I know that Mark is working diligently on a new e-book about NZ immigration and investment with a lot of insider, actionable advice and contacts… if you have interest in something like this, or a request of what you’d like to see in his book, let me know by posting a comment here and I’ll pass it along to him.

March 22, 2010
Hong Kong, SAR

If you have been considering planting a flag somewhere in Asia, I think you should really consider Malaysia. I briefly discussed the country in Friday’s Q&A updates, but I wanted to dedicate a full letter on the subject because I really think the country is worthy of your attention.

1) Malaysia is cheap… it’s one of the cheapest countries in the world, actually, on par with the costs in Thailand or the Philippines. Property prices are among the most undervalued in Asia. In fact, at roughly $1,400 per square meter, property in Malaysia is cheaper than just about everywhere else in Asia with the exception of Indonesia.

Rental prices are also quite low, as are standard living costs– Malaysia is rich in agricultural resources, so high quality food is cheap and plentiful; additionally, the government subsidizes gasoline with its oil revenues, so petrol only runs around $2/gallon.

2) Despite the low prices, Malaysia is full of modern conveniences, including top quality medical care and foreign luxury products.  This is not a place where you have to learn how to do without most of the creature comforts of your home country.

3) Malaysia is safe. It’s one of the most multicultural countries in the world where Islam, Buddhism, Christianity, and Hinduism all coexist peacefully and respectfully. Crime is extremely low, and violent crime is virtually unheard of, especially involving foreigners.

4) Rights for foreign asset ownership are quite strong in Malaysia, unlike much of the region. In Thailand and Vietnam, for example, it’s quite tricky for foreigners to own property.  In Malaysia, there is only a minimum pricing threshold set by each state, above which foreigners can own property.

5) It’s very easy to move to Malaysia. The government’s “Malaysia- My second home” program (MM2H) is a streamlined, online process to grant an extendable 10-year visa for foreigners of all ages and nationalities.  They require a small investment to qualify– less than $100,000– which can go towards the purchase of a property.

It’s one of the most welcoming residency visas in the world, rivaling even Panama’s pensionado program.

Furthermore, for PTs, the government automatically grants a 90-day tourist visa (which can be extended quite easily) upon entry for North American and European nationalities. This is another major advantage over Thailand which only allows 15-30 days, or Vietnam which requires a visa for entry.

6) Malaysia is a transportation hub with loads of cheap flights to and from many of Asia’s capitals, as well as several transpacific flights.  To give you an example, I have purchased airfare from Kuala Lumpur to Singapore for the bargain price of $0 (plus a few bucks in taxes) and to Hong Kong for less than $100.

If you need to travel anywhere in Asia on business, Malaysia is a great place to be traveling from… you’re just a few hours flight at most from anywhere in the region except Japan or South Korea.

7) Malaysia is a great place to do business; it has a strong and stable economy– the country sidestepped a chaotic breakdown in 2008/2009 and has quite reasonable debt to GDP levels and government spending habits.

There is a growing international finance industry in Labuan, Malaysia’s economically autonomous region.  Labuan, which effectively charges no tax, has distinct banking and incorporation advantages because it relies on Malaysia’s vast array of tax treaties while still setting its own tax policy.

Furthermore, because Malaysia is a stable, well-developed Muslim nation, the country is also attracting a great deal of Islamic capital, further bolstering the banking sector and creating demand for Shariah-compliant products.

Overall, if you’re interested in planting a flag in Asia, I think you should strongly consider Malaysia. Remember my basic rule of thumb– will the country continue to be a nicer place to live over the next 10-years? Absolutely. Malaysia’s trend is upward.

To explore the country, I’d suggest starting off in Kuala Lumpur, the nation’s capital, and then moving on to second tier cities like George Town.

March 3, 2010
Pattaya, Thailand

One of reasons that a lot of people are hesitant about making a move overseas is because they’re concerned about being isolated. The world can be a cruel place, especially to newbies.

Sure there are the nomads out there who want to be left alone with their little slice of paradise in the middle of nowhere… but most people crave some human interaction from time to time, especially from like-minded souls.

I’m one of those people. I enjoy the company of interesting, like-minded, and well-rounded individuals.  This is the chief reason that I’ve encouraged kindred readers to join us in the private Atlas 400 group, whose next gathering is coming up next month in Panama. I’ll be there.

On the subject of social interaction, I think Panama is one of the easier places in the world to meet people, both foreign and local. Despite Panama being a Spanish speaking country, the English language is absolutely pervasive, particularly in Panama City and Boquete.

It’s easy to meet anyone, and with the exception of a handful of elitist gringos who think too highly of themselves for having lived in the country for so long, most people are actually quite friendly and welcoming.

As a rule of thumb, the more ‘international’ a city is on a per-capita basis, the easier it will be to meet like-minded, English-speaking expats who are at your level.  Panama City has about 50,000 expats and roughly 1 million locals.  Boquete has a population of about 20,000 with at least 5,000 expats.

By contrast, as city like Shanghai has 300,000 expats and 17 million Chinese people, most of whom do not speak English.  You get the idea.

I’ve honestly found both Phuket and Pattaya, Thailand, which are fairly small cities of about 100,000 each, to be among the most international cities in the world on a per-capita basis.

Here in Pattaya, for example, I have gotten to know people from 6-continents– a Russian movie producer, a French investment banker, a Norwegian surgeon, Canadian entrepreneurs, a retired Australian footballer, an Indonesian factory owner, Yemeni medical tourists, Sudanese vagabonds, and a lovely topless sunbather from Peru.

In fact, Pattaya is the only place in the world that I have been to where on a single block you can see a dry cleaner’s sign in Arabic, a restaurant shingle in German, a real estate billboard in Russian, a newspaper kiosk in Thai, a travel agency in Mandarin Chinese, and a Go-Go bar promotion in English. It’s really amazing.

Just recently I was having lunch in an Arabic restaurant owned and operated by former Iraqi soldiers of the elite Republican Guard. When I looked around and saw Russians, Europeans, Africans, Arabs, and a handful of Jewish tourists eating large meze plates, I thought that I must have stumbled upon the center of the universe… or some strange version of MLK’s dream.

In these sorts of ultra-international locales, breaking the ice is as simple as asking the question, “where are you from?” Be prepared for long answers.

Other places that you may want to consider are Singapore, Hong Kong, Qatar, Capetown, Dubai (though it’s a bit pretentious), Georgetown (Malaysia), Punta del Este (Uruguay), Hanoi (Vietnam), Colima (Mexico), Medellin (Colombia), Cuenca (Ecuador), and just about any mid-sized city in Brazil (Natal, Florianópolis).

February 23, 2010
Pattaya, Thailand

Throughout our conversations, we have routinely discussed the importance of planting multiple flags.

If you live, work, bank, invest, own a business, and hold your assets in the same country of your citizenship, you are putting all of your eggs in one basket, and once that basket heads in the wrong direction, you can kiss your assets goodbye.

There are nearly infinite possibilities that pose substantial risks to your wealth and security, including taxes, litigation, confiscation, inflation, regulation, and good ole’ fashioned social decay.

Making the effort to move assets overseas, diversify your currency holdings, buy foreign property, set up foreign structures to operate a business, etc. are all major steps in the right direction to preserve your livelihood and safety.

If you have executed only a few of those steps, you are ahead of the 99% of the population. You will be safe while others watch their freedoms, their wealth, and their critical thinking be eroded by corrupt bureaucrats and the mainstream media.

One of the ultimate tools in preserving wealth, freedom, and security that we have touched on before is acquiring a second passport. This tool provides additional freedoms of travel, possible tax advantages, banking convenience, an escape hatch, and security.

After all, nobody hijacks a plane and threatens to kill all the Lithuanians.

Most importantly, when your home country starts heading in a catastrophic direction, a second (or third, fourth, etc.) citizenship provides you with options… and that’s what real freedom is all about– the power to choose.

Even without a cataclysmic event in your home country, a second passport pays big dividends. With a second passport, suddenly you find that you can open bank accounts and travel much more easily.

In my case, since I travel so much, the money that I have saved on visa fees alone has more than offset the cost of acquiring a second passport.

So how do you go about obtaining one?

For starters, if you’re a member of the lucky bloodline club, you may have been born as a second or third generation citizen somewhere. Many countries have programs which grant citizenship to descendents of emigrants– Ireland, Poland, India, and Italy are examples.

If, for instance, you could prove your lineage to Irish grandparents, you would have a case to apply for Irish citizenship. There are many more countries which have such programs, but I’ll save that topic for another time.

Second, there are a handful of countries where you simply pay for citizenship, either through an official program, or an unofficial program.

In terms of official programs, most people who have done even the most cursory research have read about Dominica and St. Kitts, both of which charge about $200,000 to $450,000 for citizenship.  These are the most famous, but there are others, including Austria and even the United States.

If I have my way in this part of the world, there will soon be one more.

Yesterday I mentioned that ousted former Thai Prime Minister Thaksin Shinawatra is traveling around the world on passports from Nicaragua and the Bahamas… and not because those countries have official programs for ordinary investors, but because Thaksin used his connections to make compelling donations.

Clearly, unofficial programs generally come down to knowing somebody of significant influence in the government. In most countries, the head of state has the authority to naturalize a foreigner at his/her discretion, and this happens frequently in small countries that have been assisted by the actions or donations of a particular individual.

Now… assuming that you don’t have any heads of state in your rolodex, aren’t descended from Polish grandparents, and don’t want to swallow a $250,000 pill for St. Kitts citizenship, the next category applies to you.

I call it ‘connected’ citizenship, in which an individual can become naturalized through some sort of connection to the country.  Typically this can be a combination of residency, marriage, adoption, religious affiliation, and of course, birth.

Obviously we can’t go back in time to change our place of birth, but the others may be well within our control, particularly residency.  In fact, most countries provide a means for naturalization through residency, including the United States and Canada.  But there are three important factors that determine whether a residency program is worthwhile:

First, how long do you have to be a resident in order to be eligible for citizenship? If you have 8 to 10 years to kill, you may want to consider putting the time in for France or Italy. But most people want something much faster, 1-4 years at most.

Second, how hard is it to actually obtain residency? In the United States, for example, residency applications are scrutinized and generally rejected– hence the inordinate number of undocumented workers. In practice, America now sends the tired, poor, huddled masses back where they came from.

Contrast that with, say, Singapore, where anyone with a good idea, strong work ethic, or investment capital is a strong candidate for residency through an easy, painless, transparent selection system.

Third, do you actually have to live there? Many countries’ naturalization regulations require an applicant to spend the preponderance of his/her time in that country. Canada is a great example… if you become a Canadian resident and spend too much time out of the country, you render yourself ineligible for citizenship.

For the next two days, I’m going to discuss two such countries that fit these requirements that I think you should strongly consider if you’re interested in second citizenship.

** Note, I only plan on releasing this information to email subscribers and will not be posting either article on the website. If you want to receive these articles, make sure you sign up for the daily e-letter here before tomorrow.

February 18, 2010
Bangkok, Thailand

Panama is one of those countries that registers a lot of interest from potential expats… and with good reason. It’s cheap, it’s close to North America, it has a strong and stable economy, and it’s full of opportunity for an ambitious investor and entrepreneur.

Over the past few months I have received numerous requests for more information about Panamanian property– it seems that people are finally starting to take action and getting prepared to internationalize themselves.

Of course, buying overseas property is one of the best ways to do this– property transactions are not reportable, and the capital that you park in real estate cannot be forcibly repatriated– once it leaves your home country, it’s much safer.

One of the major pitfalls of foreign property transactions that I’ve noticed over the years is when people entrust their capital to an incompetent or shady real estate agent.

It happens more often than you think– someone who looks good and sounds good, but whose opinion absolutely cannot be trusted. Panama is unfortunately full of people like this– charlatans who masquerade as real estate professionals.

In fact, I published a case study several weeks ago describing the experiences of a woman who trusted the advice of a real estate agent in Panama that sold her into a building with a condemned sewage system.

The right advice truly makes all the difference in the world, and that’s why I want to share with you some insider information about the Panama real estate market courtesy of the person who I have found to be the absolute best in the business.

His name is Ulrich Schwark; he and his partner Peter run one of Panama’s most successful real estate agencies, and they are hands down the most knowledgeable real estate professionals I have come across in the country.

Why? Because they are sharp investors themselves… they understand value, they understand risk, they understand long-term trends. And as Europeans, they can relate to foreigners and high standards of quality.

I’ve been operating in Panama for over 7-years, and I’ve met hundreds of ‘agents.’  Most of them are simply cheerleaders riding the wave. Ulrich and Peter understand the ebbs and flows of the tide and how to make money across the entire cycle.

I recently conducted a short interview with Ulrich in which he discusses the state of the market, where the best value and investments are, and a handful of really undervalued deals that he currently has available.

You can access the 30-minute interview here in mp3 format:

http://media.libsyn.com/media/withoutborders/Panama-property-interview.mp3

If you have any interest in Panamanian real estate, you should absolutely get in touch with Ulrich. The best way to reach him is to fill out this short form that describes the sort of property you might be looking for:

http://www.sovereignman.com/panama-property-interest

The information you provide is completely confidential and will go directly to Ulrich’s desk.

Blair is in her early 40s from Southern California.  She’s intelligent, fairly aggressive, and an experienced financial executive at a mid-sized manufacturing company. In total, she has about $250,000 in savings, some of which she used to buy property in Panama.

She is single with no children and has been traveling to Panama to plant flags since 2006. She plans on (semi) retiring there in another 5-years and has unfortunately learned a lot of hard and costly lessons.

At the height of the global property boom, Blair bought a unit in an ocean-view condominium tower in the San Francisco barrio of Panama City. I like San Francisco– it is well located and presents a nice mix of local Panamanians and foreign expats.

At the time, however, San Francisco was put under a building moratorium because the neighborhood was severely overcapacity with its infrastructure.  Waste treatment facilities were overburdened to the point that raw sewage was washing away construction sites, water utilities couldn’t get pressure to higher floors.

Of course, Blair’s real estate agent didn’t mention any of this to her. He cheered her on to make the purchase, encouraging her wise decision-making and investment acumen at every step along the way.  He looked good, sounded good, and had even lived in Miami for a while… sounds like a trustworthy fellow worth his salt, right?

Wrong. Blair was terribly misinformed. Aside from the sewage and the lack of water pressure, even her beloved ocean view was gone before the building was even complete– another building was erected between her bedroom window and the sea, built by (you guessed it) the exact same developers.

Like many gringos, Blair found her real estate agent on Google and was initially impressed by his English skills and claims of knowing important people in the country. She admits to being taken as a fool and quite literally is paying the price for it.

(It is exactly for this reason that I put together my Panama Black Paper, released in September and December, which names names of people in Panama to do business with, and people to avoid like the plague.)

Because Blair has such a long-term view, though, she has taken everything in stride.  She feels that, by the time she semi-retires in five years, she will be able to recoup what she invested in the condo.  Meanwhile, as Panama City’s infrastructure improves, she has been able to generate positive rental cashflow on the unit.

She has since wised up to the city life, and these days she is actively searching for a new property outside of Panama City where it is cleaner, quieter, but still accessible.

By the time she is ready to move there, she expects several new multinationals to have relocated to the nearby Panama Pacifica commercial park located just outside of the city.  This commercial park, she believes, will present a lot of opportunity to entrepreneurial-minded people who can provide essential business services.

Because she expects to be generating business income in Panama, she plans on registering a Belize company to conduct the business, thus planting her business flag outside her country of (future) residence.

She told me that she already made this mistake once– two years ago she searched for “Panama companies” on the internet and purchased a corporation from one of the service providers who popped up.

As it turns out, a Panamanian corporation was the exact opposite of what she needed, and the Panamanian lawyer she spoke with had no earthly idea what her US tax implications would be as a result.

Blair has since straightened out her tax situation once she finally found a competent US tax attorney who had expert knowledge of international business structures and was willing to help her out without breaking the bank.

Aside from planting a residency and business flag, Blair has moved some money to a European bank; she feels comfortable in Austria because she does not live there or do business there, so the government has little cause to milk her.

Lastly, she is planning on eventually acquiring second citizenship, possibly through a South American program that I will be discussing next month.

Her ideal vision for the future will be living outside of Panama City as a citizen of a South American country, with her business based in Belize, generating revenue in Panama from multinational firms, and banking her capital in Austria.

Because her foreign business will neither be engaged in US trade nor generating US-source income, her company will not be subject to US corporate income tax. Additionally, as an expatriate, she will be able to pay herself a salary of roughly $90,000/year tax free.

I think one of the key lessons here is that planting multiple flags is not always a do-it-yourself process. As Blair’s story demonstrates, there are potential landmines along the way, though expert advice is available to ensure a smooth journey.

Knowing how critical this expert advice is, in the last few months we provided you with key contacts in the Panama Black Paper, and introduced you to a top international tax attorney.  Next month, we will be discussing South American residency and citizenship programs, so stay tuned for that.

January 27, 2010
El Valle, Panama

For a future expat, there are three places worth seriously considering in Central America– Panama, Nicaragua, and Costa Rica.  Much is written about Panama, and rightfully so; the country is the most stable, economically liberal, and business oriented.

Not to be completely ignored, though, Costa Rica has its own merits that are certainly worth an honorable mention.

First, to understand Costa Rica, you need to get a feel for the country’s life cycle.  The original North American expatriate movement started with Mexico right around the time of US prohibition.  Everything fun in the United States became illegal practically overnight, and Mexican border towns became a rally point for the disillusioned.

Mexico’s expat domination lasted for several decades until finally, around the 1980s, people became dissatisfied with the large number of foreigners living in Mexico, as well as the rising cost of living.  They sought greener pastures further south.

Costa Rica became the obvious choice– Panama was a complete disaster between Torrijos and Noriega, Nicaragua was embroiled in civil war, and Honduras was quietly exterminating its socialists.

Initially there were only a handful of expats living in Costa Rica, but eventually the word got out that living in Costa Rica was cheap, beautiful, and spiritual… it was like the India of the western hemisphere, cheap drugs and all.

For the next two decades, the steady inflow of North American tourists created steady demand, and new developments sprouted up all over the country. In time, the ‘cheap’ cost of living in Costa Rica had risen sharply, rivaling that of Mexico.

That’s when the expatriate market turned its sights on Panama in the early 2000s– the Canal had been turned over to the Panamanians without disaster, and the country had managed to build a stable government and society in the 15-years post-Noriega. At the time, Panama was much, much cheaper than Costa Rica as well.

Today, I find the costs of living in both countries to be comparable, as well as the real estate prices. But I find that, putting the two countries head-to-head, Costa Rica has the following advantages:

1) Costa Rica has no military. Technically Panama has no military either, but with so many national police (green uniforms), tourist police (tan uniforms), and Presidential guard (black uniforms) running around the country with automatic weapons, they might as well be an army, albeit a poorly trained, dysfunctional one.

I doubt that the Panamanian police forces have the capability or iron will to go house-to-house against the locals, but Costa Rica lacks the manpower resources altogether.

2) Environmental sustainability is much more prevalent in Costa Rica– and I’m not necessarily just talking about tree hugging… Costa Rica is simply cleaner, especially compared to Panama City.

Panama City’s boom has come so quickly that the city has experienced significant growing pains– notably with its infrastructure challenges. You see a lot of garbage, sewage, etc. piled up where the city hasn’t figured out how to deal with its problems.

To be fair, it’s not the same outside of Panama City, but head-to-head, I would still say that Costa Rica is cleaner and more pristine.

So what are Costa Rica’s chief flaws compared to Panama?

1) Currency– Panama is dollarized, but Costa Rica has its own currency (the colon); you might think this is a good thing, but the colon is so small and thinly traded that it essentially follows the dollar, without necessarily getting any of the benefits of being the world’s reserve currency.

The bottom line is that the Costa Rican colon (CRC) is essentially the worst of both worlds, and in a currency crisis, the country will likely be hit hard between the eyes.

2) Costa Rica’s main city, San Jose, is small, ugly, and devoid of anything interesting to do. Panama City, on the other hand, is vibrant, exciting, and open for business. This is central to Costa Rica’s personality– it is designed for one thing: eco-tourism. Panama, conversely, is multifaceted with both business and tourism opportunities abundant.

As a consequence of this, Costa Rica is overrun with tourists, week-in, week-out, doing the same zip-line, bird-watching snorkel tour over and over again. Plus, there is a noticeable lack of available products and services in Costa Rica when compared to Panama.

3) Costa Rica is far more bureaucratic. In Panama, obtaining a residency visa, importing household goods, and buying property is a much easier process than in Costa Rica, which usually has much stiffer fees and taxes associated with everything that you do. Just getting the cable turned on in San Jose can be a nightmare.

Based on my experience between the two countries, and given the relative cost comparison, I would definitely recommend Panama over Costa Rica unless your sole priority is environmental purity… in which case you should go to the Maldives.

January 18, 2010

Tangier, Morocco

If you’re on the run and looking for a place to lay low, one city you should consider is Tangier.

You have to start with a bit of history– as far back as the days of the Phoenicians and Carthaginians, Tangier was an important commercial center due to its location at the entrance of the Mediterranean.

For the next 2,000 years, the city was conquered by successive nations, including the Arabs, Berbers, Portuguese, Spanish, French, and English. In 1912, though, several countries signed a treaty declaring Tangier a politically neutral, economically liberal ‘international’ city, open to all nationalities and businesses.

As such, Tangier attracted a shady cast of characters ranging from international bankers and businessmen to foreign diplomats to expat artists, as well as legions upon legions of spies. People came from all over Europe, Africa, and the Middle East to Tangier, and its place in history, particularly in espionage, is unparalleled.

Movies and storybooks paint a romantic picture of the city… and all of Morocco for that matter– the name conjures the same imagery as Casablanca, including my favorite scene from the classic movie:

Unfortunately, Tangier is now a long way off from Bogart’s day. Sure, it was once quite picturesque, laden with European architecture amid Berber traditions. Today, while there are still some nice parts of town, the whole place is generally run-down, as if the maid hasn’t shown up since 1956.

The best analogy for Tangier is probably Havana, Cuba; Tangier was to the Europeans and Arabs what Havana was to North and South Americans– fully of tourists, wealth, hedonism, shady deals, and spies… lots of spies.

Similarly, the last 50-years has been rather unkind to both cities, due largely to an exodus of foreigners and their capital. But while its original wealth has faded, Tangier has still retained its ‘can-do’ (i.e. corrupt) outlook… and this is part of what makes it a great place to disappear:

First, the costs are reasonable… not cheap, but reasonable, so it won’t break the bank to lay low there for a while. Real estate (if you would consider buying there) will set you back around $1,500 per square meter for a clean place with a sliver ocean view, roughly 10% of the price in Rome.

Renting a modest apartment will cost you less than $500/month.

Food is also quite cheap, and you can buy fresh vegetables, herbs, and spices from the markets in the same place that merchants did thousands of years ago.

Second, language is not a problem, so you will be able to communicate. One of the strange side effects of being conquered so many times is that the locals managed to pick up quite a few languages. Most people you will meet speak English, French, Spanish, and Arabic.

Third, the city is crazy. For first-timers, it can be shocking, and even for hardened veterans it can be overwhelming. You have to constantly be on guard against being fleeced, accosted, harassed, or otherwise annoyed by your new friend who wants to ‘make you very special price’ on a Moroccan rug.

In other words, most people are not going to want to come looking for you in Morocco because it’s simply too much hassle.

Fourth, everything is for sale– and negotiable. Do you want you passport stamp backdated? Not stamped at all? Do you want to eliminate all record of your visit? Do you want to trade for goods and services in gold? Assume a new identity?

Tangier is the place where all of this can happen before you even leave the port.

If I have been too subtle in the past, let me be absolutely clear this afternoon: the time to do something, the time to take action to safeguard your future and your families livelihood, is NOW.

I’m more impassioned than usual this morning… and with reason.  Reluctantly, I tuned in to Team Obama’s press briefing last night about the ongoing saga of the Nigerian underwear bomber.  Obama’s is clearly trying to cultivate a fear of al-qaeda while simultaneously building blind trust in his government.

After the President’s remarks, his Homeland Security Secretary and Deputy National Security Advisor took the stage to unveil a series of proposals to ‘improve security.’

I’ll spare you the details as you have probably already heard them, but the bottom line is simply more government– a bureaucrat’s ultimate and only solution. This means more TSA, more air marshals, more undercover agents, more gun-toting soldiers, more pat-downs, more scanners, more searches, more scrutiny, more suspicion, etc.

How do you spell police state?

I’m ordinarily laid back about this sort of thing. I can afford to be since I’m a safe distance from all of that stupidity… but in this case I looked down to find that my knuckles were turning white, clenched around my glass of 2005 priorato.

I set my wine down and remarked to my friends who were watching with me, “What is it going to take for people to wake up and get the hell out of town? Do they need legions of storm troopers marching down the street before they realize it’s time to go??”

I was positively exacerbated.  The US is turning into a police state, and I’m not even saying this specifically to Americans living there. Many countries around the world are following close order behind Uncle Sam.

Once again, the time to act is now.  So what should you do?

First, make sure you have access to funds outside of your home country. This is one of the most important flags that you can plant.  You should open a foreign bank account (like I discussed in the Panama Black Paper), and/or consider storing precious metals in a private storage facility overseas.

Later this quarter, I plan on releasing a new Black Paper that contains actionable information to open an account at safe foreign banks that still take US customers.  You haven’t heard of most of them, and would probably never hear about them because it’s actually illegal for foreign bank to advertise in the United States in most cases.

Stay tuned for that.

Second, you should really be thinking hard about foreign property. Why? Because it can be a great investment; it’s an easy, non-reportable way to move money overseas; and it can be your escape hatch when you’re finally ready to hit the eject button.

Remember, I’m not talking about a 50 million euro villa in Monaco; you can pick up cheap land in Latin America for less than $50 per acre, and I’m pretty sure that everyone reading this letter has at least 50 bucks to spare.

Also, as I’ve discussed in the past, you can buy foreign property using your tax-deferred retirement savings, and I plan on revisiting this topic in short order because it is an absolute no-brainer.

Additionally, if there’s interest, I may also explore the idea of building a small, cost-effective, subscribers-only development.  It would likely be on the outskirts of Panama City and include self-sustaining fresh water and agricultural resources.

Third, if you have the means, you should really consider obtaining second (or third, fourth, etc.) citizenship. Second citizenship can be the ultimate emergency exit if things get really bad, and it effectively serves as the most comprehensive insurance policy you could even have.

I have a lot of contacts in this field, and my colleagues and I are currently experimenting with a few options that I plan on bringing to you soon.  I won’t bring you a passport program unless one of us has gone through the process ourselves, so give me some time while we play guinea pig.

Fourth, give serious consideration to your finances; unless you are already independently wealthy or have sustainable income streams, think about what you would do to earn money if you lost your job today.

Think about what skills you have– what problems can you solve that other people are willing to pay you for? What opportunities to you see around you that can be quickly and profitably exploited?

I guarantee you that there is opportunity everywhere around you. For example, a friend of mine is an intelligent, 22-year old girl who lives in Minsk, Belarus– the last bastion of the Iron Curtain.  While Belarus is not the totalitarian state it once was under the Soviet Empire, it’s pretty close.

And yet, despite living under a tyrannical yolk, my friend has become quite a successful entrepreneur, launching a successful brick-and-mortar company and several profitable web sites just within the last few months.

I raise this simply to point out that if an inexperienced but intelligent and energetic young girl can find opportunity in a place like Belarus, then I would wager that there is a plethora of opportunity out there in places like Panama, Abu Dhabi, Chile, China, Angola, Thailand, Bulgaria, and even the US/Europe.

In fact, I know this to be true because I see so much of this opportunity when I travel.

So those are the top four things I would recommend you do in making your own personal preparations. I clearly have a lot of work to do between the real estate, the citizenship programs, and the banking Black Paper… but after seeing the writing on the wall so plainly last night, I will be refocusing my efforts to get these moving quickly for you.

In the meantime, let me know your thoughts– I’m frankly curious to know what you would like to see in a real estate development, and at what, if anything, it would take for you to hit the eject button.

January 6, 2010

Reporting from: Estepona, Spain

I’m sitting now in lovely Estepona, Spain– a coastal town on the Mediterranean that experienced a massive property boom over the last decade.

The community I’m in is anchored by a five-star Ritz Carlton golf resort, and surrounded on all sides by the mountains or the ocean.  Ancient military tacticians marveled at the defensibility of such a position and likely did not envision it being turned into a holiday hot-spot.

As the coastal region here is generally dry, warm, and nestled in the mountains, it’s ideally suited for me. I prefer clean places that are reasonably priced with great weather, access to major transportation, vibrant culture, and yes, a single’s scene.  Coastal Spain is all of these… but to buy now I would be overpaying. Here’s why:

When the credit bubble got underway earlier in this century, coastal Spain was overrun with foreign property buyers, and their easy credit inflated home prices.   Like other parts of the world, property values in Spain are now upside down in equity– the home is worth less than the mortgage balance.

This is bad news for banks, bad news for owners, but great news for cash buyers… as long as there is legitimate value.

Appraisers generally use three ways to value a property.

The first is the ‘replacement cost’ method, in which the appraiser estimates what it would cost to construct the unit from scratch.  Between 2003-2006, the industry was booming… most contractors were booked solid, and demand for materials and labor pushed up construction costs.

Today is a different story altogether; most contractors haven’t seen a payday in months, and material prices have plummeted alongside housing demand. You could now build one of these spacious 2-bedroom villas for around 100,000 euros, not including the land cost.

The second method is the market approach, in which a property is appraised at a similar price point to where comparable properties are selling. If a 2-bedroom villa with an ocean view recently closed at 400,000 euro, then your 2-bedroom villa with ocean view can likely sell for around the same… in theory.

The problem with the market valuation is that it is highly susceptible to the irrational exuberance of the market’s participants.  Remember, at the end of the day, markets are simply comprised of emotionally charged individuals… they experience fear, euphoria, anxiety, and impatience, and these emotions skew market valuations.

Throughout history, markets have historically proven that they are terrible indicators of value: loss-making tech stocks traded at infinite valuations, small shacks in California sold for millions of dollars, and debt-free mining companies were valued at less than the cash they had in the bank.

None of these passed the common sense test.

Furthermore, here in Spain, the property market has essentially dried up.  Most of the owners have adopted a ‘wait and see’ approach, foolishly believing that if they wait around long enough, price will eventually return to their highs.

This idea is totally absurd. Japanese equity investors are still waiting for the Nikkei to return to its 1989 high of 39,000. Today the Nikkei is still shy of 11,000… so I guess those investors will just have to keep waiting.

Home prices here in Spain won’t start appreciating until the prices are cheap enough to entice buyers.  There is no magical timeframe that will suddenly turn around home prices; if sellers refuse to sell, and buyers refuse to buy, then the market can theoretically remain in a stalemate forever… which leads me to…

The third valuation approach is the income method. For an investor, this is the only thing that counts: What is the investment return I can achieve with this property, and is that investment return adequate for the level of risk that I am taking?

As an example, when I was in Southern Italy over the holiday, I went scrounging around my local family’s neighborhood looking at property.  I found that the going rate for a modest 2-bedroom home was 220,000 euros.

Then I found out that the same home can be rented for about 450 euro per month.

Some quick, back-of-the-envelope math suggests that, after deducting reasonable amounts for vacancy, maintenance, insurance, and utilities (Berlusconi eliminated property taxes), the net operating income would be around 4,200 euro per year.

If the home is bought with cash, that amounts to a whopping 1.9% yield, roughly the same as a much lower risk Certificate of Deposit.  The risk adjusted return on these properties is clearly unreasonable.

I’m seeing the same thing in Spain right now– villas rent for a pittance, but property owners are stubbornly sitting on their asking price, not budging.

Eventually, external pressures will force sellers to capitulate– most won’t be able to continue making their mortgage payments, and others will be so desperate to raise cash they will finally slash prices.

When this happens, prices will drop and yields will rise. I think the time to jump in is when yields comfortably reach double digits and outpace less risky asset classes by a wide margin.

Buying foreign property makes a lot of sense; maybe Spain is for you, maybe it’s not… but you should strongly consider planting an overseas flag, and I recommend using this valuation method to determine your entry point.

January 4, 2010

Reporting from: Malaga, Spain
Welcome back; I hope you had a relaxing holiday.

I spent 10-days with my family combing through the Italian countryside and drinking some unbelievable wine from a local grape called “Primitivo.” It’s a distant cousin of the California Zinfandel, and is only found in this region. A bottle from the best vineyard will set you back about 9 euro.

For New Year’s Eve, I saw a fireworks show that was simultaneously the most disorganized and explosive I have ever witnessed… so literally for me, the new year began with a bang.

I’m optimistic about 2010. I know a lot of people in the financial community who think that ‘this is it,’ that 2010 shall bear the worst economic cataclysm in history, causing widespread doom and agony.

Sure the conditions are ripe for stock/bond market crashes, a currency crisis, and multiple sovereign debt defaults.  But these are a far cry from a gloomy end of human civilization.

It’s not that I have tremendous faith in world ‘leaders’ (as ridiculous a moniker as that is to use); last month’s debacle in Copenhagen only further underscored how perverse and ineffective the existing political process is, and everyone is really starting to see it.

The Social Contract is deteriorating rapidly, and in the end, the one thing that you can count on is that people will ultimately do what they perceive to be in their self-interest.  This is what drives markets and trends.

As the protracted effects of government stupidity become more apparent, one such trend that I see emerging this year is the rise of the sovereign individual– the rebirth of the multiple flags approach.

I’ve talked about this before and I wanted to start off the year with a quick primer since it is a recurring theme of this letter. To be more specific, I absolutely implore you to plant multiple flags as part of your New Year resolutions.

The idea, originally conceived by international finance guru Harry Schultz, suggests diversifying different aspects of your identity across multiple ‘flags,’ or geographic jurisdictions.

As an example, Schultz coined the term ‘three-flags’ in the 1960s, suggesting that an individual should have citizenship in one country, residence in another, and businesses in another.

Later authors expanded on this idea by adding other ‘flags,’ including places to bank, places to ‘play,’ places to house electronic assets, etc.

Many writers today talk about ‘five flags’ or ’six flags,’ but frankly I don’t see a limit on the number of things we can diversify geographically: email, citizenship, residence, banking, brokerages, gold/silver deposits, business registration, e-commerce, customer base, phone/fax, financial instruments, postal mail, etc.

So what’s the point? Why should you do this?

Diversifying geographically increases your freedom, your privacy, your sovereignty, and potentially reduces your tax burden. It protects you against bank failures, market changes, litigation, divorce, overzealous governments, and “NGC’s” (non-government criminals).

Perhaps even more importantly, planting multiple flags expands your existing contact base and opens a lot of doors to new opportunities.

Think of it like a life insurance policy– even if the worst never happens, it gives you great peace of mind and in many cases can rank as a significant asset.

While everyone recognizes these benefits of life insurance, no one actually expects to die anytime soon… so they put shopping for a policy on the back burner, sometimes until it’s too late.

In this case, the time to start diversifying internationally and planting multiple flags is now… before it’s too late– before currency controls are imposed, before tax codes change, before the last remaining foreign banks close their doors to foreigners.

I could cite you examples all day long, but I will list just a few hypothetical cases–

Imagine getting sued, losing the case, and having your financial assets commandeered by the court. Now imagine if your assets were safely offshore in another country.

Imagine being investigated by the government and having your email archives turned over to the authorities. Now imagine if your email server were in another country.

Imagine being robbed (taxed) by the government because your business is structured within its jurisdiction. Now imagine if your business were registered in another country.

Imagine having everything in your home country taken from theft, coercion, and litigation. Now imagine having cash and gold locked away in a secure, private vault overseas.

Imagine the social decay in your city getting so bad that riots and violent crime are a common occurrence. Now imagine having property overseas.

I’m sure you get the idea. Putting your assets, your business, your citizenship, your residency, your family’s livelihood under one flag, one government, is putting all of your eggs in one very frail, weak basket.

Technology makes it incredibly easy to diversify, and I see more and more people waking up to that reality each day. It takes only moments to set up an offshore email account, a few minutes to lease a private vault, and just a couple of hours to set up a company in Singapore.

The possibilities are truly endless, you just need to find the right tools and the right flags that work for you. Yes, even if you are a US citizen who is taxed on worldwide income, there are still several options available to live a multiple flags lifestyle.

I will be discussing the options in future letters, as well as individual case studies.

Seriously… isn’t it time the investment community stopped listening to the rating agencies?

Moody’s, Fitch, and S&P– these are the usual suspects who completely missed the boat on the US sub-prime debacle.  Back in 2005, they gave pristine credit ratings to risky mortgage portfolios stuffed full of borrowers who are notorious for not paying.

The recent debt crisis in Dubai underscores their irrelevance once again.

As I discussed earlier this week, Dubai’s flagship holding company announced that it had run out of cash and put a temporary stalemate on all debt payments.  The announcement sent markets reeling and once again caught the rating agencies with their pants down.  

It’s mystifying how these three groups, each with a long tradition of getting it completely wrong, are still considered relevant by the financial community.

Meanwhile, amid Comrade Bernanke’s reconfirmation hearings, the job summit, the estate tax extension, and the Afghanistan rollout, it has been quite a week. 

These four events underscore some significant problems that are faced the United States: reckless monetary policy, inappropriate fiscal stimulus, a government budget crisis, and a disastrous war effort.  

As I mentioned in this week’s letter on the conflict in Afghanistan, though, nothing will actually be accomplished other than more summits, hearings, and motivational speeches. 

Sure, it would be nice to affect the system, but is it really worth spending one’s life fighting against a corrupt bureaucracy? Especially when so many ‘fellow citizens’ embrace the status quo, and most others are too uninformed to care? Ssssh… American Idol is on.

I’ve spent a great deal of time setting up a system that keeps me largely free of these headaches.  I still close my eyes and shake my head on occasion, but it’s mostly like watching a bad sitcom. With a multiple flags approach, you have the ability to pick up the remote and change the channel.

On the subject, I received several questions from a letter I wrote earlier this week, outlining my top picks for Asia and Latin America (Chile, Panama, Colombia; and Malaysia, Philippines, and China). 

The biggest question– why weren’t Uruguay and Thailand included on the list?

Thailand is a fantastic country, and I will be spending more time there next year. The problem is that it is difficult to reside in Thailand for the short-term and long-term.

Neighboring Malaysia gives 90-day, extendable tourist visas upon entry; Thailand is good for 15 to 30. Malaysia makes it easy to establish residency; Thailand only issues 100 permanent residency permits each year. 

The property market in Thailand is also quite cumbersome, with significant restrictions on foreign ownership and a lot of sharks who will take advantage of foreigners.

Overall Thailand is a wonderful place, and there are ways around these challenges. But comparing price and hassle, I think Malaysia is a better value.

Uruguay is also great country and would probably be #4 on my list.  I wouldn’t dissuade anyone from buying property or living there. In terms of value, available services, and lifestyle, though, I would pick Chile, Panama, or Colombia, mostly because Uruguay can be exceptionally sleepy.

And although I did not mention it in the original letter, I really like Ecuador as well.
The country is poor… very poor, but its local agriculture is spectacular– “all natural” is the only way they know how to produce.

This is of vital importance to me; I’m very careful about what I put in my body and think that the poison and hormone-filled foods in North America significantly contribute to poor health… and health, after all, is our most important asset.

We’re fortunate that world class physicians are available in places like Panama and Thailand for the price of a steak dinner, but as someone who has a natural aversion to doctors and hospitals, I tend to focus more on staying healthy.  To me, this has a lot to do with food.

Aside from Ecuador, I’ve also noticed that Laos, Chile, New Zealand, and surprisingly China have a vast stock of organic and all-natural food products.  Meanwhile I’m highly suspect of foods in Buenos Aires and Eastern Europe, especially at restaurants.

Of course, the hardest place to have a restaurant meal that isn’t served with a side of poison is in the US– probably the impact of corporate chains.

I recently bought an e-book though, for the whopping price of $29.95, that is the most comprehensive guide I’ve ever seen for all-natural restaurants in the US.  I was really impressed, especially given the price– about 200 pages of listings, reviews, and pricing of just about every place you would want to eat, coast-to-coast.

If you travel frequently or just want to eat some good, poison-free food, you should check it out…  as far as I can tell, the information simply isn’t available anywhere else– www.healthyeatshere.com

Tony looked the part– measuring tape draped over his shoulder, wire frame spectacles, and ashy hands that had been sullied by the chalk marks he had been making on my garments. 

“SAHM SIP!” he said in Thai, announcing my 30-inch waist to an anxious-looking recorder.  The fitting was almost over, and Tony’s crew was about to spend the rest of the evening cranking out an exquisite wardrobe of new clothes for me– pants, shirts, ties, blazer, and a new suit.

This is another great reason to come to Thailand… what I call, ‘cutting out the middle man.’

For about $1,000, you can completely redo your entire wardrobe; right down to custom-fitted underwear should you so choose.  Throw in another $2k in travel expenses, and you have an amazing experience, all for the price of one nice suit in the western world.

It’s no secret that the vast majority of clothing retailers outsource their labor to cheap countries.  There’s nothing wrong with this; if Canadians were doing it, a pair of socks would cost $12 in Toronto. 

The fact of the matter is that countries should specialize in what they can do the most efficiently– Saudi Arabia should not be growing orchids, Switzerland should not be producing cheap knickknacks, and Bangladesh should not be designing particle colliders.

It is not about human worth or intelligence, but rather a question of economic capability based on available resources– land, water, commodities, education, labor, etc. Directing available resources towards products and services that can be produced the most efficiently is how economies create wealth.

In the long run, economic conditions change. China, now a center for low cost labor, will one day soon have to transition itself away from cheap manufacturing; it will be a painful readjustment, but as the economy grows and the currency appreciates, the Chinese will not be able to compete against Vietnam and Indonesia in the market for low-cost labor.

The same thing will happen one day in Thailand; they will graduate from making clothes for $15/day to designing software for $15/hour. In many ways, this transition is already under way as more and more locals flock to university and technical training schools.

In the meantime, though, you can still come here and enjoy the fruits of economic progression; this includes ultra-cheap, high quality medical care that I discussed yesterday, as well as a first class retail fashion experience.

I’ve always had an aversion to buying clothes in the west– it never made sense to pay $300 for a pair of jeans that I know were made for less than $5. Here in Thailand, I’m cutting out the middle man, and whatever I buy is custom fit to my body.

The best part, though, is the level of service.

The first time I met Tony the tailor several years ago, I literally had less than 12 hours to go in Bangkok… it was about 6pm, and I was departing on a flight at 5:55am. I ordered half a dozen garments, and I explained my situation to him– “Look, I’m leaving in 12 hours and I know it’s already closing time, is that a problem?”

“It’s not your problem, it’s my problem.”

To this day, that is probably the best answer I have ever received from anyone, and it’s reflective of their incredible service and dedication. 

This combination of service and value for price stands in stark contrast to the west’s level of service and overpriced goods… and it’s just one indication of Thailand’s upward trajectory.

The air smelled of sweat and blood, and I could barely hear my friends talking to me over the screaming crowd.  With each blow, bookmakers were shifting odds and taking bets with such a frenzy that the arena may as well have been the New York Stock Exchange on Black Monday.

This was the scene tonight at a local Muay Thai match here in Pattaya… and aside from being a much needed break for me to soak in some raw carnage, it was also a compelling episode of quintessential Thailand.

To give you a bit of background, Muay Thai is the country’s national sport and famous martial art– it is a cross between a Buddhist ritual and a fantasy death match. Referred to as the ‘art of eight limbs,’ Muay Thai is essentially a clash of knees, shins, elbows, and chins, all without protection, in front of howling spectators and bookmakers. 

Tonight’s event was a bit unusual because the local fight promoters imported a rival gang of fighters from Europe.  The gimmick worked; European tourists packed the house to see their countrymen duke it out with the locals, even though the $36 ticket price is considered quite expensive for Thai entertainment.

I saw boys as young as 8-years old fighting it out in the ring.  One of the kids was knocked out cold, much to the delight of the cheering locals who were in attendance. The Europeans in the crowd were rather shocked to see such a young boy being pummeled comatose, though to be honest, there’s far more violent sports out there.

In Afghanistan, for example, the locals play a version of polo/rugby/suicide/bestiality called Buzkashi (pronounced “BOOZE-ka-shee”)… you might be familiar with it– it’s the one where the Afghan horseman wrestle each other at top speed for a dead animal carcass.  Buzkashi has to be one of the most violent sports on the face of the earth, and people die regularly from participating (and watching).

And even the very-civilized French have a rather strange ritual called Toro Piscine , which means “bull, swimming pool.”  As the name suggests, the event involves a small ring, an inflatable swimming pool, and an angry bull who attempts to impale spectators.  Occasionally children get caught in the line of fire, which is usually a big crowd pleaser. 

Given other countries’ penchant for ritualistic violence, tonight’s Muay Thai event seemed right on the money, notwithstanding the concussions, broken arms, and shattered ribs.  What was so uniquely Thai about the event, however wasn’t the violence, or even the fact that pre-pubescent boys were pitted against each other.

It was the chaos… the commotion. Bleachers lined with prostitutes scouting for old men, frenzied spectators throwing money at the bookies, ritualistic fight music being played continually by the band, the free flowing booze, the smoke, the stench, the homeless kids, the nasty seats and floors, the angry lunatics fighting outside of the ring, etc.

It’s a little something like you would imagine Deadwood City in the Old West.  If this event were in Singapore, for example, it would take place in a spotless venue next to a 12-story shopping mall and have a legion of security guards and ushers to ensure that everyone was enjoying themselves in the most orderly way possible.

Thailand is chaos. It’s fun and has a lot of great potential, but it’s chaos. I hope you enjoy the videos.

I arrived into Thailand at 3am this morning from Shenzhen, and instantly I felt a bit happier. China is undoubtedly a booming colossus full of opportunity, but culturally it can be a bit grating after a while.  After a month on the mainland,  I needed a break, and Thailand was the perfect choice.

Aside from being one of my favorite countries in the world, I wanted to spend some time scouting Thai investment opportunities.  I think the country is ripe for growth, but there are signs of a short-term correction.  I want to be ready when that happens because there will be a lot of buying opportunities.

Additionally, some friends from Europe have met me here, and we’re putting in for visas to Burma. Thailand is the best place to apply for a Burmese visa, and if approved, I will be hopping over there for a few days to get a feel for the place and its opportunities.

Meanwhile, I’m spending the next few days hiding out in Pattaya, a great little Thai beach town that ranks among the cheapest civilized places in the world.

Aside from a few marquee western brands, it’s practically impossible to spend more than $100/night in accommodations here, and everything from drinks to taxi rides to motorcycle rentals is so cheap the prices are almost cute.

There are a lot of westerners here, mostly older men who troll around the city looking to pick up younger Thai women.  You see it everywhere– the proverbial ‘age mismatch’ between a pasty white gentleman in his 60s with a beautiful young thing in her 20s.  The Thais don’t seem to mind, and neither do their male companions.

As such, the place is fabulous for hedonists and retirees… you can live on the cheap and have a great deal of fun in Pattaya, regardless of what you are into– outdoor sports, firearms, aquatics, food, nightlife, spa pampering, exotic animals, etc.

I would say that it’s probably the only place in the world where you can get a massage, play with a tiger, shoot an assault rifle, ride an elephant, and bungee jump– all within about 3 hours and $50.

More importantly, though, Thailand is one of the easiest places in the world to relax. The culture of service here is one of the most deferential in the world– Thais will wait on their patrons hand and foot and cater to their every possible whim.

For example, Thai bathroom attendants give backrubs to grown men who are in the middle of using a urinal, and everyone from elevator operators to hotel porters will snap their heels together and render a formal military salute to patrons who pass by.

To say that the Thai people make you feel welcome is a massive understatement… sometimes it can even make you a bit uncomfortable, especially when you consider the price (or lack of) that you are paying.

In the long term, I don’t see any direction for Thailand but up… it’s hard to imagine things becoming much cheaper here, but more importantly, the country controls vast quantities of two resources that will be absolutely critical in the future– productive agricultural land, and fresh water.

Given the extreme pricing imbalance in Thailand as well as the country’s natural resource wealth, I believe there is strong support for long-term investment here, despite any short-term fluctuations that occasionally arise due to geopolitical instability.

I will be discussing this more in future letters, but as I mentioned last week, an easy way to take a position in the country is through its currency, the baht.  You can buy baht through an online FOREX platform like GFT Forex (www.gftforex.com) or at major banks.

My inbox has been flooded lately with questions about a luxury real estate development in northern Argentina called La Estancia de Cafayate. Undoubtedly, the volume of emails is a strong indicator of the number of people thinking about expatriation.

Rather than answer the questions myself, though, I decided that it was a good occasion for me to reach out to my own network and call the man himself, Doug Casey, who is developing the project.

Doug and I spent some time chatting about the project, his thoughts on Argentina, investing, and networking with fellow expats. In full disclosure, I have absolutely no financial interest in the property whatsoever in any capacity. Furthermore, I have not purchased a lot at the property because, as a nomadic single male, I am not an ideal candidate.

For the right people, though, Cafayate is probably close to paradise. This would apply to expeditioners, retirees, hedonists, and even hermits.

The weather and scenery are spectacular, and the amenities in the development are second to none– I have seen it with my own eyes, and Doug really did a great job putting together a first class community, right down to the cigar bar.

As I mention in the interview, though, there are a multitude of beautiful places in the world.  One of the things that sets Cafayate apart is that it is a clear example of an ‘open door’ to a fascinating and intriguing network of individuals.

I wrote about this in the Network Infiltration Black Paper– finding a network’s open door often means being a customer first, whether through a club membership or real estate development.  It is the natural way to get noticed and provides an opportunity to start building relationships.

Cafayate is a great example– other buyers in the project include successful investors and entrepreneurs, influential foreigners, high ranking corporate executives, etc., each of whom is ‘philosophically sound’ as Doug explains it.

Becoming part of the community is an opportunity to build relationships with this network of successful individuals, including Doug himself, who will be living and spending time in Cafayate.

While the project and its network are definitely not for everyone, Doug’s commentary is entertaining and valuable for all. I challenge him on his view of Argentine politics, and we enjoy some laughs, especially when I get him to speak Spanish.

You can listen to the interview by selecting one of the streaming audio options below; to download it, right click one of the selections and click “Save As” to save it to your computer.

Doug Casey interview (primary server)

Doug Casey interview (alternate server)

Doug Casey interview (alternate server)

To hear more from Doug, you can sign up for his weekly column, Conversations with Casey.

I love Uruguay… it is, without a doubt, one of my top five choices in Latin America– the country is clean, beautiful, and cheap, full of great wine and friendly people. But if you’re considering the country as a place to live, work, or do business, there are definitely a few things you need to know:

First, Uruguay is NOT a financial center. It achieved a reputation over the years as a tax haven full of private, secret bank accounts. Not true. Sure it was a great place for wealthy Argentines to stash their cash, but frankly your 3-year old’s Piggy bank is probably safer than most Argentine banks.

By comparison, Uruguay’s banks seemed extraordinarily stable… and because it is so close to Buenos Aires, Uruguay became the natural offshore financial center for Argentina.

There was a time when Uruguay had some level of banking secrecy and no personal income tax. This has all changed, most recently because Uruguay was temporarily placed on the OECD’s banking blacklist earlier this year.

Their Finance Minister literally jumped through hoops to have this scourge removed, and when the ‘blacklist’ label was dropped, any remaining semblance of bank secrecy went with it.

Ironically, despite no longer having any significant benefit, many banks in Uruguay refuse to work with US citizens. You will run into this a lot at many private banks– so if you are looking to open a personal account there, try Banco Republica: it’s a government-owned bank with government-backed deposit insurance, and they accept US customers.

The second thing you need to understand is that Uruguay is not a tropical paradise. Sure it’s a lovely place, but there are definitely four seasons there– it’s not Costa Rica or even Brazil where you can expect balmy weather year-round.

Third, you have to be prepared to enter a time warp… though a lot of people are drawn to the old-timey feel of Montevideo; the entire country is so quiet and sleepy, it seems as if you were living in the 1950s.

Fourth- Punta del Este is a vibrant, happening place… for about 3 months out of the year. From December through February, Punta swells as thousands upon thousands of visitors from around the world descend on this small town to party all night and roast all day.

The nightclubs are nonstop, the restaurants are packed, and the beaches are littered with European models and FashionTV shoots.

For the other nine months, Punta is about as happening as an average town in rural Iowa… and pursuant to point #2 above, these are the months where the weather is slightly less than spectacular.

Fifth– Staple items like groceries are noticeably cheaper in Uruguay, at least 10% to 30% less than what you would pay in North America, Europe, or Australia. But if you’re in the mood to go shopping for clothes, cars, electronics, or just about anything that has to be imported, get ready for sticker shock.

The Uruguayan government imposes stiff luxury taxes and duties on imported goods, and this includes most products beyond basic staples.

For example, rundown cars that you wouldn’t consider paying more than $5,000 for in North America might cost $10,000 to $20,000 in Uruguay; and a shiny new computer at the Punta del Este Apple store will set you back almost twice what you would pay in the US.

You can get around the stiff automobile prices by first purchasing and registering a vehicle in another country, then driving it into Uruguay as a ‘tourist’. This is a prime example of the multiple flags theory that I discuss frequently– having your assets registered in one country and living in another.

Overall, you should consider Uruguay if you fall into the internationalist, hermit, or retiree expat categories.

If you have any other personal experiences from Uruguay or specific questions, I would love to hear them.

Stunned.

That was the word used to describe the aghast crowds gathered in Chicago this past Friday upon hearing the news that their beloved city had been passed over for the 2016 games by the International Olympic Committee.

Based on the poll numbers, most Chicagoans (and Americans for that matter) were confident that they would be selected over the other finalist candidate cities– Rio, Tokyo, and Madrid.

Why? Because they were convinced that the international celebrity of Chicago’s favorite son, President Obama, would nail down the deal.

It didn’t. I’m sure Obama’s oratorical passions were well-delivered when he addressed the IOC, but the body’s negative response underscores sentiment echoed around the world:

“The United States doesn’t get to dictate the rules anymore.”

So with the stroke of a pen, Chicago was the first city to be eliminated among the four finalists.  In the end, the 2016 games were ‘awarded’ to Rio de Janeiro, which is an ironic BRIC nation follow-up to the 2008 summer games that were held in China.

(Fortunately, despite the embarrassing loss, Chicago will be better off in the long run– Olympic games have a tendency to be net negatives for host cities.)

The real irony is that the Chicago rejection highlights to most Americans for the first time that their country’s influence has truly waned.

Sure, the upper echelons of the American bell curve figured this out years ago, but now it is finally becoming obvious even to Joe Six Pack.

And while the talking heads were busy on Friday trying to determine how Obama could have conceivably lost to that Banana Republic down south, the *real* story of the day was going largely unnoticed:

The US government announced a few days ago that it was ending its decade-long deal with ICANN, the nonprofit Internet Corporation for Assigned Names and Numbers. If the Internet is a superhighway, ICANN is the Federal Highway Department– it has enormous influence over the internet’s architecture and technology.

ICANN was established by the Clinton administration in 1998 so that one single body could have executive authority in the decision making process of internet architecture. Naturally, it has been controlled for years by the US government.

Over the last decade, internet usage around the world has grown dramatically, its fundamental plumbing remains largely American; users around the world who don’t speak English or even have a Latin alphabet have to use an anglicized system to access the web.

Russians, Chinese, Arabs, even Europeans– they’ve all had enough.  The Chinese even threatened to build their own version of the internet if the United States didn’t give up control of ICANN.

And so, late last week, while many Americans sat ’stunned’ from the realization that their greatest international celebrity could not influence a winning Olympic bid, the US government quietly gave up control of the world’s primary information and communication conduit.

Somewhere Al Gore is weeping.

Clearly, similar events which demonstrate declining US influence will continue grabbing daily headlines; realistically, though, this is probably a good thing for two reasons:

First, as more countries take a seat at the table of global leadership, the decision making process will become incredibly congested.  I’m excited for this because it likely means that do-good western politicians will no longer have autonomy to execute their agenda around the globe.

Perhaps more importantly, though, having more countries influencing the global economy likely means that nations will be in direct competition with each other to attract talented people and capital.  In the long run, this means lower tax rates, reduced regulation, and less obtrusive governments.

It is clear to me that Obama already recognizes that America must now share the power that it once held so tightly.  With each passing day, more Americans are starting to realize it too.

Yes, it’s unfortunate that so many in Chicago had their hopes crushed with Friday’s decision.  I have always loved the city and rank it as one of my favorite places in the US along with Austin, Miami, Savannah, and the entire state of Wyoming.

But it’s probably better that they begin to learn the hard lesson now, along with the rest of the country– because once the United States sheds its nationalistic superiority complex and begins looking at other nations as peers and partners, America will literally discover a world of opportunity.

And with that, I’m off to Shanghai once again.  More to follow.

First of all I really appreciate all of your thoughts and comments this week; I would definitely encourage you to spend a few minutes reading the comments on ‘Give me Liberty or Give me Boarding Pass’ posted on Tuesday.

One question in particular that I would like to address came from Amanda:

“Simon aren’t foreign governments even more likely to seize foreigner’s assets since they have no votes to lose?”

Personally, I believe that a well-selected foreign government is much less likely to seize foreigners assets than western governments.

Why? Because smaller countries are much more dependent on ‘wealthy foreigners’ than your home government. If they develop a reputation of not respecting foreigners or their assets, revenue drops off a cliff.

In contrast, you are just a worthless individual in the United States– a speck… a peon among the masses. You have no power.

Think you own your home? Guess again. It can be seized at any time by any variety of government agency at local, state, and the federal level for an endless list of infractions that vary from the mundane to the absolutely ridiculous– taxes, trade violations, drug enforcement, zoning violations, child protection, etc.

Even without this anti-carrot that is constantly being dangled, the government gives us constant reminders that we’re just renting our property from them.  An email from a subscriber underscores this point:

Simon– I happen to own some vacant land located about 1km from a large shopping area in my town.   This land is located on a busy road sandwiched between one of my homes and a condo complex.   My wife is a yoga instructor and was looking to expand her studio, so we thought we’d consider building a first class facility on the vacant lot.

When we went before the zoning board to tell them what we wanted to do, they basically laughed at us and told us that, “If you really want to support the community, you should lease one of the empty spaces in one of the local strip malls.”

Funny thing, I didn’t say anything about “supporting the community.”  All I wanted to do was build a structure on my own property.  I figure that since I pay such an enormous amount in taxes and take zero services from the city/state, I’m already doing my part to “support the community”.

Simon again. This story is indicative of where I see the culture headed– it is more important to be a ‘responsible party member’ than to advance your own self-interest.  Apparently the definition of “life, liberty, and the pursuit of happiness” is now left up for interpretation by county employees.

I feel much more free in many foreign countries, secure that I actually OWN my property, and happy that the government just leaves me the hell alone.

Sure, the United States has better marketing than most countries as the ‘land of the free’– there are no unquestioning, flag-waving Chileans or Panamanians bombastically singing songs about their freedom like well-programmed robots.

And that’s what makes living overseas a well-kept secret. Most people are brought up to believe that (^ insert your home country) is the greatest country in the world. They believe it, unwaveringly… and think that anyone who would move is simply crazy.

I usually explain it by drawing an “X”.  I start from the top left and say– this is the United States. Right now we’re up here, close to the top, but quickly heading in this direction (drawing line towards the bottom right).

I stop halfway to the bottom and put my pencil on the bottom left.  This is many overseas countries. They’ve started near the bottom but are quickly growing in this direction (moving line towards the top right).

Right now, the US may still be ‘above’ the foreign country… but at some point, and likely soon, the two lines will cross. The US is heading towards the bottom, and the foreign country is headed higher.

As an opportunist, I intend on establishing myself there before the two lines cross.

I’m in the United States through the end of next week out of necessity… I need to tie up some loose ends (read: taxes!).  Once I get my confession mailed out to Uncle Sam, I’ll be out the door once again.

Whenever I am in the United States, I always think deep thoughts about liberty. This place has changed so much since I was a child that it is hardly recognizable.

When people overseas ask me where I’m from, I always say that I’m an American… which is simply a reflection of my state of mind, not geography.  As my friend Doug Casey says, ‘America’ is an idea, not a country.’  I agree entirely.

America as an idea espoused economic and individual freedom, limited government, entrepreneurial risk-taking, and a market-based economy.  America was the one place in the world where rags-to-riches stories were commonplace, and where wealth was held up in a respectable light.

The United States has drifted a long way from America.  To underscore this point, I’d like to share an email that I just received from a close friend of mine who lives in the Midwest, ‘America’s heartland’:

Dear Simon-

As you know, I have two young children who attend pre-school at a local Montessori school.  The school is completely private and quite expensive… not a single dollar of public funds goes to this school even though I pay out the nose in state taxes to support public schools.

Yesterday, the county health inspector decided to show up and go through the health records of all the students.   Naturally I was immediately bothered that a public official could go through what I consider to be private records.

The truth is, after lengthy conversations with her pediatrician and a lot of self-study, my wife and I decided against many of the immunizations.

Frankly I don’t see the benefit in sticking my child full of a bunch of unnecessary chemicals. I didn’t get most of these shots when I was a kid and yet somehow I managed to live this long.

Regardless, the county health jackass gave us **one week** to get her ‘caught up’ on her immunizations, or else she will be forbidden to attend this PRIVATE school anymore.

The only way out of this is if I apply for an immunization exemption for my daughter on the grounds that our religion forbids me to have her inoculated.  Here’s the actual text of the document that I have to sign and have notarized:

“A religious exemption may be granted to an applicant if immunization conflicts with a genuine and sincere religious belief.   A Certificate of Immunization Exemption for religious reasons shall be signed by the applicant or, if the applicant is a minor, by the parent or guardian or legally authorized representative and shall attest that the immunization conflicts with a genuine and sincere religious belief and that the belief is in fact religious, and not based merely on philosophical, scientific, moral, personal, or medical opposition to immunizations.  The Certificate of Immunization Exemption for religious reasons is valid only when notarized.   Religious exemptions do not apply in times of emergency or epidemic as determined by the state board of health and declared by the director of public health.”

It infuriates me that the government requires me to have my child immunized to attend a private school.  If I disagree for medical or philosophical reasons then that’s not OK… but if I’m a Scientologist, then they’ll let me off the hook.  Are you kidding me?

I have little doubt that the lack of immunizations for my children demonstrates to the state that I’m a bad parent.   How long before Child Protective Services comes knocking on my door for a little home inspection?

Simon again.

I probably visit at least 30 countries each year… and to be completely frank, there is no perfect place.  But as free people we are able to decide for ourselves where we want to live, under what level of government– to ‘opt-in,’ if you will, to the set of regulations that we are willing to live under.

And believe me, there are a hell of a lot of places out there where my friend wouldn’t have to deal with this type of coercion.

Sure, the US is a comfortable place to live, but as my friend points out some of the critical freedoms are being erroded right under our noses.   The distinction between private and public is blurred.   The idea of being a “responsible” citizen is being held up as the ideal compared to personal liberty.

The US is on a downward trajectory. Many other places are on an upward trajectory. It is only a matter of time (and not too much time, at that…) before other countries surpass the United States’ quality of life.  Many already have.

After all, it’s easy to build a Starbucks, Super-Target, and endless rows of McMansions.  The hard part is finding a place where the government leaves you alone to live your life and prosper, and surrounding yourself with people who feel the same way.

Do you have similar stories? Do you agree that the US is on a downward slide, or do you believe that it’s still the best place to be? I’d really like to hear what you have to say.

In full disclosure, I am heavily biased.  Hong Kong is one of my favorite cities in the world.

Remember those ‘7 expat categories?‘ well, I am definitely a mix of several… maybe all. But Hong Kong ticks all the boxes for me, and always has– I’ve been coming here for years and love it more every time.

To give you an example, I like having access to modern conveniences and the availability of goods and services. I like quality infrastructure, beautiful architecture, and a thriving nightlife.

But I also like a little bit of anarchy… a seedy underbelly that makes my spidey-senses tingle… a heavy international flavor where there are people from all over the world dogging it out with each other to come up on top.

To me, Hong Kong has exactly the right blend of the Yin and Yang– order vs. chaos, Wild West vs. City of London.  This stands in stark contrast to the very orderly and somewhat sterile environment of Singapore.

A lot of people fretted when the British gave up control in 1997… 12-years on, however, so far so good. In fact, Hong Kong has vastly improved in many ways. The expatriate community has grown, as has its importance as a financial center.

As an example, my very plugged-in colleague Christine Verone gave me the inside scoop on the gold scene: the local government just recently announced that they were moving gold reserves out of London and into their new high tech vault (located at the Hong Kong International Airport).

According to Christine, this has significant implications for not only Hong Kong, but the entire region: for starters, there is now going to be same-day settlement of precious metal trades in Asian time zones. It also means that Asia will have its own gold ETFs.

The gold facility will clearly support Hong Kong’s rise as a global trading center for bullion, reducing London’s role in storage and settlement.  Similarly, as the CFTC in the United States continues down its over-regulatory warpath, there will be a flood of new business and capital heading east.

Christine’s analysis is spot-on (as it should be given her extensive background in wealth management).  If you look you can see signs everywhere that capital flows and financial infrastructure are migrating to Asia with Singapore, Hong Kong, and Shanghai as the crown jewels.

So why should you be interested in Hong Kong?

1) There are still jobs in Hong Kong (and Singapore). If you’re looking for work and are on top of your game, these are the cities where you need to be looking… and for an internationalist, there is the right mix of opportunity for you and stability for the family to make it a great place.

2) For the pioneer, Hong Kong is definitely one of Asia’s capital cities– and you can bet that the explosive growth of places like Burma, rural China, Cambodia, and Vietnam is going to be ruled from Hong Kong. The city will be a great place to base a business that focuses on these markets.

3) The banking industry hasn’t rolled over and probably isn’t going to with mainland China standing by its side. The West can kick and scream all it wants, but Hong Kong, Shanghai, Singapore, and Abu Dhabi are all standing shoulder to shoulder; this is why the OECD keeps picking on countries like Costa Rica.

Any downside? Of course.

Like Singapore, cost of living can be quite high in Hong Kong– this is not the place to retire on $500/month.

Hong Kong’s currency is still pegged to the US dollar.  Lately the HK dollar appears to be busting at the seams, clutching desperately at the peak-end of it’s allowed trading band with the greenback.  I don’t see any way that Hong Kong can maintain this currency peg, though I regard this more as an investment opportunity than an inconvenience.

The weather is not spectacular (unless you love humidity) and air quality is certainly not the cleanest in the world… though probably not excessively worse than most other major cities.

Tomorrow I am off to Shanghai and will be attending a wealth management conference showcasing the up-and-coming jurisdiction of Labuan. As always, it should be interesting.

Two years ago, Jim Rogers sold his New York home, packed his bags, and left for Singapore.  If you spend no more than three minutes on the ground here, you will see why.

For the internationalist, Singapore is as close to ‘perfect’ as could possibly be imagined:

1) It’s clean. And I mean eat-off-the-streets clean.  Most big cities (Buenos Aires, New York, even Paris) feel like they need a good pressure wash… not Singapore. The air quality is clear, the bay water is blue, and the buildings almost glisten in the sunlight.

2) Everything just works. One of the problems you frequently encounter when you move overseas is that normal, everyday things aren’t up to the same standards that you are used to… internet service goes down, the hot water heater breaks frequently, the gas stations arbitrarily shut down, etc.

In Singapore, you can expect exactly the same standard of service and excellence as you would in London or San Francisco.

3) What crime? It doesn’t exist. Singapore is one of the safest countries in the world, right up there with Dubai and Vatican City.  Ironically, visible police presence is minimal, contrary to western opinion that cops are walking around caning people for spitting on the street.

4) Great amenities. Healthcare in Singapore is second-to-none; in fact, it is promoting itself heavily as a medical tourism destination. Check out the Parkway Health center for more information.

The nightlife in Singapore is also pretty good… it’s not as wild as, say, Manila or Bangkok (darts, anyone?), but I would say it’s just as nice as London– plenty of restaurant choices, nightclubs, go-go bars, shopping, etc.

5) Last but not least, Singapore is open for business.  It seems as if a bunch of really sharp entrepreneurs sat together in a back room somewhere several decades ago and devised plans for their own version of Galt’s Gulch.

Everything in Singapore is designed for business, and entrepreneurs in particular– from the residency program to investment incentives, I’m hard-pressed to think of a government that is more supportive of commerce than Singapore.

They are doing everything they can to attract the brightest minds and the best business people, all of whom make the city-state a better place.

I’m most impressed with the financial infrastructure, which I will be discussing in more detail tomorrow. Banking and corporate structures in Singapore are so clean and transparent, I would be shocked if it weren’t THE dominant world financial center in 20-years, and likely 10-years.

So is there any downside? Sure.

For starters, the cost of living can be ridiculous– Housing is by far the biggest expense, with average sales price for residential property in the neighborhood of 1,000 Singapore dollars per square foot, roughly $700 (US)… so a little 2-bedroom apartment will set you back about a half-million. Not cheap.

Fortunately, other things aren’t too bad.  Food at the grocery store is actually quite reasonable, and the quality is excellent… so if you are into organic living, you won’t have any problems in Singapore.

Gas prices are also reasonable– diesel fuel runs about $3.30 / gallon, and a taxi ride just about anywhere in town will only set you back a couple of bucks.

And as for that dinner out on the town? Expect to pay Chicago prices, plates ranging from $15 to $50 depending on the quality of the restaurant. A Big Mac will set you back about $2.90 (US).

Now… considering that I spent all day meeting with bankers and lawyers, you can expect to hear great things tomorrow about the financial structures of Singapore. Stay tuned.

In the meantime, if you have any specific questions about Singapore or your own stories, please comment.

Remember the 7 expat categories from last week?

Well I have to say that Manila is paradise for a few of them…

I come through here from time to time on business and it definitely ranks as one of my favorite places in Asia– cheap, modern, relatively clean, but still with a hint of seedy underbelly to it.

I discussed the financial infrastructure yesterday; until recently, the Philippines had one of the most secretive banking systems in the world patterned after what Hong Kong used to be. In fact, a lot of things here are patterned after Hong Kong, or at least try to be.

Perhaps it’s the influence of having been a Spanish colony for so long, but most things in the Philippines fall just short of the mark– there are soaring skyscrapers in Ortigas and Makati City… with slightly unlevel floors. There are broad, clean motorways… yet still mind-numbing traffic.

Perhaps this is why our local friend remarked to us months ago that “Manila is what Hong Kong would look like if it were turned over to the Mexicans.” He’s right.

Frankly I’m delighted with Manila despite its professional shortcomings. The level of service and hospitality is absolutely incredible, the nightlife is energized, and the scenery is spectacular. All of this makes Manila ideal for several groups.

Hedonists: You will love it here. If you are foreign looking in any way, you will feel like an international celebrity given the level of attention you receive. There are quite a few, eh, venues… for which you are sure to find and endless supply of entertainment at all hours of the day and night.

If you’ve ever had the dream of living in a tropical paradise being fanned and fed grapes by adoring concubines attending to your every whim, this is one of the places where you can live it on the cheap.

Expeditioner: You will feel very much at home here; there are more Starbucks than I can count and several spectacular 5-star hotels to fulfill your most capricious need (I strongly recommend the Mandarin Oriental… make sure you visit Melody in the 17th floor lounge).

But at the same time, you are an hour’s distance by flight, road, and sea ferry to unknown wilderness complete with guided tours… so there is plenty of opportunity to quench your sense of adventure without giving up creature comforts (like complete Botox treatments for $300).

Internationalist: Move here and set up shop without a second thought for the safety of your family. You are safe in Manila… and not because of an overbearing police presence, but because it’s simply not a violent culture. There are plenty of western style amenities for the kids– schools, sports, etc. and enough of an expat community that no one will feel isolated.

Retiree: If you hate waiting in line to see the doctor, you will like Manila. Healthcare quality is good, and your retirement check will go a long way here– 3 bedroom house for $479/month? Done.

Other important points– English is widely spoken here… and by “widely”, I mean 99.999% of the population. You will probably have to travel to a small village without electricity to find a single person who doesn’t speak English.

And as for that recession? It basically skipped the Philippines. The economy here certainly slowed down, but there are no signs of massive economic destruction like we see in Spain, California, Argentina, and Dubai.

To give you an excellent comparison, I honestly believe that Manila has a very similar feel to Panama City… so if you have been to Panama and like the city, you will probably love Manila.

People ask me this question all the time:

“Simon, I really want to leave the country, but where should I go?”

Quite literally, there is a world of possibilities out there, each full of richness and opportunity. But as you could imagine, it depends on what kind of person you are. What would be a great expat haven for some seems like a hellish nightmare to others.

Over the years I have seen thousands of expats roaming in and out of different countries around the world. In my opinion, most expats fall into seven categories… and chances are you probably fit one of the molds as well:

PIONEER: You are an opportunity-focused expatriate, and you are willing to relocate solely for the prospect of making a great deal of money and doing something interesting. You think nothing of charging in to an almost native, potentially dangerous environment and care nothing of dilapidated infrastructure, squalor.

You are willing to learn the local language and don’t care if anyone else speaks English there… you love the almost lawless, wild west persona and can literally smell the money everywhere.

EXPEDITIONER: You are a classical traveler in the mold of British merchants and explorers– you want to make the journey overseas, but you want your amenities too, complete with a triple mocha latte.

You want to storm the plains of the Serengeti… with an armed guide. You want to see India up close and personal… then go back to your five star hotel.

In short, you want the richness of the expat experience, but you want it to be easy and painless.

RETIREE: You have had a full career and are looking for a switch… it’s not about playing golf every day (though there will be plenty of that), it’s about finding a new direction in life, taking new steps, and getting energized again.

You are looking for something worthwhile to throw your time and effort into, and you want to be surrounded by like minded people who are in a similar position in life.  In a way, you want to turn back the clock and find a place that reminds you of home years ago– 1950s America, for example.

NOMAD: You are a permanent traveler. You roam the globe because there are simply too many amazing places to see, and abundant opportunities in each.  You perhaps have a ‘home base’ somewhere, but you don’t see it for months at a time.  You know people all over the world and enjoy making new connections and trying new things.

You count air miles as an asset and talk about ‘running down to Panama for a few days’ as if you were going down the street to pick up a quart of milk at the grocery store.

HERMIT: You shun contact with most of the world because they just don’t get it.  You are passionate about your beliefs and are looking for a place where you can execute an agenda– growing organic food, preparing for social chaos, etc.

You are possibly interested in setting up a small community with like-minded souls, preferably away from major civilization where you can live your life without bother or interference from governments or corrupt social institutions.

INTERNATIONALIST: You are a smart, educated, opportunistic professional that is a cross between the pioneer and expeditioner– you thrive on opportunity but need some basic structure to feel comfortable… probably because you have a family or some other obligations beyond yourself.

As long as basic needs are met– safety, schools, healthcare, etc., you are happy and can focus on building a life and a new business.

HEDONIST: You have been successful in life and simply want to enjoy the fruits of your efforts over the years– wine, women, whatever else seems interesting. You almost feel like a kid again, free to jump on a plane to follow your favorite team, see an old friend, or make new ones.

You pick a country because of its opportunities for pleasure, and are always willing to explore new ones.

… so there you have it. In all honesty, most people can find elements of several categories but are generally dominant in one.

The places that you will probably find appealing depend on which kind of expat you are.  We will explore these together in future letters, and I will use these categories as a reference point from now on when I write about cities and countries.

Think about which one you are and let me know what you think. Did I miss any?

I’m really disturbed by what’s happening in Alabama.

You’ve probably heard– Jefferson County/Birmingham’s board of knucklehead politicians has managed to drive local finances into the ground over the last few years. Faced with unserviceable debt and a string of large losses from complex derivative instruments, the county is effectively bankrupt.

The good news is that the government is being forced to make deep, deep budget cuts, including ‘essential services.’  Personally, I have no problem with this– I have long wondered why nuisances like driver licenses, license plates, and business permits even exist, let alone be considered ‘essential.’

The disturbing part is that the local government is paring back its police force.  By itself, I would welcome this as good news– I have a natural disdain for ‘law enforcement’ and would rather take my chances with criminals than with police.

Furthermore, I have lived in many places where local police forces take a backseat to private security guards who are charged with actually protecting people and property instead of harassing customers.

Unfortunately, instead of going the private route, Jefferson County is talking about calling in the National Guard… and the thought of simultaneous military HMMW-V patrols in Baghdad and Birmingham is not a vision of America that I care to participate in.

It’s not isolated to Alabama– this scenario is playing out in city halls and state legislatures across the United States. I believe wholeheartedly that this will be the  ‘next next’ shoe to drop (after commercial real estate– more on this later in the week): an implosion of state and local government finances.

During good times, unemployment was low, real estate values were high, and consumer spending was an addiction. Consequently, tax revenues from income, property, and sales were very high. Governments were living high off the hog with the public’s money building bridges to nowhere and expensive office buildings to house their bloated bureaucracies.

Today, tax revenues have dried up but the bloated bureaucracy remains. Suddenly the interest payments on all those school and sewer bonds are unserviceable and the parks department is bitching for new lawn mowers… ‘essential services.’

What’s happening in Jefferson County is simply a prelude to this requiem.  After the commercial real estate dust settles, the preponderance of state and local governments will be in a similar state of fiscal emergency.  Local governments will have their hands out to the states, and states will have their hands out to the federal government.

This is when things will become very difficult, and it goes much further than military personnel patrolling the streets.

Emergency taxes, wealth confiscation, and capital controls will likely be part of this future as the government ensures that every American is doing his/her patriotic duty to bail out the government.

Each of us will be faced with a choice– bail out… or bail? Continue participating in this corrupt bureaucracy, or find freedom elsewhere? After all, there’s a lot of wonderful places in the world and now is the time to prepare– do you have a lifeboat strategy yet?

If not, I strongly recommend you take some time to listen to asset protection guru Mark Nestmann.  We interviewed him a few weeks ago and his advice is worth its weight in gold. There are steps that you can take now to protect your wealth, protect your family, and protect your freedom– click here to listen to the interview.

I’ll tell you why Honduras is really starting to trouble me… I have a few friends left at Joint Task Force- Bravo stationed at Soto Cano Air Base about 50 miles from the capital city of Tegucigalpa, and the situation appears quite tense.

Officially the 500+ US military forces on the ground have been ordered back onto the base and to stay out of sight for the time being… SOUTHCOM, the military command that oversees troops in Honduras, is concerned that the slightest hint of US aggression or influence could result in yet another prolonged conflict.

But while the generals understand that US military forces are sapped and strained, politicians can see a silver lining in the political chaos: finding a reason to invade is a great excuse to raise taxes, dump money into the private sector to support the war, and create another US-friendly state beacon in the region to buffer against Chavez, Ortega, and Correa.

It sounds too perverted for reality, but this is the mindset of policy wonks who are itching to take their PhD dissertations for a test spin in the real world. I’m watching very carefully for signs of a troop buildup at Soto Cano in the hopes that Honduras doesn’t turn into the next Cuba.

(as an aside, I do not expect the situation in Honduras to have any adverse affect on Panama; in fact, it probably makes Panama’s stock rise as the country continues to be a beacon of stability in an otherwise nuttier region.)

My guess is that there’s probably a lot of Hondurans right now who wish they had a lifeboat strategy… remorse is a terrible emotion. There were probably a lot of Rwandans in 1994 and Japanese-Americans in 1942 who thought the same thing.  Being prepared is never about pessimism of fear-mongering, but rather the rejection of the blissfully ignorant notion that ‘it could never happen here.’

It can. And it just might.

I’m not of the camp that geopolitical and economic calamity will get so bad that the entire world will look like a sequel to Mad Max: Beyond Thunderdome… perhaps I have more faith in my species and the free market.  But I am open to a variety of possibilities, and more conspicuously the ‘unknown unknowns,’ to quote the potentially-soon-to-be-late Donald Rumsfeld.  Consequently, I structure my life in a way that allows for maximum freedom and flexibility.

Based on my own experiences, I would suggest the following:

* Find at least one (and preferably several) places outside of your home country to escape to. Strongly consider buying property there.

* Consider a second citizenship program; at a minimum, set up residency in another country.

* Store physical and paper assets outside of your home country, and outside of the electronic banking system.

* Demand privacy.

* Keep some investment capital at the ready so that you can jump on phenomenal deals as they arise

* Look for opportunities for additional income that are not constrained by your geography

More on all of these topics in future issues; after all, that’s what this letter is all about– achieving freedom, and I sincerely hope that this content can help.  On that note, I was really overwhelmed at the responses and positive feedback from Friday’s suggestion to buy Mark Nestmann’s book ‘The Lifeboat Strategy’.  Again, I highly recommend that everyone read it, it’s one of the best ’starter guides’ to internationalization that I have read.

You can find it at MarkNestmann.com; based on popular demand, I’ve contacted Mark to request a short interview and to answer some of your questions in a public forum. More to follow.