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In Old Vienna
Alettermock2
Monday, September 25, 2006
Vol. 8 No. 191
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In Today's Letter:
Comment:
In Old Vienna
Offshore:
Bermuda Beats London
Wealth:
Another Hedge Fund Takes a Hit
Bonus Offshore:
What to Know Before Going Offshore
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In Old Vienna
Dear A-Letter Reader,
VIENNA: This past fortnight in Europe, hobnobbing with bankers and
investment advisors from Vienna, Liechtenstein, London, Copenhagen and
Zurich, has reminded me to tell you what you're missing if you're not
already a member of the Sovereign Society.
The truth is that U.S. law prevents many Americans from taking part directly in some of the world's most profitable investments.
In the face of highly restrictive U.S. stock registration and
reporting laws, most foreign mutual funds and bond brokers won't do
business in the U.S. -- or with Americans. These restrictive U.S. rules
amount to investment censorship. This excludes a huge number of the
more than 54,000 offshore mutual funds worldwide. Only about 8,000
offshore funds are registered for sale in the United States.
This U.S. investment censorship is a scandal. Offshore funds can be
far more profitable than domestic funds. They can take speculative
positions prohibited by U.S. securities laws. Fund managers employ
sensible risk-hedging techniques that would be impossible for U.S.
funds to use. Offshore funds are often more affordable. Minimum
investments are much lower, many as low as US$10,000.
You can also invest offshore using your retirement plan. A domestic
IRA or 401K retirement plan may purchase offshore funds and possibly
defer some current taxes. You can create your retirement plan offshore
where you're free to invest as you see fit. Or you can make investments
using an offshore life insurance policy as a 'wrapper' for your choice
of foreign stocks or funds.
The beauty of Sovereign Society membership is that the minute you
join, you are eligible immediately for an offshore bank account in
Austria, Liechtenstein, or Denmark. It's automatic. You join the
Society and we do the rest. In a few days your offshore bank can act as
your agent for those profitable offshore investments that are otherwise
denied.
So -- for increased profits, better privacy, and greater peace of mind, I hope you'll join with us and go offshore.
That's the way that it looks from here.
BOB BAUMAN, Editor
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Today... An Email Alert Using the CIA-Based "New Intelligence"
Could Make You $64,250
What
began as a pattern-recognition theory developed by the U.S. Government,
U.S. Air Force, and the CIA, is now being used in the private sector…
And by 8 p.m. – it’s going to trigger a special alert for a small group of people.
LINK: Click here
for the full story.
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Bermuda Beats London As Insurer's Choice
London:
Offer any reasonable businessperson lower taxes and less government
regulation and he or she will take that deal any time. Thus it is no
surprise that many UK-based insurance companies are leaving England for
a new home in one of Her Majesty's richest overseas territories, the
usually sunny, mid-Atlantic island of Bermuda. Two more major insurers
have just announced they are Bermuda bound. In a bid to compete with
rivals, Hiscox P.L.C. and Omega Underwriting are already based in the
tax haven. These businesses moving their headquarters has reignited the
debate over whether London can compete with the tiny Atlantic island
that has transformed itself into a leading world insurance and
re-insurance center. Observers say it's simple: lower taxes are a big
incentive for global businesses to move offshore. "I think it's
inevitable others will follow us," said Bronek Masojada, chief
executive of Hiscox. While he said the company's decision was prompted
primarily by the fact that over half the group's business now comes
from the United States and Bermuda, he agreed that "the tax and
regulation issues are a combined second." That's what I call a classic
case of British understatement.
BOB BAUMAN, Editor
LINK: http://www.businessinsurance.com/cgi-bin/news.pl?newsId=8410
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Bet on Natural Gas Almost Destroys Popular Hedge Fund
Another hedge fund takes a hit. Amaranth Advisors LLC,
a popular multi-strategy hedge fund based in the United States, almost
collapsed in September following an ill-timed bet on natural gas. The
company's lead energy trader lost an estimated $4.6 billion dollars
riding natural gas earlier this month. The same strategy resulted in a
double-digit gain just a few months prior.
Spot natural gas prices have tanked 18% in September and have
crashed over 55% since hitting a high last December. Coined a
"multi-strategy" fund, Amaranth obviously is not a diversified
investment product. In its prospectus, the Fund claims to engage in a
host of speculative investments, including some commodities. But that's
not what happened in September as its notional leverage (the total
number of its leveraged assets) ran an estimated 8 to 1, clobbering the
fund and its investors. Many fund of funds, which invest in other hedge
funds, and pension funds staked big bets on Amaranth, including
Canada's largest pension fund (Caisse Populaire) and San Diego County,
which lost a reported $3 billion dollars.
So here's what this means for you and your investments...
Hedge funds might belong in a diversified portfolio, but
increasingly since 2000, the industry has attracted inexperienced
traders, record amounts of capital and as a result, the industry is
mired in an environment of "crowded trades." Compared to ten or twenty
years ago when hedge funds were not mass-marketed, the industry is now
considered mainstream. When too many traders are chasing the same
trades and trying to achieve the same results, performance suffers. In
2005, a record 850 hedge funds closed as margins compressed in a low
return environment.
In the future, there are a few simple rules you can apply to try to
avoid such hedge fund disasters. First, it's usually safer to choose
hedge funds with multiple managers. Multi-manager hedge funds offer far
less risk than a single-adviser hedge fund because you bet on several
managers rather than one person's judgment. Also, when looking at hedge
funds, you should analyze the prospectus very carefully, especially
liquidity provisions. And always ask the advisor how much leverage is
typically used. It's leverage that resulted in a 65% loss for Amaranth
this month.
ERIC ROSEMAN, Investment Director
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When You Go Global, Get it Right!
Global
investments are going mainstream...but it's important to understand the
potential drawbacks-especially if you're a U.S. citizen.
Take something as simple as purchasing a vacation property in
another country. Expenses for the property will be denominated in
the local currency, so it makes sense to open a bank account there to
pay them, and also to receive any income if you rent out the property.
But merely by opening that account, you've opened a can of worms. If
the value of all offshore accounts you have signature or other
authority over exceeds US$10,000 at any time, you must report their
existence to the IRS on Schedule B of your federal income tax return.
You have a separate annual reporting obligation via Treasury Form TD F
90-22.1. Failure to report the account on both forms, each year,
can result in a five-year prison sentence and a US$500,000 fine...a
huge price to pay for what is in most cases an innocent omission.
Similar traps exist if you follow the advice often given to purchase
the vacation property through a foreign corporation. You must report
any transfer of assets to a foreign corporation on IRS Form 926. And
you'll be required to submit a detailed annual reporting form to the
IRS each year, Form 5471.
There are also possible drawbacks in the country where you purchased
the vacation home. For instance, you may find yourself liable to
inheritance tax or probate proceedings in that country at the death of
the co-owner (if any). Numerous solutions are available to avoid this
problem. One that works in some countries (e.g., Canada) is for a
married couple to structure the purchase of Canadian property through a
U.S. trust. At the death of one spouse, the other will inherit without
it being subject to Canadian probate proceedings.
Don't let these possible pitfalls prevent you from venturing
offshore. Just make sure you get good professional advice before doing
so!
MARK NESTMANN, Privacy Expert & President of The Nestmann Group
www.nestmann.com
EDITOR'S NOTE: If you're interested in "going
global," but want to avoid all these unnecessary offshore mishaps
described above, you might consider joining us for the first ever Offshore Advantage Seminar
in November. This inaugural event will take you step-by-step through
all aspects of the offshore world. Plus we'll have leading offshore
experts from around the world to give you their latest ideas on
investments and asset protection. You can save $45 by signing up before
October 1st, so don't wait! Click here to find out more.
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Master the ABC's of the Offshore World in Just Four Days!
- If you'd like to know how to quickly and easily set up a private offshore bank account...
- If you'd like a clear picture of how to diversify internationally in the most promising investments around the world...
- If you'd like to find out the simplest, most direct way to create a tax-efficient, near judgement-proof estate...
...this is an event you will not want to miss.
LINK: http://www.isecureonline.com/Reports/191SOAM6/E191G803/
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