How to Score a Double Play of
Profits from your Global Investments

Today's comment is by Mike Burnick, Senior Editor, Global Markets Analyst and editor of Global Market Investor.

Dear A-Letter Reader,

I just returned home from Europe, after traveling to a conference not far outside Paris. When you're living in the Eurozone, even for just a week, and paying extra for things like meals, taxi cabs and trains in euro...the impact of the falling dollar really hits home.

Most of us know all about the slumping value of the buck. In fact, the dollar hit an all-time low against the euro while I was in France. The buck is now down about 50% just since 2002! Each euro cost me US$1.41. A medium size Coke at a local café cost me about US$5.30 - I'm glad I didn't supersize it!

This tale also points out the importance, and significant advantages, of offshore diversification for your investments. Right now, many economies outside the U.S. are enjoying faster rates of overall growth, which gives you an edge. The falling value of the dollar also boosts your foreign stock holdings too - even if the local market remains relatively flat.

Currency Gains Made Easy

Here's a good example of what I mean. In May, I recommended an energy sector ETF that's listed on the Toronto stock exchange. This exchange traded fund is only up about 2% in Canadian dollar terms since then. That doesn't sound that exciting, but when you convert that to U.S. dollars, this fund has advanced 13%. This difference is due almost entirely to changes in currency exchange rates between the U.S. and Canadian dollar.

It's best to find a strong emerging or international market, with exceptional internal growth prospects of its own, plus a strong currency to boot. In such case, you can earn a double play of profits - you benefit from both the appreciation in the local stock market as well as gains in the currency.

A case in point is the iShares Turkey ETF (ITKY: LN). I recommended this ETF (listed in London and traded in pounds) to my Global Market Investor subscribers back in March. Since then, it's climbed 39% in U.S. dollar terms. But there's more to the story. The British pound has also been appreciating versus the dollar, so this ETF is actually up about 44% for U.S. based investors who took my advice if you factor in the increase of the pound.

When Researching Offshore Markets,
Look for Profit Double Plays from the Currency

There are many other great examples of this profit double play at work too. Take Brazil for instance. The local Bovespa Index has gained 30% so far this year. That's not too shabby. But the Brazilian real has also been on a tear against the weak U.S. dollar. Result: A whopping 48% year to date gain in the iShares MSCI Brazil ETF (EWZ).

Or take Germany, where the Dax 30 Index has jumped 18% so far this year. Once again, the euro's appreciation against the dollar adds another helping of gains - boosting your overall return in the iShares MSCI Germany ETF (EWG) to 26% year to date.

Bottom line: Whenever I'm searching for attractive offshore markets, I always start with the fundamental growth prospects of the economy, and the valuation of the local market. However, I also consider the appreciation potential of the local currency against the greenback - always looking for that extra edge in profits!

MIKE BURNICK, Senior Editor & Global Markets Analyst

P.S. This November 7 - 10, I'll introduce exactly how to maximize your currency gains with the right domestic and offshore investments at our Offshore Advantage Academy. I'll tell you how to get started investing, how to manage your portfolio and specifically what you should add to your portfolio before 2008. You're invited to join us on Paradise Island, The Bahamas for four days packed with asset protection and investment strategies. Sign up before midnight tonight and receive a special early bird discount. Click here to sign up now.

Political Correctness - the Truthful Sounding Lie

As one who has been forced by economic necessity to become a writer over the years, I am acutely aware of language, word choice, syntax and the use of proper English. As one of those voracious readers, I take pleasure in a well-constructed sentence, a well written essay or a captivating book that holds my interest.

When I was a very small boy, I learned that certain words the big kids might utter were not acceptable for my use. Accompanied by a memorable smack on my bum, I was told very clearly: "Bobby, don't you ever let me hear you say that again!"

About 30 years ago, a new phrase intruded its ugly presence into the national consciousness - "PC" or "politically correct." The American Heritage Dictionary defines this phrase as: "Of, relating to, or supporting broad social, political and educational change, especially to redress historical injustices in matters such as race, class, gender, and sexual orientation."

In more recent times "political correctness" doesn't just mean excluding supposedly unacceptable words. It means placing a negative connotation on formerly acceptable words to describe selective bogeymen.

The famously politically incorrect George Orwell once said: "Political language...is designed to make lies sound truthful and murder respectable, and to give an appearance of solidity to pure wind. One cannot change this all in a moment, but one can at least change one's own habits, and from time to time one can even, if one jeers loudly enough, send some worn out and useless phrase into the dustbin, where it belongs."

I raise this question because in the last few days, I noticed some blatant examples of abusing and/or distorting the phrase "tax haven."

Example 1: Speaking to a group of U.S. congresspersons (PC) and foreign leaders from Caribbean tax haven nations, the Premier of the British overseas territory of Bermuda, Dr. E.F. Brown MP, said that his government monitors "legislation and congressional musings on what some of your colleagues refer to as 'offshore tax havens' with great interest and we respect your legislature's aims in protecting revenue for American taxpayers."

No doubt he was referring to the blatantly anti-tax haven bills introduced by U.S. Senators Levin (D-MI), Dorgan (D-ND) and Obama (D-ILL). These ugly legislative attacks on Americans' right to invest and do business freely in other nations include the creation of blacklists of many leading nations simply because they honor financial privacy and refuse to share private information with the IRS.

Bermuda's Dr. Brown then baldly added: "Our position when lobbying on Capital Hill is frank and forthright. We are not a tax haven and not an environment of corporate inversions designed to allow any evasion of taxes. [emphasis added]. Ours is an Island of sound, AA-rated practices and we deliver a product attractive to companies who otherwise would have significant liabilities were they elsewhere."

He then went on to note that since Hurricane Katrina and the 9-11 terror attacks "...almost US$25 billion in claims have been delivered from Bermuda to American policy holders. Perhaps even more impressive, $100 billion dollars of U.S. capital is invested in Bermuda; the overwhelming majority of that money is a result of the insurance and re-insurance industry."

Who does the Premier think he is kidding?

The only reason all those billion dollar insurance and re-insurance companies are clustered on the pink sands of Bermuda is that the island is indeed a major tax haven, imposing little or no taxes on foreign owned companies. Apparently the Premier is afraid to speak the truth with words that are not PC.

It may seem a small matter. But by pointing out the odious nature of political correctness, I'm emphasizing the crucial importance of plain speaking, freedom of choice, freedom of speech and the freedom to conduct one's financial affairs as one pleases.

If you want to know more about what the world's tax havens has to offer you, click here for information about the new edition of my book, Where to Stash Your Cash: Tax Havens of the World.

BOB BAUMAN, Legal Counsel

Privacy & Rights

Make Sure You Ask Big Brothers'
Permission Before You Fly

Last year, I wrote here that if Uncle Sam gets its way, we'd all be on no-fly lists, unless the government gives us permission to leave - or re-enter - the United States.

Now, the Transportation Safety Administration (TSA) has proposed a similar system for travel on commercial airlines WITHIN the United States. Both systems will come into effect Feb. 19, 2008.

Under the TSA's "Advance Passenger Information System (APIS) initiative," you'll need to obtain permission from the U.S. government to travel on any commercial airliner or ship that goes to or from the United States. You won't receive your boarding pass until you are cleared by APIS. You'll also need permission to travel through the United States (e.g., if you're changing planes at a U.S. airport on a trip between two foreign countries). It doesn't matter if you're a U.S. citizen or permanent resident. Everyone will need permission to enter - or leave - the United States.

Then, on Aug. 23, 2007, the TSA issued proposed regulations for its "Secure Flight" program. The TSA wants commercial airlines to submit passenger information through a single DHS portal for both the Secure Flight and APIS programs. This would result in one DHS system responsible for watch list matching for all aviation passengers.

Naturally, the entire process - for both domestic and international travel - will occur in total secrecy. If you're denied permission to travel, you won't be able to appeal the decision to any court. Your only recourse will be through the TSA bureaucracy. Essentially, you'll be reduced to pleading with the TSA to say something like, "pretty please, give me a boarding pass."

What this amounts to is essentially a reprise of the infamous "internal passport" system in effect in the former Soviet Union. In 1933, Soviet dictator Josef Stalin introduced "internal passports" that prohibited Soviet citizens from leaving their place of residence without permission. Over time, the internal passport became the prime instrument of Soviet oppression over its citizens.

It's bad enough needing to ask Uncle Sam for permission to leave the United States, and to reenter it. But an internal passport is a blueprint for totalitarianism.

If you don't like the idea of having to obtain permission from Uncle Sam to travel domestically, you have until Oct. 22, 2007 to submit written comments to TSA for consideration before the final rule is issued. To do so, go to the "Federal e-Rulemaking Portal" at www.regulations.gov and follow the instructions for submitting comments. Submissions must include docket number "TSA-2007-28572."

MARK NESTMANN, Privacy Expert & President,
The Nestmann Group
www.nestmann.com