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 10, 2010
Undisclosed location

I’m going under the knife tomorrow… it’s a little unexpected, but apparently I need a rather urgent surgical procedure performed, and the doctors here have fit me in at their first available time.

To be honest with you, I’m pretty disappointed– no, not because of the operation. These things happen from time to time, and I’m pretty fearless. I’m mostly disappointed because I’m not in much condition at the moment to get on a plane and fly to another country where I would actually prefer to be operated on.

This is all rather ironic, because a couple of my friends had commented, “wow, I bet you’re happy that you just happened to be in the US for this!” Actually, no, I’m dismayed.

First of all, my US insurance company won’t cover the procedure… at least at the moment. If I wait a bit longer until the condition becomes life threatening, then they would cover it. But because I’m not presently terminal, I’m left to cover the costs on my own with cold, hard cash.

I figured this out ahead of time with the friendly folks at my insurance company, so when I went in to see the doctor here, I made him an offer.

“Look,” I said, “I’m paying cash. No insurance companies will be involved. Let’s make a deal.” Happily, he settled with me on a reasonable price, knowing that he would be paid immediately without having to deal with the usual bureaucratic runaround.

The price that we negotiated is just a fraction of the normal price that they bill to the insurance companies; it’s truly unbelievable how much excess doctors are forced to build into their prices simply because they know that they will only be paid a percentage of their invoices.

What’s even more unbelievable, though, is that the ‘reasonable’ price we agreed upon is still multiples more expensive than what I would pay for comparable, if not even higher quality care in the Orient.

This is the second chief reason I’m disappointed– aside from cost, I truly believe that I would receive better care in Asia. As for the operation itself, I’d say the odds are evenly stacked. It’s a simple procedure, and I’d trust a qualified surgeon of any nationality to carry it out without any significant errors.

What I’m more concerned about is the treatment I’ll receive before and after the surgery– the incessant forms they’ll have me fill out, the wasting away in a waiting room, the needless drugs they’ll pump me full of, the ridiculous OSHA and FDA regulations, the speed with which they’ll kick me out to make room for the next patient, etc.

These sorts of things seldom happen to foreigners in overseas hospitals. Overseas, foreigners are in control of their own treatment; they’re actually treated like a vested partner in the doctor/patient relationship instead of like a child, and this is certainly a nice change.

Frankly, this is what being a ‘permanent tourist’ is all about– maintaining that status as a valued customer who should be courted, instead of a regular citizen who will be milked and slowly bled to death… but I digress.

House calls are commonplace overseas… perhaps even more commonplace than they were in America back in the 1950s. It’s nothing for a doctor to swing by the house to check up on you, or even hire a few nurses out for the week to take care of you.

I was dumb enough to mention this to the attending physician; needless to say, he started arguing with me that the quality of treatment in Asia is substandard.

“Oh,” I told him, “so you or one of your colleagues has actually been to the hospitals in Hong Kong, Thailand, and Singapore to judge first hand?”

Silence.

It always puzzles me how rumor and stigma are perpetuated by the uninformed.

Lastly, having any medical procedure performed in the US has me a bit nervous these days. Nobody really quite knows what the Obama health system will look like (least of all the government), but I’m still concerned about ending up on a list in some government database as a guy ‘who has health insurance but doesn’t use it.’

Yes, I actually think the dastardly practice of negotiating directly with the physician instead of using a government-approved plan is going to land me in hot water with the IRS one of these days…. because, naturally, it falls to the Department of the Treasury to enforce healthcare legislation.

This is one of the other advantages to having medical procedures performed overseas; the records are actually private, and if you want, no one else will ever find out. It’s as close as you can get to dropping off the grid for your medical care without having to sacrifice quality.

To me, medical care is just another overseas flag that we can plant, especially if planned properly. In my case, I just got caught in the wrong place at the wrong time… which is ironic considering that I’m in the US at the moment undergoing treatment.

Look, I’m sure that things will be just fine tomorrow. I have no illusions that the surgeon is somehow unqualified or anything like that… but we all know that medical care is a package deal. And while the medical quality of US treatment may still be among the world’s best, many other countries are quickly closing the gap, and they’re already offering more attractive packages.

I could expand on this more, but if you’re interested, I would consider Dusit Bangkok and Bumrungrad in Thailand, and Raffles in Singapore.

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 16, 2010
Medellin, Colombia

Yesterday I celebrated tax day by charging up my AMEX card on one of the IRS’s official payment websites. There’s nothing like earning travel points for keeping the flames of bureaucracy burning.

And speaking of travel, I should be headed to Ecuador this weekend where I plan on spending several days hopefully hopping around the country; more to follow next week.

On to this week’s questions…

Fred asks, “Simon, I cannot find a clear answer as to whether or not the purchase of Perth Mint Certificates in excess of $10,000.00 would require filing of Treasury Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts).

This is a really important question that applies to both Perth Mint Certificates and GoldMoney.com accounts. The IRS, as usual, provides no clear guidance specific to these institutions… so I posed the question to my team of legal/tax advisors.

One of them, “JN”, participated with on the recent S&A teleconference that I discussed yesterday, and he is probably one of the world’s foremost experts in offshore banking. I find that his information is priceless, and he’s the kind of guy that you definitely want in your corner.

JN had this to say:

“As far as the TDFs are concerned, I would generally argue that neither gold currency accounts nor Perth mint certificates meet the definition of a foreign financial account.

The new “jobs” bill however changes the dynamics, effective December 31, 2012 by requiring the disclosure of ANY asset outside the US that has a value of $50k or more. This will pretty much make the TDF issue academic except in cases where someone has say between 10k and $49k in gold.”

Next, William asks, “Simon, Medellin sounds like it’s full of opportunity; I’m curious how you would compare/contrast the investment opportunities with Panama.”

Frankly, an analysis of Colombia vs. Panama deserves its own missive. But briefly, I think the best Colombian small investment opportunities are in the property market; you’ll likely score the trifecta– substantial capital appreciation, high income yields, and currency appreciation.

As such, property in Medellin is an excellent investment candidate for tax free / tax deferred structures.

There are also a handful of Colombian mining companies traded on public exchanges, but I’m staying away from them. Here’s why:

The property market in Medellin is undervalued. Cheap, actually… mostly because the market is still pricing in the “Colombia stigma,” i.e. prices are lower than what they should be because the market still has overstated concerns about stability and security.

On the other hand, mining companies with heavy Colombia operations seem to have absolutely no risk priced into their stocks… which is quite strange. The stock market has assumed away Colombia’s risk, and the property market is irrationally overstating it.

The truth lies somewhere in the middle… though I would argue that the best properties in cities like Medellin have very little risk compared to remote mining sites where there is still paramilitary activity.

Next, Bonnie in Massachusetts asks, “Hi Simon, I do a lot of serious road cycling. Are the roads in Panama good for cycling? Are there bike groups or clubs down there?”

The best places to bike in Panama (or walk) are the Amador Causeway (about 4 miles) and the Cinta Costera… but typically, no, the roads in Panama are terrible for cycling. If you bike on a regular city street, you’ll probably get run over. Panama is not biker/walker friendly.

Next, Richard comments, “What’s up with all the violence in Thailand? I thought it was an idyllic Buddhist country. Now it seems like they’re more prone to violence than the good old U.S.A. Even with our budget issues and governator, I’ll take southern California anytime.”

I like southern California too… but don’t be too quick to judge Thailand based on an anomalous incident in which 21 people died. Statistically, violent crime is much, much worse in southern California.

In Thailand, violent crime, particularly against foreigners is almost unheard of; the worst thing you have to worry about there is corruption, not getting your head blown off.

Lastly, Pamela comments, “Simon- I would like your take on Medellin from the single female perspective. What about the men– looks, demeanor, attitude relative to females, local and foreign. What about safety/security, getting around, etc.?”

Look, I definitely do not claim to have the perspective of a single female… but from the best that I can tell, men here interact with their women in typical Latin style, though slightly more respectfully than I have seen in places like Argentina where men regard women as their toys.

As for safety and security, the single women that I know here have never complained about being accosted or threatened… though it is uncommon to see a single, nonprofessional woman in Medellin, mostly because Colombians tend to socialize in mixed groups.

Overall, while I’m soundly unqualified to rate the attractiveness of the men folk here, I can tell you that Colombians are generally a very friendly people. If you speak some Spanish you should be able to make friends in no time, and that goes for anyone.

April 12, 2010
Medellin, Colombia

As tectonic plates slowly drift over millions of years, an occasional fissure opens up in the earth’s surface.  We call them volcanoes, and they provide a means for the earth to release some of the intense pressure that builds up over time.

Volcanic eruptions are typically harmless… the earth blows off some steam and everything settles quickly. In rare instances, though, when significant pressure builds up near highly populated areas, an unmitigated disaster can occur.

Over the last few days, several geopolitical hotspots have simultaneously erupted around the world– the violence in Thailand, the coup in Kyrgyzstan, the plane crash in Poland which killed its President, etc.

Kyrgyzstan and Poland are the harmless eruptions that generally blow over… nothing to worry about. Kyrgyzstan is only significant to US interests as a supply base for the pointless Afghanistan conflict, it’s only significant to Russia for ego, and it’s not really significant to the Chinese at all, even though they share a border.

Similarly, Poland has a strong economy and will continue to shine despite the untimely demise of its political leadership.  While the plane crash was truly unfortunate, it may likely highlight how much an economy can succeed when it is unconstrained by bureaucrats.

Thailand, on the other hand, has some potential to be one of the disastrous eruptions.

When I was living there over the last few months, I watched the “Red Shirt” opposition group really step up its anti-government protests– their ultimate goal has been to force new, open national elections.

The Red Shirts have been vigilant in maintaining constant pressure on the current government, even employing creative tactics to garner attention like dumping blood in front of the Prime Minister’s house.

Most of their demonstrations, though, have been largely ignored… until now.

This weekend, the Red Shirts staged another protest in Bangkok that coincided with a major Thai holiday. As protestors stood eyeball to eyeball with Thai military and police forces, it seemed like just another day in Thailand– political demonstrations are incredibly commonplace in the kingdom, so nobody pays much attention.

At some point during the evening, however, gunfire rang out and all hell broke loose.  Over 20 people were killed on both sides with hundreds wounded, and no one seems to know exactly where the gunfire came from or what started the violence.

If you want to see a first hand account of what happened, check out this video from blogger Tony Joh. He gives an incredibly balanced (and colorful) report with his boots planted very firmly on the ground in the thick of it.

(note: If you get squeamish easily, stop watching at exactly 7 minutes into the video.)

It’s funny how death can really get the ball rolling on political issues. A bill might be tied up in Congress for years, but the moment a 12-year old boy dies, suddenly it becomes important.

In Thailand, the protestors haven’t been able to make a dent in their goals despite months of their best efforts. The government has remained in control with the full support of the military, one of Thailand’s most powerful institutions.

Today, however, after so much loss of life, Thailand’s Army chief called for new elections. This is the clearest sign that things may actually be changing in Thailand, and it’s also fueling speculation that the initial gunshots over the weekend may have actually been staged by the Red Shirts.

To be clear, political instability in Thailand is nothing new.  If it’s not political demonstrations, then there are rumors about the King’s health. If it’s not the King, then there’s a new dispute with neighboring Cambodia… it’s always something.

Most of the time, instability in Thailand is totally peaceful, and markets shrug off these events. Despite ongoing tensions, the Thai Baht has steadily appreciated for months against the dollar, and this provides an interesting indication of the market’s perception of risk: blood in the streets is a better bet than 30-year Treasuries.

Today, though, markets woke up to the realization that Thailand may be entering an extended period of instability; it could take months to sort out the consequent election issues resulting from this weekend’s bloodshed– and if something happens to their 82-year old king during that period, the country will be in real trouble.

The Thai stock index dropped 5% today, undoubtedly due to a rush of foreign capital being pulled out of the country. In the near-term, there may be significant buying opportunities in the market as solid companies become undervalued by capital flight.

I’m watching a handful of Thai stock like Bangkok Bank, Bumrungrad Hospital, and Krung Thai Bank, all of which have strong businesses, decent dividend yields, and US pink sheet listings.

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.

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 19, 2010
Pattaya, Thailand

My time here in Thailand is finally coming to an end, at least for now. On Monday morning, after I stop by the US embassy to pick up my renewed passport, I’ll be headed to Hong Kong.

I should briefly mention something about passports. Starting in 2007, the US government began manufacturing all new passports with RFID chips– small devices which record and transmit data.

Malaysia was actually the first country to issue RFID passports back in 1998; since then, most of the developed word has adopted them. The data which is collected/transmitted varies by country but generally includes some personal information as well as some travel data.

The RFID chips have a range of up to 10 meters, and many countries do not have encryption devices.

I’ve spent the last year searching around the world for an embassy in some remote country that hasn’t moved to RFID yet. Unfortunately, I was unsuccessful, so from now on I’ll be walking around with a passport that transmits my personal information.

My understanding is that there are passport ‘shields’ available which absorb most of the transmissions, and I will definitely be looking into this more closely.

On to this week’s questions…

William says, “Simon, thank you for the IRA information this week. I know that Congress has changed the law– do you think that now is a good time to consider the new IRA structure? Can I use it to move my retirement funds overseas?”

Great question. First of all, I must apologize because this only applies to US citizens.

32 million Americans will need to make a decision this year; it’s a unique situation because, this year alone, there are several things coming together: first, the IRS has changed the rules, making it a smooth process to switch from a traditional to Roth IRA.

If you combine that with the devaluing rules, and the concept of an Open Opportunity IRA, you’re looking at a potentially enormous tax savings… but only for a limited time while the IRS keeps this window of opportunity open.

Also, once the structure is established, it’s really a fantastic vehicle for moving cash overseas, or even buying foreign property in many instances.

If you want to plant a flag overseas with your retirement savings, this is really the best way to do it, and the time to do it is now while you can still save on the taxes.

Sarah asks, “Simon- you stated that you would report on Malaysia. I’m more interested in establishing a non-US flag there than in Singapore.”

Malaysia is really a wonderful place… it’s Singapore without the costs, and Thailand without the chaos. I’ll dedicate a whole missive to it, but briefly here’s what you should know:

Malaysia is an easy place to plant a residency flag. You can stay in the country for 90-days without a visa, easily renewable for another 90-days. If you want to stay longer, the “My Second Home (MM2H)” program is one of the best economic residency programs in the world.

MM2H provides a 10-year visa for foreigners who meet basic qualifications– people under 50 have to deposit roughly $90,000 in a local bank, half of which can be withdrawn after 1-year for the purchase of a home. People over 50 need to deposit about $45,000 or prove a $3,000 monthly pension.

Like the Panama pensionado program, the MM2H visa entitles you to a variety of discounts and benefits with things like vehicle purchase and education.

The program is also very streamlined. Like Singapore, you can begin the application process online and check the status of your application on the government’s website, www.mm2h.gov.my

Ralph asks, “Dear Simon, Could you give us your opinion on the best country/countries to incorporate a business in? Thanks for your informative E-letters. Looking forward to the next.”

This is a tough one because it really depends on many factors– your home tax country, what do plan on doing with the new business, where you plan on living, etc.

In fact, the most important thing you should understand about offshore planning is that there is no “one size fits all” solution.

For example, a manufacturing company owned by a US citizen may want to look into Ireland because of the comprehensive tax treaty with the United States.

An IP holding company owned by an expat Australian, Brit or Canadian, on the other hand, may want to strongly consider Labuan, Malaysia. Malaysia has a tax treaty with Australia, Canada and the UK, but not the US.

In the Western hemisphere, a lot of people tend to look into Panamanian structures. For a passive holding company, this might make sense… but for an operating business, I would stay away from Panama because it’s not a common law country.

The bottom line is– always seek the right advice from a tax professional in your home country who understands proper overseas structures. I have contacts in the US and UK if you need.

Lastly, Libero asks, “Simon, you mentioned not so long ago about a special clause for Italian citizens somehow being able to obtain Panamanian citizenship. Can you provide more details?”

The governments of Italy and Panama signed a bilateral treaty several years ago that entitles citizens of one country to obtain RESIDENCE in the other… so an Italian citizen can obtain Panamanian residency, and vice versa.

This treaty only grants residency, not citizenship. To be clear, there is no fast track Panamanian citizenship program, at least not a legitimate one.

Panamanian naturalization is a long, difficult, and muddy process… I know some people who have been living in Panama and married to a local for 20-years, and they have been denied citizenship.

If you’re looking for second citizenship, I would suggest somewhere other than Panama. Try the southern cone countries that I wrote about a few weeks ago.

Have a great weekend.

March 18, 2010
Pattaya, Thailand

Something interest happened this week in Thailand that I think says a lot about the country and its people.

For the last several months… well, years, actually… a large group of organized protesters has stepped up its calls for the current government of Thailand to step down. The group is known as the “Red Shirts” for the uniform they wear, and their top priority is to have open and fair elections to select a new government.

Over the last few months, the Red Shirts have grown more vocal, staging massive protests and rallies across the country. Their latest move was devilishly clever, in my opinion.

In the last few days, group organizers mobilized about 40,000 Red Shirt volunteers to stand in the blazing Bangkok heat, roll up their sleeves, and give blood… not for some natural disaster relief effort, though. Just to make a point, and a bloody one at that.

In this case, the Red Shirts collected about 300 Liters of blood and dumped it in front of the Prime Minister’s residence in Bangkok… as my local friends have told me, now the PM must wade through a river filled with the blood of Thai people on his way to work.

I really admire the creativity. I could only imagine the media effect this would have in the United States if an antiwar group did the same thing at the White House.

Even moreso, though, I was struck by the peaceful nature of the protest, especially with such a strongly symbolic gesture.

You see, Thais are an extremely peaceful people. They have been fighting against one corrupt government or another as long as anyone can remember… but despite their passion for freedom, their rallies remain peaceful.

When the Red Shirts descended on the Prime Minister’s residence, it was tightly guarded with police and military forces. The guards let them through, they dumped the blood, said a few words for the press, and dispersed.

I think in a lot of other places, the energy of the situation would have turned violent quickly. In Thailand, it was peaceful and respectful, and I think this says a lot about the country and culture.

Fundamentally, Thailand is an incredibly safe place to live exactly for this reason… its people are peaceful, and not just for catchy slogans or tourism campaigns. In fact, if you want to get the best idea about the true nature of a culture, look for situations like this when the country is going through a tough time.

In Thailand, the river of blood episode comes on the back of two years worth of extreme economic uncertainty and political instability. This is far from Thailand’s finest hour… yet the situation is still completely nonviolent, a clear indication of the Thai people’s temperament.

Another example is what’s happening in Chile. Rocked by a series of historically powerful earthquakes and aftershocks, the country has been dealt a seriously bad hand lately. And yet, in their darkest hour, despite the difficult conditions without food or power, Chileans still conduct themselves in a non-violent, civilized way.

Mainstream media sources, always on the lookout for guns and violence, paint a different picture of both countries. Even if they have to make up facts, they want people to believe that Thailand is about to descend into chaos, and that Chile is already there.

It’s not true. Chile and Thailand are both going through some challenges at the moment, but the civilized and non-violent actions of the people are demonstrative of how truly safe both countries are, even during difficult times.

If conditions in the world happen to turn truly sour, I would have no problem calling Chile or Thailand home because both cultures have already been tested by adversity.

See the video of what I’m talking about here:

March 12, 2010
Pattaya, Thailand

Greetings once again from the land of smiles.

First of all, I really appreciate all the responses after yesterday’s letter in which I announced that I will be speaking at the upcoming Casey Research Crisis and Opportunity Summit. I’m really looking forward to meeting with so many of you in Las Vegas.

For some reason, a few subscribers had difficulty with the link that gives more information about the event, so I want to re-post it here in case you’d like to join us:

http://www.caseyresearch.com/crpmkt/crpSolo.php?id=181

And with that, let’s move on to this week’s questions:

Stephen asks, “Simon – I don’t recall you mentioning the Seychelles as a potential offshore banking location? Any reasons not to incorporate there and/or open a bank account?”

Seychelles has a reasonably developed financial infrastructure and is a decent choice for offshore merchant processing… but I find it to be expensive to set up a company, and the due diligence requirements are fairly strict.

More importantly, though, I am generally mistrustful of very small countries that rely almost completely on their offshore industries. If the government has a string of bad years, they won’t think twice about imposing new taxes and fees on all the entities incorporated there.

Russ asks, “Simon, I know you’re busy, but I have a quick question regarding GoldMoney.com.  Is this account something that must be reported to the IRS as a foreign financial account?”

That’s a great question… a lot of people have asked it, and the bottom line is that there is no clear guidance one way or the other.

On one hand, GoldMoney should not be regarded as a financial account because it exists outside of the banking system and deals strictly with precious metals, which are not regarded by the government as a monetary instrument.

On the other hand, the service is clearly designed to be a banking substitute, and as all administrative and storage facilities are overseas, it certainly could qualify.

Jim Turk, the founder of GoldMoney.com, is one of the people who thinks that it does not qualify as a foreign financial account. Your best bet is to talk to your accountant and decide how you want to proceed.

Robert asks, “My father is Italian and based on my lineage, I am entitled to Italian citizenship.  I have already done most of the leg work, aside from getting the required apostilles, but I have been hesitant to complete the process as I live and work here in the good ‘ole USA.  In your expertise, would you find this to be a good option for a second passport?”

Western European passports are extremely valuable for most people– they entitle the citizen to live and work anywhere in the EU, and they’re fantastic travel documents, even better than a US or Canadian passport.

With any second passport, though, there are a few things that you really need to watch out for:

First, military conscription is a very real issue in many countries, including Italy. I believe the maximum draft age in Italy is 25, which means that anyone who obtains Italian citizenship between the ages of 18 and 25 must serve briefly in the military.

Second, you should also watch out for tax consequences. At the moment, Italy does not tax worldwide income, but as the economic situation there continues to deteriorate, it is entirely possible that the Italian government may start taxing its expats.

Christina asks, “Simon you’ve written before about the marquee international hospitals in Thailand like Bumrungrad International. Do you have any experience with ‘tier 2′ hospitals? Is there a major step down in quality?

I recently had the pleasure of carting myself off to the emergency room here in Pattaya. I’ve been to the ER in many countries, including in the United States, and as I think anyone could attest, you spend more time waiting around the ER than being treated.

Here at Pattaya International Hospital, though, I was literally being treated within -seconds- of my arrival. As soon as I showed up, I was met in the parking lot by two nurses who took me straight to a bed in the back where they triaged me.

The doctor came within 5 minutes, and he spoke flawless English, having studied in Canada.  To me, this speed is a major differentiator in quality and one of the reasons I routinely tell people that, in case I get sick, I really hope that I’m in a country like Thailand.

That’s it for this week! Thanks for bearing with me while I recover.

March 8, 2010
Pattaya, Thailand

I managed to pick up some nasty bug that has knocked me into next Tuesday… But while I feel completely miserable at the moment, this little bacterial bout has given me the opportunity to experience, first-hand, the joys of the Thai medical system.

First, doctors make house calls. When you’re as sick as I am, the last thing you want to do is get dressed, sit in the car, and go to the doctor’s office. Not a problem in Thailand… they come to you, all for about $30. And yes, they speak perfect English.

Second, if you’re a believer in medication, you can buy pretty much buy whatever you want over-the-counter– from antibiotics to codeine to Viagra. And everything costs a small fraction of what you would expect. You almost feel guilty, like you’re ripping off the pharmacy.

I paid 80 baht, roughly $2.50, for a 5-day batch of antibiotics, ibuprofen, and throat lozenges.

Third, if you so choose (and I do), you can have a team of nurses attending to your every need while you’re getting better. I’ve got a couple of ladies whose sole mission in life is to take care of whatever I need– changing the sheets, making a bowl of soup or tea, giving me a massage, or just sitting next to the bed with a wet washcloth over my forehead.

It’s funny what kind of misperceptions people have about medical care overseas. I’m frequently asked “What happens if you get sick overseas? Aren’t you concerned about the quality of medical care?”

Trust me, if/when I get sick, especially in an emergency, I truly hope that I’m in a place like Thailand or Panama instead of wasting away in waiting room back in the US, or paying through the nose for medicine.

Anyhow, I’m going to cut this short today for obvious reasons… depending on how I feel tomorrow I may or may not post something, so don’t be surprised in case you don’t hear from me.

February 22, 2010
Pattaya, Thailand

I was in the back of a black sedan on Friday morning speeding along Highway 7 from Pattaya to Bangkok when my driver’s phone rang. He picked up, jabbered for a few seconds, and then said to me:

“Sir, my friend call me from Bangkok; he say big protests in city, we need to go around.”

“No chance–” I replied. “Let’s go see how serious they are this time…”

Here in Thailand, you have to be living under a cave to not know what’s going on in the political scene. It starts with former Prime Minister Thaksin Shinawatra, who was ousted by the Thai military while he was out of the country in 2006.

He’s one of the richest men in Thailand having amassed a fortune in the telecom industry, and among other things, Thaksin has been accused of corruption, tax evasion, censorship, and human rights violations.

About half of Thailand loves him, the other half hates him… it just so happens that the current administration falls on the side of hating him, and they have issued several warrants for his arrest.

In fact, shortly after the 2006 coup, the new government set up a commission to investigate Thaksin’s financial holdings; it was ruled that he accumulated an unusual fortune during his time in office, and roughly $2.3 billion of his assets were frozen pending further investigation.

Years later, an official legal judgment has yet to be made about Thaksin’s frozen assets… until this week.

This Friday, February 26, is known as Judgment Day in Thailand because a high court will finally rule on the fate of his assets.

Did he evade taxes? Did he use public office for personal gain? Or did he follow the letter of the law and become victimized by Thailand’s notoriously corrupt politicking? The verdict is set to galvanize the country as many Thais regard it as a referendum on the corruption of their political institution.

There have already been mass demonstrations leading up to the decision by a group known as the “Red Shirts,” who in many ways are like the Tea Party protesters in the United States.

Like the Tea Party, the Red Shirts are commonly unified by their desire for acute political change. They despise the current administration and everything it has done to their country, yet many of the Red Shirts are undecided about Thaksin… sort of like Sarah Palin.

Many regard him as a free market hero who can liberalize the economy, while others find him to be just another self-serving politician… though not necessarily guilty of the charges against him.

The protests on Friday were held by the Red Shirts who shut down several streets and chanted refrains about freedom, justice, and change. I jumped in the thick of it to get a sense of their passions… are they true believers, or simply going through the motions?

I was surprised at what I saw.

The thing is, in Thailand, these sorts of protests and mini political revolutions are about as common as seeing a military parade in North Korea or the Bellagio fountains in Las Vegas– if you miss it, just wait around for another few hours.

Oh yeah, and they sell T-shirts. Lot’s of souvenirs, actually… something like “I went to the revolution in Thailand and all I got was this lousy T-shirt” sort of thing.

It’s widely expected that the outcome of the “Judgment Day” decision will result in nationwide protests and rioting, regardless of the outcome. That makes for a lot of t-shirt sales.

As you could imagine, foreign governments are totally overreacting. The British and US embassies are urging their citizens to exercise caution; and if there are wide-scale protests, you can count on the mainstream media to portray Thailand as a country coming apart at the seams.

Truthfully, Thailand will be just fine. Both foreigners and locals alike are accustomed to political instability… it’s par for the course in Thailand. Government or no government, Thailand is one of the most peaceful places on earth.

Case in point, Pattaya is probably the most international city per capita I have ever been to– Russians, Americans, Canadians, Brits, Germans, French, Thai, Indians, Pakistanis, Chinese, Malaysians, Japanese, Aussies, Arabs, and Jews, all living in one place in complete harmony.

Why? Because they’re here for the same things– ultra-low cost of living, privacy, warm weather, quality medical care, high class lifestyle, and of course, cheap sex.

These factors trump politics any day of the week, and they won’t go away just because of a couple of protests.

If Thaksin is able to engineer a real revolution, he will make his return to Thailand. In the meantime, he is enjoying the fruits of having planted multiple flags and traveling around the world on second, third, fourth, fifth, and sixth passports from friendly jurisdictions in the Caribbean, Asia, and Latin America.

Let’s talk about these later this week. Stay tuned.

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

I was having breakfast this morning at my favorite Bangkok cafe– they do a delicious American breakfast with eggs, bacon, toast, orange juice, and fresh fruit for under $3… and it’s delicious.  For another $3 I could get a backrub while I eat.

As I was reading the local paper, something caught my eye in the business section– a full page ad for a real estate development about 2 hours outside of Bangkok. The development looked generic enough– another condo tower with a pretty view of the ocean, nothing special.

The catch? They are giving away a gold bar with each sale.

Particularly in tough times, sales managers come up with all sorts of gimmicks to improve their numbers. If the sales gimmick speaks to a specific need or concern in the marketplace, chances are it will probably succeed.

In Missouri, for example, many people report concerns that President Obama will modify their 2nd Amendment right to bear arms. In fact, there has been a massive wave of gun sales across the US since Obama won the election last year.  To capitalize on this fear, a Missouri car dealer decided to start giving away a free handgun with each new car sold. 

His sales volume quadrupled. 

In China, uneven demographics have young males substantially outnumbering by young females, and it’s becoming harder and harder for men to find available women.  Capitalizing on young men’s concerns, Chinese development company Jin Tai Cheng that promised a $9,000 to anyone who would buy a home and marry one of their pretty sales agents, most of whom were single and good looking.

Naturally, the promotion was of great interest to male buyers seeking a wife. 

These cases indicate that the market responds quickly when promoters address a specific need or fear.  In Thailand, at least one developer seems to have hit a chief concern squarely on the head.

According to local agents, sales activity has jumped since the developer started running the ‘gold bar giveaway’ promotion, though I was not given precise figures as they are a private company.

Asians in general have a deeper gold tradition than western cultures; Thailand, for example, has been issuing gold coins for centuries. I saw seeds of gold mania in China when I was there most of the last two months, and I have seen it here in Thailand this month. 

Gold is quoted in the daily papers in both US dollars and Thai baht, and there seem to be gold shops on just about every block.

The majority of gold shop inventory is jewelry, but the local Thais (similar to the Chinese) have been buying it up as an investment, not because it looks pretty. Gold bars also tend to be bought up very quickly, the most popular of which is the ’10 baht’ variety, roughly 4.9 ounces of 965 purity.

To me, the most interesting part of the story is that the advertisement is specifically catered to Westerners… although the condo price points are within reach of well-to-do Thais, the ad was printed in English and being marketed in a foreigner newspaper.

The pickup in sales activity suggests that foreigners are attracted to the sales promotion because it speaks to one of their major concerns– perhaps inflationary expectations, perhaps economic misgivings, or perhaps the fear of being left behind the gold boom. 

Either way, the increased interest at the consumer level translates into increased retail bullion sales activity, and this should have a positive price affect for both gold and silver. I wouldn’t be surprised to see more of these types of promotions, and I’ll be on the lookout for similar signs when I arrive to Europe next week.

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.

I was reading a menu, but I wasn’t in a restaurant.

Liposuction: $625
Tummy Tuck: $1,250
Breast Enlargement: $1,125
Sex change operation: $1,625

I did a double take. Yep, that wasn’t a misprint.

Thailand is renowned for a lot of things– beautiful beaches, crazy nightlife, political instability, etc. One of the things it should be better known for is medical tourism.

People often ask me because I travel so much, “Simon, what would you do if something happened to you– wouldn’t you be scared to go to a hospital in a foreign country?”

In a word, no. In fact, I sincerely hope that I am overseas if some bad accident or disease should happen to befall me, because I’m confident that I won’t die in the waiting room filling out insurance paperwork.

Health care in many developed countries is either bankrupt, too expensive, and/or incompetent. Here in Thailand, private care is among the highest quality and most efficient in the world.

It really makes one wonder which countries should truly be considered ‘developed’…

Bangkok has a few marquee private hospitals– Dusit Medical, and the more famous Bumrungrad. To call them ‘hospitals’ is a bit of a misnomer… realistically they are luxurious 5-star resorts that happen to be staffed with highly-skilled, western-trained physicians.

Whatever is ailing you, they can handle it– plastic surgery, cancer treatment, hip replacement, etc. The nice thing is that the doctors in Thailand are actually free to practice medicine in a low bureaucracy environment without constant fear of regulation or litigation.

This, along with the lower wages in Thailand, results in substantial cost savings. As for the quality? Well, I’d like to pass on a note from my friend Croc who recently had two surgeries at Bumrungrad in Bangkok. Croc is active, fit, in his late 30s.

Dear Simon,

I have just done something that in the US, or most of the world for that matter, is impossible: three days after arriving in Bangkok, I had underwent two surgeries, complete with the requisite tests and appointments.

For the cost of typical yearly insurance premiums in the US, I had facial plastic surgery, and I had my torn meniscus repaired. What really impressed me, aside from my $360 MRI and my $42 x-ray, was the kindness, professionalism and shocking efficiency of Bumrungrad Hospital.

Thailand is not a country generally known for Swiss organization… but when you consider the financial dire straits that western civilization has found itself in, especially regarding health care, finding efficiency, kindness, quality, and great value at a hospital is certainly worth passing on.

One million patients are treated at Bumrungrad Hospital every year, and roughly six hundred thousand are foreigners. Most of the staff speaks English, and they have translators for just about every language you could imagine.

The hospital’s pricing is out of reach for most local Thais, but Bumrungrad’s a la carte menu of services is priced at a phenomenal discount to what you would pay in the US. There is no shame in being uninsured here. On the contrary, people paying cash are accorded a VIP status.

From the moment I entered the hospital, I was checked-in and awaiting my first consultation in under fifteen minutes. After my initial consultation with an English speaking knee specialist trained at Harvard, I was sliding into a GE-brand MRI machine.

In all, I met with three doctors, had two surgeries, blood work, x-rays, and an MRI. It all cost me around five thousand dollars and took three days. In between visits I sat next to the pool at my hotel getting a twenty-dollar massage.

Bumrungrad makes no bones about its desire to cater to paying foreigners. The business model works, as evidenced by waiting rooms of Arabs, Aussies, Europeans and even a few Americans.

For a few thousand dollars you can actually get some real medical work done in Thailand– teeth cleaning, heart surgery, breast augmentation… you name it, anything is possible here.

Simon again. Thailand is not alone, there are at least a dozen other places in the world with top quality medical care at a paltry cost, and as Croc’s story testifies, there is no sacrifice to quality or service.

For me, medical tourism is the cornerstone of my health care plan. I have a high deductible US insurance plan that covers me against emergencies and catastrophes when I am in the states (only about 3-months each year). For smaller issues, I pay cash at specialty clinics, which I’ve found to be fairly cost effective.

For larger issues, though, I’m on a plane. The cost savings of the medical care alone more than makes up for the travel expenses of the trip.

I’m curious to hear what you think– would you fly to another country for medical care? If not, why not? Bear in mind, the cost savings of the treatment more than covers the travel expense.

First of all, thanks to all the well-wishers (especially Dusty) after my accident… your concern is much appreciated, and I’m feeling a lot better.

Today I want to talk about real estate in Thailand, and particularly here in Pattaya.  I’ve spent the last few days scouting property, and talking to agents, developers, and buyers.  Overall, some aspects of the market are reasonably attractive in the long-term, but I need to give you a bit of background first.

In general, I dislike countries that place restrictions on foreign ownership… buying property in Panama, for example, is great. Foreign ownership is allowed and protected to the same extent as a local Panamanian’s. Plus, buying property can often lead to residency.

Thailand is completely different.  Foreign ownership is limited by law, and this is a big negative to me. For people that are interested in moving here, though, the private sector has found a few ways around these restrictions.

First, a foreigner can establish a Thai company and buy property through that company. S/he would be the largest individual shareholder, but have to give up at least 51% of the company in order for the transaction to be legitimate. Usually a team of attorneys would be the remaining shareholders.

In this case, a buyer would clearly need to have a high degree of trust in the attorneys who are the legitimate controlling shareholders of the company and property.

Second, a foreigner can buy a property for a domestic company or individual, then lease it back from them.  The lease term is capped at 30-years, then renewable for another 30-years. This is known as the “2×30″ scheme.

For example, you pay $100,000 for a property, and then deed the property to a local Thai.  You would then ‘rent’ the property for a nominal fee for 30-years, renewable for another 30-years.  At the end of 60-years, unless they change the law, you/your heirs will lose access to the property.

In this case, you need to have an iron-clad rental agreement that ensures you cannot be evicted from your own property over the two 30-year periods, plus provisions for your estate.

Frankly, I find both of these options to be rather risky and unappealing.  There is an attractive loophole for condominium projects, though, which stipulates that up to 40% (or 49% in some cases) of the project can be owned directly by foreigners.

For this reason, you frequently see condo listings advertise “Foreign Owned,” which means that buying the property will have no effect on the building’s foreign ownership quota.

Mid-range condo prices in Pattaya average between $900 and $1,500 per square meter, while high-end condo projects can cost upwards of $2,500 per square meter.

At the moment, though, there is excess inventory on the market.  Developers started too many projects in the last 24-months, and the volume of buyers has decreased dramatically from the peak.

It’s the same story around the world, and Thailand’s foreign ownership restrictions make things even worse. 

To boost sales, developers have started offering financing in this traditionally ‘cash-only’ market. Financing incentives consist of a 10% to 20% down payment, followed by fixed payments for 5 to 10-years.

Other developers have come up with other gimmicks, like giving away free Toyota SUV to buyers, or even a Thai wife.  As you can imagine, these are generally signs of a real estate market that is wallowing near the bottom. 

My assessment is that developer financing will probably kick start an increase in sales.  Given the erosion of wealth that has occurred around the world, many people simply do not have $100,000 for a condominium in Thailand… many more, however, have $20,000 for a down payment and $600/month to pay the note.

This includes North American and European retirees, as well as another key market in Pattaya– Russians.

Pattaya is crawling with Russians, and their influence is omnipresent– there are signs and billboards everywhere written in Russian Cyrillic, and Thai musicians have even learned Russian songs that they play on the streets and in the local bars.

Many real estate agencies cater specifically to Russian customers, and at a fraction of the price of Dubrovnik, Pattaya is an attractive location for them.

One final note about property in Thailand– unlike many other countries, a large purchase in Thailand does not guarantee residency. Many people who have lived here for years still have to do a periodic ‘visa run’ to neighboring Laos or Cambodia to reset their visas for another 30 to 90 days.

You should strongly consider this if you are thinking about moving to Thailand; there’s no place in the world quite like it, but you really have to want to be here to go through the hassle and bureaucracy of the visa.

For the right person, Thailand is paradise. You can test it out on the cheap– a nice, clean property rental is about $500/month.

For other people, there may be much better locations where property purchase and residency go hand-in-hand, like Malaysia’s “My Second Home” program. More on that in a future letter.

I’m actually reporting tonight from bed-side in my hotel room; I managed to crash my $3/day motorcycle rental this afternoon, and between the cracked rib and other pleasantries, I’ve decided to call it an early evening.

Fortunately for me, Thailand has some of the best healthcare in the world, at least if you’re an expat and go to the several renowned and accredited private hospitals… but more on that in future letters.  Tonight I thought I would sit down and specifically address some of your questions, which is something I have not done in some time:

Keith from Ontario recently asked, “Simon– where is your money when World War III starts?”

Good question. The emergency fund is in physical gold and silver, plus a lot of currency from about 40 different countries. I travel with quite a bit of it and keep the rest stashed away in some strategic locations around the world– you can read about these places in our free Gold Report.

I don’t believe that the world is going back to a barter or gold system anytime soon.  Governments like having an inflatable fiat currency, and people have become too institutionalized on worthless paper money.

If there is a future cataclysmic event that causes a worldwide currency and financial meltdown, governments and financial markets will likely engineer a substitute quite quickly. In this case, gold and silver will have been fantastic investments, but likely not needed as a hard currency for the long-term.

If, on the other hand, a major catastrophe turns the world into Mad Max, I think everyone will be wishing s/he had invested in bullets and crop land instead of precious metals.  You might want to check out a great book called Emergency by Neil Strauss for an interesting read about a potential breakdown of our social and financial system… I highly recommend it.

On the same subject, Judy asks “Do you know if Panama has right to carry in place? If you currently have RTC, is it legal to ship your gun to Panama and conceal carry it there as well?”

You can obtain a weapons permit in Panama and even import your own firearms if you have established residency.  The system is fairly convoluted, though– the permit documentation is tied directly to the firearm, not necessarily the individual, so when you buy a weapon, you have to ensure that you buy a permitted firearm.

It’s best to navigate this process with a lawyer, at least the first time you do it. Any of the attorneys I mentioned in my Panama Black Paper will be able to help you with this issue.

Amanda recently asked a question about Australia– “Simon, I’d like to know your opinion on the land down under…”

I think Australia has fantastic prospects.  I generally dislike all governments, but by comparison, the Aussies run a sound economy that normally maintains a trade surplus based on raw materials, as well as a balanced budget.

The Australian dollar has room to appreciate– unlike other countries like Japan and South Korea which depend on a weaker currency to make their exports appear cheap, Australian commodities exporters sell at world market prices, irrespective of the Australian dollar’s value.

Naturally, the country is not perfect and there are a few speed bumps with household debt and immigration policy… but overall, I think the economy is sound and the Australian dollar is a good place to be relative to other fiat currencies, especially considering the higher interest rates.

Howard writes about Thailand– “For investors and businessmen, Thailand is a culture based on deceit and power; a major business expense here is corruption payments… and nothing here is clear, honest, or straight-ahead.”

I agree entirely. Doing business in most places overseas, particularly in developing nations, is fraught with challenges (read: corruption), and Thailand is no different. More specific stories and solutions on this in future letters.

My old friend Nuckolls writes, “According to the mainstream press, California is either a failed state or a gold mine waiting to be rediscovered.  I’m banking on the gold mine future…getting in at busted prices and waiting perhaps five years for the eventual regrowth. Do you have any premonitions about how long I could be waiting for that?”

California has a couple of things going for it that are positive economic drivers– first, it is home to some key industries like entertainment and technology that are still in tremendous demand around the world. Warner Brothers and Apple set the gold standard for everyone else to follow, and this isn’t changing anytime soon.

Second, people still really want to live in California, especially people with money.  This, along with its poor credit rating, will likely force the tough political choices that are necessary for the state to get back on its feet.

Third, California property tax is low, and this is protected by the state constitution. Other things equal, this makes California one of the more attractive US property markets for long-term growth. 

Between the recession, the wild fires, the massive foreclosures, and the fault lines, there are probably some great deals on property. As for how long you will be waiting? Unfortunately we have to look at these things in terms of election cycles given how interfering governments have become in the economy.

I wouldn’t expect anything until after the 2014 election, though given how bad the federal government is mismanaging the economy, an inflation-adjusted turnaround could be well beyond that.

As a final note, if you recently wrote or commented about your interest in official diplomatic programs, you will be hearing from me personally on the subject in the near future. Stay tuned.

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.

He has ruled through 12 US Presidents, a string of military dictatorships, several coups, and a historic transition to democracy. At 81 years of age, King Bhumibol of Thailand has really seen it all.

Despite his essentially ceremonial position, King Bhumibol is revered, almost worshiped, by his people– not like other constitutional monarchies where the royal family is merely a rubber stamp soap opera.

He has used his extreme influence on several occasions during his reign to intervene in many of Thailand’s crises, which seem to occur every other Tuesday when there’s a coup or ingredients for violent protest.

In 2003, for example, after an idiotic Thai actress sparked an international incident with neighboring Cambodia, angry Cambodians burned the Thai embassy in Phnom Penh to the ground. Naturally, an enraged Thai mob gathered in the streets to storm the Cambodian embassy in Bangkok… but Bhumibol intervened, requesting calm and that the people disperse. They obeyed like dutiful subjects.

I don’t really understand what makes one human being subjugate himself to another human being– to bow and curtsy and protect as inviolable even mere photographs of a monarch… yes, in Thailand, not only are insults to the King punishable by imprisonment, insults to his image are as well– by up to 30 years.

The ‘king culture’ is so deeply inculcated in Thai society that his death would have an enormous impact on the country and its economy. Two weeks ago, when rumors began circulating that the King was on his deathbed, Thai equities were rocked, falling 10.7% in just two days. Bond yields rose. Thailand’s currency, the baht, fell against major currencies.

The rumors turned out to be false, but the market’s reactions gave an indication of what will happen when the King’s reign finally comes to an end: investors view a Thailand without Bhumibol with the same level of risk as a Thailand in crisis without an elected government (1992, 2005-2006, 2008).

Each of these crises, whether a coup or the eventual demise of the King, is buying opportunity. There is no change to the long-term value of Thai equities or local assets due to political turmoil– as Thailand’s recent history shows, the country always rises from the chaos relatively quickly, and the markets recover accordingly.

In the case of this month’s health rumors, Thai markets recovered in about three days. The King made a public appearance to assure everyone that he is very much alive, and the Thai SET Index settled pretty close to its pre-rumor level.

When the King actually does pass away, it will be difficult to tell how long Thailand will be in ‘chaos’– perhaps hours, days, or a few weeks at the most, similar to how the entire Catholic world waits with baited breath for the College of the Cardinals to burn white smoke after the passing of a Pope.

Regardless of the duration, though, it will undoubtedly be a buying opportunity; once Thailand gets back to the business of doing business, markets will once again recover and investors can feel very smart for taking the risk.

In all fairness, the timing on these things is impossible to predict. Despite his advanced age and long list of existing medical conditions, King Bhumibol could end up being like Pope John Paul II was– very old, very decrepit, but seemingly able to last forever… and we’ll all be talking about him 10-years from now in the same way.

Statistically speaking, though, this is highly unlikely… and that’s why I’m headed to Bangkok next week where I will put boots on the ground to uncover some of the country’s best investments.

If you want to take a position in Thailand, you can buy the currency through an online FOREX platform like GFT Forex (www.gftforex.com), or you can purchase equities in the Thai market through Hong Kong based BOOM Securities.