privacy

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.

Tagged as: bad governments, bank accounts, expatriation, Gold and Silver, privacy, second passports, taxes

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