Reporting from the Total Wealth Symposium at the Intercontinental Playa Bonita Resort in Panama.
Dear A-Letter Reader:
While we've been here at the Total Wealth Symposium enjoying Panama - searching for salsa bands in Casco Viejo, finding breaks between sessions to indulge in the spa or swim in the pool - the markets have been sputtering.
Even in Paradise, that fact that has not been lost on anyone.
So Sovereign Society Chairman John Pugsley stepped in on Friday to give us some economic perspective...and solutions...on the current financial predicament we're facing.
"An amazing disaster is hanging over our heads," he said. "They are boiling us so slowly, we don't feel the temperature rising. But it is. And very soon, we'll be cooked."
For the last 35 years, John has been an observer, an author and an investor in the financial markets. During all that time, he's encountered very few economists who have a firm grasp on the concept - and the causes - of inflation. So we continue to perpetuate the same bad habits. And soon, those with these same nasty habits will pay a very steep price.
Consider this: Since 1960 the money supply has risen 34.6 times, but consumer price levels have only risen six-fold. That means there is 34 times more money circulating through the system, but prices are only 6 times higher. In any other time or any other country, this imbalance would have caused hyperinflation and led to a massive default by now.
Some believe such a thing can't possibly happen in the United States. The economy is too big. The dollar's status as the world's reserve currency is too secure. John dispelled those beliefs as myths that are prolonging the situation. Gratuitous confidence in the U.S. economy has only exacerbated the monetary and fiscal profligacy that has fueled the U.S.'s debt-addicted bubble economy.
If you don't want to get soaked in this looming fiscal hurricane - John suggests you use a study umbrella. With a dollar crash scenario, it's wise to diversify. How you hold your cash is critical. Investing in other currencies can produce substantial profits for you even as the dollar declines.
But John also reminded us that all currencies are still fiat money. For you long-term investments, you'll want tangible assets. Commodities and companies that produce the commodities that are experiencing exploding demand should be among the best performers in coming years-especially as the U.S. dollar depreciates.
John, like many other speakers at The Sovereign Society's 21st Annual Total Wealth Symposium, is very bullish on silver and gold. He also indicated that real estate in a handful of non-bubble markets is a tangible asset that could provide solid returns. However, the coming recession will hurt liquidity in the property market. So make sure you don't over-leverage yourself and that you can hang in there through the inevitable rocky patch ahead.
Following Jack to the podium, Kathy Lien and Boris Schlossberg, award-winning editors of The Money Trader, stepped in to demystify the currency markets for attendees - and show us how to identify possible places to profit in the coming year.
You might be surprised to know:
- Currency exchange represents a US$2 trillion-a-day market. It is a market that, as Kathy says, is "liquid like the ocean." That means you can trade major currencies even in very large positions without worrying about moving the market. It's also a market that trades 24 hours a day, five days a week.
- There are no commissions in this market. Your cost is the spread-and that can run as low as 3/100ths of one percent.
- You only need to be familiar with 8 currencies to start trading: EURO, U.S. Dollar, New Zealand Dollar, Australian Dollar, Canadian Dollar, Swiss Franc, British Pound, and the Japanese Yen. Every currency trade that Boris and Kathy recommend to their clients and Money Trader subscribers is based on pairings among these 8 currencies.
- Three things affect how these pairings will trade against one another: economic trends, political events and interest rates.
A country's GDP, employment rates and consumer spending affects the value of its currency. Currency markets detest political instability and love entrepreneurial freedom. And how important interest rates are to the currency market can't be over-stated.
In fact, Boris and Kathy claim that a country's central banker is a far more important and influential person than their head of state. (Note to Ben Bernanke and George Bush - you got that, right?)
Big name traders like George Soros and Bruce Kovner have ridden the coattails of the FX market to billion dollar fortunes. Hedge funds use currency markets to generate billions of dollars in profits and to manage risk in their portfolio. But thanks to the Internet and other technologies, currency trading is now accessible to the average person. You can open an account with less than $1,000.
Just to illustrate one way to make easy profits, Boris and Kathy explained a carry trade. It's one of the simplest and most common trades you can place in this market. The carry trade cashes in on the difference in interest rates between two currencies.
For example, in the United States, the Federal Funds rate just inched up to 5%, while the Japanese Central Bank rate is closer to 0%. If you took a long position in the U.S. dollar versus the Japanese yen, you would receive interest on your dollars and pay interest on the Japanese yen. Since the net difference is 5%, you automatically are poised to earn 5% on the trade just in interest income. Plus, you make money if the U.S. dollar appreciates versus the yen.
In this way, you could make 15% to 25% on this trade. Or, knowing how to correctly use leverage while still strictly limiting your risk, you could make 150% to 250% on the same trade.
Next, Eric Roseman delivered on his promise in his opening remarks - to reveal which emerging market is likely to deliver profits to investors while so many other overheated emerging markets become submerging markets.
The emerging market bull he's hot on has already corrected. Two years ago, its stocks were trading 50% higher than they are today. Now, all contrarian buy signals are flashing.
I'm talking about China. This is another one of those jam-packed presentations where Eric makes a compelling case for his recommendation. Let me give you a few highlights...
China is still growing at an unprecedented 9-10% a quarter. As they march toward the Beijing Olympics in 2008, the economic boom is unlikely to slow down. The government is taking steps to make investing more transparent and palatable (although Eric is clear they have a long way to go). And the Chinese currency - the yuan - is very undervalued, and there is a steady effort to unpeg it from the dollar and let it move to assume its true value.
Not to mention, the Chinese are sitting on a lot of cash. They hold mountains of U.S. dollars, plus they own the second highest amount of U.S. debt (in the form of U.S. Treasuries) of any foreign country. In many critical ways, they are sitting in a very strong position to surge.
That said, since the correction in the Chinese market two years ago, the sentiment about China is the worst it's been since 1998. Eric believes that 2005 saw the secular bottom of this market, and between now and 2008 it's going to bounce back up to those highs we saw, and maybe beyond.
One of the best ways to play China is through a top-performing mutual fund that used to be restricted to all but the wealthiest investors. This fund has crushed its peers for the last nine years yet it also has a minimum investment of $200,000. Eric showed attendees how they could buy this very same fund for just $5,000-and get the services of two of Europe's oldest rated banking havens at the same time.
At the end of today's sessions, Platinum Lifetime and Traders Ring members got even more intimate time in with Eric, Boris and Kathy, and John. Under the palm-thatched roof of a gazebo overlooking the Pacific, drinks and hors d'oeuvres flowed freely, and so did the investment insights, recommendations and conversations.
During his cocktail hour chat, Eric related some of the methodology behind the spectacular gains subscribers to his VIP service, Commodity Trend Alert, have made in recent years. I overheard one woman ask her husband if they had a certain stock he mentioned in their portfolio. Yes, he assured her, we do. When did we get in, she went on. He looked over his shoulder, leaned into her, and said, Early ...
She just smiled and nodded. The stock has gone up 880% since Eric first recommended it.
After a full day of sessions, and a couple cocktails, a few of us set out to find the real Panama. Where better to look than Casco Viejo, the oldest part of the city. Transported back to colonial times, we wound through the narrow streets where people strolled or simply stood along every street. At the end of one road, the driver gave us a choice: salsa, or disco tec. No choice, in my mind. Salsa!
Here at Platea, a local jazz club and piano bar, the 8-piece Latin jazz band was in full swing. The dance floor was packed with moving hips and three-stepping feet. Your conference reporter couldn't have been happier.
"You found your people, didn't you?" asked my colleague. Indeed, I believe I have.
A lot of the attendees I've talked to this week felt the same way. One gentleman confided that he found the women here so beautiful, he purchased a condo this trip just so he could come back to visit more often.
There is something so welcoming about Panama. The amenities we are accustomed to in the U.S. are here, certainly. America's influence and investments have shaped this place, so we feel safe and comfortable here. But it's more than that.
It's the relaxed pace. The feeling of freedom that pervades everything from banking laws to the salsa floor. A certain live-and-let-live attitude that is so refreshing, you don't want to leave.
Indeed, some don't. I personally found myself hatching an exit plan while the Salsa band played. Which brings me back to the first three speakers of the day - each one had lots of advice if you want to do the same...
The morning session started with International Living's Brandon Clogston. Brandon has made his home here as an expat. He reports finding the familiar brands and favorite television shows and other comforts from home available helped him make the transition.
One of the most compelling aspects of moving to Panama is that you can take advantage of extraordinary retirement benefits at any age - even as young as 18!
To attract people of means, and retirees, Panama has instituted a Pensionado Program. It allows you to enjoy 'retirement' benefits as long as you can document a minimum monthly pension of $500 (plus another $100 per dependent), you are eligible to a long list of perks, such as:
- 50% off entertainment anywhere in the country (movies, theaters, concerts, sporting events)
- 30% off bus, boat, and train fares
- 25% off airline tickets
- 50% off hotel stays from Monday through Thursday
- 30% off hotels stays from Friday through Sunday
- 25% off at restaurants
- 15% off at fast-food restaurants
- 15% off hospital bills (if no insurance applies)
- 10% off prescription medicines
- 20% off medical consultations
- 15% off dental and eye exams
- 20% off professional and technical services
- 50% reduction in closing costs for home loans
- 25% discounts on utility bills
- 15% off loans made in your name
- 1% less on home mortgages for homes used for personal residence
Even if you don't qualify for this program, however, there are still many paths available for residency and even citizenship if you'd like.
Rainelda Mata-Kelly, a Panamanian lawyer, has helped many Sovereign Society members arrange their affairs here. She said that while it is not easy to come to Panama and get a job - there are laws that ensure that Panamanians get first dibs on employment - there are many other more palatable options.
Most Sovereign Society members are eligible to come here as a "person of means" - either by making investments in Panama or through the Pensionado Program. Panama offers a number of sophisticated structures to choose from for organizing your affairs - many of which would also make you eligible for residency or citizenship. Depending on your circumstances, you could establish a corporation, or an IBC, and gather your Panama holdings into that structure. Or a Private Interest Foundation or "Family Foundation" might be more appropriate for you. This is when the assets of a group of people, usually a family, are pooled into one structure. It is modeled after a similar structure in Liechtenstein, and it also confers asset protection, and keeps your holdings safe from suits of attachments.
To figure out what approach would work best for you, you are well-advised to consult an attorney, particularly one who, like Rainelda, is up to date on the most recent legislation affecting these structures.
Also, Rainelda emphasized that taxation in Panama is very fair. If you don't generate income here, you don't pay tax on that income. If you bring your pension here, you don't pay tax on it. You can't escape the long arm of the IRS, necessarily, but at least you don't have to fear adding another excessive tax burden as a Panamanian resident.
Another way to come to Panama as an investor is to participate in a forestry program such as the one offered by United Nature. Robert Kroesen was here to tell us - and show us - his teak plantation situated on the edge of the rainforest in the town of Darien.
The case for a forestry investment might surprise you - especially teak. Teak provided the infrastructure for many Asian nations, and is still in great demand - especially in India, where teak floors and furnishings are a sign of wealth and prosperity. Eighty percent of the world's teak supply comes from Myanmar (formerly Burma). But now it's an endangered species there - and United Nature is filling the gap.
Panama offers the perfect growing conditions for teak, and reforestation and environmental projects are high on the list of priorities for the Panamanian government. So much so that they enacted a special law - Law 24 - which grants tax reductions for people in Panama who invest in teak plantations. Using this law, you can also apply for residency through reforestation as your gateway to a new life in Panama.
In addition to the tax and residency benefits, Robert laid out projections showing projected compounded annual gains in the 9% to 11% range. With the average investment in the $30,000 range, Robert made a compelling case the teak program could be one of the most affordable and accessible ways to obtain residency here, garner a respectable return on your investment and live the kind of life most people only dream of.
There were even more sessions today than I can cover here - or else I would miss today's sessions! Tomorrow I'll fill you in on the remaining three speakers from Saturday:
- Thomas Fisher shows how an offshore investment account can help protect your purchasing power (especially if you live in a country with a vulnerable currency) while at the same time giving you access to some of the world's best performing investments.
- Robert Vrijhof, a Swiss portfolio manager, will talk about how you can get double-digit yields from investment rated Sovereign Debt.
- Colin Bowen will change the way you think about life insurance, showing you how you can receive a substantial annuity, take advantage of private and secure estate planning benefits, and gain tremendous tax savings at the same time.
And there are more sessions tomorrow, too. Horacio Marquez has a brilliant strategy for identifying the next rising markets by following big shifts in $90 trillion in international money flows.
Bob Bauman will be back with a report from Hong Kong. Earlier this year Bob spent nearly a month there on behalf of The Sovereign Society. While staying in the Asian asset haven, Bob made contacts, did research and due diligence on investment opportunities, and saw firsthand how the political and economic situation works on the ground.
Raphael Berkien of ExactPay will explain in detail exactly how their liberating worldwide debit card works. The combination of privacy and access is unique - and judging by the line at his table since he arrived, it's a very intriguing option for many people who live a global lifestyle.
Mark Seaton has pioneered software to protect your internet security. Frank Trotter will discuss the best ways to own, store and hold gold in your portfolio...and why. And Sam Taliaferro, development pioneer who was first to hit Boquete and tame it into what is now a top destination for North American and European expats, will give an update on Panama today. Is it too late to get in on the boom? And why has Donald Trump just announced his intentions to do his first major property development project in Panama? Find out tomorrow...
I Can't Give You All the Moneymaking and Money-saving Details... But You Can Hear Them for Yourself
Before I sign off, I want to tell you a little more about the conference special, the "Total Wealth Havens Bundle" - and the bonus conference recordings that go with it - for the special conference rate of just $229. If you purchased everything in the bundle separately it would cost you $445 - that's a savings of $216 - and this conference special only lasts until tomorrow when you receive my final report. So let me take a minute to fill you in ...
We've assembled a collection of our special reports on four of our favorite asset havens: Panama Money Secrets, Swiss Money Secrets, Hong Kong Money Secrets and the Liechtenstein Report. Each of these goes into greater detail about the privacy and protection each of these countries can offer you.
We'll send these reports along with a complete set of recordings from the Total Wealth Symposium here in Panama this week. More than a dozen specific and current investment recommendations, handouts from the sessions and specifics I haven't been able to cram into these reports will be yours. As someone who has worked hard to keep up with the information - typing away at record speed in some sessions - I'd give a lot to be able to hit the rewind button and listen to each session a couple times through to get the information down right and be able to put it to use. That's what having the recordings can do for you.
So take a moment to click here and secure your "Total Wealth Havens Bundle" today. I'll see you back here tomorrow. Same time, same place.
Your Conference Insider,
Monica Day
P.S. - I forgot to mention a special treat coming up tomorrow: Eric Roseman's wrap-up. I just got a sneak peek at his presentation - a concise and action-oriented summation of the 5 top mega-investment ideas from this week - and how you can act on them right away. Given the rising volatility in the markets, the time is just right to get situated in these trends today. Stay tuned...