May 6, 2010
Undisclosed Location

If you’ll kindly indulge me, I will jump right into this week’s questions.

First, Jeff writes, “Simon- you really called the gold/euro short (XAUEUR), I’m up 25% since you mentioned it. Where do you see it going now?”

The European-induced panic is causing a rush to ‘quality’ once again. The dollar has surged, Treasuries rallied, and just about everything else fallen, including oil, silver, and that third-world peso we call the euro.

One of the lone standouts, though, has been gold. Once again, I find the market’s rush into Treasuries coupled with the simultaneous rise in gold prices to be an incredibly bullish sign for gold.

I’m far from a gold bug, but I cannot ignore facts and simple analysis. In good times, investors frequently use the bond market to park large swaths of cash. These days, though, institutions are increasingly skeptical about lending money to corrupt, fiscally irresponsible politicians, especially at low interest rates.

One of the most obvious alternatives for institutional investors is gold… so instead of gold falling during the panicked sell-off, many investors are rushing into gold faster than US Treasuries.

Not only has this been excellent for our gold/euro trade, it suggests that investors are now starting to view gold as a ‘less risky’ asset than government securities. In the longer-term, this will be tremendously bullish for gold as more investors shun sovereign debt for the metal.

In the medium-term, I think the next move will be a rise in the gold/silver ratio; it tends to rise during times of tension and high risk perception. I also think that the Swiss National Bank is finally going to intervene in the euro/franc cross, but I’ll save that for another time.

Next, Dieter writes, “Simon- you mentioned that in the event of a dollar crash, Panama would be OK in the long run. I disagree; Panama does not produce anything, and the income from the Canal is not enough to sustain itself. Comments?”

Correct. Panama does not produce anything to speak of. Neither does Hong Kong.

Yet, the two are able to attract significant foreign investment because of relatively business-friendly environments, as well as large pools of capital from neighboring countries that fund robust financial sectors.

(Chinese money goes to Hong Kong, Colombian/Venezuelan money to Panama)

The pools of capital and foreign investment have built diversified economies in both locations, including strong domestic consumption markets. Coupled with Panama’s Canal revenue, I believe that the country will be much better positioned than most of its neighbors in the event of a dollar crisis. I’ll discuss this more next week.

Next, Don from Thailand cautions us all: “Simon, I brought my gold to Thailand with me and it was forcibly confiscated upon entry. They said that I should have declared it at Customs and paid a VAT fee of several thousand dollars.”

Ouch. I’m not sure how much gold Don had on him, but these days, it’s just not a good idea to be carrying more money in your briefcase than the annual salary of the guy inspecting it.

In most countries, gold is not considered money, at least officially. All across Asia, though, gold has significant cultural importance. In many poor countries, if officials spot your gold and can take advantage of you, then they absolutely will. After all, they’re the ones wearing the guns.

The thing is, no one should be thinking about storing gold in poor, underdeveloped countries anyhow– stick to Austria, Switzerland, Hong Kong, etc. These are countries of negligible corruption risk and a well-defined rule of law. And make sure you check customs rules before you go.

For large amounts, use a secure transportation service like Viamat; they’ll ensure the integrity of your shipment from door-to-door, and even store it for you if necessary.

Next, Paul writes, “Simon, great article about Greece. Although the US is not dealing with a 900% debt to GDP ratio, we are heading down a road that sure feels the same. Increased taxes, VAT, and massive entitlements will surely bring us to a critical tipping point soon. Ecuador keeps looking better all the time.”

Agreed. Look, these problems aren’t going away. There is no chance that Greece can possibly be bailed out, and there is no chance that Spain, Portugal, and Italy won’t follow. Then Japan. Then the UK. Then finally the United States.

These countries absolutely have to implode. As Bill Bonner astutely remarked last weekend in Las Vegas, “when things get out of whack, they tend to get back into whack.”

Well… 900% of GDP worth of government debt and obligations is out of whack. Trillions upon trillions of dollars in unfunded and growing entitlement programs is out of whack. Borrowing and spending your way out of debt is out of whack.

Getting back into whack requires a system reset.

Here’s the good news: this is nothing to be afraid of. We can all see this coming from miles away despite the governments’ lies and the blinders on the mainstream media.

We can prepare, today, by planting multiple flags to safeguard ourselves, our families, and our assets… and then focus on thriving from all the opportunity being created.

Remember– the sky is not falling. Now is the time to be calm, confident, and measured. Panic is for the unprepared, and fear is for the uninformed.

April 30, 2010
Las Vegas, NV

It’s chilly in Las Vegas, but I’m having a great time meeting so many subscribers here at the Casey conference; I’m pleased at how many have turned up for the event, and I’m always humbled by the exceptional people we have in our community.

My only regret is that the conference organizers could not allocate more space for Sovereign Man readers, and I will personally ensure this doesn’t happen next time.

As I need to get going shortly to mingle with all the incoming attendees, let’s jump right in to this week’s questions:

First, a question that I have been asked hundreds of times over the last two months– “Simon, several weeks ago you posted two job openings on your website for people who were interested in working with you. What is the status of those positions?”

We recently filled both of the positions. It was one of the more difficult business decisions that I’ve had to make given the quality and number of applications that we received. We may be hiring again soon, and I will post that to the website as well if/when the time comes.

Second, Dana asks, “Dear Simon, if I trade US/Canadian financial markets from my home in Ecuador, would the government of Ecuador expect me to pay taxes on that income?”

No, especially as a non-resident foreigner. It’s the same in several countries, like Panama. This is one of the reasons for taking a multiple flags approach– having citizenship of one country, tax residence in another, and spending time/owning property in another.

Next, Neil writes, “Simon- I’m an investor and US citizen with residency in Uruguay. I want to hold gold coins in Hong Kong or Singapore, but I have a question– will I be able to open a bank account in Asia so that I will be able to wire money to my account in Uruguay once I sell my gold?”

Even as a US citizen, you should not have any problems opening a personal bank account at any number of multinational banks in Asia… try HSBC or Standard Chartered Bank, both of which have US branches and are accustomed to dealing with the Treasury Department’s arcane regulations.

Once you have the account open, you shouldn’t have any problems wiring the proceeds to your Uruguayan account once you sell your gold. Just remember a couple of things-

1) Singapore charges GST (VAT) on gold sales;

2) Don’t forget to fill out TDF 90-22.1, report of foreign financial account, each year after you open the new bank account;

3) You will have to report the proceeds of your gold sales on your tax return if you turn a profit.

Next, Dave asks, “Simon- I am currently living in Treviso, Italy, and I’m considering moving to Switzerland. However, I haven’t seen any posts about living in or considering Switzerland. What’s your take on the country?”

I like Switzerland. For me, it’s as close to a perfect civilization as it gets in this world. The government is [relatively] hands off, the people are [relatively] intelligent and freedom loving, and the country is quite clean and modern.

On the downside, the weather is too cold for my taste, it’s unconscionably expensive, and the people are boring.

Despite what has happened with Switzerland’s banking privacy, I still think the country is worthy of a number of flags, including banking, residency, citizenship, and tax home. I’ll be spending time there this summer and will report more at that time.

Lastly, Ken asks, “Simon, you wrote about Joel Nagel’s upcoming asset protection conference in Belize yesterday. It sounds worthwhile… but aren’t you negative about Belize?”

To be clear, I have no issues with Belize as a banking jurisdiction. True, I personally do not like Belize as a place to spend much time, but I don’t expect everyone to share my tastes.

I know that there are many subscribers who are very interested in Belize, and Joel Nagel’s asset protection conference is probably the perfect opportunity to go check it out.

Why? Because Joel is one of the best international tax attorneys in the business, so you’ll learn everything you need to know about protecting your assets. Plus, you’ll be able to open a Belize bank account through his personal connections, and you’ll have plenty of time to spend exploring the country to see if you like it.

March 26, 2010
Vancouver, BC

I’m headed to Panama shortly where I look forward to meeting up with my friends and colleagues in the Atlas 400 group. We’re going to an exclusive deep-sea fishing resort for a few days, and afterwards I plan on taking up some unfinished business in Panama.

One of the things on my agenda is to revisit the sustainable community concept that I began discussing a few months ago. This is something that I really want to do, for personal reasons… I’ve always wanted a place that doesn’t rely on ‘the system’ for food, water, power, and security.

In my travels around the world, though, I’ve not yet found a community that provides this, at least up to my own standards… it’s possible that one exists, I just haven’t seen it yet.

I have a detailed plan in mind that will start small and allow the community to grow as the market dictates; my biggest challenge is time. At the moment, I have several other business and investment obligations on my plate, and I’m hesitant to commit to another major undertaking.

As I said, though, for personal reasons I would really like to develop this community, and I’ll be making a final decision once I meet with my team of architects and engineers in Panama over the next 2-weeks. Stay tuned.

On to this week’s questions:

First of all, Tom asks– “I’m exploring Hong Kong at the moment and am wondering if there are any subscribers in HK who would be willing to talk with me about the residency process. I’ll be here until April 3, then off to Singapore where I will be conducting similar due diligence.”

If anyone is in the area and willing to meet with Tom, please drop us a line and my assistant will forward your contact information to him.

William asks– “I live in the US and so does my business partner. We have a start up internet business hosted in the Netherlands. We have been trying to find a way to incorporate and get a bank account offshore. I have had many problems while researching this. Any suggestions?”

First of all, it’s a fantastic idea to plant a flag overseas when you incorporate a business, particularly one that’s internet-based. A properly-structured foreign corporation provides a way to legally defer tax payments (similar to an IRA) plus you have substantially reduced liability.

There is no “one size fits all” solution though. The most important thing you can do is talk to a qualified tax attorney in your home country– that means someone who understands international tax law, as well as the benefits of individual offshore tax jurisdictions. (this is a rare species)

It’s absolutely critical that you do this because no one in an offshore jurisdiction really understands the tax and structural implications that affect you.

Get the right advice and it will pay huge dividends in the future. If you need a referral, drop us a line. I have tax attorney contacts in the US and the UK.

Jack asks, “Simon, do you have any suggestions for an American who would like to open a bank account in Thailand?”

Yes. Don’t open a bank account in Thailand. It’s a beautiful country, but not a place with a trustworthy financial system. Thailand is highly corrupt and immature as a banking center… and there are too many solid options in the region– Hong Kong, Singapore, and Labuan are great alternatives.

If you want to have a bank account in denominated in Thai Baht, you can easily do this at a number of other banks in Asia, such as HSBC in Hong Kong.

Finally, Mark asks, “Simon, you said the price of housing in Malaysia is $1400 per square meter– if I did my math right, this works out to $128 per sq ft. This is the low end of new housing in the States. So, from that perspective it doesn’t seem that inexpensive. Your thoughts?”

First of all, just to clear things up, when I said the price of housing in Malaysia is $1400 per square meter, I’m referring to the average cost of high quality, expat-level housing (not raw land) in tier-1 neighborhoods.

With few exceptions, this is lower than comparable costs in the US, Canada, and Europe. To be honest, Detroit is probably one of the cheapest places on earth to buy property right now… probably cheaper than Malaysia. A speculator may be able to make a fortune in Detroit– but with tremendous risk.

“Low prices” don’t always mean “great value.” And despite the low prices, there are a few things that really scare me about US real estate.

First, continued government intervention makes me want to run away like a scalded dog. The government is unable to ‘fix’ anything other than elections, and their continued intervention in the housing and mortgage markets will only lengthen the pain in the sector.

Second, state and local governments are broke, and as a source of revenue, I’m convinced they’ll be looking to increase property taxes. In the hardest hit areas, I expect tax rates to more than triple.

Third, in the medium-term, I also expect prices to keep falling… stagnate at best. If you consider the supply/demand fundamentals, there is still way too much supply on the market, and not enough households or available credit to fill the void. In my assessment, this is not the bottom.

To me, while there are some bubbles forming on the continent, parts of Asia demonstrate significant value as long-term property investments, currency diversification, and residency flags. I don’t see those benefits in the US at the moment, particularly given the risks.

That’s it for this week; have a great weekend and we’ll talk again on Monday.

March 25, 2010
Tokyo, Japan

About 20-years ago, many of the world’s sovereign nations started down an interesting path.  Region by region, governments formed supranational free trade blocs in order to facilitate economic growth.

Supranational organizations were nothing new… from the failed League of Nations after the Great War to the UN and NATO, large multi-country blocs had been formed in the past, but usually for political purposes or military alliances.

Conceived in 1989, the Asia-Pacific Economic Cooperation (APEC) was among the first international forums specifically designed to boost trade and enhance economic growth in the region, politics be damned.  After APEC came MERCOSUR in South America, NAFTA in North America, the EU, and finally the African Union.

A few years into the new millenium, most of the world was covered in trade blocs that were supposed to throw politics out the window… today, though, only APEC remains as a pure financial body, and the rest of the world could learn some valuable lessons from that region.

Aside from reduced trade restrictions that are standard for these organizations, APEC has come up with a few really brilliant ideas. Their goal is to make it easy for businesses to engage in commerce with each other– and by facilitating business at the individual level, more deals get done, and more wealth is created.

One of the ways that they’ve done this is by creating a program called the APEC Business Traveler Card (ABTC).  It’s literally a small plastic card that entitles cardholders to visa free travel for at least 59 days throughout the APEC sphere, as well as expedited immigration clearance at airports and other ports of entry.

At major airports in the region, for example, you’ll see signs all over the place for “ABTC FAST TRACK” which gives priority clearance at customs, immigration, check-in, and security to ABTC card holders.

Actually, in many cases, the ABTC is as powerful and useful as a diplomatic passport, but without the cost… and since APEC includes several countries like China and Vietnam that normally have a stringent visa process, the additional travel freedom is substantial.

This is a great tool for PTs and anyone who does a lot of business in Asia.

So how do you obtain one?  You need to be a passport holder from one of the participating countries– so if you’re from Australia or New Zealand, for example, I highly recommend going through the application process; check your respective country’s immigration website.

If you’re not already from the APEC sphere, you need to obtain another passport… which you should be thinking about already.  Of the participating APEC countries, the most straightforward ones to obtain are Chile, New Zealand, and Singapore, as well as Hong Kong permanent residence.

With each of these countries, the residence and naturalization process takes anywhere from 2-7 years, and in each case, the process is unmistakenly clear and leaves very little to subjective interpretation.

For example, obtaining a Hong Kong permanent residence card (which qualifies for the ABTC program) requires 7-years under one of the various residency schemes, such as the investor visa or professional worker visa.

In Singapore, citizenship can be obtained in as little as 2-years; it’s 5-years in New Zealand, and 5-years in Chile.

Frankly,I will need to write entire letters specifically on the subject of second passports from these countries; for now, though, you should definitely be thinking in that direction– and if you’re interesting in eventually planting a residency flag in Asia, those are the countries you should consider for second passports.

Stay tuned.

March 24, 2010
Hong Kong, SAR

One of the worst things that can happen to a country is to experience a brain-drain.  The loss of productive people who create new technologies and companies means the loss of the jobs and wealth that they create.

The long-term aggregate effects of this can be truly devastating, and history provides no shortage of examples.

By nature, though, people are generally creatures of habit– inert beings. They must be acted upon by a tremendous force to uproot them and get them moving… but everyone has a breaking point.

In aging superpowers, governments seem to be doing all they can to exert enough force to push people beyond their breaking points.

I have seen, from my own vantage point, a flood of new, fed up expats arriving to places like Hong Kong where the jobs and opportunities are plentiful, and they have strong incentives to be productive.

In fact, though it doesn’t have the same songs and bombastic statement as other countries who think they have the lock on ‘freedom,’ Hong Kong is one of the most economically free places in the entire world.  The level playing field ensures that everyone has a chance to succeed.

Do you remember how the world thought that Hong Kong was going to turn into yet another communist graveyard when it reverted to Chinese authority in 1997?

The exact opposite happened. Rather than force Hong Kong under its totalitarian authority, mainland China learned from the island’s success and adopted increasingly free market policies.

Hong Kong shows how far free market policies can go in transforming an entire society; 100-years ago, it was just a rock, devoid of any natural resources, and populated by largely illiterate fishermen.  Only decades later, the island had risen to prominence as a global financial center.

How did this happen? By allowing businesses to freely compete with each other for consumer dollars, and by attracting the best and brightest minds across the entire world to come and become wealthy from their hard work and ingenuity.

Essentially, this is the concept of “America” that has worked so many times in the past.

Today, Hong Kong has matured, along with the rest of Asia.   It is no longer the only free-wheeling boomtown of the “wild, wild east,” and the island now finds itself competing for financial primacy with the likes of Singapore, Tokyo, Shanghai, and even Labuan.

This competition is good, though, and I think it’s a sign of things to come.

Smaller jurisdictions, particularly those which lack cash cow natural resources, will continue to compete with each other to attract the most productive people through ultra-low taxes, residency/citizenship incentives, and top quality standard of living.

The theme is simple– “If you are bright and motivated, we want you to live here; and, because your ideas and hard work will make this a better place for everyone, we’ll let you keep most of what you earn and enjoy the fruits of your success.”

In aging superpowers, it goes something like this– “If you are bright and motivated, we expect you to provide for everyone else. You should be happy to do this because it is your patriotic duty, in our sole opinion. There will be consequences if you fail to comply.”

Large, debt-ridden nations will likely continue down their path of self-destruction.  I fully expect smaller countries, however, to choose a different direction and join the competition to attract the intellectual and financial capital of productive people.

This is good news for the productive who will find that they have increasing options for residence, better lifestyle, and the accumulation of wealth.

I’m seeing the signs of this already– for example, there is a very interesting new business and employment incentive program in Chile that I’ll be discussing soon, and a variety of new measures to boost entrepreneurship in countries as diverse as Guatemala, Cambodia, and Lithuania.

In the meantime, if you find yourself in the ‘fed up’ category, I’d strongly encourage you to look in places like Hong Kong for new beginnings… obtaining residency is a straightforward process, and within the island’s strong economy is a multitude of jobs and business opportunities

March 23, 2010
Hong Kong, SAR

The banking system in Hong Kong is one of the most advanced in the world, and if you’re shopping around for a place to plant a banking flag, you should definitely consider it.

As a jurisdiction, Hong Kong was effectively founded and built into a global financial center for the sole purpose of bridging east and west. Today, as Asia has grown into an economic powerhouse, Hong Kong is still the region’s center of banking and commerce– like London in Europe or New York in the Americas.

In particular, though, there are a few things that I think set apart Hong Kong as a banking jurisdiction:

First, the banks in Hong Kong are actually well-capitalized.  Unlike banks in the west which have used fuzzy accounting tricks and nearly interest-free government loans to prop up their balance sheets, Hong Kong’s banks actually have their own substantial cash reserves on the balance sheets.

Furthermore, the banks are reasonably and appropriately regulated without any undue government interference or hypocritical political backlash.

Second, I find banking in Hong Kong to be cheaper and more efficient than many other jurisdictions.  Wires often take place instantaneously, and costs for international transactions are a fraction of the price that I pay in the United States and Europe.

Third, because Hong Kong as a jurisdiction is ultimately backed by its big brother mainland China, bankers in Hong Kong have a certain confidence in being able to deliver more personalized service.

Once your account is approved, you’re in the club… and bankers will go out of their way to service your needs without constantly quoting you the latest OECD requirements.

The tough part about Hong Kong is getting approved, especially for a business account. Most banks will want to see the whites of your eyes before opening an account for you, which is a dreadful inconvenience for most people.

I discussed one ’short-cut’ for doing this a few weeks ago, though if you find yourself traveling to the region, I always recommend that people go visit the bank that they’ll be doing business with so that you can feel more comfortable about the relationship.

Besides, Hong Kong is a fantastic city and worth a visit… though I must admit the air is quite dirty today– I see nothing but haze from my room on the 38th floor of the W Hotel, apparently due to some sandstorms in central China… but I digress–

Another reason for visiting Hong Kong is to buy and store gold, which you can also do at just about any bank in town. My friend Tim, a brilliant financial mind and fellow Atlas-400 member, is also in town, and he was just telling me about some interesting anomalies he noticed in the gold market:

Prices are not uniform. The buy price on a one ounce Canadian Maple Leaf coin (what the bank will pay you) at Hang Seng bank is HK$8,520 (roughly $1,097). At Bank of China, the buy price is 4% higher.

Furthermore, Tim seems to have found an arbitrage opportunity in Chinese panda gold coins, which for some reason sell for a much higher premium to spot price in the United States than they do here in Hong Kong.

Once you’ve acquired gold, storing it in Hong Kong is quite easy at any number of banks; I have worked with NCB Bank, Public Bank (out of Malaysia) and HSBC in the past, and they generally have safety deposit boxes available.

There is also a private storage facility called, appropriately, “The Storage”.  It’s located in a rather peculiar part of town, but the facility is quite secure with 24-hour armed guards and backup redundant systems.

Unfortunately, The Storage does not do anonymous box rentals, which is a fairly recent policy change.

Their box rental charges are about $75 (USD) per year, and you can prepay up to 2-years in advance.  As always, it’s best to call first to find out what documentation requirements are necessary.

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).

March 2, 2010
Pattaya, Thailand

Thanks to completely draconian US-led regulation, opening a bank account anywhere is about as fun as a barium enema.  Opening a foreign bank account can be an even greater nightmare.

Most of the time, a foreign bank will want you standing there, in person, to open an account, as well as to provide a seemingly endless array of notarized documents, stamped papers, and letters of reference.

Trust me, it’s not their preference either… in order to keep from being blacklisted by the OECD, though, banks have to resort to this level of bureaucracy.  They’re called “Know Your Customer (KYC)” rules, and the idea is to over-collect personal and financial information in order to determine that a bank customer is not a terrorist.

Anyone with half a brain can see that this is one of the stupidest notions in the world.  It’s like locks on a door– if someone wants to break in, a pithy little lock is not going to stop him.  Similarly, if a “terrorist” (I hate even using that word) wants to open a bank account, an avalanche of paperwork is not going to stop him.

As an example, I would point to accused arms dealer Victor Bout who currently sits in prison right here in Thailand; Bout was placed under US and UN sanctions back in July 2004, and yet he was still able to register numerous Delaware companies with bank accounts.

All the KYC regulations do is make it much more difficult for everyone else.

In our regular conversations, we’ve talked about the importance of having a foreign bank account… it is an essential flag to plant overseas, and you want to really consider low-tax jurisdictions with a strong, stable financial sector that have a history of not plundering the banks.

This includes places like Switzerland, Hong Kong, Singapore, Panama, UAE, Qatar, and a few others.

Many people understand the need to move some money out of their home country but are simply unable to take a far away trip just to open a bank account.  If you’re one of these people, here’s an easy back door. It’s less than ideal, but it works.

The first thing you need to do is pick your banking jurisdiction, i.e. Hong Kong, Singapore, etc. and then find a large multinational bank in that jurisdiction that has a branch near you.

As an example, I will use Hong Kong and HSBC… though there are other jurisdictions and banks that you could use as well (Standard Chartered, etc.)  HSBC is a good example because it has a presence in more than 60 countries, and you’d be hard pressed to find a civilized place that does not have a branch.

Among HSBC’s many branches are offices in Los Angeles, Miami, Vancouver, etc. So first you call HSBC in Hong Kong, explain that you are a foreigner, want to open a bank account, and would like to certify all the paperwork through your local HSBC branch.

The HSBC rep in Hong Kong will fax you all the appropriate paperwork, and when you have completed the documentation requirements, you should get in touch with the nearest HSBC branch in your home country and make sure they have “international banking services” available.

Let’s say you live in Orlando… that means you should head down to Miami, and the Miami branch will validate all the documents on behalf of the Hong Kong office.

Afterwards, the Hong Kong office will receive the documents and finalize the account opening.

This is the fastest and easiest way to open a foreign bank account without actually having to fly to a foreign country and go through the process on the ground.

The obvious disadvantage is that many people do not want to deal with a large, multinational foreign bank like HSBC, Standard Chartered, etc. I agree; it’s better to deal with a solvent local bank that does not have a large international presence.

However, unless/until you are able to get on a plane and fly to Asia, Europe, or the Middle East, this is one of the best and most cost effective interim solutions.

To be clear, even though you are opening it through a local branch in your home country, the bank account will be considered foreign and based in the offshore jurisdiction that you chose. If you are a US citizen, this obliges you to file US Treasury form TDF-90-22.1 by June 30 of each year.

So much for BMW’s run-flat tires. Believe it or not, I’m actually sitting on the side of the A3 motorway in central Germany, about halfway between Frankfurt and Munich, waiting for the tow-truck to arrive. 

Apparently you’re supposed to be able to drive on these tires even when they’re flat… and with such confidence in their country’s manufacturing capabilities, the German rental car company didn’t bother providing me with a spare.  Call me old-fashioned, but I’ll take a spare and a jack over run-flat tires any day.

Given what we put this car through, though, it has performed admirably– about 2,500 miles of hard driving in just 4 days at speeds usually exceeding 200 km/h.  You see a lot of interesting things when you spend that kind of time on the road, and one of my observations leads me to believe that we are in for a major shift world finance.

For starters, customs agents across Western Europe are visibly out in force, patrolling the highways and major travel hubs.  Their mission? Generate revenue, coercively if necessary.

In just a single 12-hour period, we were stopped twice in France by government thugs.  Similar to my treatment that I described last week at Helsinki airport, the encounter felt more like an inquisition– where were we driving from, what were we doing there, what do we do for a living, and most importantly, how much money were we carrying…?

They seemed disappointed and skeptical when we said “uh, about 250 euro…” as if two well-dressed gentlemen in a nice sports car were cosmically obliged to be carrying more than 10,000 euro.

They didn’t take our word for it and continued the snooping and inquisition.  If this had happened only one time, I would have written it off as an anomaly. But multiple times within a short period of time is suggestive of a broader agenda.

My business partner Matt had a similar experience before his flight from Chicago to Frankfurt just last week; as he was strolling down the jet bridge to board the plane from the business class entrance, he ran into a squad of customs agents waiting to randomly inspect passengers.

Once again, their chief concern was monetary instruments– How much cash was he carrying?

Customs officials are like feudal lords; they wield supreme power in their little border fiefdoms and have the authority to confiscate whatever they like, for any reason, and then stick you with the onus of proving your innocence.

This is exactly why the government has its people patrolling the airports and highways… low on ‘hope’ and short on ‘real change’, the government has tasked its border enforcement with grabbing as much cash as possible.  It’s sort of like setting up a speed trap in a small town with no economic prospects.

If customs officials believe the amount of money that you are carrying is for suspicious purposes, they have the authority to relieve you of your cash, Constitution be damned. The same standards apply in Europe. In a very literal sense, this amounts to highway robbery.

The standard generally applied is “presumed guilty until proven innocent,” and I think it’s safe to assume that these types of searches and seizures specific to monetary instruments will increase.  More importantly, though, these measures are likely an overture to the eventual implementation of capital controls.

Governments rely on capital controls to regulate the flow of capital through their borders.  In times of crisis begotten by political stupidity, they have an even greater need to keep money on shore to ensure that you’re paying your fair share of somebody else’s mortgage.

The first step in capital controls is to go after cash; it raises money through confiscation and makes people rely more on the banking system out of fear.  The next step is to re-regulate the banking system to make cash transactions more cumbersome and dealing with foreign financial institutions more controlled.

This is already in the works with the recently passed US House of Representatives bill H.R. 4213.

I discussed this trend towards capital controls three-months ago, but frankly I am surprised at how fast things are moving. The time to plant a financial flag overseas is now, and there are a couple of ways to do that.

First, foreign bank and brokerage accounts are a reasonable solution. I’ve mentioned this numerous times in the past, most recently with a discussion about Islamic Banking. I think that Panama, Singapore, Hong Kong, UAE, Malaysia, and Canada are all reasonable places to bank.  There are many more that I will be discussing in the future.

While there are some annual disclosures to file in some countries (like the US), it is completely legal to have a foreign bank account, and I doubt governments will ever change that… they’ll just make it next to impossible to move money.

That’s why the window of opportunity is now.

Second, buying foreign property makes a lot of sense. At present, there are no reporting requirements for foreign real estate, and as we have discussed in the past, you can even move individual retirement savings into foreign land.

More to follow on all of this. Stay tuned.

I’m flipping through channels at 1am here in Seoul, and do you know what I see? Math problems– nutty professors, Korean-style, working out complex partial differential equations and geometric progressions with the intensity and flair of a concert pianist.

In fact, it’s not just one channel… it’s five, roughly 20% of the entire late night channel line-up.

When you think about it, this makes perfect sense. South Korea, once dismissed as an Asian backwater where American GIs defended the frontiers of freedom, has developed itself into a formidable economy on the back of an incredibly hard-working, educated, entrepreneurial culture.

GDP per-capita is now about $28,000 per person, making South Korea’s economy roughly equivalent to Italy, Israel, and New Zealand.

It shows. The landscape is well-developed with wide, clean highways, soaring skyscrapers (at very high occupancy), extensive port facilities, and a highly advanced digital infrastructure.

The great unspoken fear of South Korea is that all of this beautiful infrastructure would be wiped off the face of the earth on the day that North Korea’s Kim Jong-Il threw a nuclear temper tantrum.

It won’t happen. South Koreans do not live in fear of North Korea– it simply doesn’t register on their radar. The North Korea invasion fear, which have kept a US military presence in the south for roughly 60-years, is one of the biggest scams in geopolitical history.

Today, the North Koreans are as much of a military threat to South Korea as the Russians are to Germany (which begs the question– why are US troops still in Europe preparing to defend the Fulda Gap against Soviet Hordes?)

If US troops pulled out of South Korea, the economy would take a short-term hit and present a major buying opportunity. But within 3-years, the private sector will have reallocated the economic resources formerly tied to US military bases– it happened in Panama between 2000 and 2003 after US troops left, and I would venture to say that Panamanians are not half as good businessmen as the South Koreans.

The export-centric Korean economy took quite a hit at the start of the crisis because of the slowdown in global trade. Korea’s large conglomerates like Samsung, LG, Hyundai, POSCO, etc. all suffered in the early days as demand cratered and economists pontificated about whether Asia’s economies could decouple from the west.

Exploring this ‘decoupling’ issue was one of my primary missions in going to Asia… I wanted to put boots on the ground and see for my own eyes whether or not these economies are still dependent on the west.

My conclusion? The slowdown in U.S. consumers activity will continue to be a weight on the shoulders of the Asian exporters. But, while western consumers are dying, Asia’s massive pool of consumers are just beginning to bloom.

I saw it in China, where the level of Chinese consumer activity can only be described as ‘overwhelming.’ I saw it in the Philippines where remittances from overseas workers support domestic spending. I saw it in Singapore where the slowdown seems to have had minimal impact; and I can see it here in South Korea.

Asia is exporting to itself, building up vibrant domestic economies while governments spend their increasingly worthless dollar reserves on stimulus projects. To me, this is a clear indication that Asian currencies will continue their rise against the dollar (as well as the euro) since ‘cheap’ currencies relative to the west are no longer a priority.

But which ones to buy?

The Japanese yen is not a good option in my opinion– Japan is an aging economy that still depends heavily on the United States, and my expectations is that the government will not allow the yen to appreciate much beyond 85 yen to the dollar.

The Chinese renminbi is also not a good option for now– China plays too many games with its currency, and exchange controls are a capitalist’s nightmare.

I do like the Thai baht and think that Thailand has a great future in general, though I would definitely wait to invest until its 81-year old King passes away, leaving the country in temporary turmoil.

The Taiwanese dollar (TWD) and South Korean won (KRW) are good bets for now as proxies on thriving Asian tiger economies; I also really like the Australian dollar (AUD), which has great fundamentals, as an extension of Asia’s growth.

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.