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Wednesday, August 6, 2008 - Vol. 10, No. 186
Today's comment is by Bob Bauman JD, former Congressman and now author and Legal Counsel for The Sovereign Society.
I know I often write about the disturbing trends here in the United States, but regardless, I still sincerely hope that America will endure and prosper in the years to come.
Unfortunately, I know that won't happen unless we clearly recognize our problems and make a determined effort to address them.
This election year certainly discourages my hopes for real solutions. That's despite the fact that politicians are using the amorphous "hope" as a slogan to cover up their plans for more Big Brother and more big government this year.
Also, despite my faith in our country, some Americans have had enough.
In his recent book, Bad Money, Reckless Finance, Failed Politics and the Global Crisis of American Capitalism (Viking Press 2008), political commentator Kevin Phillips warns that an unprecedented number of citizens are fed up with failed politics and a shaky economy.
According to Phillips, these disgruntled citizens have already departed for other countries, and even larger numbers are planning to do so. I commented on his book a few months ago on my blog.
The Poor Are Clamoring to Get In, the Rich Are Pushing to Get Out
The fact that Americans are fleeing this country is hardly news to Sovereign Society members and readers.
For the decade since our founding, we at The Sovereign Society have noted sadly that each year hundreds of thousands of U.S. citizens and resident aliens have been leaving America to make a new home in other nations.
Admittedly, that number pales against the millions clamoring to get into the U.S., legally and otherwise.
But there's a huge difference in the economic status of these two fluid groups.
Those seeking admission (or just illegally crossing our borders) are by and large, poverty stricken persons. These immigrants are desperately trying to better their lot with a new life in the American Promised Land. They'll settle for low paying jobs, welfare, free education for their kids, and U.S. taxpayer subsidized housing and health care.
The Americans who are leaving are the wealthy and the talented - those who have had enough, thank you.
More Citizens Are Leaving Than Ever Before...and They're Young
In the August 5th issue of U.S. News and World Report an extensive article notes that many younger people are leaving the United States. These young emigrants are taking their young families and seeking their fortune or an easier life in foreign lands.
If this data collected from 2005 and 2007 is correct, it's possible that three million U.S. citizens are going abroad to live each year. Assuming that number is accurate, that's a huge increase over recent years.
And according to the study, the largest number of relocating persons is not retirees, but rather they are young adults ranging from 25 to 34 years old. That's particularly interesting considering this age range pays for Social Security and other benefits for older generations.
John Wennersten, author of Leaving America: The New Expatriate Generation (Praeger Pub. 2008), sees this exodus of Americans as "a long-term trend."
Wennersten writes that while Americans who go abroad are typical pioneers in some ways looking for a new "Go West," they also are part of a larger development, "a global economic shift that is fostering real economic growth in neglected areas of the world, like Latin America, Eastern Europe, and Southeast Asia."
U.S. citizens are certainly not the sole beneficiaries of this shift. However, they are active players in foreign countries where former state-run industries are being privatized. This is creating new trade markets and opportunities.
Your Average Joes Don't Want to Go
A major question is whether America is ultimately gaining or losing from this movement of talented Americans to other countries.
The answer is not simple. Wennersten says he estimates we're losing about US$30 billion in payroll, but he considers the outflow of expertise an even bigger potential drain.
"It's not the average guys who are going," he says. "It's these 'creatives' who will be establishing the paradigm of the future."
Two years ago we assisted the editors of WORTH magazine in a series of articles on why Americans were moving their assets and their lives offshore. So, this trend is not new. It began over a decade ago.
Many of these self-exiles are wealthy people seeking to escape what they see as the tyranny of the United States government.
John Gaver of Action America has written: "The problem is that increasingly, the wealthy perceive, whether correctly or incorrectly, that they are under attack by their own government and they are taking the only rational option left open to them. They're taking their wealth and leaving."
The Tax Exodus Hit Congressmen Where It Hurts: Their Egos
A 1994 Forbes magazine article described how some wealthy Americans had acquired a second nationality, surrendered their U.S. citizenship, and thus avoided millions in U.S. income and estate taxes.
(The U.S. Supreme Court has ruled giving up your citizenship is a constitutional right and U.S. law contains a procedure to accomplish this.)
The Forbes story inspired the U.S. Congress to fight this supposedly terrible tax exodus. They're now obsessed with finding out exactly how to punish such allegedly unpatriotic tax exiles.
This anti-expat obsession manifested itself in its most virulent form last month in a new, tough expatriate exit tax law.
Looking for Your Own Road Map Abroad? We Can Help
If offshore interests you, we can help you. The Sovereign Society exists to give advice and direction for those interested in "going offshore" in many different ways.
We can offer you a road map to offshore freedom, including legal ways to protect your assets, lower your taxes, expand profitable investments and how (and where) to move your residence and/or citizenship offshore.
If you're contemplating expatriation, I have the information to help you on such a global course in two of my books. I can tell you how to secure a second passport, and how to plan your finances abroad. Both books explain in detail how to live well offshore under what we call "the ultimate estate plan" - expatriation. And it's all legal.
BOB BAUMAN, Legal Counsel
P.S. This November, I'll be in Cancun, Mexico with the rest of The Sovereign Society "professors" for our third annual Offshore Advantage Academy.
In three days, we'll cover how to save on your tax bills, get "guaranteed" returns with investments most Americans never hear about, buy and sell stronger currencies than the dollar, which offshore assets you have to report to the IRS (plus three you can keep a secret), and so much more.
A word to the wise: This seminar has sold out for the past two years, so if you're interested please sign up now early while we can still accommodate you. Get all the details here.
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One of the Great Market Mysteries of 2008
As I said yesterday, the Dow Jones Utility Average (DJUA) continues to break down this summer. But while the DJUA sinks, another Dow index continues to hold its ground.
In fact, one of the great index mysteries of 2008 is the relentless strength of the Dow Jones Transportation Average or DJTA.
This barometer is up 8.3% this year and traded 9.9% below its all-time high this spring. But for now, the index has failed to confirm Dow Theory because the larger Dow Jones Industrials Average has lagged. It's still off 20% from its high last October and down 14.6% in 2008.
In a bull market, both averages must rise together. But in a bear market, which is where we stand now, the Dow is in the gutter while the Transports remain rather resilient even amid US$125 oil.
I believe what's happening for the Transports is an anomaly. The railroads are leading this index higher this year, mainly because of booming freight revenues as a consequence of surging fuel costs. Other segments of freight are getting smashed, including ground and air transport.
It's only a matter of time until the Transports break down. That freight moving across the country is bound to slow. I see that happening as overseas economies finally break from their dizzy growth rates. When that happens, look for the Transports to confirm the Dow in bear market territory.
ERIC ROSEMAN, Investment Director
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Being the "Nice Guy" Can Apparently
Get You into Legal Trouble
In the nearly 25 years that I've been writing about American lawsuits, I thought I had seen everything. But now mothers can actually hold sperm donors accountable for child support payments. This trend definitely takes the cake.
An increasing number of courts have ruled that sperm donors must take financial responsibility for their offspring, especially if the donors become involved in their lives. In some cases, this goes against an agreement between the donor and the mother that the donor will not have to financially support the child. In most cases, courts will overlook the parents' agreements or conduct in the interest of providing for the children.
For instance, in a case decided last week, the New Mexico Court of Appeals ruled that a sperm donor who was "always present" in the lives of the children he fathered for a lesbian couple must pay US$250/month in child support. That's despite the fact that the man never agreed to be financially responsible for the children.
As the defendant, Kevin Zoernig, said: "It's technically not supposed to be true, but basically if you want to see your kids, you better pay."
In states that have enacted a version of the Uniform Parentage Act, truly anonymous sperm donors don't assume parenting responsibilities. But, donors must also sign away all parental rights, including visitation rights and even the right to know the identity of their children.
However, many sperm donors want to take some involvement in the upbringing of their children. And here's where being a nice guy can get you in trouble.
The bottom line is that if you become a sperm donor and want to avoid child support payments, it's best to take no involvement whatsoever in the life of the child. This may be very difficult if you donate sperm to someone you know.
It's only natural to want to take some role, however minimal, in the upbringing of the child. Just realize if you do so, you'll probably need to take financial responsibility as well.
MARK NESTMANN, Privacy & President of The Nestmann Group
www.nestmann.com
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